##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 20-F
  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, 2005
 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 1-14700
 
  Siliconware Precision Industries Co., Ltd.
  Taiwan, Republic of China
 No. 123, Sec. 3, Da Fong Road, Tantzu, Taichung, Taiwan, ROC
  Title of Each Class
    
    Name of Each Exchange On Which RegisteredNone
  Common Shares, par value NT$10 per share
  None
  As of December 31, 2005, 2,328,919,337 Common Shares were outstanding
 
  þ o
  o þ
  þ o
  þ o o
  o þ
  o þ




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##### 



SILICONWARE PRECISION INDUSTRIES CO., LTD.
FORM 20-F ANNUAL REPORT
FISCAL YEAR ENDED DECEMBER 31, 2005
  
 TABLE OF CONTENTS
 PageForward Looking Statements in This Annual Report May Not Be Accurate
    
    
    1PART I
    
    
    2Item 1. Identity of Directors, Senior Management and Advisers
    
    
    2Item 2. Offer Statistics and Expected Timetable
    
    
    2Item 3. Key Information
    
    
    2Item 4. Information on the Company
    
    
    18Item 4A. Unresolved Staff Comments
    
    
    36Item 5. Operating and Financial Review and Prospects
    
    
    36Item 6. Directors, Senior Management and Employees
    
    
    58Item 7. Major Shareholders and Related Party Transactions
    
    
    63Item 8. Financial Information
    
    
    65Item 9. The Offer and Listing
    
    
    66Item 10. Additional Information
    
    
    68Item 11. Quantitative and Qualitative Disclosures About Market Risk
    
    
    81Item 12. Description of Securities Other Than Equity Securities
    
    
    82PART II
    
    
    83Item 13. Defaults, Dividend Arrearages and Delinquencies
    
    
    83Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds
    
    
    83Item 15. Controls and Procedures
    
    
    83Item 16A. Audit Committee Financial Expert
    
    
    83Item 16B. Code of Ethics
    
    
    83Item 16C. Principal Accountant Fees and Services
    
    
    84Item 16D. Exemptions from the Listing Standards for Audit Committees
    
    
    84Item 16E. Purchase of Equity Securities by the Issuer and Affiliated Purchasers
    
    
    84PART III
    
    
    84Item 17. Financial Statements
    
    
    84Item 18. Financial Statements
    
    
    84Item 19. Exhibit Index
    
    
    86EX-8.1 LIST OF SIGNIFICANT SUBSIDIARIESEX-12.1 CERTIFICATION OF CEO PURSUANT TO SEC. 302EX-12.2 CERTIFICATION OF CFO PURSUANT TO SEC. 302EX-13.1 CERTIFICATION OF CEO PURSUANT TO SEC. 1350EX-13.2 CERTIFICATION OF CFO PURSUANT TO SEC. 1350EX-15.1 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
  - i -




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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.
  1




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##### Table of Contents



PART I
 
 Item 1. Identity of Directors, Senior Management and Advisers
  
 Item 2. Offer Statistics and Expected Timetable
  
 Item 3. Key Information
 A. Selected Financial Data
  Year Ended December 31,2001
    
    2002
    
    2003
    
    2004
    
    2005NT$
    
    NT$
    
    NT$
    
    NT$
    
    NT$
    
    US$(6)(in millions, except earnings (loss) or dividends per share and per ADS data)Income Statement Data:ROC GAAPNet operating revenues
    
    
    16,530
    
    
    
    22,299
    
    
    
    27,411
    
    
    
    35,252
    
    
    
    43,488
    
    
    
    1,326Cost of goods sold
    
    
    (15,109
    )
    
    
    (20,210
    )
    
    
    (23,298
    )
    
    
    (28,871
    )
    
    
    (33,960
    )
    
    
    (1,035
    )Gross profit
    
    
    1,421
    
    
    
    2,089
    
    
    
    4,113
    
    
    
    6,381
    
    
    
    9,528
    
    
    
    291Operating expenses
    
    
    (1,428
    )
    
    
    (1,542
    )
    
    
    (1,592
    )
    
    
    (2,048
    )
    
    
    (2,279
    )
    
    
    (70
    )Operating income
    
    
    (7
    )
    
    
    547
    
    
    
    2,521
    
    
    
    4,333
    
    
    
    7,249
    
    
    
    221Equity investment income
(loss)(1)
    
    
    (1,199
    )
    
    
    61
    
    
    
    (533
    )
    
    
    308
    
    
    
    448
    
    
    
    14Other non-operating
income(1)
    
    
    608
    
    
    
    469
    
    
    
    882
    
    
    
    732
    
    
    
    853
    
    
    
    26Other non-operating expenses
    
    
    (884
    )
    
    
    (797
    )
    
    
    (667
    )
    
    
    (1,548
    )
    
    
    (941
    )
    
    
    (29
    )Income (loss) before income
tax(1)
    
    
    (1,482
    )
    
    
    280
    
    
    
    2,203
    
    
    
    3,825
    
    
    
    7,609
    
    
    
    232Income tax benefit
    
    
    283
    
    
    
    145
    
    
    
    636
    
    
    
    457
    
    
    
    (16
    )
    
    
    (0.5
    )Income from continuing operations
    
    
    (1,183
    )
    
    
    425
    
    
    
    2,839
    
    
    
    4,282
    
    
    
    7,593
    
    
    
    231.5Cumulative effects of changes in
accounting principles
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    651
    
    
    
    19.5Net income (loss)(1)(2)
    
    
    (1,183
    )
    
    
    425
    
    
    
    2,839
    
    
    
    4,282
    
    
    
    8,244
    
    
    
    251Earnings (loss) per share(3)Basic
    
    
    (0.54
    )
    
    
    0.19
    
    
    
    1.30
    
    
    
    1.93
    
    
    
    3.59
    
    
    
    0.11Diluted
    
    
    (0.54
    )
    
    
    0.19
    
    
    
    1.18
    
    
    
    1.51
    
    
    
    3.38
    
    
    
    0.10Shares used in per share
calculation (average, as
adjusted)(2)Basic
    
    
    2,195
    
    
    
    2,169
    
    
    
    2,182
    
    
    
    2,216
    
    
    
    2,294
    
    
    
    2,294Diluted
    
    
    2,195
    
    
    
    2,169
    
    
    
    2,448
    
    
    
    2,604
    
    
    
    2,670
    
    
    
    2,670Earnings (loss) per
ADS(3)
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##### Table of Contents



Year Ended December 31,2001
    
    2002
    
    2003
    
    2004
    
    2005NT$
    
    NT$
    
    NT$
    
    NT$
    
    NT$
    
    US$(6)(in millions, except earnings (loss) or dividends per share and per ADS data)Basic
    
    
    (2.70
    )
    
    
    0.95
    
    
    
    6.50
    
    
    
    9.65
    
    
    
    17.95
    
    
    
    0.55Diluted
    
    
    (2.70
    )
    
    
    0.95
    
    
    
    5.90
    
    
    
    7.55
    
    
    
    16.90
    
    
    
    0.52Dividends per share(4)
    
    
    1.45
    
    
    
    
    
    
    
    
    
    
    
    1.35
    
    
    
    1.55
    
    
    
    0.05ADSs used in per ADS calculation
(average, as
adjusted)(3)Basic
    
    
    439
    
    
    
    434
    
    
    
    436
    
    
    
    443
    
    
    
    459
    
    
    
    459Diluted
    
    
    439
    
    
    
    434
    
    
    
    490
    
    
    
    521
    
    
    
    534
    
    
    
    534(Restated)
    
    (Restated)
    
    (Restated)US GAAPNet income (loss)
    
    
    (1,790
    )
    
    
    (169
    )
    
    
    3,097
    
    
    
    3,671
    
    
    
    3,971
    
    
    
    121Earnings (loss) per
share(5)Basic
    
    
    (0.82
    )
    
    
    (0.08
    )
    
    
    1.42
    
    
    
    1.65
    
    
    
    1.74
    
    
    
    0.05Diluted
    
    
    (0.82
    )
    
    
    (0.08
    )
    
    
    1.34
    
    
    
    1.27
    
    
    
    1.73
    
    
    
    0.05Shares used in per share
calculation (average, as
adjusted)(5)Basic
    
    
    2,176
    
    
    
    2,169
    
    
    
    2,182
    
    
    
    2,225
    
    
    
    2,277
    
    
    
    2,277Diluted
    
    
    2,176
    
    
    
    2,169
    
    
    
    2,449
    
    
    
    2,422
    
    
    
    2,295
    
    
    
    2,295Earnings (loss) per ADSBasic
    
    
    (4.10
    )
    
    
    (0.40
    )
    
    
    7.10
    
    
    
    8.25
    
    
    
    8.70
    
    
    
    0.27Diluted
    
    
    (4.10
    )
    
    
    (0.40
    )
    
    
    6.70
    
    
    
    6.35
    
    
    
    8.65
    
    
    
    0.26ADSs used in per ADS calculation
(average, as
adjusted)(5)Basic
    
    
    435
    
    
    
    434
    
    
    
    436
    
    
    
    445
    
    
    
    455
    
    
    
    455Diluted
    
    
    435
    
    
    
    434
    
    
    
    514
    
    
    
    484
    
    
    
    459
    
    
    
    459
 Year Ended December 31,2001
    
    2002
    
    2003
    
    2004
    
    2005NT$
    
    NT$
    
    NT$
    
    NT$
    
    NT$
    
    US$(6)(in millions)Other Data:ROC GAAPCapital expenditures
    
    
    5,474
    
    
    
    6,445
    
    
    
    4,885
    
    
    
    9,785
    
    
    
    8,245
    
    
    
    251Depreciation and
amortization
    
    
    4,323
    
    
    
    4,902
    
    
    
    5,185
    
    
    
    6,153
    
    
    
    6,572
    
    
    
    200
 As of December 31,2001
    
    2002
    
    2003
    
    2004
    
    2005NT$
    
    NT$
    
    NT$
    
    NT$
    
    NT$
    
    US$(6)(in millions)Balance Sheet Data:ROC GAAPCash and cash
equivalents
    
    
    6,310
    
    
    
    5,970
    
    
    
    12,203
    
    
    
    10,922
    
    
    
    12,341
    
    
    
    376Working capital
    
    
    6,176
    
    
    
    6,856
    
    
    
    4,766
    
    
    
    13,492
    
    
    
    15,475
    
    
    
    472Total assets
    
    
    42,566
    
    
    
    46,236
    
    
    
    54,658
    
    
    
    58,962
    
    
    
    67,175
    
    
    
    2,048Short-term debt
and current
portion of
long-term debt
    
    
    2,667
    
    
    
    2,968
    
    
    
    10,342
    
    
    
    4,013
    
    
    
    1,885
    
    
    
    57Long-term debt
    
    
    10,640
    
    
    
    14,143
    
    
    
    8,813
    
    
    
    16,639
    
    
    
    14,644
    
    
    
    446Total liabilities
    
    
    16,519
    
    
    
    20,057
    
    
    
    24,960
    
    
    
    25,469
    
    
    
    26,350
    
    
    
    803Total
stockholders
equity
    
    
    26,047
    
    
    
    26,179
    
    
    
    29,698
    
    
    
    33,493
    
    
    
    40,825
    
    
    
    1,245(Restated)
    
    (Restated)
    
    (Restated)US GAAPTotal assets
    
    
    47,852
    
    
    
    50,333
    
    
    
    61,756
    
    
    
    65,118
    
    
    
    81,167
    
    
    
    2,475Total liabilities
    
    
    16,517
    
    
    
    20,017
    
    
    
    25,419
    
    
    
    26,020
    
    
    
    29,776
    
    
    
    908Total
stockholders
equity
    
    
    31,335
    
    
    
    30,316
    
    
    
    36,337
    
    
    
    39,098
    
    
    
    51,391
    
    
    
    1,567
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(1)
    
    The ROC Securities and Futures Bureau has allowed us to delay our recognition of investment
income in certain investee companies accounted for under the equity method. In particular, we
derive a significant amount of our investment income in ChipMOS Technologies Inc., or ChipMOS,
which we owned 28.8% equity interest as of March 31, 2006. In 2002, because ChipMOS did not
provide its financial statements to us in time to enable us to recognize its financial results
for such period, we were permitted to delay the recognition of the investment loss of ChipMOS
until 2003. As a result, we did not recognize investment loss of ChipMOS for 2002 in our
financial results under ROC GAAP until the first quarter of 2003. For the three months ended
March 31, 2003, we recognized an investment loss of NT$366 million for ChipMOSs financial
results in 2002. If this investment loss had been included in our results for 2002, our
non-operating income, income before income tax and net income for 2002 would have been reduced
by the same amount and our basic and diluted earnings per share in 2002 would have been
reduced by NT$0.2. In 2003 and 2004, we also experienced a delay in recognition of investment
income. For the three months ended March 31, 2004, we recognized an investment income of
NT$247 million from ChipMOSs financial results in 2003. From January 1, 2005, we adopted ROC
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 of
investees accounted for under the equity method until the subsequent year, and recognized
investment income from all investees accounted for under the equity method based on investees
audited financial statements for the same periods. Therefore, for the three months ended March
31, 2005, we recorded our investment income of NT$667 million from ChipMOS in 2004 as
cumulative effects of changes in accounting principles and recognized an investment income of
NT$433 million from CgipMoss financial results in 2005. We also experienced a delay in
recognition of investment income in Double Win Enterprise Co., Ltd. in 2003 and 2004 and
Taiwan High-tech Corporation in 2003, and recognized their financial results in the subsequent
year. Our investment income (loss) from Double Win Enterprise Co., Ltd. and Taiwan High-tech
Corporation 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. In 2003, 2004 and 2005, our
investment income (loss) under US GAAP from ChipMOS were NT$250 million, NT$664 million and
NT$469 million (US$14.3 million), respectively. As a result, our financial results under US GAAP
would not provide meaningful year-to-year comparison to our financial results under ROC GAAP.(2)
    
    Net income in 2001 was net of minority interest loss of NT$16 million. The company does not
have minority interest in 2002, 2003, 2004 and 2005, and is therefore not presented separately
in this table.(3)
    
    Retroactively adjusted for all subsequent stock dividends and employee share bonuses.(4)
    
    Adjusted to reflect 235,421,212 shares, 189,447,578 shares and 168,889,805 shares distributed
as stock dividends in 2001, 2004 and 2005, respectively, with respect to the earnings of 2000,
2003 and 2004. No stock dividend was declared in 2002 and 2003.(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$32.80 to US$1.00 on December 30, 2005.  ( in millions)
    
    As reported
    
    Restatement
    
    As restatedNet income
    
    
    (223
    )
    
    
    54
    
    
    
    (169
    )Earnings(Loss) per share:Basic
    
    
    (0.11
    )
    
    
    0.03
    
    
    
    (0.08
    )Diluted
    
    
    (0.11
    )
    
    
    0.03
    
    
    
    (0.08
    )Total assets
    
    
    50,333
    
    
    
    0
    
    
    
    50,333Total liabilities
    
    
    20,071
    
    
    
    (54
    )
    
    
    20,017Total shareholders equity
    
    
    30,262
    
    
    
    54
    
    
    
    30,316
 4




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Currency Translations and Exchange Rates
  Year Ended December 31,
    
    Average(1)
    
    High
    
    Low
    
    At Period-End2001
    
    
    33.91
    
    
    
    35.13
    
    
    
    32.23
    
    
    
    35.002002
    
    
    34.53
    
    
    
    35.16
    
    
    
    32.85
    
    
    
    34.702003
    
    
    34.41
    
    
    
    34.98
    
    
    
    33.72
    
    
    
    33.992004
    
    
    33.27
    
    
    
    34.16
    
    
    
    31.74
    
    
    
    31.742005
    
    
    32.16
    
    
    
    33.77
    
    
    
    30.65
    
    
    
    32.80October
    
    
    33.47
    
    
    
    33.77
    
    
    
    33.19
    
    
    
    33.55November
    
    
    33.58
    
    
    
    33.71
    
    
    
    33.39
    
    
    
    33.51December
    
    
    33.29
    
    
    
    33.56
    
    
    
    32.80
    
    
    
    32.802006January
    
    
    32.04
    
    
    
    32.59
    
    
    
    31.83
    
    
    
    31.97February
    
    
    32.32
    
    
    
    32.65
    
    
    
    31.97
    
    
    
    32.40March
    
    
    32.46
    
    
    
    32.62
    
    
    
    32.28
    
    
    
    32.42April
    
    
    32.29
    
    
    
    32.54
    
    
    
    31.90
    
    
    
    31.90May
    
    
    31.74
    
    
    
    32.13
    
    
    
    31.28
    
    
    
    31.99June (up to June 15, 2006)
    
    
    32.31
    
    
    
    32.62
    
    
    
    32.02
    
    
    
    32.53
 
 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
  D. Risk Factors
  Risks Relating to Our Financial Condition and Business
 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.
 5




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
    
    changes in our product mix or our customers preferences. When we discontinue or add a
product 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 product mix to respond to changes in demand
and to adjust our prices sufficiently enough to maintain the level of our capacity
utilization.
  The cyclical nature of the semiconductor industry makes us particularly vulnerable to economic
downturns and changes in the semiconductor industry
   We are highly dependent on the personal computer industry and any downturn in the personal computer
industry would harm our operating results
  6




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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
  A decline in the operating results of ChipMOS would reduce our participation in the memory chip
package market and harm our financial performance
  Potential conflicts of interest with ChipMOS may cause us to lose opportunities to expand and
improve our operations
  7




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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.
  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
  8




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If we cannot compete successfully in our industry, our current and potential customers would likely
decide not to use our services, which would seriously harm our services
  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 services strategy
plan in the future
  If demand for the services of Taiwans wafer foundries decreases, a significant source of our sales
would decrease, which would seriously harm our services
  If we are unable to obtain raw materials from our suppliers, our production schedules would be
delayed and we may lose customers
  9




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If we are unable to obtain equipment from our suppliers, we may be forced to delay any future
expansion plans
  If we are unable to manage our growth effectively, our expansion plans could be jeopardized
  We are exploring the possibility of expanding our operations or making additional investments in
the PRC, which may expose us to additional political, regulatory, economic and foreign investment
risks
  We depend on key management and the loss of any key management personnel may disrupt our services
  We depend on our technical personnel and the inability to attract and retain them would jeopardize
our operations and future expansion plans
  10




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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
outside our control, the occurrence of which may seriously harm our services
   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
  11




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Investor confidence in us may be adversely impacted if we or our independent registered public
accountants are unable to attest to the effectiveness of our internal control over financial
reporting as of December 31, 2006 as required by Section 404 of the Sarbanes-Oxley Act of 2002.
   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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If we are unable to successfully package and test our products 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;
    
    defective plating services;
    
    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 products;
 13




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
    
    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.
   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.
  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,
increases in interest rates and the economic performance of Taiwan markets
  14




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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 services and
operations, as well as our financial condition and results of operations.
  Our future tax obligations may adversely affect our profitability
   15




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##### Table of Contents



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: (a) 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
ROC SFB, plus any ADSs issued pursuant to the events described in the above two bullet
points; and (b) this deposit may only be made to the extent previously issued ADSs have
been cancelled.
  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
   16




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##### Table of Contents



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
  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
  17




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##### Table of Contents




    
    the court rendering the judgment does not have jurisdiction over the subject matter
according to ROC law;
    
    the judgment or the court procedures resulting in the judgment is contrary to the
public order or good morals of the ROC;
    
    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 ROC; or
    
    judgments of ROC courts are not recognized and enforceable in the jurisdiction of the
court rendering the judgment on a reciprocal basis.
 We may be considered a passive foreign investment company, which could result in adverse U.S. tax
consequences for U.S. investors.
  
 Item 4. Information on the Company
 A. History and Development of the Company
 www.spil.com.tw
   18




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
    
    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;
    
    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; and
    
    expanding in the PRC to remain competitive and position ourselves to achieve greater
market share as some of our customers and foreign competitors have expanded their
operations in the PRC.
 3⁄4 3⁄4
 B. Business Overview
 Our Business
   19




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##### Table of Contents



Year Ended December 31,2003
    
    2004
    
    2005NT$
    
    %
    
    NT$
    
    %
    
    NT$
    
    %(audited) (consolidated)(in millions, except for percentages)Ball grid array packages
    
    
    11,698
    
    
    
    42.7
    
    
    
    16,416
    
    
    
    46.6
    
    
    
    21,963
    
    
    
    50.5Quad flat packages
    
    
    8,635
    
    
    
    31.5
    
    
    
    9,435
    
    
    
    26.7
    
    
    
    8,823
    
    
    
    20.3Small outline packages
    
    
    3,160
    
    
    
    11.5
    
    
    
    3,800
    
    
    
    10.8
    
    
    
    3,911
    
    
    
    9.0Other packages
    
    
    956
    
    
    
    3.5
    
    
    
    1,467
    
    
    
    4.2
    
    
    
    3,259
    
    
    
    7.5Total packaging revenues
    
    
    24,449
    
    
    
    89.2
    
    
    
    31,118
    
    
    
    88.3
    
    
    
    37,956
    
    
    
    87.3Testing and other revenues
    
    
    2,962
    
    
    
    10.8
    
    
    
    4,134
    
    
    
    11.7
    
    
    
    5,532
    
    
    
    12.7Total net operating revenues
    
    
    27,411
    
    
    
    100.0
    
    
    
    35,252
    
    
    
    100.0
    
    
    
    43,488
    
    
    
    100.0
  Our Packaging Services
   
    
    the size of the package;
    
    the number of electrical connections the package can support; and
    
    the thermal and electrical requirements of the package.
   20




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##### Table of Contents



Lead-Frame Packages
    
  Quad Flat Packages
 Package
    
    Lead-count
    
    Major Applications
    
    End UsesQuad Flat Package
    
    100-256
    
    Package with leads
on four sides
designed for
advanced
processors,
consumer and
industrial
controllers,
digital signal
processors and
application
specific integrated
circuits
    
    Desktop personal
computers, consumer
and industrial
products,
commercial and
office equipment,
automotive systemsLow-Profile Quad Flat
Package
    
    32-256
    
    Low-profile and
lightweight package
designed for
application
specific integrated
circuits, digital
signal processors,
microprocessors/controllers, graphic
processors, gate
arrays, static random access
memory and personal
computer chipsets
    
    Wireless
communication
products, laptop
computers, digital
cameras,
cordless/radiofrequency
devices
 21




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##### Table of Contents



Package
    
    Lead-count
    
    Major Applications
    
    End UsesThin Quad Flat Package
    
    44-176
    
    Designed for
lightweight,
portable
electronics
requiring broad
performance
characteristics
    
    Laptop computers,
personal computers,
disk drives, office
equipment, audio
and video products,
wireless
communication
productsVery Thin Quad Flat Package
    
    80-100
    
    Designed for
lightweight,
portable
electronics
requiring low
profile packages
    
    Laptop computers,
personal computers,
disk drives, office
equipment, audio,
video products,
wireless
communication
productsQuad Flat No-lead Package
    
    5-88
    
    Small and light
package with
improved thermal
and electrical
performance makes
it suitable for
wireless
transmitters RF
front end, hard
disk devices and
micro-controllers
    
    Wireless
communication
products, disk
drives, portable
products, consumer
productsThin Quad Flat No-lead
Package
    
    48-56
    
    This device offers
similar features to
those of Quad Flat
No-lead Package,
but can process
smaller and lighter
packages
    
    Wireless
communication
products, disk
drives, portable
products, consumer
products
 Small Outline Packages
 Package
    
    Lead-count
    
    Major Applications
    
    End UsesPlastic Dual In-line
Package
    
    14-42
    
    General purpose
plastic package
used in consumer
electronic products
    
    Games, telephones,
televisions,
audioequipment,
computer
peripheralsSmall Outline Package
    
    24-44
    
    Small lead-frame
package designed
for applications
requiring reduced
height
    
    Pagers, cordless
telephones, fax
machines, copiers,
printers, computer
peripherals, audio
and video products,
automotive systemsShrink Small Outline
Package
    
    24-70
    
    Small lead-frame
package designed
for applications
requiring reduced
height
    
    Pagers, cordless
telephones, fax
machines, copiers,
printers, computer
peripherals, audio
and video products,
automotive systemsSmall Outline J-Bend
Package
    
    20-44
    
    Package designed
for memory and low
pin-count
applications
    
    Consumer
(audio/video/entertainment),
communications
(pagers/cordless
phones),
radiofrequency
devices, cable TV,
office appliances
(fax/copiers/printers/personal computer
peripherals)
 22




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##### Table of Contents



Package
    
    Lead-count
    
    Major Applications
    
    End UsesThin Small Outline
Package I
    
    28-56
    
    Package designed
for high-volume
production of
low-lead count
memory devices
including flash
memory, static
random access
memory and dynamic
random access
memory
    
    Laptop computers,
personal computers,
still and video
cameras and
standard
connections for
peripherals to
computersVery Thin Small
Outline Package I
    
    48-56
    
    Package designed
for a variety of
applications where
small sized memory
devices are
required, such as
static random
access memory,
flash memory and
electrically
erasable
programmable
read-only-memory
    
    Memory module,
mobile phones,
PDAs, laptop
computers, and
digital still
camerasDual Die TSOP I
    
    48-56
    
    Package designed
for a variety of
applications where
small sized memory
devices are
required, such as
static random
access memory,
flash memory and
electrically
erasable
programmable
read-only-memory
    
    Memory module,
mobile phones,
PDAs, laptop
computers and
digital still
camerasThin Small Outline
Package II
    
    32-86
    
    Smaller version of
Thin Small Outline
Package I designed
for logic and
analog devices and
memory devices
including flash
memory, static
random access
memory, erasable
and electrically
erasable
programmable read
only memory, and
dynamic random
access memory
    
    Disk drives,
recordable optical
disks, audio and
video products,
consumer
electronics,
communication
products
 Substrate Packages
   
    
    smaller size;
    
    greater pin count;
    
    greater reliability;
    
    better electrical signal integrity; and
 23




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##### Table of Contents




    
    easier attachment to a printed circuit board.
    
   
  Package
    
    Lead-count
    
    Major Applications
    
    End UsesFlip-Chip Ball Grid Array
    
    256-2,304
    
    Much higher
electrical
performance than
traditional ball
grid array for
modern, more
demanding
applications
    
    Workstations,
networking,
graphics,
application
specific integrated
circuits, personal
digital assistants,
processorsChip Scale Package
    
    36-591
    
    Low cost solution
for low
input/output count
suitable for
semiconductors that
require a smaller
package size than
plastic ball grid
array
    
    Memory, analog,
flash memory,
application
specific integrated
circuits, radio
frequency devices,
personal digital
assistants,
communications,
mobile phones,
laptop computers,
sub-notebooks,
wireless systemsStacked-Die Chip Scale
Package
    
    21-400
    
    Low cost solution
for low
    
    Memory, analog, flash
 24




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##### Table of Contents



Package
    
    Lead-count
    
    Major Applications
    
    End Usesinput/output count
suitable for
semiconductors that
require a smaller
package size than
plastic ball grid
array. This device
offers double
memory capacity
with increased
device
functionality while
allowing
manufacturers to
maintain size
reduction roadmaps
    
    memory,
application
specific integrated
circuits, radio
frequency devices,
personal digital
assistants,
communications,
mobile phones,
laptop computers,
sub-notebooks,
wireless systemsBall Grid Array
    
    
    119-1,156
    
    
    Ball grid array
package designed
for applications
which require high
performance
    
    Laptop computers,
disk drives, video
cameras, global
positioning
systems, wireless
communication
products, standard
connections for
peripherals to
computersThermal Enhanced Ball Grid
Array
    
    
    241-1,521
    
    
    Optimum low cost
solution for high
speed, high power
applications with
multiple routing
layers for high
performance
applications
    
    Application
specific integrated
circuits,
microprocessors,
gate arrays,
personal digital
assistants,
communications,
mobile phones,
laptops,
sub-notebooks,
boardsLow Profile Ball Grid Array
    
    
    144-352
    
    
    Low-profile and
light-weight
package designed
for applications
which require high
performance
    
    Laptop computers,
wireless
communication
products, computer
peripheralsLand Grid Array
    
    
    7-190
    
    
    Land grid array
package designed
for applications
which require high
performance
    
    Laptop computers,
disk drives, video
cameras, global
positioning
systems, wireless
communication
products, standard
connections for
peripherals to
computersOrganic Leadless Chip Carrier
    
    
    28-48
    
    
    Package designed
for CMOS image
sensor chip, which
offers small and
light-weight for
image applications
    
    Mobile phones,
PDAs, laptop
computers, digital
still cameras,
personal computer
cameras, toys,
automobile,
security and
surveillanceCeramic Leadless Chip Carrier
    
    
    48
    
    
    Offers similar
feature as organic
leadless chip
carrier, but only
using ceramic
substrate material
    
    Mobile phones,
PDAs, laptop
computers, digital
still cameras,
personal computer
cameras, toys,
automobile,
security and
surveillance
 25




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##### Table of Contents



Package
    
    Lead-count
    
    Major Applications
    
    End UsesOrganic Leadless Grid Array
    
    
    28-48
    
    
    Offers small and
light-weight for
image sensor
applications and is
made of organic
substrate designed
for better thermal
performance
    
    Mobile phones,
PDAs, laptop
computers, digital
still cameras,
personal computer
cameras, toys,
automobile,
security and
surveillanceCMOS Image Sensor Module
    
    
    n/a
    
    
    Offers
manufacturing
flexibility for
customized
solutions for image
sensor applications
that require short
time-to-market
    
    Mobile phones,
PDAs, laptop
computers, digital
still cameras,
personal computer
cameras, toys,
automobile,
security and
surveillance
 Testing and Other Services
   Wafer Probing.
 Logic and Mixed Signal Final Testing.
 Other Testing Services.
  26




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Customers
    Year Ended December 31,2003
    
    2004
    
    2005NT$
    
    %
    
    NT$
    
    %
    
    NT$
    
    %(audited) (consolidated)(in millions, except for percentages)Taiwan
    
    
    11,875
    
    
    
    43.3
    
    
    
    14,127
    
    
    
    40.1
    
    
    
    16,544
    
    
    
    38.0U.S. and Canada
    
    
    14,775
    
    
    
    53.9
    
    
    
    20,001
    
    
    
    56.7
    
    
    
    24,349
    
    
    
    56.0Others (1)
    
    
    761
    
    
    
    2.8
    
    
    
    1,124
    
    
    
    3.2
    
    
    
    2,595
    
    
    
    6.0
 
 (1)
    
    Includes primarily Japan, Germany, Singapore and Hong Kong.    27




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##### Table of Contents



Sales and Marketing
     Quality Control
   28




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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;
    
    reduction of the height 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.
    Supplies
 Raw Materials
  29




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##### Table of Contents



Equipment
   Competition
   
    
    the breadth of package and test offerings;
    
    technical competence;
    
    manufacturing yields;
    
    manufacturing cycle times;
 30




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##### Table of Contents




    
    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
  
    
    ChipMOS.As of December 31, 2005, we held a 28.8% equity interest in ChipMOS, which is
engaged in the business of semiconductor packaging and testing and LCD driver and IC
manufacturing. We acquired this equity interest in 1997 as part of a joint-venture
arrangement with Mosel Vitelic Inc., Mr. Frank Lee, one of our officers, is a director of
ChipMOS.
    
    Sigurd Microelectronics Corp.As of December 31, 2005, we held, directly and
indirectly, a 24.0% equity interest in Sigurd Microelectronics Corp. Sigurd provides
lower-end packaging and testing services. Mr. Byron Chiang, one of our officers, is a
director of Sigurd.
    
    Double Win Enterprise Co. Ltd.As of December 31, 2005, we held a 24.1% equity interest
in Double Win Enterprise Co. Ltd., which is engaged in the business of printed circuit
boards and surface mount technology. Mr. Frank Lee and Mr. Byron Chiang, two of our
officers, are directors of Double Win Enterprise Co. Ltd. Mr. Chao-Hong Huang, one of our
officers, is a supervisor of Double Win Enterprise Co. Ltd.
    
    Phoenix Precision Technology Corporation.As of December 31, 2005, we held, directly
and indirectly, a 17.6% equity interest in Phoenix Precision, a supplier of semiconductor
raw materials, including substrates. Mr. Bough Lin, our Chairman, Mr. Yen-Chun Chang, one
of our directors, and Ms. Teresa Wang, one of 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. Wen-Lung Cheng,
one of our supervisors, is supervisor of Phoenix Precision.
    
    King Yuan Electronics Co., Ltd.As of December 31, 2005, we held a 8.8% equity interest
in King Yuan, which is engaged in the business of semiconductor testing. Mr. Bough Lin,
our Chairman, and Mr. Fu-Mei Tang, one of our supervisors, are directors of King Yuan.
  31




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##### Table of Contents



Intellectual Property
   
    
    Flip Chips 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 will expire in November 2014.
    
    Flip Chips flip-chip wafer Level CSP technology, which enables us to produce a chip
scale package at the stage of wafer level. This license will expire in January 2011.
    
    FujiTsu Limiteds electroplating bumping technology which enables us to produce a
bumped wafer with cost-effective, fine-pitch and high-reliability features instead of
screen printing bump to meet current market requirements. This license will expire in
December 2007.
    
    LSI Logic Corporations 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.
    
    Tessera, Inc.s TCC technology which enables us to produce micro ball grid array
products. This license will terminate at the expiration of the patent.
    
    ITRIs electrical enchanced-PBGA technology which enables us to produce a high
electrical performance packages by consolidated power ring and ground ring. The license
will expire in Dec 2007.
    32




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##### Table of Contents




    
    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
     Insurance
   Employees
  Capital Expenditures and Divestitures
  33




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##### Table of Contents



Year Ended December 31,2003
    
    2004
    
    2005NT$
    
    NT$
    
    NT$
    
    US$(in millions)Equipment purchases
    
    
    4,627
    
    
    
    8,777
    
    
    
    7,673
    
    
    
    234.0Land and building construction and
purchases
    
    
    258
    
    
    
    1,008
    
    
    
    572
    
    
    
    17.4
 Litigation (Tessera issue)
  C. Organizational Structure
  Total Paid-in
    
    Direct/IndirectCapital(1)of
    
    EquityCompany
    
    Main Activities
    
    Location
    
    Such Entity
    
    Interest(in millions)SPIL (B.V.I.) Holding
Limited
    
    Investment activities
    
    British Virgin
Islands
    
    US$
    62.8
    
    
    
    100.0
    %Siliconware Investment
Company Ltd.
    
    Investment activities
    
    Taipei, Taiwan
    
    NT$
    1,770.0
    
    
    
    100.0
    %Siliconware U.S.A. Inc.
    
    Sales, solicitation,
marketing and order
collection ordering
in North America
    
    San Jose, CA, USA
    
    US$
    1.3
    
    
    
    100.0
    %SPIL (Cayman) Holding
Limited
    
    Investment activities
    
    Cayman Islands
    
    US$
    35.1
    
    
    
    100.0
    %Siliconware Technology
(Suzhou) Limited
    
    Manufacturing of
DRAM modules, flash
memory cards,
transistor and other
electronic
components
    
    Suzhou, Jiangsu,
China
    
    US$
    35.0
    
    
    
    100.0
    %
 
 (1)
    
    Aggregate par value of all issued shares. 34




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##### Table of Contents



Total Paid-in
    
    Direct/IndirectCapital(1) of
    
    EquityCompany
    
    Main Activities
    
    Location
    
    Such Entity
    
    Interest(in millions)ChipMOS Technologies Inc.
    
    Testing and assembly
of integrated circuits
    
    Hsinchu, Taiwan
    
    NT$8,934.4
    
    
    28.8
    %Sigurd Microelectronics
Corp
    
    Testing and assembly
of integrated circuits
    
    Hsinchu, Taiwan
    
    NT$1,857.6
    
    
    24.0
    %Double Win Enterprise
Co., Ltd
    
    PCB, SMT process
and hand insert
    
    Taoyuan, Taiwan
    
    NT$280.0
    
    
    24.1
    %Phoenix Precision
Technology Corp
    
    Researching,
developing,
manufacturing and
selling ball grid
array substrate
    
    Hsinchu, Taiwan
    
    NT$5,793.9
    
    
    17.6
    %King Yuan Electronics
Co., Ltd.
    
    IC testing
    
    Hsinchu, Taiwan
    
    NT$9,154.0
    
    
    8.8
    %
 
 (1)
    
    Aggregate par value of all issued shares. D. Property, Plants and Equipment
   Wire Bonding orFacility
    
    Location of Facility
    

    Size of Facility

    

    Size of Land(1)
    

    Testing Capacity(square meters)

    

    (square meters)Facility I
    
    Taichung, Taiwan
    

    6,755

    

    7,881
    

    1,900 wire bondersFacility II
    
    Taichung, Taiwan
    

    81,146

    

    26,246
    

    418 wire bondersFacility III
    
    Taichung, Taiwan
    

    134,620

    

    39,455
    

    113 testers, 1,643 wire bondersFacility IV
    
    Hsinchu, Taiwan
    

    32,645

    

    14,215
    

    160 testers
 
 (1)
    
    We own all of our properties except otherwise noted.   35




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Item 4A. Unresolved Staff Comments
  
 Item 5. Operating and Financial Review and Prospects
  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.
  36




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##### Table of Contents



Consolidation
   Delay in Recognition of Investment Income in Certain Investee Companies Accounted for Under Equity
Method
 ChipMOS
    37




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Universal Communication
  Double Win and Taiwan High-tech
  CAESAR
   Change in Product Mix
   38




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##### Table of Contents



Year Ended December 31,2003
    
    2004
    
    2005NT$
    
    %
    
    NT$
    
    %
    
    NT$
    
    %(audited) (consolidated)(in millions, except for percentages)Ball grid array packages
    
    
    11,698
    
    
    
    42.7
    
    
    
    16,416
    
    
    
    46.6
    
    
    
    21,963
    
    
    
    50.5Quad flat packages
    
    
    8,635
    
    
    
    31.5
    
    
    
    9,435
    
    
    
    26.7
    
    
    
    8,823
    
    
    
    20.3Small outline packages
    
    
    3,160
    
    
    
    11.5
    
    
    
    3,800
    
    
    
    10.8
    
    
    
    3,911
    
    
    
    9.0Other packages
    
    
    956
    
    
    
    3.5
    
    
    
    1,467
    
    
    
    4.2
    
    
    
    3,259
    
    
    
    7.5Total packaging revenues
    
    
    24,449
    
    
    
    89.2
    
    
    
    31,118
    
    
    
    88.3
    
    
    
    37,956
    
    
    
    87.3Testing and other revenues
    
    
    2,962
    
    
    
    10.8
    
    
    
    4,134
    
    
    
    11.7
    
    
    
    5,532
    
    
    
    12.7Total net operating revenues
    
    
    27,411
    
    
    
    100.0
    
    
    
    35,252
    
    
    
    100.0
    
    
    
    43,488
    
    
    
    100.0
 Expansion and Utilization Rate
   Applications of Critical Accounting Policies
   39




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##### Table of Contents



Revenue Recognition
  Accounts Receivable and Allowances for Doubtful Accounts
  Inventory Reserves
   Impairment of Long-Lived Assets
    40




---



##### Table of Contents



Provision for Income Taxes and Deferred Tax Asset Valuation Allowances
  Employee Bonuses
  41




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##### Table of Contents



Goodwill
  Embedded Derivatives
      42




---



##### 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 Expenses. Selling expenses consist primarily of salaries and related personnel
expenses and other marketing expenses.
    
    General and Administrative Expenses. General and administrative expenses consist
primarily of salaries for our executive, administrative, finance and human resource
personnel, fees for professional services, and the cost of computers to support our
operations.
 43




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##### Table of Contents




    
    Research and Development Expenses. Research and development expenses consist primarily
of salaries, bonuses and related costs for product and 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.
 Results of Operations
  Year Ended December 31,2003
    
    2004
    
    2005%
    
    %
    
    %(audited) (consolidated)Net operating revenues
    
    
    100.0
    
    
    
    100.0
    
    
    
    100.0Cost of goods sold
    
    
    85.0
    
    
    
    81.9
    
    
    
    78.1Gross profit
    
    
    15.0
    
    
    
    18.1
    
    
    
    21.9Operating expenses:Selling expenses
    
    
    1.5
    
    
    
    1.6
    
    
    
    1.3General and administrative expenses
    
    
    2.3
    
    
    
    2.1
    
    
    
    1.9Research and development expenses
    
    
    2.0
    
    
    
    2.1
    
    
    
    2.0Operating expenses
    
    
    5.8
    
    
    
    5.8
    
    
    
    5.2Operating income
    
    
    9.2
    
    
    
    12.3
    
    
    
    16.7Investment income (loss)
    
    
    (1.9
    )
    
    
    0.9
    
    
    
    1.0Net non-operating income (loss)
    
    
    0.8
    
    
    
    (2.3
    )
    
    
    (0.2
    )Income before income tax and minority interest
    
    
    8.1
    
    
    
    10.9
    
    
    
    17.5Income tax benefit
    
    
    2.3
    
    
    
    1.3
    
    
    
    Income from continuing operations
    
    
    10.4
    
    
    
    12.2
    
    
    
    17.5Cumulative effects of changes in accounting
principle
    
    
    
    
    
    
    
    
    
    
    1.5Net income (loss)
    
    
    10.4
    
    
    
    12.2
    
    
    
    19.0
 2005 Compared to 2004
 Net operating revenues.
    44




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##### Table of Contents



Gross profit and gross margin.
 Operating expenses.
 
    
    Selling expenses.Selling expenses increased by 3.1% from NT$549 million in 2004 to
NT$566 million (US$17.3 million) in 2005 mainly due to an increase in salaries.
    
    General and administrative expenses.General and administrative expenses increased by
14.6% from NT$747 million in 2004 to NT$856 million (US$26.1 million) in 2005 due primary
to increased salaries paid to administrative personnel.
    
    Research and development expenses.Research and development expenses increased by 13.9%
from NT$753 million in 2004 to NT$858 million (US$26.2 million) in 2005 due to increased
salaries paid to R&D personnel and cost for developing new products.
 Operating income and operating margin.
 Net non-operating income (loss).
 Cumulative effects of changes in accounting principles
 Income tax (expense) benefit.
 45




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##### Table of Contents



Net income (loss).
 2004 Compared to 2003
 Net operating revenues.
    Gross profit and gross margin.
 Operating expenses.
 
    
    Selling expenses.Selling expenses increased by 32% from NT$415 million in 2003 to
NT$549 million in 2004 mainly due to commission fees paid to Siliconware USA Inc. for
sales of our products in North America.
    
    General and administrative expenses. General and administrative expenses increased by
20.7% from NT$618 million in 2003 to NT$747 million in 2004 due primary to increased
salaries paid to administrative personnel.
    
    Research and development expenses.Research and development expenses increased by 34.6%
from NT$559 million in 2003 to NT$753 million in 2004 due to increased salaries paid to
R&D personnel and cost for developing new products.
 Operating income and operating margin.
 46




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##### Table of Contents



Net non-operating loss.
 Income tax benefit.
 Net income (loss).
 B. Liquidity and Capital Resources
  Liquidity
   47




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Year Ended December 31,2003
    
    2004
    
    2005NT$
    
    NT$
    
    NT$
    
    US$(in millions)Net cash provided by operating activities
    
    
    8,053
    
    
    
    8,767
    
    
    
    13,215
    
    
    
    402.9Net cash used in investing activities
    
    
    (4,228
    )
    
    
    (11,620
    )
    
    
    (6,397
    )
    
    
    (195.0
    )Net cash provided by (used in) financing
activities
    
    
    2,408
    
    
    
    1,659
    
    
    
    (5,435
    )
    
    
    (165.7
    )Effect of exchange rate changes on cash
    
    
    
    
    
    
    (86
    )
    
    
    36
    
    
    
    1.1Net increase (decrease) in cash and cash
equivalents
    
    
    6,233
    
    
    
    (1,280
    )
    
    
    1,419
    
    
    
    43.3
 Net Cash Provided by Operating Activities
   Net Cash Used in Investing Activities
   48




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##### Table of Contents



Net Cash Provided by (Used in) Financing Activities
   Capital Resources
    
    
    A multiple-purpose credit facility entered into on December 26, 2001 in the aggregate
principal amount of NT$3,470 million for the purposes of (i) refinancing certain of our
long-term indebtedness at a lower interest rate and (ii) buying back the convertible bonds
due 2004 in any amount at any time after the closing of the offering of our convertible
bonds due 2007, or meeting our cash requirement in the event that holders of the
convertible bonds due 2004 exercise their put options on July 21, 2002. This facility
consists of: (i) secured corporate bonds due 2005 in the aggregate amount of NT$800
million issued between January 16, 2002 and January 18, 2002, which are guaranteed by
several banks, including ABN-AMRO Rothschild, Taiwan branch, each with the maturity date
of January 18, 2005, (ii) a medium-term loan facility in the amount of NT$1.17 billion,
and (iii) a NIF commercial paper facility in the amount of NT$1.5 billion renewable until
January 18, 2005, each for a period not to exceed 180 days. The extent to which we will
draw on this facility will depend on interest rates, exchange rates and other relevant
factors, including whether we should exhaust the proceeds of our convertible bonds due
2007 before we apply the proceeds of the credit facility in the event that certain of the
holders of the convertible bonds due 2004 exercise their put options on July 21, 2002.
    
    A multiple-purpose credit facility led by China Trust Commercial Bank entered into on
July 14, 2004 in the aggregate principal amount of NT$5.0 billion for the purposes of
refinancing certain of our long-term indebtedness at a lower interest rate. This facility
is a mid-term credit facility. As of December 31, 2005, we had drawn NT$4.8 billion
(US$146.3 million) from the credit facility to refinance our exiting indebtedness.
 49




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##### Table of Contents




    
    On January 28, 2002, we issued convertible bonds in the amount of US$200 million due
2007, the proceeds of which were used to purchase raw materials and to finance the
exercise of the put options by bondholders on July 21, 2002 with respect to, and for our
repurchase of, certain convertible bonds due 2004, which we issued in 1997 and are no
longer outstanding. The zero coupon convertible bonds due 2007 are convertible into our shares or ADSs. As of December 31, 2005, US$30.2 million of these convertible bonds had
been converted. We had repurchased US$33.7 million of these convertible bonds and had
redeemed US$7.2 million of these convertible bonds at the option of the bondholders.
    
    On February 5, 2004, we issued another series of convertible bonds in the amount of
US$200 million due 2009, the proceeds of which were used to purchase equipment and raw
materials. The zero coupon convertible bonds due 2009 are convertible into our shares or
ADSs. None of these convertible bonds had been converted as of December 31, 2005. These
bonds are scheduled to mature in February 2009 and will be redeemable by us on February 5,
2008 at the option of the bondholder.
 Transactions with Related Parties
   Inflation/Deflation
  Taxation
  50




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##### Table of Contents



US GAAP Reconciliation
  Reconciliation of Consolidated Net Income
 For the Years Ended December 31,2003
    
    
    2004
    
    
    2005NT$
    
    
    NT$
    
    
    NT$
    
    
    US$[Restated]
    
    
    [Restated](in millions)Net income as reported under ROC GAAP
    
    
    2,839
    
    
    
    4,282
    
    
    
    8,244
    
    
    
    251.3US GAAP adjustments:Compensated absences
    
    
    (2
    )
    
    
    1
    
    
    
    (10
    )
    
    
    (0.3
    )Compensation
    
    
    (341
    )
    
    
    (699
    )
    
    
    (1,235
    )
    
    
    (37.6
    )Impairment on long-term investments
    
    
    
    
    
    
    
    
    
    
    13
    
    
    
    0.4Embedded derivative
    
    
    86
    
    
    
    (80
    )
    
    
    (2,422
    )
    
    
    (73.9
    )Adjustment to the gain on disposal of
available for sale marketable
securities
    
    
    
    
    
    
    (2
    )
    
    
    
    
    
    
    Trading marketable securities
    
    
    6
    
    
    
    
    
    
    
    
    
    
    
    Treasury stock transferred to employee
    
    
    (154
    )
    
    
    (193
    )
    
    
    
    
    
    
    Equity investments:Timing difference
    
    
    631
    
    
    
    399
    
    
    
    (658
    )
    
    
    (20.0
    )Net income/(loss) variance between
US GAAP and ROC GAAP
    
    
    (30
    )
    
    
    (8
    )
    
    
    37
    
    
    
    1.1
 51




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##### Table of Contents



For the Years Ended December 31,2003
    
    
    2004
    
    
    2005NT$
    
    
    NT$
    
    
    NT$
    
    
    US$[Restated]
    
    
    [Restated](in millions)Accounting for income (loss) in
preferred stock
    
    
    87
    
    
    
    (29
    )
    
    
    
    
    
    
    Technology and know-how contributed
to a joint venture investee
    
    
    (6
    )
    
    
    
    
    
    
    
    
    
    
    Total US GAAP adjustments
    
    
    277
    
    
    
    (611
    )
    
    
    (4,275
    )
    
    
    (130.3
    )Taxation effect
    
    
    (19
    )
    
    
    
    
    
    
    2
    
    
    
    Net income under US GAAP
    
    $
    3,097
    
    
    $
    3,671
    
    
    $
    3,971
    
    
    $
    121.0
 Reconciliation of Consolidated Shareholders Equity
  As of December 31,2003
    
    2004
    
    2005NT$
    
    NT$
    
    NT$
    
    US$[Restated]
    
    [Restated](in millions)Total shareholders equity as reported
under ROC GAAP
    
    
    29,698
    
    
    
    33,493
    
    
    
    40,825
    
    
    
    1,245US GAAP adjustments:Compensated absences
    
    
    (21
    )
    
    
    (20
    )
    
    
    (30
    )
    
    
    (1
    )Compensation
    
    
    (342
    )
    
    
    (438
    )
    
    
    (881
    )
    
    
    (27
    )Impairment on long-term investments
    
    
    (213
    )
    
    
    (213
    )
    
    
    (199
    )
    
    
    (6
    )Embedded derivative
    
    
    87
    
    
    
    7
    
    
    
    (2,416
    )
    
    
    (74
    )Available for sale marketable securities
    
    
    2,072
    
    
    
    852
    
    
    
    9,177
    
    
    
    280Equity investments:Timing difference
    
    
    259
    
    
    
    658
    
    
    
    
    
    
    
    Net income variance between US GAAP
and ROC GAAP
    
    
    97
    
    
    
    88
    
    
    
    125
    
    
    
    4Accounting for income in preferred stock
    
    
    29
    
    
    
    
    
    
    
    
    
    
    
    Technology and know-how contributed to
a joint venture investee
    
    
    (210
    )
    
    
    (210
    )
    
    
    (210
    )
    
    
    (6
    )Siguard merged Universal
    
    
    
    
    
    
    
    
    
    
    117
    
    
    
    4Acquisition of Siliconware Corp.
    
    
    4,874
    
    
    
    4,874
    
    
    
    4,874
    
    
    
    148Taxation effect
    
    
    7
    
    
    
    7
    
    
    
    9
    
    
    
    Shareholders equity under US GAAP
    
    
    36,337
    
    
    
    39,098
    
    
    
    51,391
    
    
    
    1,567
  52




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Employee Bonuses
  Equity Investments
     Taxation Effect
  Goodwill Acquired through Acquisition
 53




---



##### Table of Contents



Impairment of Long-lived Assets
  Embedded Derivatives
    Stock Dividends
  54




---



##### Table of Contents



Marketable Securities
  Treasury Stock Transferred to Employees
  Calculation of EPS
   Merger between Equity-Method Investees
  Recent Accounting Pronouncements
  55




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##### Table of Contents



56




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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
  57




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##### Table of Contents



Payments Due by PeriodLess Than
    
    
    
    
    
    
    
    
    
    More ThanContractual Obligations
    
    Total
    
    1 Year
    
    1-3 Years
    
    4-5 Years
    
    5 Years(in NT$ millions) (consolidated)Long-term debtSecured long-term loans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Unsecured long-term loans (3)
    
    
    5,124.2
    
    
    
    1,790.9
    
    
    
    3,333.3
    
    
    
    
    
    
    
    Secured bonds
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Unsecured bonds
    
    
    
    
    
    
    
    
    
    
    11,310
    
    
    
    
    
    
    
    Operating leases (1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Purchase obligations (2)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total contractual cash obligations
    
    
    5,124.2
    
    
    
    1,790.9
    
    
    
    14,643.3
    
    
    
    
    
    
    
    
 
 (1)
    
    Represents our obligations to make lease payments to use the land on which our facilities
are located, primarily in Taichung and Hsinchu in Taiwan.(2)
    
    Represents the agreements to purchase goods or services that are enforceable and legally
binding on us that specify all significant terms, including: fixed or minimum quantities to be
purchased; fixed, minimum or variable price provisions; and the approximate timing of the
transaction.(3)
    
    Excludes interest payments because our interest rates on these loans are variable. 
 Item 6. Directors, Senior Management and Employees
 A. Directors and Senior Management
  Yearswith
    
    Principal Business ActivitiesName
    
    Age
    
    Position
    
    Us
    
    Performed Outside Our CompanyBough Lin
    
    
    54
    
    
    Chairman
    
    
    23
    
    
    Director of Phoenix Precision
Technology,King Yuan Electronics, Premier
Image Technology, SPILs subsidiary
Supervisor of ITE Tech.
EVP of SPILChi-Wen Tsai
    
    
    58
    
    
    Vice Chairman; President
    
    
    23
    
    
    President of SPIL
Director of SPILs subsidiaryWen-Lung Lin
    
    
    54
    
    
    Director;
    
    
    1
    
    
    Chairman of Ku-Ming Investment Co.Yen-Chun Chang
    
    
    51
    
    
    Director; Senior Vice President
    
    
    23
    
    
    SVP of SPIL
Director of PPT
Director of SPILs subsidiaryWen-Jung Lin
    
    
    59
    
    
    Director
    
    
    15
    
    
    NoneJerome Tsai(1)
    
    
    52
    
    
    Director
    
    
    1
    
    
    Director of ChipMOS(Bermuda)
Supervisor of Phoenix Precision Technology
 58




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##### Table of Contents



Yearswith
    
    Principal Business ActivitiesName
    
    Age
    
    Position
    
    Us
    
    Performed Outside Our CompanyHsiu-Li Liu
    
    
    51
    
    
    Independent Director (3)
    
    
    15
    
    
    Chairman of So Dar InvestmentIng Dar Liu
    
    
    58
    
    
    Independent Director (3)
    
    
    1
    
    
    Director of Sercomm Corp., AME Inc., Cando
Corp., Socle Technology Corp.Jing-Shan Aur
    
    
    57
    
    
    Independent Director (3)
    
    
    1
    
    
    NoneWen-Lung Cheng
    
    
    58
    
    
    Supervisor
    
    
    4
    
    
    Chairman of Joinwin Investment
Supervisor of Phoenix Precision Technology
Director of SPILs subsidiaryFu-Mei Tang
    
    
    54
    
    
    Supervisor
    
    
    1
    
    
    Director of King Yuan ElectronicsTeresa Wang (2)
    
    
    50
    
    
    Supervisor
    
    
    4
    
    
    Director of Phoenix Precision Technology
CFO of Phoenix Precision TechnologyJohnson Tien
    
    
    52
    
    
    Senior Vice President
    
    
    10
    
    
    NoneKuo-Jui Tai
    
    
    43
    
    
    Vice President
    
    
    3
    
    
    NoneChien-An Chen
    
    
    56
    
    
    Vice President
    
    
    15
    
    
    NoneChien-Hua Chen
    
    
    51
    
    
    Vice President
    
    
    7
    
    
    NoneMichael Chang
    
    
    44
    
    
    Vice President
    
    
    7
    
    
    NoneEva Chen
    
    
    47
    
    
    Chief Financial Officer
    
    
    1
    
    
    None
 
 (1)
    
    Representing Pei-Sheng Cultural Educational Foundation.(2)
    
    Representing Siliconware Investment Company Ltd.(3)
    
    Our independent directors independency complies with SECs and Nasdaqs independency
requirements. Bough Lin
 Chi-Wen Tsai
 Wen-Lung Lin
 Yen-Chun Chang
 Wen-Jung Lin
 Jerome Tsai
 59




---



##### Table of Contents



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
 Eva Chen
 B. Compensation of Directors, Supervisors and Executive Officers
  C. Board Practices
  Audit Committee
  60




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##### Table of Contents



Difference between NASDAQ Requirement and Home Country Practices
  Under the Rule 4350(c)(1) a majority of the board of directors must comprise of independent
directors.
 Under Rule 4350(c)(2) , the company is required to have regularly scheduled meetings at which
only independent directors are present.
 Rule 4350(c)(3) requires that compensation of the chief executive officer of the company must
be determined, or recommended to the board, either by a majority of the independent director or an
independent compensation committee.
 Under Rule 4350(c)(4) , director nominees must either be selected, or recommended for the
Boards selection, either by a majority of the independent directors or an independent nominations
committee.
 Under the Rule 4350(h) , each issuer shall conduct a review of all related party transactions
on an ongoing basis and all such transactions shall be approved by the companys audit committee or
another comparable independent body.
 Under Rule 4350(i)(1) (A), each issuer shall require shareholder approval when a stock option
or purchase plan is to be established or materially amended or other equity compensation
arrangement made or materially amended, pursuant to which stock may be acquired by officers,
directors, employees, or consultants.
 61




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##### Table of Contents



D. Employees
      Number of shares issuableupon exercise of options

    

    Expiration Date

    
    Exercise price23,753,900

    

    February 2008

    
    NT$11.92,594,400

    

    May 2008

    
    NT$12.4
  62




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##### Table of Contents



E. Share Ownership
  Number ofOrdinary Shares
    
    Per SharePercentage of
    
    Issuable on
    
    ExerciseNumber of
    
    Shares
    
    Exercise of
    
    PriceName
    
    Shares Owned
    
    Owned
    
    Option
    
    (NT$)
    
    Exercisable PeriodBough Lin
    
    
    60,121,979
    
    
    2.40%
    
    
    360,000
    
    
    
    11.9
    
    
    Feb. 2003 to Feb. 2008Chi-Wen Tsai
    
    
    33,059,323
    
    
    1.32%
    
    
    360,000
    
    
    
    11.9
    
    
    Feb. 2003 to Feb. 2008Wen-Lung Lin
    
    
    29,220,133
    
    
    1.17%
    
    
    
    
    
    
    
    
    
    Yen-Chun Chang
    
    
    13,313,598
    
    
    *
    
    
    240,000
    
    
    
    11.9
    
    
    Feb. 2003 to Feb. 2008Wen-Jung Lin
    
    
    6,350,013
    
    
    *
    
    
    
    
    
    
    
    
    
    Jerome Tsai(1)
    
    
    8,780,659
    
    
    *
    
    
    
    
    
    
    
    
    
    Hsiu-Li Liu
    
    
    12,493,662
    
    
    *
    
    
    
    
    
    
    
    
    
    Ing-Dar Liu
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Jing-Shan Aur
    
    
    129,580
    
    
    *
    
    
    
    
    
    
    
    
    
    Wen-Lung Cheng
    
    
    6,303,277
    
    
    *
    
    
    
    
    
    
    
    
    
    Fu-Mei Tang
    
    
    7,164,615
    
    
    *
    
    
    140,000
    
    
    
    11.9
    
    
    Feb. 2003 to Feb. 2008Teresa Wang(2)
    
    
    32,089,876
    
    
    1.28%
    
    
    
    
    
    
    
    
    
    Johnson Tien
    
    
    677,125
    
    
    *
    
    
    72,000
    
    
    
    11.9
    
    
    Feb. 2003 to Feb. 2008Kuo-Jui Tai
    
    
    103,786
    
    
    *
    
    
    300,000
    
    
    
    11.9
    
    
    Feb. 2003 to Feb. 2008Chien-An Chen
    
    
    451,350
    
    
    *
    
    
    140,000
    
    
    
    11.9
    
    
    Feb. 2003 to Feb. 2008Chien-Hua Chen
    
    
    18,000
    
    
    *
    
    
    42,000
    
    
    
    11.9
    
    
    Feb. 2003 to Feb. 2008Michael Chang
    
    
    56,259
    
    
    *
    
    
    140,000
    
    
    
    11.9
    
    
    Feb. 2003 to Feb. 2008Eva Chen
    
    
    303,152
    
    
    *
    
    
    
    
    
    
    
    
    
    
 
 *
    
    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
  63




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##### Table of Contents



December 31, 2004
    
    December 31, 2005
    
    April 14, 2006(4)Percentage of
    
    
    
    
    
    PercentageNumber of
    
    Shares
    
    Number of
    
    of Shares
    
    Number of
    
    PercentageName of beneficial owner
    
    Shares Owned
    
    Owned
    
    Shares Owned
    
    Owned
    
    Shares Owned
    
    of Shares OwnedCitibank(1)
    
    
    151,548,541
    
    
    
    7.20
    %
    
    
    177,076,825
    
    
    
    7.60
    %
    
    
    419,366,509
    
    
    
    16.73
    %Bough Lin
    
    
    44,479,265
    
    
    
    2.11
    %
    
    
    53,721,979
    
    
    
    2.31
    %
    
    
    60,121,979
    
    
    
    2.40
    %Kuming Investment
Company Ltd.(2)
    
    
    48,583,204
    
    
    
    2.31
    %
    
    
    46,019,524
    
    
    
    1.98
    %
    
    
    49,693,552
    
    
    
    1.98
    %Li-Ping Wang(3)
    
    
    46,241,103
    
    
    
    2.22
    %
    
    
    49,932,821
    
    
    
    2.14
    %
    
    
    49,932,821
    
    
    
    1.99
    %Government of Singapore
Investment Corp. PFE.
Ltd
    
    
    7,409,400
    
    
    
    0.35
    %
    
    
    19,617,600
    
    
    
    0.84
    %
    
    
    40,772,428
    
    
    
    1.63
    %Chi-Wen Tsai
    
    
    34,049,299
    
    
    
    1.62
    %
    
    
    33,059,323
    
    
    
    1.42
    %
    
    
    33,059,323
    
    
    
    1.32
    %Silinconware Investment
Company Ltd.
    
    
    29,717,353
    
    
    
    1.41
    %
    
    
    32,089,876
    
    
    
    1.38
    %
    
    
    32,089,876
    
    
    
    1.28
    %Wen-Lung Lin
    
    
    22,479,000
    
    
    
    1.07
    %
    
    
    29,220,133
    
    
    
    1.25
    %
    
    
    29,220,133
    
    
    
    1.17
    %Chunghwa Post Co., Ltd.
    
    
    36,215,470
    
    
    
    1.72
    %
    
    
    17,436,985
    
    
    
    0.75
    %
    
    
    28,462,888
    
    
    
    1.14
    %Workers Retirement
Fund Supervisory
Committee
    
    
    36,215,470
    
    
    
    1.72
    %
    
    
    17,436,985
    
    
    
    0.75
    %
    
    
    28,462,888
    
    
    
    1.14
    %Directors and
Supervisors as a group
    
    
    25,972,255
    
    
    
    1.23
    %
    
    
    32,836,480
    
    
    
    1.41
    %
    
    
    24,443,294
    
    
    
    0.98
    %
 
 (1)
    
    As record owner of our shares(2)
    
    The president of Kuming Investment Company Ltd. is the husband of Ms. Li-Ping Wang.(3)
    
    Ms. Wangs husband also serves as the president of Kuming Investment Company Ltd.(4)
    
    Our most recent record date.    B. Related Party Transactions
 Related Party Transactions Policies
  64




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##### Table of Contents



Sigurd Microelectronics Corp.
  ChipMOS Technologies Inc.
  
    
    We are obligated under a joint venture agreement with Mosel Vitelic to severally
guarantee up to 30% of ChipMOSs indebtedness if ChipMOS requires a guarantee to secure
financing. We currently do not guarantee any of ChipMOSs indebtedness. Mr. Frank Lee, one
of our officers, is a director of ChipMOS.
 Phoenix Precision Technology Corporation
  
    
    Mr. Bough Lin, our Chairman, Mr.Yen-Chun Chang, one of our officers, and Ms. Teresa
Wang, one of 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 a supervisor of Phoenix Precision. Wen-Lung Cheng,
one of our supervisors, is a supervisor of
Phoenix Precision.
 C. Interests of Experts and Counsel
  
 Item 8. Financial Information
 A. Consolidated Statements and Other Financial Information
  Litigation
  Dividend Policy and Distributions
  65




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##### Table of Contents



Total NumberStock
    
    of Shares
    
    
    
    
    
    
    
    
    
    OutstandingDividend Per
    
    Issued as Stock
    
    
    
    
    
    
    
    
    
    SharesShare(1)
    
    Dividend(2)
    
    Stock Dividend Amount
    
    at Year EndNT$(3)
    
    US$(4)(in thousands)1995
    
    
    40.0
    %
    
    
    70,048,800
    
    
    
    6,059,221
    
    
    
    234,581
    
    
    
    280,668,0001996
    
    
    60.0
    %
    
    
    168,400,800
    
    
    
    6,432,911
    
    
    
    233,245
    
    
    
    457,800,0001997
    
    
    40.0
    %
    
    
    183,120,000
    
    
    
    17,213,280
    
    
    
    618,738
    
    
    
    654,200,0001998
    
    
    36.0
    %
    
    
    235,512,000
    
    
    
    11,752,049
    
    
    
    341,928
    
    
    
    904,162,0001999
    
    
    23.0
    %
    
    
    207,957,260
    
    
    
    12,269,478
    
    
    
    378,805
    
    
    
    1,127,092,4022000
    
    
    14.0
    %
    
    
    157,793,537
    
    
    
    5,964,596
    
    
    
    190,684
    
    
    
    1,449,882,8702001
    
    
    14.5
    %
    
    
    235,421,212
    
    
    
    4,237,582
    
    
    
    122,793
    
    
    
    1,852,761,6832002(5)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,853,668,6832003(6)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,876,625,6832004
    
    
    13.5
    %
    
    
    189,447,578
    
    
    
    3,788,952
    
    
    
    119,375
    
    
    
    2,105,073,0602005
    
    
    15.5
    %
    
    
    168,889,805
    
    
    
    5,733,809
    
    
    
    174,811
    
    
    
    2,328,919,337
 
 (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)
    
    The NT dollar amount of stock dividends paid is calculated based upon the closing price per
Share on the Taiwan Stock Exchange on the date when the Shares issued as stock dividends
commenced trading.(4)
    
    The US dollar amount of stock dividends paid is calculated based upon the noon buying rate
announced by the Federal Reserve Bank of New York on the date when shareholders possessed the
right to ownership of the stock dividends.(5)
    
    We did not declare a dividend in 2002 because we incurred a net loss in 2001.(6)
    
    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. B. Significant Changes
  
 Item 9. The Offer and Listing
 A. Offer and Listing Details
 Market Price Information for Our Shares
  66




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##### Table of Contents



Closing Price forEach Share(1)
    
    
    
    
    
    Taiwan Stock Exchange IndexAverage DailyTradingPeriod
    
    High
    
    Low
    
    Volume
    
    High
    
    Low(in thousands ofNT$
    
    NT$
    
    shares)2000
    
    
    81.5
    
    
    
    17.8
    
    
    
    13,921
    
    
    
    10,202.20
    
    
    
    4,555.912001
    
    
    32.0
    
    
    
    14.0
    
    
    
    16,058
    
    
    
    6,104.24
    
    
    
    3,446.262002
    
    
    39.6
    
    
    
    15.3
    
    
    
    18,277
    
    
    
    6,462.30
    
    
    
    3,850.042003
    
    
    37.4
    
    
    
    15.3
    
    
    
    19,698
    
    
    
    6,182.20
    
    
    
    4,044.732004
    
    
    42.4
    
    
    
    19.8
    
    
    
    20,556
    
    
    
    7,135.00
    
    
    
    5,255.06First Quarter
    
    
    42.4
    
    
    
    31.5
    
    
    
    20,997
    
    
    
    7,135.00
    
    
    
    5,907.15Second Quarter
    
    
    38.2
    
    
    
    21.5
    
    
    
    21,247
    
    
    
    6,916.31
    
    
    
    5,450.72Third Quarter
    
    
    27.5
    
    
    
    19.8
    
    
    
    19,258
    
    
    
    5,970.29
    
    
    
    5,255.06Fourth Quarter
    
    
    28.4
    
    
    
    22.6
    
    
    
    21,036
    
    
    
    6,160.96
    
    
    
    5,597.802005
    
    
    70.8
    
    
    
    21.9
    
    
    
    20,048
    
    
    
    6,267.32
    
    
    
    5,565.41First Quarter
    
    
    29.6
    
    
    
    21.9
    
    
    
    21,717
    
    
    
    6,267.52
    
    
    
    5,734.87Second Quarter
    
    
    32.9
    
    
    
    26.8
    
    
    
    17,325
    
    
    
    6,373.86
    
    
    
    5,715.16Third Quarter
    
    
    35.8
    
    
    
    29.3
    
    
    
    17,502
    
    
    
    6,455.57
    
    
    
    5,925.54Fourth Quarter
    
    
    46.9
    
    
    
    29.1
    
    
    
    25,098
    
    
    
    6,575.53
    
    
    
    5,632.97November
    
    
    35.6
    
    
    
    29.9
    
    
    
    21,249
    
    
    
    6,203.84
    
    
    
    5,798.41December
    
    
    46.9
    
    
    
    35.7
    
    
    
    30,044
    
    
    
    6,575.53
    
    
    
    6,179.822006 (up to June 15)
    
    
    48.5
    
    
    
    36.5
    
    
    
    23,860
    
    
    
    7,474.5
    
    
    
    6,331.81First Quarter
    
    
    48.5
    
    
    
    38.2
    
    
    
    28,477
    
    
    
    6,742.39
    
    
    
    6,364.60January
    
    
    41.9
    
    
    
    48.5
    
    
    
    36,950
    
    
    
    6,742.39
    
    
    
    6,381.97February
    
    
    45.9
    
    
    
    39.9
    
    
    
    28,897
    
    
    
    6,720.08
    
    
    
    6,474.69March
    
    
    42.8
    
    
    
    38.2
    
    
    
    21,537
    
    
    
    6,642.96
    
    
    
    6,364.60Second Quarter (up to June 15)
    
    
    47.2
    
    
    
    36.5
    
    
    
    18,609
    
    
    
    7,474.05
    
    
    
    6,331.81April
    
    
    43.0
    
    
    
    47.1
    
    
    
    19,164
    
    
    
    7,171.77
    
    
    
    6,660.76May
    
    
    47.2
    
    
    
    39.8
    
    
    
    16,970
    
    
    
    7,474.05
    
    
    
    6,843.98June (up to June 15, 2006)
    
    
    37.8
    
    
    
    36.5
    
    
    
    20,780
    
    
    
    6,959.64
    
    
    
    6,331.81
 
 Sources:
    
    Taiwan Stock Exchange Statistical Data 1999-2006, Taiwan Stock Exchange and
Bloomberg.   Market Price Information for Our American Depositary Shares
  Closing Price
    
    Average Dailyfor Each ADS(1)
    
    Trading VolumePeriod
    
    High
    
    LowUS$
    
    US$2000 (from June 7)
    
    
    5.62
    
    
    
    2.18
    
    
    
    431,4332001
    
    
    4.30
    
    
    
    1.88
    
    
    
    247,5422002
    
    
    5.48
    
    
    
    2.23
    
    
    
    394,0062003
    
    
    5.27
    
    
    
    1.98
    
    
    
    730,0262004
    
    
    6.00
    
    
    
    2.83
    
    
    
    1,047,141First Quarter
    
    
    6.00
    
    
    
    4.24
    
    
    
    2,040,297
 67




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##### Table of Contents



Closing Price
    
    Average Dailyfor Each ADS(1)
    
    Trading VolumePeriod
    
    High
    
    LowUS$
    
    US$Second Quarter
    
    
    5.21
    
    
    
    2.83
    
    
    
    1,052,894Third Quarter
    
    
    3.85
    
    
    
    2.84
    
    
    
    551,108Fourth Quarter
    
    
    4.40
    
    
    
    3.23
    
    
    
    544,2672005
    
    
    6.95
    
    
    
    3.08
    
    
    
    719,177First Quarter
    
    
    4.32
    
    
    
    3.08
    
    
    
    461,689Second Quarter
    
    
    4.87
    
    
    
    3.82
    
    
    
    520,471Third Quarter
    
    
    5.38
    
    
    
    4.55
    
    
    
    821,256Fourth Quarter
    
    
    6.95
    
    
    
    4.39
    
    
    
    1,030,962November
    
    
    5.28
    
    
    
    4.50
    
    
    
    877,963December
    
    
    6.95
    
    
    
    5.50
    
    
    
    1,285,5792006 (up to June 15)
    
    
    7.88
    
    
    
    5.45
    
    
    
    1,793,394First Quarter
    
    
    7.88
    
    
    
    6.07
    
    
    
    1,967,287January
    
    
    7.34
    
    
    
    6.81
    
    
    
    1,985,841February
    
    
    7.53
    
    
    
    6.23
    
    
    
    2,080,178March
    
    
    6.86
    
    
    
    6.07
    
    
    
    1,857,895Second Quarter (up to June 15)
    
    
    7.45
    
    
    
    5.45
    
    
    
    1,586,060April
    
    
    7.40
    
    
    
    6.67
    
    
    
    1,841,409May
    
    
    7.45
    
    
    
    6.08
    
    
    
    1,335,540June (up to June 15)
    
    
    6.27
    
    
    
    5.45
    
    
    
    1,646,042
 
 Source:
    
    NASDAQ Stock Exchange.  B. Plan of Distribution
  C. Markets
  D. Selling Shareholders
  E. Dilution
  F. Expenses of the Issue
  
 Item 10. Additional Information
 A. Share Capital
  68




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##### Table of Contents



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
   Shares
  69




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##### Table of Contents



New Shares and Preemptive Rights
  Shareholders
  Transfer of Shares
  70




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##### Table of Contents



Shareholders Meetings
  Voting Rights
     Dividends and Distributions
   71




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##### Table of Contents




    
    allocation of 10% of our net income as legal reserve; and
    
    payment of 2% 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.
  
    
    10% is distributable as bonus shares for employees.
    
    4% is set aside as remuneration of directors and supervisors.
    
    86% is allocated as a dividend to shareholders.
  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.
   72




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##### Table of Contents



Liquidation Rights
  Other Rights of Shareholders
   Voting of Deposited Securities
     
    
    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.
  73




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##### Table of Contents



C. Material Contracts
 Immunity Agreement with Motorola, Inc.
   License Agreement with Flip Chip Technologies, L.L.C.
  Joint Venture Agreement with Mosel Vitelic, Inc.
  D. Exchange Controls
  74




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##### Table of Contents



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 ROC citizen, who owns ADSs and who is not physically
present in the ROC for 183 days or more during any calendar year; or
    
    a corporation or a non-corporate body that is organized under the laws of a
jurisdiction other than the ROC for profit-making purposes and has no fixed place of
business or other permanent establishment in the ROC.
  Dividends
   Capital Gains
  75




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##### Table of Contents



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.
  
    
    a dealer in securities or currencies;
 76




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##### Table of Contents




    
    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.
     Taxation of Dividends
  77




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##### Table of Contents



78




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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.
     
    
    the excess distribution or gain will be allocated ratably over your holding period for
our shares or ADSs;
 79




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##### Table of Contents




    
    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.
        80




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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
   www.sec.gov
 I. Subsidiary Information
  
 Item 11. Quantitative and Qualitative Disclosures About Market Risk
  81




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##### Table of Contents



Foreign Exchange Risk
  Expected Maturity DateExpressed in NT$ amount (in millions)
    
    2006
    
    2007
    
    2008
    
    2009
    
    2010
    
    Thereafter
    
    Total
    
    Fair valueOn-balance sheet financial instrumentsAssetsMarketable SecuritiesTime Deposit (US$)
    
    
    7,799
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,799
    
    
    
    7,799LiabilitiesLong-term Debt:Fixed Rate (US$)
    
    
    
    
    
    
    4,227
    
    
    
    6,560
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,787
    
    
    
    21,574Variable Rate (US$)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Average interest rate
    
    
    
    
    
    
    0
    %
    
    
    0
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0
    %
    
    
    
 Interest Rate Risk
   2010 andDebt Obligations
    
    2006
    
    2007
    
    2008
    
    2009
    
    thereafter(in millions, except percentages)US$-denominated debt:Fix rate
    
    
    
    
    
    
    4,730
    
    
    
    6,580
    
    
    
    
    
    
    
    Interest rate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    NT$-denominated debt:Variable rate
    
    
    1,467
    
    
    
    3,333
    
    
    
    
    
    
    
    
    
    
    
    Average interest rate
    
    
    2.1
    %
    
    
    2.1
    %
    
    
    
    
    
    
    
    
    
    
    Fix rate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Interest rate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    RMB-denominated debt:Variable rate
    
    
    324
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Average interest rate
    
    
    4.7
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Fair value
    
    
    1,791
    
    
    
    10,952
    
    
    
    7,910
    
    
    
    
    
    
    
    
 
 Item 12. Description of Securities Other Than Equity Securities
  82




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##### Table of Contents



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
      
 Item 16A. Audit Committee Financial Expert
  
 Item 16B. Code of Ethics
  83




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##### Table of Contents



Item 16C. Principal Accountant Fees and Services
   2004
    
    
    2005NT$
    
    
    NT$
    
    
    US$(in thousandsAudit Fees (1)
    
    $
    6,683
    
    
    
    7,490
    
    
    
    228.4Audit-related Fees (2)
    
    
    830
    
    
    
    1,231
    
    
    
    37.5Tax Fees (3)
    
    
    900
    
    
    
    900
    
    
    
    27.4All Other Fees (4)
    
    
    404
    
    
    
    140
    
    
    
    4.3Total
    
    $
    8,817
    
    
    
    9,761
    
    
    
    297.6
 
 (1)
    
    Audit fees consist of fees billed for the annual audit of the companys consolidated
financial statements and the statutory financial statements of the companys subsidiaries.
They also include fees billed for other audit services, which are those services that only the
external auditor reasonably can provide, and include the provision of comfort letters and
consents and the review of documents filed with the SEC.(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 the companys financial
statements or that are traditionally performed by the external auditor, and include
consultations concerning financial accounting and reporting standards; internal control
reviews; review of security controls and operational effectiveness of systems.(3)
    
    Tax fees include fees billed for tax compliance services, including the preparation of
original and amended tax returns and claims for refund; tax consultations, such as assistance
and representation in connection with tax audits and appeals, transfer pricing, and requests
for rulings or technical advice from taxing authorities; tax planning services; and expatriate
tax compliance, consultation and planning services.(4)
    
    All other fees include fees billed for occasional training services. 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
  
 PART III
 
 Item 17. Financial Statements
  
 Item 18. Financial Statements
  84




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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, 2003, 2004 and 2005
    
    F-4Consolidated Statements of Income for the Years Ended December 31, 2003, 2004 and 2005
    
    F-6Consolidated Statements of Changes in Stockholders Equity for the Years Ended December
31, 2003, 2004 and 2005
    
    F-8Consolidated Statements of Cash Flows for the Years Ended December 31, 2003, 2004 and 2005
    
    F-10Notes to Consolidated Financial Statements
    
    F-12CHIPMOS TECHNOLOGIES INC.Report of Independent Registered Public Accounting Firm
    
    F-84Consolidated Balance Sheets as of December 31, 2003, 2004, and 2005
    
    F-85Consolidated Statements of Operations for the Years Ended December 31, 2003, 2004 and 2005
    
    F-87Consolidated Statements of Changes in Shareholders Equity for the Years Ended December
31, 2003, 2004 and 2005
    
    F-89Consolidated Statements of Cash Flows for the Years Ended December 31, 2003, 2004 and 2005
    
    F-90Notes to Consolidated Financial Statements
    
    F-92
 85




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##### Table of Contents



Item 19. Exhibit Index
 ExhibitNumber
    
    Description of Exhibits1.1
    
    Articles of Incorporation of Siliconware Precision Industries Co., Ltd. (English translation)(1)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*15.1
    
    Consent of Independent Registered Public Accounting Firm
 
 *
    
    filed herewith.1
    
    Incorporated by reference to Exhibit 3.1 to our Year 2001 Form 20-F filed with the SEC
on June 25, 2002.2
    
    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, 2000.3
    
    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, 2000.4
    
    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, 2000.5
    
    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, 2000.6
    
    Incorporated by reference to Exhibit 11.1 to our Year 2003 Form 20-F filed with the
Commission on June 28, 2004. 86




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##### Table of Contents



SIGNATURES
  SILICONWARE PRECISION INDUSTRIES CO., LTD.By:
    
    /s/ Eva ChenName:
Title:
    
    Eva Chen
Chief Financial OfficerDate:
June 29, 2006
 87




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##### Table of Contents



INDEX TO THE FINANCIAL STATEMENTS
 PageSILICONWARE PRECISION INDUSTRIES CO., LTD.Report of Independent Registered Public Accounting Firm
    
    F-2Consolidated Balance Sheets as of December 31, 2003, 2004 and 2005
    
    F-4Consolidated Statements of Income for the Years Ended December
31, 2003, 2004 and 2005
    
    F-6Consolidated Statements of Changes in Stockholders Equity for
the Years Ended December 31, 2003, 2004 and 2005
    
    F-8Consolidated Statements of Cash Flows for the Years Ended
December 31, 2003, 2004 and 2005
    
    F-10Notes to Consolidated Financial Statements
    
    F-12CHIPMOS TECHNOLOGIES INC.Report of Independent Registered Public Accounting Firm
    
    F-84Consolidated Balance Sheets as of December 31, 2003, 2004 and 2005
    
    F-85Consolidated Statements of Operations for the Years Ended
December 31, 2003, 2004 and 2005
    
    F-87Consolidated Statements of Changes in Shareholders Equity for
the Years Ended December 31, 2003, 2004 and 2005
    
    F-89Consolidated Statements of Cash Flows for the Years Ended
December 31, 2003, 2004 and 2005
    
    F-90Notes to Consolidated Financial Statements
    
    F-92




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F-1




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##### Table of Contents



F-2




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##### Table of Contents



F-3




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
 (EXPRESSED IN THOUSANDS OF DOLLARS)
 December 31,2004
    
    
    2005NT$
    
    
    NT$
    
    
    US$(Note 2)ASSETSCurrent AssetsCash and cash equivalents (Note 4)
    
    $
    10,922,393
    
    
    $
    12,340,833
    
    
    $
    376,245Short-term investments (Note 5)
    
    
    1,942,970
    
    
    
    
    
    
    
    Notes receivable, net
    
    
    72,083
    
    
    
    156,899
    
    
    
    4,784Accounts receivable, net (Notes 6 and 23)
    
    
    5,720,274
    
    
    
    9,516,426
    
    
    
    290,135Other financial assets  current
    
    
    407,087
    
    
    
    823,295
    
    
    
    25,100Inventories (Note 7)
    
    
    1,977,001
    
    
    
    2,805,287
    
    
    
    85,527Deferred income tax assets  current (Note 20)
    
    
    709,093
    
    
    
    759,226
    
    
    
    23,147Other current assets  other
    
    
    533,924
    
    
    
    540,185
    
    
    
    16,46922,284,825
    
    
    
    26,942,151
    
    
    
    821,407Long-term Investments (Note 8)Long-term investments under the equity method
    
    
    3,952,489
    
    
    
    4,653,136
    
    
    
    141,864Long-term investments under the cost method
    
    
    2,863,849
    
    
    
    2,547,540
    
    
    
    77,6696,816,338
    
    
    
    7,200,676
    
    
    
    219,533Property, Plant and Equipment (Notes 9, 24)Cost:Land
    
    
    2,128,476
    
    
    
    2,128,476
    
    
    
    64,892Buildings
    
    
    6,609,819
    
    
    
    7,158,668
    
    
    
    218,252Machinery and equipment
    
    
    34,710,602
    
    
    
    39,596,050
    
    
    
    1,207,197Utility equipment
    
    
    696,662
    
    
    
    785,110
    
    
    
    23,936Furniture and fixtures
    
    
    507,134
    
    
    
    638,432
    
    
    
    19,464Other equipment
    
    
    1,417,708
    
    
    
    1,562,453
    
    
    
    47,63646,070,401
    
    
    
    51,869,189
    
    
    
    1,581,377Accumulated depreciation
    
    
    (19,905,800
    )
    
    
    (23,894,328
    )
    
    
    (728,486
    )Construction in progress and prepayments for equipment
    
    
    1,024,283
    
    
    
    2,277,389
    
    
    
    69,43327,188,884
    
    
    
    30,252,250
    
    
    
    922,324Other AssetsRefundable deposits
    
    
    11,557
    
    
    
    10,112
    
    
    
    308Deferred charges
    
    
    826,984
    
    
    
    804,700
    
    
    
    24,534Deferred income tax asset  noncurrent (Note 20)
    
    
    1,600,223
    
    
    
    1,709,675
    
    
    
    52,124Other assets  other (Note 10)
    
    
    233,529
    
    
    
    255,649
    
    
    
    7,7942,672,293
    
    
    
    2,780,136
    
    
    
    84,760TOTAL ASSETS
    
    $
    58,962,340
    
    
    $
    67,175,213
    
    
    $
    2,048,024
   F-4




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES
 CONSOLIDATED BALANCE SHEETS (CONTINUED)
  December 31,2004
    
    
    2005NT$
    
    
    NT$
    
    
    US$(Note 2)LIABILITIES AND STOCKHOLDERS EQUITYCurrent LiabilitiesShort-term loans
    
    $
    
    
    
    $
    93,768
    
    
    $
    2,859Notes payable
    
    
    984
    
    
    
    5,493
    
    
    
    168Accounts payable (Note 23)
    
    
    2,104,797
    
    
    
    5,124,110
    
    
    
    156,223Income tax payable (Note 20)
    
    
    36,352
    
    
    
    153,016
    
    
    
    4,665Accrued expenses
    
    
    1,077,473
    
    
    
    1,657,575
    
    
    
    50,536Other payables (Note 11)
    
    
    1,508,061
    
    
    
    2,532,728
    
    
    
    77,217Current portion of long-term loans (Notes 12 and 13)
    
    
    4,013,376
    
    
    
    1,790,895
    
    
    
    54,600Other current liabilities
    
    
    51,486
    
    
    
    109,860
    
    
    
    3,3498,792,529
    
    
    
    11,467,445
    
    
    
    349,617Long-term LiabilitiesBonds payable (Note 12)
    
    
    11,533,146
    
    
    
    11,310,300
    
    
    
    344,826Long-term loans (Note 13)
    
    
    5,106,346
    
    
    
    3,333,300
    
    
    
    101,62516,639,492
    
    
    
    14,643,600
    
    
    
    446,451Other Liabilities
    
    
    37,276
    
    
    
    239,161
    
    
    
    7,291Total Liabilities
    
    
    25,469,297
    
    
    
    26,350,206
    
    
    
    803,359Stockholders EquityCapital stock (Notes 1 and 15)
    
    
    21,050,731
    
    
    
    23,289,193
    
    
    
    710,036Capital reserve (Note 16)Additional paid in capital
    
    
    6,339,617
    
    
    
    6,863,226
    
    
    
    209,245Premium arising from merger
    
    
    1,951,563
    
    
    
    1,951,563
    
    
    
    59,499Others
    
    
    14,652
    
    
    
    38,590
    
    
    
    1,177Retained earnings (Note 17)Legal reserve
    
    
    750,886
    
    
    
    1,179,104
    
    
    
    35,948Special reserve
    
    
    
    
    
    
    141,053
    
    
    
    4,300Unappropriated earnings
    
    
    4,320,831
    
    
    
    8,241,034
    
    
    
    251,251Unrealized loss on long-term investment
    
    
    
    
    
    
    (737
    )
    
    
    (22
    )Cumulative translation adjustments
    
    
    (141,053
    )
    
    
    (47,463
    )
    
    
    (1,447
    )Net loss not recognized as pension cost
    
    
    
    
    
    
    (1,828
    )
    
    
    (56
    )Treasury stock (Note 18)
    
    
    (794,184
    )
    
    
    (828,728
    )
    
    
    (25,266
    )Total Stockholders Equity
    
    
    33,493,043
    
    
    
    40,825,007
    
    
    
    1,244,665Commitments and Contingencies (Note 25)TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
    
    $
    58,962,340
    
    
    $
    67,175,213
    
    
    $
    2,048,024
  F-5




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF INCOME
  For the years ended December 31,2003
    
    
    2004
    
    
    2005NT$
    
    
    NT$
    
    
    NT$
    
    
    US$(Note 2)Net Operating Revenues
    
    $
    27,411,427
    
    
    $
    35,252,156
    
    
    $
    43,487,877
    
    
    
    1,325,850Cost of Goods Sold (Note 23)
    
    
    (23,297,669
    )
    
    
    (28,871,540
    )
    
    
    (33,959,940
    )
    
    
    (1,035,364
    )Gross Profit
    
    
    4,113,758
    
    
    
    6,380,616
    
    
    
    9,527,937
    
    
    
    290,486Operating ExpensesSelling expenses
    
    
    (415,433
    )
    
    
    (548,694
    )
    
    
    (565,765
    )
    
    
    (17,249
    )General and administrative expenses
    
    
    (618,397
    )
    
    
    (746,695
    )
    
    
    (855,917
    )
    
    
    (26,095
    )Research and development expenses
    
    
    (559,076
    )
    
    
    (752,473
    )
    
    
    (857,730
    )
    
    
    (26,150
    )(1,592,906
    )
    
    
    (2,047,862
    )
    
    
    (2,279,412
    )
    
    
    (69,494
    )Operating Income
    
    
    2,520,852
    
    
    
    4,332,754
    
    
    
    7,248,525
    
    
    
    220,992Non-operating Income and GainInterest income
    
    
    88,379
    
    
    
    157,015
    
    
    
    304,237
    
    
    
    9,275Investment income accounted for
under the equity method
    
    
    
    
    
    
    307,728
    
    
    
    447,950
    
    
    
    13,657Gain on disposal of investments
    
    
    344,385
    
    
    
    
    
    
    
    
    
    
    
    Others
    
    
    448,763
    
    
    
    575,965
    
    
    
    548,813
    
    
    
    16,732881,527
    
    
    
    1,040,708
    
    
    
    1,301,000
    
    
    
    39,664Non-operating Expenses and LossesInterest expenses
    
    
    (375,111
    )
    
    
    (353,321
    )
    
    
    (241,578
    )
    
    
    (7,365
    )Impairment loss (Note 19)
    
    
    
    
    
    
    
    
    
    
    (163,650
    )
    
    
    (4,989
    )Investment loss accounted for under
equity method
    
    
    (533,061
    )
    
    
    
    
    
    
    
    
    
    
    Others (Note 11)
    
    
    (291,783
    )
    
    
    (1,194,922
    )
    
    
    (535,386
    )
    
    
    (16,323
    )(1,199,955
    )
    
    
    (1,548,243
    )
    
    
    (940,614
    )
    
    
    (28,677
    )Income Before Income Tax
    
    
    2,202,424
    
    
    
    3,825,219
    
    
    
    7,608,911
    
    
    
    231,979Income Tax (Expense) Benefit
(Note 20)
    
    
    636,292
    
    
    
    456,958
    
    
    
    (15,517
    )
    
    
    (473
    )Income from Continuing Operations
    
    
    2,838,716
    
    
    
    4,282,177
    
    
    
    7,593,394
    
    
    
    231,506Cumulative Effects of Changes
in Accounting Principles (Note 3)
    
    
    
    
    
    
    
    
    
    
    650,508
    
    
    
    19,832Net Income
    
    $
    2,838,716
    
    
    $
    4,282,177
    
    
    $
    8,243,902
    
    
    $
    251,338
   F-6




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF INCOME
   For the years ended December 31,2003
    
    
    2004
    
    
    2005NT$
    
    
    NT$
    
    
    NT$
    
    
    US$Basic Earnings Per ShareIncome from continuing operations
    
    $
    1.01
    
    
    $
    1.72
    
    
    $
    3.31
    
    
    $
    0.10Cumulative effects of changes
in accounting principles
    
    
    
    
    
    
    
    
    
    
    0.28
    
    
    
    0.01Net Income (Before Tax)
    
    $
    1.01
    
    
    $
    1.72
    
    
    $
    3.59
    
    
    $
    0.11Net Income (After Tax)
    
    $
    1.30
    
    
    $
    1.93
    
    
    $
    3.59
    
    
    $
    0.11Diluted Earnings Per ShareIncome from continuing operations
    
    $
    0.92
    
    
    $
    1.31
    
    
    $
    3.14
    
    
    $
    0.10Cumulative effects of changes
in accounting principles
    
    
    
    
    
    
    
    
    
    
    0.24
    
    
    
    0.01Net Income (Before Tax)
    
    $
    0.92
    
    
    $
    1.31
    
    
    $
    3.38
    
    
    $
    0.11Net Income (After Tax)
    
    $
    1.18
    
    
    $
    1.51
    
    
    $
    3.38
    
    
    $
    0.11Pro forma information as if the investment gain/loss in equity investees was not deferred in the subsequentNet income
    
    $
    3,493,355
    
    
    $
    4,681,037
    
    
    $
    7,593,394
    
    
    $
    231,506Basic
Earnings Per Share (in dollars)
    
    $
    1.60
    
    
    $
    2.11
    
    
    $
    3.31
    
    
    $
    0.10Diluted Earnings Per Share (in dollars)
    
    $
    1.44
    
    
    $
    1.80
    
    
    $
    3.13
    
    
    $
    0.10
  F-7




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
  UnrealizedCapital Stock Issued
    
    
    
    
    
    
    Retained Earnings
    
    
    Loss on Long -
    
    
    CumulativeShares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Special
    
    
    Unappropriated
    
    
    term
    
    
    Translation(Thousand)
    
    
    Capital Stock
    
    
    Capital Reserve
    
    
    Legal Reserve
    
    
    Reserve
    
    
    Earnings
    
    
    Investments
    
    
    Adjustments
    
    
    Treasury Stock
    
    
    TotalNT$
    
    
    NT$
    
    
    NT$
    
    
    NT$
    
    
    NT$
    
    
    NT$
    
    
    NT$
    
    
    NT$
    
    
    NT$2003Balance at January 1, 2003
    
    
    1,885,174
    
    
    $
    18,851,737
    
    
    $
    8,087,113
    
    
    $
    424,495
    
    
    $
    
    
    
    $
    425,195
    
    
    ($
    302,780
    )
    
    $
    35,683
    
    
    ($
    1,342,891
    )
    
    $
    26,178,552Appropriation for legal reserve
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    42,519
    
    
    
    
    
    
    
    (42,519
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Appropriation for special reserve
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    302,780
    
    
    
    (302,780
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Reversal of unrealized loss on long-term investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    302,780
    
    
    
    
    
    
    
    
    
    
    
    302,780Long-term investment adjustments for investee
companys additional paid in capital
    
    
    
    
    
    
    
    
    
    
    617
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    617Long-term investment adjustments for investee
companys cummulative translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (32,405
    )
    
    
    
    
    
    
    (32,405
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,838,716
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,838,716Transfer of treasury stock to employees
    
    
    
    
    
    
    
    
    
    
    11,380
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    398,569
    
    
    
    409,949Balance at December 31, 2003
    
    
    1,885,174
    
    
    $
    18,851,737
    
    
    $
    8,099,110
    
    
    $
    467,014
    
    
    $
    302,780
    
    
    $
    2,918,612
    
    
    $
    
    
    
    $
    3,278
    
    
    ($
    944,322
    )
    
    $
    29,698,2092004Balance at January 1, 2004
    
    
    1,885,174
    
    
    $
    18,851,737
    
    
    $
    8,099,110
    
    
    $
    467,014
    
    
    $
    302,780
    
    
    $
    2,918,612
    
    
    $
    
    
    
    $
    3,278
    
    
    ($
    944,322
    )
    
    $
    29,698,209Appropriation for legal reserve
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    283,872
    
    
    
    
    
    
    
    (283,872
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Reversal of special reserve to unappropriated earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (302,780
    )
    
    
    302,780
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Remuneration to directors and supervisors
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (57,153
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (57,153
    )Employees cash bonus
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (73,674
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (73,674
    )Employees stock bonus
    
    
    21,050
    
    
    
    210,497
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (210,497
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Cash dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (663,066
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (663,066
    )Stock dividends
    
    
    189,447
    
    
    
    1,894,476
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,894,476
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Conversion of Euro convertible bonds
    
    
    9,402
    
    
    
    94,021
    
    
    
    213,140
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    307,161Long-term investment adjustments for investee
companys additional paid in capital
    
    
    
    
    
    
    
    
    
    
    (10,862
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10,862
    )Long-term investment adjustments for investee
companys cumulative translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (144,331
    )
    
    
    
    
    
    
    (144,331
    )Cash dividends for treasury stock held by subsidiaries
    
    
    
    
    
    
    
    
    
    
    9,455
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,455Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,282,177
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,282,177Transfer of treasury stock to employees
    
    
    
    
    
    
    
    
    
    
    (5,011
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    150,138
    
    
    
    145,127Balance at December 31, 2004
    
    $
    2,105,073
    
    
    $
    21,050,731
    
    
    $
    8,305,832
    
    
    $
    750,886
    
    
    $
    
    
    
    $
    4,320,831
    
    
    $
    
    
    
    ($
    141,053
    )
    
    ($
    794,184
    )
    
    $
    33,493,043
   F-8




---



##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
 (EXPRESSED IN THOUSANDS OF DOLLARS)
 UnrealizedLossCapital Stock Issued
    
    
    
    
    
    
    Retained Earnings
    
    
    on Long-
    
    
    Cumulative
    
    
    Net Loss NotShares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Special
    
    
    Unappropriated
    
    
    term
    
    
    Translation
    
    
    Recognized As(Thousand)
    
    

Capital Stock
    
    
    Capital Reserve
    
    
    Legal Reserve
    
    
    Reserve
    
    
    Earnings
    
    
    Investments
    
    
    Adjustments
    
    
    Pension Cost
    
    
    Treasury Stock
    
    
    TotalNT$
    
    
    NT$
    
    
    NT$
    
    
    NT$
    
    
    NT$
    
    
    NT$
    
    
    NT$
    
    
    NT$
    
    
    NT$
    
    
    NT$2005Balance at January 1, 2005
    
    $
    2,105,073
    
    
    $
    21,050,731
    
    
    $
    8,305,832
    
    
    $
    750,886
    
    
    $
    
    
    
    $
    4,320,831
    
    
    $
    
    
    
    $
    (141,053
    )
    
    $
    
    
    
    $
    (794,184
    )
    
    $
    33,493,043Appropriation for legal reserve
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    428,218
    
    
    
    
    
    
    
    (428,218
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Appropriation for special reserve
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    141,053
    
    
    
    (141,053
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Remuneration to directors and supervisors
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (74,258
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (74,258
    )Employees cash bonus
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (175,927
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (175,927
    )Employees
stock bonus
    
    
    18,766
    
    
    
    187,655
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (187,655
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Cash dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,583,342
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,583,342
    )Stock dividends
    
    
    168,890
    
    
    
    1,688,898
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,688,898
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Unrealized loss on long-term investment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (737
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (737
    )Conversion of Euro convertible bonds
    
    
    26,934
    
    
    
    269,342
    
    
    
    494,719
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    764,061Employee stock option exercised
    
    
    9,257
    
    
    
    92,567
    
    
    
    28,890
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    121,457Long-term investment adjustment for
investee companys additional paid-in capital
    
    
    
    
    
    
    
    
    
    
    1,696
    
    
    
    
    
    
    
    
    
    
    
    (41,705
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (40,009
    )Long-term investment adjustment for investee
companys cumulative translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,643
    )
    
    
    
    
    
    
    93,590
    
    
    
    
    
    
    
    
    
    
    
    90,947Long-term investment adjustment for
investee companys unrecognized pension cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,828
    )
    
    
    
    
    
    
    (1,828
    )Long-term investment adjustment for
investee companys treasury stock variances
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (34,544
    )
    
    
    (34,544
    )Cash dividends for treasury stock held by
subsidiaries
    
    
    
    
    
    
    
    
    
    
    22,242
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    22,242Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,243,902
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,243,902Balance
at December 31, 2005
    
    $
    2,328,919
    
    
    $
    23,289,193
    
    
    $
    8,853,379
    
    
    $
    1,179,104
    
    
    $
    141,053
    
    
    $
    8,241,034
    
    
    $
    (737
    )
    
    $
    (47,463
    )
    
    $
    (1,828
    )
    
    $
    (828,728
    )
    
    $
    40,825,007
  F-9




---



##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (EXPRESSED IN THOUSANDS OF DOLLARS)
 December 31,2003
    
    
    2004
    
    
    2005NT$
    
    
    NT$
    
    
    NT$
    
    
    US$(Note 2)Cash flows from operating activitiesNet income
    
    $
    2,836,716
    
    
    $
    4,282,177
    
    
    $
    8,243,902
    
    
    $
    251,338Adjustments to reconcile net income to net cash provided
by operating activitiesDepreciation
    
    
    4,854,558
    
    
    
    5,727,223
    
    
    
    6,053,840
    
    
    
    184,568Amortization
    
    
    330,768
    
    
    
    425,383
    
    
    
    518,024
    
    
    
    15,793Bad debts expense
    
    
    4,834
    
    
    
    
    
    
    
    2,911
    
    
    
    89Recovery of decline in market value of
short-term investments
    
    
    (6,349
    )
    
    
    (12
    )
    
    
    
    
    
    
    Provision for (recovery of) reserve for sales allowance
    
    
    27,294
    
    
    
    36,082
    
    
    
    (25,457
    )
    
    
    (776
    )Gain on disposal of investments and recovery of decline
in market value of short-term investments
    
    
    (340,950
    )
    
    
    (69,584
    )
    
    
    (37,173
    )
    
    
    (1,133
    )Provision for (recovery of) loss on obsolescence and decline
in market value of inventory
    
    
    (109,910
    )
    
    
    (12,746
    )
    
    
    5,603
    
    
    
    171Long-term investment (income) loss under the equity method
    
    
    313,010
    
    
    
    (307,728
    )
    
    
    (1,098,458
    )
    
    
    (33,490
    )Long-term investment loss under the cost method
    
    
    189,454
    
    
    
    17,803
    
    
    
    39,000
    
    
    
    1,189Impairment loss on long-term investment under the cost
method
    
    
    
    
    
    
    
    
    
    
    163,650
    
    
    
    4,989Cash dividend received from long-term investment under
the equity method
    
    
    12,684
    
    
    
    27,832
    
    
    
    198,805
    
    
    
    6,061Loss on decline in market value upon reclassification of
long-term / short-term investment
    
    
    30,597
    
    
    
    
    
    
    
    
    
    
    
    (Gain) loss on disposal of property, plant and equipment
    
    
    (39,395
    )
    
    
    52,291
    
    
    
    (26,792
    )
    
    
    (817
    )Provision for loss on idle assets
    
    
    131,828
    
    
    
    460,539
    
    
    
    68,766
    
    
    
    2,097Amortization of discount on commercial paper
    
    
    2,762
    
    
    
    
    
    
    
    
    
    
    
    Amortization of discount on long-term notes
    
    
    6,385
    
    
    
    2,367
    
    
    
    1,712
    
    
    
    52Compensation interest on bonds payable
    
    
    204,873
    
    
    
    172,127
    
    
    
    137,367
    
    
    
    4,188Foreign currency exchange loss (gain) on bonds payable
    
    
    (163,751
    )
    
    
    (668,742
    )
    
    
    408,777
    
    
    
    12,463(Gain) loss on redemption of bonds payable
    
    
    
    
    
    
    8,117
    
    
    
    
    
    
    
    Reversal of deferred credit account
    
    
    (23,506
    )
    
    
    
    
    
    
    
    
    
    
    (Increase) decrease in assets:Notes receivable
    
    
    8,706
    
    
    
    46,448
    
    
    
    (84,816
    )
    
    
    (2,586
    )Accounts receivable
    
    
    (1,220,618
    )
    
    
    (405,172
    )
    
    
    (3,767,018
    )
    
    
    (114,848
    )Other financial assets  current
    
    
    17,566
    
    
    
    14,937
    
    
    
    (435,260
    )
    
    
    (13,270
    )Inventories
    
    
    (414,850
    )
    
    
    (68,977
    )
    
    
    (831,822
    )
    
    
    (25,360
    )Other current assets
    
    
    (128,401
    )
    
    
    16,989
    
    
    
    (20,433
    )
    
    
    (623
    )Deferred income tax assets
    
    
    (631,184
    )
    
    
    (464,386
    )
    
    
    (159,586
    )
    
    
    (4,865
    )Increase (decrease) in liabilities:Notes payable
    
    
    1,071,607
    
    
    
    (1,071,912
    )
    
    
    4,509
    
    
    
    137Accounts payable
    
    
    780,972
    
    
    
    (34,962
    )
    
    
    3,020,326
    
    
    
    92,083Income tax payable
    
    
    (9,362
    )
    
    
    (4,256
    )
    
    
    116,664
    
    
    
    3,557Accrued expenses
    
    
    106,157
    
    
    
    255,763
    
    
    
    593,046
    
    
    
    18,081Other payables
    
    
    60,611
    
    
    
    471,388
    
    
    
    61,747
    
    
    
    1,883Other current liabilities
    
    
    148,890
    
    
    
    (168,362
    )
    
    
    60,690
    
    
    
    1,850Other liabilities
    
    
    (1,288
    )
    
    
    (4,987
    )
    
    
    193
    
    
    
    6Accrued pension liabilities
    
    
    
    
    
    
    31,008
    
    
    
    1,900
    
    
    
    58Net cash provided by operating activities
    
    
    8,050,708
    
    
    
    8,766,648
    
    
    
    13,214,617
    
    
    
    402,885
   F-10




---



##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (EXPRESSED IN THOUSANDS OF DOLLARS)
 December 31,2003
    
    
    2004
    
    
    2005NT$
    
    
    NT$
    
    
    NT$
    
    
    US$(Note 2)Cash flows from investing activitiesPayment for pledged time deposits
    
    $
    (44,800
    )
    
    $
    (503,500
    )
    
    $
    (405,839
    )
    
    $
    (12,373
    )Refund of pledged time deposits
    
    
    304,400
    
    
    
    425,300
    
    
    
    440,134
    
    
    
    13,419Purchase of short-term investments
    
    
    
    
    
    
    (4,759,999
    )
    
    
    (4,774,000
    )
    
    
    (145,549
    )Proceeds from disposal of short-term investments
    
    
    54,097
    
    
    
    2,830,000
    
    
    
    6,730,250
    
    
    
    205,191Purchase of long-term investments
    
    
    (219,292
    )
    
    
    (265,156
    )
    
    
    (6,334
    )
    
    
    (193
    )Proceeds on capital reduction from equity investee
    
    
    
    
    
    
    16,900
    
    
    
    
    
    
    
    Purchase of long-term investments in bonds
    
    
    (295,000
    )
    
    
    
    
    
    
    
    
    
    
    Proceeds from disposal of long-term investments
    
    
    1,155,114
    
    
    
    736,118
    
    
    
    303,477
    
    
    
    9,252Acquisition of property, plant and equipment
    
    
    (4,884,707
    )
    
    
    (9,784,816
    )
    
    
    (8,244,928
    )
    
    
    (251,370
    )Proceeds from disposal of property, plant and equipment
    
    
    116,853
    
    
    
    259,587
    
    
    
    58,090
    
    
    
    1,771Payment for deferred charges
    
    
    (380,103
    )
    
    
    (578,977
    )
    
    
    (502,050
    )
    
    
    (15,306
    )Payment for refundable deposits
    
    
    (2,094
    )
    
    
    (1,825
    )
    
    
    (1,151
    )
    
    
    (35
    )Proceeds from refundable deposits
    
    
    4,995
    
    
    
    5,995
    
    
    
    5,394
    
    
    
    164Acquisition of other assets
    
    
    (37,416
    )
    
    
    
    
    
    
    
    
    
    
    Proceeds from disposal of other assets
    
    
    12
    
    
    
    
    
    
    
    
    
    
    
    Net cash used in investing activities
    
    
    (4,227,941
    )
    
    
    (11,620,373
    )
    
    
    (6,396,957
    )
    
    
    (195,029
    )Cash flows from financing activitiesProceeds from short-term loans
    
    
    2,875,700
    
    
    
    
    
    
    
    93,768
    
    
    
    2,859Repayment of short-term loans
    
    
    (3,177,700
    )
    
    
    
    
    
    
    
    
    
    
    Proceeds from issuance of commercial paper
    
    
    2,397,441
    
    
    
    
    
    
    
    
    
    
    
    Repayment of commercial paper
    
    
    (2,900,000
    )
    
    
    
    
    
    
    
    
    
    
    Proceeds from long-term loans
    
    
    5,128,639
    
    
    
    6,300,000
    
    
    
    
    
    
    
    Repayment of long-term loans
    
    
    (2,329,760
    )
    
    
    (9,149,169
    )
    
    
    (3,216,965
    )
    
    
    (98,078
    )Proceeds from issuance of bonds payable
    
    
    
    
    
    
    6,646,000
    
    
    
    
    
    
    
    Proceeds from deposit-in
    
    
    334
    
    
    
    110
    
    
    
    200,990
    
    
    
    6,128Repayment of deposit-in
    
    
    (371
    )
    
    
    
    
    
    
    (1,045
    )
    
    
    (32
    )Increase (decrease) in deferred credit accounts
    
    
    4,028
    
    
    
    (5,562
    )
    
    
    
    
    
    
    Proceeds from the exercise of employee stock option
    
    
    
    
    
    
    
    
    
    
    121,457
    
    
    
    3,703Redemption of bonds payable
    
    
    
    
    
    
    (1,483,391
    )
    
    
    (800,000
    )
    
    
    (24,390
    )Proceeds from disposal of treasury stock
    
    
    409,877
    
    
    
    145,128
    
    
    
    
    
    
    
    Remuneration to directors and supervisors
    
    
    
    
    
    
    (57,153
    )
    
    
    (74,258
    )
    
    
    (2,264
    )Remuneration
of employees cash bonuses and dividents
    
    
    
    
    
    
    (736,712
    )
    
    
    (1,759,232
    )
    
    
    (53,635
    )Net cash provided by (used in) financing activities
    
    
    2,408,188
    
    
    
    1,659,251
    
    
    
    (5,435,285
    )
    
    
    (165,709
    )Effect on foreign currency exchange
    
    
    
    
    
    
    (85,734
    )
    
    
    36,065
    
    
    
    1,100Net (decrease) increase in cash and cash equivalents
    
    
    6,230,955
    
    
    
    (1,280,208
    )
    
    
    1,418,440
    
    
    
    43,245Cash and cash equivalents at beginning of year
    
    
    5,969,646
    
    
    
    12,202,601
    
    
    
    10,922,393
    
    
    
    333,000Cash and cash equivalents at end of year
    
    $
    12,200,601
    
    
    $
    10,922,393
    
    
    $
    12,340,833
    
    
    $
    376,245Supplemental disclosures of cash flow information:Cash paid for interest (excluding capitalized interest)
    
    $
    170,287
    
    
    $
    324,148
    
    
    $
    162,849
    
    
    $
    4,965Cash paid for income tax
    
    $
    5,279
    
    
    $
    17,242
    
    
    $
    14,978
    
    
    $
    457Supplemental disclosures of partial cash paid for investing
activitiesAcquisition of property, plant and equipment
    
    $
    5,572,254
    
    
    $
    9,320,818
    
    
    $
    9,200,968
    
    
    $
    280,516Add: Payable at beginning of the year
    
    
    482,790
    
    
    
    1,170,337
    
    
    
    706,339
    
    
    
    21,535Less: Payable at end of the year
    
    
    (1,170,337
    )
    
    
    (706,339
    )
    
    
    (1,662,379
    )
    
    
    251,370Cash paid
    
    $
    4,884,707
    
    
    $
    9,784,816
    
    
    $
    8,244,928
    
    
    $
    553,421
  F-11




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SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (EXPRESSED IN THOUSANDS OF DOLLARS, EXCEPT EARNINGS PER SHARE)
 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 (ROC) in May 1984
and was listed on the Taiwan Stock Exchange in April 1993. As of December 31, 2005, issued
common stock was $23,289,193. The Company is mainly engaged in the assembly, testing and
turnkey services of integrated circuits. As of December 31, 2005, the Company has 12,971
employees.
 Consolidated subsidiaries
 % of shares heldby the CompanyName of investor
    
    Name of subsidiaries
    
    Main operating activities
    
    as of December 31, 2005The Company
    
    Siliconware Investment
Company Ltd.
    
    Investment activities
    
    
    100
    %The Company
    
    SPIL (B.V.I.)
Holding Limited
    
    Investment activities
    
    
    100
    %SPIL (B.V.I.)
Holding Limited
    
    Siliconware USA, Inc.
    
    Providing promotion and
marketing services
    
    
    100
    %SPIL (B.V.I.)
Holding Limited
    
    SPIL (Cayman)
Holding Limited
    
    Investment activities
    
    
    100
    %SPIL (Cayman)
Holding Limited
    
    Siliconware Technology
(Suzhou) Limited
    
    Manufacturing of
memory card, DRAM
module, transistor and
electronic component
    
    
    100
    %
 Non-consolidated subsidiaries
  Summary of Significant Accounting Policies
  F-12




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SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (EXPRESSED IN THOUSANDS OF DOLLARS, EXCEPT EARNINGS PER SHARE)
  Basis of Consolidation
  Use of Estimates
  Translation of Foreign Currency Transactions on Subsidiaries Financial Statements
  Foreign Currency Transactions
  F-13




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SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (EXPRESSED IN THOUSANDS OF DOLLARS, EXCEPT EARNINGS PER SHARE)
  Convenience Translation into US Dollars
  Cash and Cash Equivalents
  Short-term Investments
  Allowance for Doubtful Accounts
 F-14




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SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (EXPRESSED IN THOUSANDS OF DOLLARS, EXCEPT EARNINGS PER SHARE)
  Allowance for Sales Discounts
  Inventories
  Long-term Investments
 A.
    
    Long-term equity investments in which the Company owns less than 20% of the voting
rights of and has no significant influence over the investee companies are accounted for
(a) at cost, if the investee company is not listed or (b) at the lower of cost or market
value, if the investee company is listed. Valuation allowance for the unrealized loss
under this method is shown in the stockholders equity. When it becomes evident that there
has been a permanent impairment in value and the chance of recovery is minimal, loss is
recognized in the current year. However, if there is evidence that the Company has
significant influence over the investee company, the investment is accounted for under the
equity method.B.
    
    Long-term equity investments in which the Company owns at least 20% of the voting
rights of the investee companies are accounted for under the equity method, unless the
Company cannot exercise significant influence over the investee company, under which
circumstance, the investment is accounted for as indicated in A above. The excess of the
acquisition cost over the investees net book value is capitalized and amortized over 10
years.
 F-15




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (EXPRESSED IN THOUSANDS OF DOLLARS, EXCEPT EARNINGS PER SHARE)
 C.
    
    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 or expense
over the assets economic service lives. Profit (loss) from other types of intercompany
transactions is recognized when realized.D.
    
    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 first to capital reserve. If capital reserve account is
insufficient, the effect is then charged to retained earnings.E.
    
    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 Adjustment. in the
stockholders equity.F.
    
    When the Companys equity-method investees are merged, the carrying amount of the
long-term investment in the acquired company is treated as the cost, while the market value
at the acquisition date of the newly issued stocks of the acquiring company is treated as
an addition to the long-term investment in the acquiring company. The difference is
recognized as gain or loss in the current year.
 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 one 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
35 to 55 years.
 F-16




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SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (EXPRESSED IN THOUSANDS OF DOLLARS, EXCEPT EARNINGS PER SHARE)
 C.
    
    Maintenance and repairs are expensed as incurred. Significant renewals and
improvements are capitalized and depreciated accordingly. When fixed assets are disposed
of, their original cost and accumulated depreciation are removed from the corresponding
accounts with gain or loss recorded as non-operating income or loss.D.
    
    Idle assets are stated at the lower of book value or net realizable value and are
reclassified to other assets.E.
    
    According to the regulation of the Peoples Republic of China, depreciation of the
property, plant and equipment of Siliconware Technology is provided on the straight-line
method over 5 years with one-tenth of the cost as salvage value.
 Deferred Charges
  Land Use Right
  Convertible Bonds
 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 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 is credited to capital reserve; no gain or loss is recognized on bond conversion.
 F-17




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SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (EXPRESSED IN THOUSANDS OF DOLLARS, EXCEPT EARNINGS PER SHARE)
 C.
    
    The related issuance costs for convertible bonds are recorded as deferred charges, and
are 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.E.
    
    The convertible bonds with redemption options are classified as current or non-current
liabilities based on the date of redemption.
 Pension Cost
  Income Tax
 A.
    
    In accordance with ROC FAS No. 22, Accounting for Income Taxes, the income tax effect
resulting from temporary differences and investment tax credits is recorded as income tax
assets or liabilities using the asset and liability method. Deferred tax assets or
liabilities are further classified as 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.
 F-18




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SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (EXPRESSED IN THOUSANDS OF DOLLARS, EXCEPT EARNINGS PER SHARE)
 B.
    
    The Company adopted ROC FAS No. 12 Accounting for Investment Tax Credits in
determining the investment tax credit. The investment tax credits relating to the
acquisition cost of qualifying machinery and technology, qualifying research and
development expenditure, qualifying personnel training expenditure and qualifying
investments in significant technology companies are recognized as income tax adjustment in
the period the tax credits arise.C.
    
    Over or under provisions of prior years income tax liabilities are included in the
current years income tax expense.D.
    
    The Taiwan imputation tax system requires that any undistributed earnings be subject to
an additional 10% corporate income tax, which is recognized as expense at the time the
stockholders resolve to retain the earnings.
 Revenue Recognition
  Research and Development
  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
stockholders 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.
 F-19




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (EXPRESSED IN THOUSANDS OF DOLLARS, EXCEPT EARNINGS PER SHARE)
 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 after considering the retroactive effect of
stock dividend, capitalization of capital reserve, and stock bonus to employees. Diluted
earnings per share is calculated by taking into consideration additional common shares that
would have been outstanding if the dilutive potential common shares had been issued.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.
 Impairment loss
 A.
    
    The Company recognizes impairment loss whenever 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 and value in use. Net selling price is the amount
obtainable from the sale of an asset in an arms-length transaction between knowledgeable,
willing parties, after deducting any direct incremental disposal costs. The value in use
is the present value of estimated future cash flows expected to arise from continuing use
of an asset and from its disposal at the end of its useful life.B.
    
    An impairment loss recognized in prior years is reversed if there has been a change in
the estimates used to determine recoverable amount since the last impairment loss was
recognized, or the impairment loss caused by a specific external event of an exceptional
nature that is not expected to recur. However, an impairment loss is reversed only to the
extent that it does not increase the carrying amount of an asset above the carrying amount
that would have been determined for the asset (net of amortization or depreciation) had no
impairment loss been recognized in prior years. Impairment loss for goodwill is not
reversed.
 Effects of Changes in Accounting Principle
 F-20




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SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (EXPRESSED IN THOUSANDS OF DOLLARS, EXCEPT EARNINGS PER SHARE)
 A.
    
    Effective January 1, 2005, the Company adopted Statement of Financial Accounting
Standards No. 35 Accounting for Impairment of Assets in the Republic of China. The
adoption of this new accounting principle resulted in a decrease in the Companys total
assets, shareholders equity and net income by $163,650 as of December 31, 2005 and for the
year then ended. The basic earnings per share was therefore decreased by $0.07.B.
    
    Effective January 1, 2005, the Company ceased to delay in recognizing investment income
(loss) from certain equity-method investees in accordance with the amended Statement of
Financial Accounting Standards No. 5 Accounting for Long-term Equity Investment in the
Republic of China. The cumulative effect attributable to this change in accounting
principle for the year ended December 31, 2005 was $650,508, which was based on the
investees financial statements for the year ended December 31, 2004.
 December 31,2004
    
    
    2005NT$
    
    
    NT$CashCash on hand
    
    $
    1,293
    
    
    $
    1,809Savings accounts
    
    
    610,091
    
    
    
    3,064,569Checking accounts
    
    
    (653,132
    )
    
    
    10,092Time deposits
    
    
    7,498,947
    
    
    
    9,264,3637,457,199
    
    
    
    12,340,833Cash equivalentNotes with re-purchase options
    
    
    158,300
    
    
    
    Commercial paper
    
    
    3,306,894
    
    
    
    $
    10,922,393
    
    
    $
    12,340,833
 Cash and Cash Equivalents
 A.
    
    As of December 31, 2005 and 2004, the interest rates for time deposits ranged from
0.85% to 4.36% and from 0.8% to 2.53%, respectively.B.
    
    As of December 31, 2004, checking accounts had credit balance because the Company
credited checking accounts based on the due date of the notes payable issued while the
notes payable were still uncashed.
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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (EXPRESSED IN THOUSANDS OF DOLLARS, EXCEPT EARNINGS PER SHARE)
 Short-term Investment
 December 31,2004
    
    
    2005NT$
    
    
    NT$Investment in bond fund
    
    $
    1,942,970
    
    
    $
    
 Accounts Receivable
 December 31,2004
    
    
    2005NT$
    
    
    NT$Accounts receivable
    
    $
    5,822,281
    
    
    $
    9,595,886Less: Allowance for sales discounts
    
    
    (92,638
    )
    
    
    (67,180
    )Allowance for doubtful accounts
    
    
    (9,369
    )
    
    
    (12,280
    )$
    5,720,274
    
    
    $
    9,516,426
 Inventories
 December 31,2004
    
    
    2005NT$
    
    
    NT$Raw materials and supplies
    
    $
    1,675,384
    
    
    $
    2,418,288Work in process
    
    
    211,004
    
    
    
    336,923Finished goods
    
    
    136,062
    
    
    
    100,7692,022,450
    
    
    
    2,855,980Less: Allowance for loss on obsolescence and
decline in market value of inventory
    
    
    (45,449
    )
    
    
    (50,693
    )$
    1,977,001
    
    
    $
    2,805,287
 F-22




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SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (EXPRESSED IN THOUSANDS OF DOLLARS, EXCEPT EARNINGS PER SHARE)
 Long-term Investments
 A.
    
    Details of long-term investments were summarized as follows:
 December 31,2004
    
    
    2005% of
    
    
    

    
    
    % ofInvestee company
    
    Amount

    
    
    ownership
    
    
    Amount

    
    
    ownershipNT$
    
    
    

    
    
    NT$Equity methods:Sigurd Microelectronics Corp.
    
    $
    617,264
    
    
    
    24.75
    %
    
    $
    728,199
    
    
    
    24.03
    %Double Win Enterprise Co., Ltd.
    
    
    101,712
    
    
    
    24.14
    %
    
    
    84,450
    
    
    
    24.14
    %ChipMOS Technologies Inc.
    
    
    2,995,619
    
    
    
    28.73
    %
    
    
    3,924,937
    
    
    
    28.75
    %Universal Communication Technology Inc.
    
    
    237,894
    
    
    
    42.82
    %
    
    
    
    
    
    
    Artest Corporation
    
    
    
    
    
    
    30.09
    %
    
    
    
    
    
    
    30.09
    %3,952,489
    
    
    
    
    
    
    
    4,737,586Less : Accumulated impairment loss
    
    
    
    
    
    
    
    
    
    
    (84,450
    )3,952,489
    
    
    
    
    
    
    
    4,653,136Cost methods:Phoenix Precision Technology Corporation
    
    
    1,429,939
    
    
    
    18.03
    %
    
    
    1,468,939
    
    
    
    17.56
    %ThaiLin Semiconductor Corp.
    
    
    190,512
    
    
    
    3.15
    %
    
    
    
    
    
    
    King Yuan Electronics Co., Ltd.
    
    
    910,270
    
    
    
    9.08
    %
    
    
    910,270
    
    
    
    8.77
    %Others
    
    
    333,128
    
    
    
    
    
    
    
    168,331
    
    
    
    2,863,849
    
    
    
    
    
    
    
    2,547,540$
    6,816,338
    
    
    
    
    
    
    $
    7,200,676
 B.
    
    The recognition of investment income (loss) for ChipMOS Technologies Inc. (ChipMOS),
an investee accounted for under the equity method, was based on the financial statements
of the investee for the same period in 2001 and before. Commencing from January 1, 2002,
with the approval from ROC SFB, recognition of investment income (loss) has been delayed
until the subsequent year. Therefore, the Company recognized investment loss of
NT$365,669 and investment income of NT$247,238 for the years ended December 31, 2003 and
2004, based on ChipMOSs audited financial statements for the years ended December 31,
2002 and 2003, respectively. Commencing from January 1, 2005, the Company ceased to delay
in recognition of investment income. Therefore, the Company recognized investment income
of NT$432,715 for the year ended December 31, 2005. The deferred recognition of the
investment income of NT$667, 770, which was based on ChipMOSs audited financial
statements for the year ended December 31, 2004, was added to the cumulative effects of
changes in accounting principles in 2005 in accordance with SFAS No.5.
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SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (EXPRESSED IN THOUSANDS OF DOLLARS, EXCEPT EARNINGS PER SHARE)
 C.
    
    During 2002, the Company made an investment in Universal
Communication Technology Inc. (Universal), an investee accounted for under the equity method. The
Companys investment in Universal consists of cumulative preferred stock and common stock,
both with voting right. The holders of the preferred stock are entitled to receive
cumulative dividends at the rate of 10% per annum. In the event of any liquidation of the
investee, the holders of the preferred stock shall be entitled to receive, in preference
to the holders of the common stock, an amount equal to original investment amount plus any
undeclared and unpaid dividends. The recognition of investment income (loss) for
Universal has been delayed until the subsequent year. Commencing from January 2003, the
Company recognizes the investment income for Universal based on the financial statements
of the investee for the same period. For the years ended December 31, 2003 and 2004, the
Company recognized investment income of NT$15,471 and NT$7,600 for preferred stock in
accordance with the preference of the preferred stock of Universal. As for the common
stock investment in Universal, in 2003, the investment loss of $62,135 was recognized
based on the audited financial statements of Universal for the years ended December 31,
2003 and 2002. In 2004, the investment loss of $23,825 for common stock was recognized
based on Universals audited financial statements for the year ended December 31, 2004.
At March 1, 2005, Universal merged with Sigurd Microelectronics Corp. (Sigurd).
Universal was dissolved as a result of this transaction and the Company obtained 6,595
thousand shares of Sigurds common shares. For the three months ended March 31, 2005, the
investment loss of $9,775 was recognized based on Universals unaudited financial
statements for the two months ended February 28, 2005.D.
    
    Recognition of investment income has been consistently delayed until the subsequent
year for Taiwan Hi-tech Corporation and Double Win Enterprise Co., Ltd. Accordingly, the
combined investment income of NT$3,000 and NT$4,585 in these two companies for the years
ended December 31, 2003 and 2004, were based on the audited financial statements of the
investee companies for the years ended December 31, 2002 and 2003, respectively. The
deferred recognition of the investment loss of NT$17,262 from Double Wins 2004 financial
results was added to the cumulative effects of changes in accounting principles in 2005.E.
    
    For the years ended December 31, 2003, 2004 and 2005, the Company recognized
investment income (loss) of NT$69,560, NT$(11,523) and NT$62,563, respectively, for all
other investees accounted for under the equity method based on investees audited
financial statements for the same periods.F.
    
    For Artest Corporation, the Company owns non-cumulative preferred stock with voting
right. According to ROC FAS No. 5, Accounting For Long-term Investments, the
recognition of investment income (loss) for investments in preferred stock are based
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SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (EXPRESSED IN THOUSANDS OF DOLLARS, EXCEPT EARNINGS PER SHARE)
   December 31 , 2004AccumulatedCost
    
    
    depreciation
    
    
    Book valueNT$
    
    
    NT$
    
    
    NT$Land
    
    $
    2,128,476
    
    
    $
    
    
    
    $
    2,128,476Buildings
    
    
    6,609,819
    
    
    
    (1,384,875
    )
    
    
    5,224,944Machinery and equipment
    
    
    34,710,602
    
    
    
    (17,251,132
    )
    
    
    17,459,470Utility equipment
    
    
    696,662
    
    
    
    (299,735
    )
    
    
    396,927Furniture and fixtures
    
    
    507,134
    
    
    
    (273,446
    )
    
    
    233,688Other equipment
    
    
    1,417,709
    
    
    
    (696,612
    )
    
    
    721,097Construction in progress and
prepayments for equipment
    
    
    1,024,282
    
    
    
    
    
    
    
    1,024,282$
    47,094,684
    
    
    $
    (19,905,800
    )
    
    $
    27,188,884
 December 31 , 2005AccumulatedCost
    
    
    depreciation
    
    
    Book valueNT$
    
    
    NT$
    
    
    NT$Land
    
    $
    2,128,476
    
    
    $
    
    
    
    $
    2,128,476Buildings
    
    
    7,158,668
    
    
    
    (1,735,422
    )
    
    
    5,423,246Machinery and equipment
    
    
    39,596,050
    
    
    
    (20,639,321
    )
    
    
    18,956,729Utility equipment
    
    
    785,110
    
    
    
    (362,988
    )
    
    
    422,122Furniture and fixtures
    
    
    638,432
    
    
    
    (338,418
    )
    
    
    300,014Other equipment
    
    
    1,562,453
    
    
    
    (818,179
    )
    
    
    744,274Construction in progress and
prepayments for equipment
    
    
    2,277,389
    
    
    
    
    
    
    
    2,277,389$
    54,146,578
    
    
    
    ($23,894,328
    )
    
    $
    30,252,250
 For the years ended December 31, 2003, 2004 and 2005, total interest expense amounted to
NT$414,607, NT$364,347 and NT$261,252, respectively, of which NT$39,496, NT$11,026 and
NT$19,674 was capitalized to property, plant and equipment. The interest rates used to
calculate the capitalized interest were ranged from 2.92% to 4.54%, 0.73% and 1.22 % in the
respective periods.
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SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (EXPRESSED IN THOUSANDS OF DOLLARS, EXCEPT EARNINGS PER SHARE)
 Other Assets  Others
 December 31,2004
    
    
    2005NT$
    
    
    NT$Land
    
    $
    108,087
    
    
    $
    108,087Land use right
    
    
    86,961
    
    
    
    90,778Others
    
    
    38,481
    
    
    
    56,784$
    233,529
    
    
    $
    255,649
 The Company designated one of its officers to purchase the parcel of land, Da-Pu-Chu No.
123-2, and registered the title of the land under the officers personal name. As of
December 31, 2005, the land purchase has been completed and payments been made in full.
The Company has entered into a trust contract with the designated officer, which provides
the Company with land use right for nil consideration. The trust contract prohibits the
title owner from transferring the land and/or land use right under any circumstances.
 Other Payables
 December 31,2004
    
    
    2005NT$
    
    
    NT$Payables for equipment
    
    $
    706,339
    
    
    $
    1,662,380Accrued value-added tax payable
    
    
    468,000
    
    
    
    232,307Other payables
    
    
    333,722
    
    
    
    638,041$
    1,508,061
    
    
    $
    2,532,728
 The accrued value-added tax payable was due to certain revenues previously applied zero
percent of value-added tax deemed taxable by the Tax Authority. The case has been closed.
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SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (EXPRESSED IN THOUSANDS OF DOLLARS, EXCEPT EARNINGS PER SHARE)
 Bonds Payable
 December 31,2004
    
    
    2005NT$
    
    
    NT$Euro convertible bonds payable
    
    $
    11,121,558
    
    
    $
    10,819,494Secured bonds payable
    
    
    800,000
    
    
    
    Add: Compensation interest payable
    
    
    411,588
    
    
    
    490,80612,333,146
    
    
    
    11,310,300Less: Current portion of long-term
bonds payable
    
    
    (800,000
    )
    
    
    $
    11,533,146
    
    
    $
    11,310,300
 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 (thousands) listed on the
Luxembourg Stock Exchange. Major terms of the issue are as follows:
 (1)
    
    The Company may redeem the bonds at any time on or after July 29, 2004 and
prior to December 29, 2006 at their principal amount together with accrued interest,
if (i) the market price of the shares of the Company for 20 out of 30 consecutive
trading days is at least 130% of the conversion price or (ii) at least 90% in
principal amount of the bonds has already been redeemed, repurchased and cancelled or
converted.(2)
    
    Redemption at the option of the bondholders:The Company will, at the option of the bondholders, redeem such bonds on July 28, 2004
at 105.9185% of its principal amount, or on January 28, 2007 at 111.837% of its
principal amount.(3)
    
    Conversion period:At any time between April 16, 2002 and December 29, 2006.(4)
    
    Conversion price and adjustment:The conversion price was established on the issuance date at NT$32.9 (in dollars) per
share. The conversion price is subject to adjustment for bonus issues, right issues,
distributions of cash and stock dividends and other dilutions. As of December 31,
2005, the conversion price was NT$27.27 (in dollars) per share.
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SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (EXPRESSED IN THOUSANDS OF DOLLARS, EXCEPT EARNINGS PER SHARE)
 (5)
    
    As of December 31, 2005, the convertible bonds with the principal amount of
US$30,155 (in thousands) have been converted into 36,336 thousand shares, which
resulted in an increase of capital reserve of $707,858. Also, as of December 31,
2005, the Company repurchased and cancelled the bonds with the principal amount of
US$40,985 (in thousands) from open market.
 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 (thousands) listed on
the Luxembourg Stock Exchange. Major terms of the issue are as follows:
 (1)
    
    The Company may redeem the bonds at any time on or after February 5, 2006
and prior to January 29, 2009 at their principal amount, if (i) the market price of
the shares of the Company for 20 out of 30 consecutive trading days is at least 120%
of the conversion price or (ii) at least 90% in principal amount of the bonds has
already been redeemed, repurchased and cancelled or converted.(2)
    
    Redemption at the option of the bondholders:The Company will, at the option of the bondholders, redeem such bonds on February 5,
2008 at the principal amount.(3)
    
    Conversion period:At any time between March 17, 2004 and January 29, 2009.(4)
    
    Conversion price and adjustment:The conversion price was established on the issuance date at NT$47.035 (in dollars)
per share. The conversion price will be subject to adjustment for bonus issues,
right issues, distributions of cash and stock dividends and other dilutions. As of
December 31, 2005, the conversion price was NT$39.10 (in dollars) per share.
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SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (EXPRESSED IN THOUSANDS OF DOLLARS, EXCEPT EARNINGS PER SHARE)
 Long-term Loans
 December 31,Nature of loans
    
    
    Repayment period
    
    2004
    
    
    2005NT$
    
    
    NT$Credit loans
    
    Repayable in 3 semi-annual
installments from July 2006
    
    $
    4,800,000
    
    
    $
    4,800,000Secured loans
    
    Repayable in 8 semi-annual installments
from April 2002
    
    
    236,000
    
    
    
    Secured loans
    
    Repayable in January 2005
    
    
    1,170,000
    
    
    
    Commercial papers
    
    Repayable in January 2005
    
    
    1,500,000
    
    
    
    Commercial papers
    
    Repayable in 7 semi-annual
installments from April 2002
    
    
    250,000
    
    
    
    Credit loans
    
    Repayable in October and November 2005
    
    
    57,376
    
    
    
    Credit loans
    
    Repayable in February to July 2006
    
    
    308,058
    
    
    
    324,1958,321,434
    
    
    
    5,124,195Less: Current portion of long-term loans
    
    
    (3,213,376
    )
    
    
    (1,790,895
    )Discount on commercial paper
    
    
    (1,712
    )
    
    
    $
    5,106,346
    
    
    $
    3,333,300Interest rates
    
    
    
    
    1.79% ~5.18
    %
    
    
    2.06%~5.18
    %
  Pension Plan and Net Pension Cost
 A.
    
    In accordance with the Labor Standards Act, SPIL 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 Act after the enforcement of the Act. Under
the funding policy of the plan, SPIL 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 Central Trust of China, the custodian. Pension benefits are generally based on service
years (two units earned per year for the first 15 years of service and one unit earned for
each additional year of service with a maximum of 45 units). One unit represents the
six-month average wages and salaries before retirement of the employees. Retirement
benefits are paid form the pension fund.
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SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (EXPRESSED IN THOUSANDS OF DOLLARS, EXCEPT EARNINGS PER SHARE)
 B.
    
    In accordance with the Labor Pension Act, effective from 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 cost amounting to $101,629 was recognized for the
six months ended December 31, 2005.C.
    
    The following tables set forth the actuarial assumptions, funded status and amounts
recognized for SPILs defined benefit pension plan:
 (1)
    
    Assumptions used in actuarial calculations as of December 31, 2003, 2004 and
2005:
 2003
    
    
    2004
    
    
    2005Discount rate
    
    
    4.00
    %
    
    
    2.50
    %
    
    
    3.00
    %Long-term rate of compensation increase
    
    
    2.00
    %
    
    
    2.00
    %
    
    
    2.00
    %Expected rate on plan assets
    
    
    4.00
    %
    
    
    2.50
    %
    
    
    3.00
    %
 2004
    
    
    2005NT$
    
    
    NT$Vested benefit
    
    $
    (13,499
    )
    
    $
    (19,968
    )Vested benefit obligation
    
    $
    (13,157
    )
    
    $
    (19,444
    )Accumulated benefit obligation
    
    $
    (779,075
    )
    
    $
    (903,265
    )
 (2)
    
    Changes in benefit obligation during the years ended December 31, 2004 and 2005:
 2004
    
    
    2005NT$
    
    
    NT$Projected benefit obligation at beginning of year
    
    $
    (1,046,896
    )
    
    $
    (1,041,495
    )Service cost
    
    
    (145,610
    )
    
    
    (85,852
    )Interest cost
    
    
    (26,172
    )
    
    
    (32,987
    )Loss on projected benefit obligation
    
    
    175,500
    
    
    
    (46,193
    )Benefit paid
    
    
    1,683
    
    
    
    12,628Projected benefit obligation at end of year
    
    $
    (1,041,495
    )
    
    $
    (1,193,899
    )
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SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (3)
    
    Changes in plan assets during the years ended to December 31, 2004 and 2005:
 2004
    
    
    2005NT$
    
    
    NT$Fair value of plan assets at the beginning of year
    
    $
    670,396
    
    
    $
    808,825Actual return on plan assets
    
    
    8,526
    
    
    
    12,298Employer contributions
    
    
    131,586
    
    
    
    97,036Benefits paid
    
    
    (1,683
    )
    
    
    (12,628
    )Fair value of plan assets at the end of year
    
    $
    808,825
    
    
    $
    905,531
 (4)
    
    Funded status at December 31, 2004 and 2005:
 2004
    
    
    2005NT$
    
    
    NT$Fair value of plan assets
    
    $
    808,825
    
    
    $
    905,531Projected benefit obligation
    
    
    (1,041,495
    )
    
    
    (1,193,899
    )Funded status
    
    
    (232,670
    )
    
    
    (288,368
    )Unrecognized transition assets
    
    
    (5,477
    )
    
    
    (4,564
    )Unrecognized net actuarial loss
    
    
    207,249
    
    
    
    260,133Accured pension cost
    
    $
    (30,898
    )
    
    $
    (32,799
    )
 (5)
    
    Components of net periodic cost for the years ended December 31, 2003, 2004 and
2005:
 2003
    
    
    2004
    
    
    2005NT$
    
    
    NT $
    
    
    NT$Service cost
    
    $
    100,276
    
    
    $
    145,610
    
    
    $
    85,852Interest cost
    
    
    27,500
    
    
    
    26,172
    
    
    
    32,987Expected return on plan assets
    
    
    (22,080
    )
    
    
    (16,760
    )
    
    
    (25,150
    )Recognition of transition assets
    
    
    (913
    )
    
    
    (913
    )
    
    
    (913
    )Recognition of actuarial loss
    
    
    3,819
    
    
    
    14,201
    
    
    
    6,160Net periodic pension cost
    
    $
    108,602
    
    
    $
    168,310
    
    
    $
    98,936
 D.
    
    SUI has established a 401(k) profit-sharing plan covering substantially all employees.
The plan provides for voluntary salary reduction contributions by eligible participants in
accordance with Section 401(k) of the Internal Revenue Code, as well as discretionary
matching and profit sharing contributions from SUI. Profit-sharing and 401(k) matching
contributions are determined annually by SUIs Board of Directors.E.
    
    Under the Provisional Act of SPF, Siliconware Technology (Suzhou) Limited is required
to pay fixed contributions to SIP Provident Fund Management Center each month.
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SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Capital Stock
 A.
    
    As of December 31, 2005, the authorized capital of the Company was $31,500,000
represented by 3,150,000,000 common shares with par value of NT$10 (in dollars) per share.
As of December 31, 2005, issued common stock was $23,289,193 represented by 2,328,919,337
shares.B.
    
    On June 13, 2005, the stockholders of the Company resolved to capitalize the
unappropriated earnings of $1,688,898 and the employee bonus of $187,655 by issuing 187,655
thousand new shares. The Securities and Futures Bureau (SFB) has approved this capital
increase, and registration has been completed.C.
    
    The Company issued $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,
2005, the outstanding ADSs amounted to 49,067,383 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.(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.
    
    In July 2002, the Board of directors of the Company resolved to issue up to 40,000
units of employee stock option. Each unit of employee stock option is entitled to
subscribe 1,000 shares of the Companys common stock. The Company has to issue additional
40,000,000 shares of common stock if all of the employee stock options are exercised. The
exercise price of the employee stock option is subject to adjustment for distribution of
cash dividend or changes in capital stock in accordance with certain formula. The granted
employee stock option will expire in five years and graded vested after two years of
service in accordance with the employee stock option plan.
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SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (1)
    
    For the year ended December 31, 2005, details of the employee stock option
granted, exercised and cancelled and exercise price of the employee stock option
were as follows:
 WeightedaverageNumber
    
    
    exercise priceof shares
    
    
    (in NT dollars)Outstanding options at January 1, 2003
    
    
    
    
    
    $
    Granted
    
    
    40,000
    
    
    
    15.66Forfeited/cancelled
    
    
    (2,489
    )
    
    
    15.602003
    
    
    37,511
    
    
    
    15.67Granted/cancelled
    
    
    
    
    
    
    Forfeited
    
    
    (1,683
    )
    
    
    13.76Outstanding options at December 31, 2004
    
    
    35,828
    
    
    
    13.76Exercised
    
    
    (9,257
    )
    
    
    13.12Forfeited/cancelled
    
    
    (223
    )
    
    
    15.10Outstanding options at December 31, 2005
    
    
    26,348
    
    
    
    11.97
 (2)
    
    As of December 31, 2005, the details of the outstanding employee stock option were
as follows:
 Options granted
    
    
    Options vestedExercise
    
    
    
    
    
    Weighted
    
    
    Weighted
    
    
    
    
    
    
    Weightedprice
    
    
    
    
    
    average
    
    
    average
    
    
    
    
    
    
    average(in NT
    
    Number
    
    
    remaining
    
    
    exercise price
    
    
    Number
    
    
    exercise pricedollars)
    
    of options
    
    
    contractual life
    
    
    (in NT dollars)
    
    
    of options
    
    
    (in NT dollars)$11.9~$12.4
    
    
    26,348
    
    
    2.13 Years
    
    $
    11.95
    
    
    
    1,425
    
    
    $
    11.97
 Capital Reserve
 A.
    
    According to the Company Law of the ROC, 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 or from donation shall be exclusively used to cover accumulated deficit
or be transferred to capital. Other capital reserve shall be exclusively used to cover
accumulated deficit. The capital reserve can only be used to cover accumulated deficit
when the legal reserve is insufficient to cover the deficits.B.
    
    According to the Company Law of the ROC, the capital reserve arising from paid-in
capital in excess of par on the issuance of stocks can only be transferred to capital once
every year. The transfer of capital reserve to capital can not be made in the year the
company issued new shares and the amount to be capitalized is subject to certain
limitation.
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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 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 dues;(2)
    
    Offset prior years operating losses, if any;(3)
    
    Set aside 10% of the remaining amount after deducting (1) and (2) as legal
reserve;(4)
    
    Set aside 2% 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.
    
    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.C.
    
    In accordance with the ROC 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
losses on long-term investments. 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 long-term investments no
longer result in a net reduction in the stockholders equity, the special reserve
previously set aside will then be available for distribution.D.
    
    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. This 10% additional
tax on undistributed earnings can be used as tax credit by the stockholders, including
foreign stockholders, against the withholding tax on dividends. In addition, the domestic
shareholders can claim a proportionate share in the Companys corporate income tax as tax
credit against its individual income tax liability effective 1998. As of December 31,
2005, the undistributed earnings derived on or after January 1, 1998 was $8,241,034.
 F-34




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 E.
    
    As of December 31, 2005, the balance of stockholders imputation tax credit account
of the Company was $31,794. The rate of stockholders imputation tax credit to
undistributed earnings is approximately 0.40%. However, the actual stockholders
imputation rate is subject to change since the actual stockholders tax credit rate is
based on the rate on the dividend allocation day. In 2005, the stockholders imputation
rate on the distributed earnings is 0.51%.F.
    
    On June 13, 2005 and June 11, 2004, the stockholders of the Company resolved to
distribute cash dividends of $0.75 and $0.35 (in dollars) per share, and stock dividends
of $0.8 and $1 (in dollars) per share, respectively.G.
    
    As of February 17, 2006, the board of directors of SPIL has not resolved the
distribution of the year 2005 earnings. Therefore, any information in relation to the
year 2005 earnings will be posted to the website of the Taiwan Stock Exchanges after the
Boards resolution and the Shareholders approval is obtained.H.
    
    The Companys earnings distribution of 2004 for employee bonuses and directors and
supervisors remunerations were as follow:
 F-35




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 The amount of the actualearnings distributionsapproved by the board ofdirectors and shareholders in 2005(a) The amount of the retained earnings distributed1. Employees cash bonuses
    
    $
    175,9272. Employees stock bonuses(i) Shares (in thousands of shares)
    
    
    18,766(ii) Amounts
    
    $
    187,655(iii)As a percentage of outstanding common shares
    
    
    0.90
    %3. Directors and supervisors remunerations
    
    $
    74,258(b) Informations regarding earnings per common share1. Original earnings per common share (note 1)
    
    $
    2.092. Adjusted earnings per common share (note 2)
    
    $
    1.87
 TREASURY STOCK
 2004Reason for acquisition
    
    Beginning
    
    
    Additions
    
    
    Reductions
    
    
    EndingNumber of shares (in thousand)Transfer to employees
    
    
    8,548
    
    
    
    
    
    
    
    (8,548
    )
    
    
    
 2005Reason for acquisition
    
    Beginning
    
    
    Additions
    
    
    Reductions
    
    
    EndingNumber of shares (in thousand)Transfer to employees
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 A.
    
    According to the ROC Securities Exchange Act, the number of treasury shares shall not
exceed 10% of the Companys total outstanding common shares. The cost of the treasury
stocks shall not exceed the total of retained earnings, paid-in capital in excess of par
value and realized capital reserve. In addition, treasury stock shall not be used as
collateral and shall not have the stockholders rights until transferred.B.
    
    According to the ROC Securities Exchange Act, treasury shares should be sold to the
Companys employees within three years from the date of acquisition. Any unsold treasury
stock after three years shall be considered unissued shares, and shall be charged against
contributed capital and capital reserve.
 F-36




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 C.
    
    As of December 31, 2005, Siliconware Investment Company Ltd., the subsidiary of the
Company, holds 32,090thousand shares of the Companys stock, with book value
of NT$24.75 (in dollars) per share. The average closing price of the Companys stock was
NT$40.95 (in dollars) per share in December 2005.
 IMPAIRMENT OF ASSETS
 Amounts recognized inIncome fromcontinuing operations
    
    

Shareholders equityImpairment loss on long-term investment
    
    $
    163,650
    
    
    $
    
  A.
    
    Impairment loss of $79,200 for long-term investment in Universal, which was
triggered by the merger with Sigurd and the investments carrying amount exceeded the
recoverable amount.B.
    
    Impairment loss of $84,450 for long-term investment in Double Win. The management
believed the impairment loss was triggered by the downturn of the overall market and
industry where Double Win operated, as well as the fact that Double Win withdrew from
public trading in 2005.
 F-37




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Income Tax
  2003
    
    
    2004
    
    
    2005NT$
    
    
    NT$
    
    
    NT$Income tax expense calculated at the statutory tax rate (25%)
    
    $
    550,877
    
    
    $
    963,892
    
    
    $
    2,083,671Tax exempt income and other permanent differences
    
    
    217,377
    
    
    
    (367,301
    )
    
    
    (780,039
    )Investment tax credits
    
    
    (720,436
    )
    
    
    (1,434,949
    )
    
    
    (834,025
    )Tax on interest income separately taxed
    
    
    873
    
    
    
    3,671
    
    
    
    1,006Changes in valuation allowance for deferred tax assets
    
    
    (677,818
    )
    
    
    366,341
    
    
    
    (579,627
    )Prior years under (over) provision
    
    
    (10,282
    )
    
    
    (3,935
    )
    
    
    112,570Income tax benefit for current year
    
    
    (639,409
    )
    
    
    (472,281
    )
    
    
    3,556Additional 10% tax on undistributed earnings
    
    
    3,117
    
    
    
    15,323
    
    
    
    11,961Income tax expense (benefit)
    
    
    (636,292
    )
    
    
    (456,958
    )
    
    
    15,517Adjustments:Net change of deferred tax assets
    
    
    631,184
    
    
    
    464,386
    
    
    
    272,156Prior years (under) over provision
    
    
    10,282
    
    
    
    3,935
    
    
    
    (112,570
    )Tax on interest income separately taxed
    
    
    (873
    )
    
    
    (3,671
    )
    
    
    (1,006
    )Prepaid income tax
    
    
    (7,725
    )
    
    
    (20,957
    )
    
    
    (25,176
    )Subsidiarys tax payable
    
    
    (4,255
    )
    
    
    (6,565
    )
    
    
    (12,510
    )Income tax refund receivable
    
    $
    (7,679
    )
    
    $
    (19,830
    )
    
    $
    136,411Income tax payable carried over from prior year
    
    $
    40,608
    
    
    $
    36,352
    
    
    $
    16,605
 A.
    
    For the years ended December 31, 2003, 2004 and 2005, significant portion of the
permanent differences derived from gain on disposal of investments and long-term
investment income (loss) accounted for under the equity method and revenue from assembly
and testing of certain integrated circuit products which is exempted from income tax.B.
    
    As of December 31, 2004 and 2005, deferred tax assets and liabilities were as
follows:
 December 31,2004
    
    
    2005NT$
    
    
    NT$Deferred tax assets  current
    
    $
    709,093
    
    
    $
    759,226Deferred tax liabilities  current
    
    
    
    
    
    
    709,093
    
    
    
    759,226Valuation allowance for deferred tax assets
    
    
    
    
    
    
    709,093
    
    
    
    759,226Deferred tax assets  noncurrent
    
    
    2,873,540
    
    
    
    2,232,063Deferred tax liabilities  noncurrent
    
    
    (390,403
    )
    
    
    (219,101
    )2,483,137
    
    
    
    2,012,962Valuation allowance for deferred tax assets
    
    
    (882,914
    )
    
    
    (303,287
    )$
    1,600,223
    
    
    $
    1,709,675
 F-38




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 C.
    
    The details of deferred tax assets and liabilities as of December 31, 2004 and 2005
were as follows
 December 31,2004
    
    
    2005Amount
    
    
    Tax effect
    
    
    Amount
    
    
    Tax effectNT$
    
    
    NT$
    
    
    NT$
    
    
    NT$CurrentTemporary differencesUnrealized loss on obsolescence and
decline in market value of inventories
    
    $
    54,195
    
    
    $
    13,548
    
    
    $
    55,803
    
    
    $
    13,951Unrealized loss on sales allowance
    
    
    92,638
    
    
    
    23,160
    
    
    
    67,180
    
    
    
    16,795Unrealized foreign exchange loss
    
    
    165,540
    
    
    
    41,385
    
    
    
    155,641
    
    
    
    38,910Bad debts expense
    
    
    
    
    
    
    
    
    
    
    12,280
    
    
    
    3,070Investment tax credit
    
    
    
    
    
    
    631,000
    
    
    
    
    
    
    
    686,500$
    709,093
    
    
    
    
    
    
    $
    759,226NoncurrentTemporary differenceUnrealized loss on long-term investments
    
    $
    628,009
    
    
    $
    157,002
    
    
    $
    667,009
    
    
    $
    166,753Depreciation expense
    
    
    (761,056
    )
    
    
    (190,264
    )
    
    
    (669,724
    )
    
    
    (167,431
    )Unrealized foreign currency exchange gain
arising from bonds payable
    
    
    (800,556
    )
    
    
    (200,139
    )
    
    
    (206,678
    )
    
    
    (51,670
    )Compensation interest from bonds payable
    
    
    442,090
    
    
    
    110,523
    
    
    
    490,806
    
    
    
    122,702Unrealized loss on idle assets
    
    
    484,413
    
    
    
    121,103
    
    
    
    322,543
    
    
    
    80,636Loss carryforwards
    
    
    25,513
    
    
    
    6,378
    
    
    
    25,513
    
    
    
    6,378Investment tax credit
    
    
    
    
    
    
    2,478,534
    
    
    
    
    
    
    
    1,855,5942,483,137
    
    
    
    
    
    
    
    2,012,962Valuation allowance for deferred tax assets-noncurrent
    
    
    
    
    
    
    (882,914
    )
    
    
    
    
    
    
    (303,287
    )$
    1,600,223
    
    
    
    
    
    
    $
    1,709,675
  D.
    
    The Companys income tax returns have been assessed and approved by the Tax
Authority through 2003. However, the Company did not accept the reason and result of the
reassessment and has petitioned to the government against the decision of the Tax
Authority of its 2000 income tax returns. In addition, the Company did not accept the
reason and result of the assessment of the Tax Authority and has requested for
reassessment of its 2001 and 2002 income tax return. The Company believes that if it
fails on the petition or reassessment, the result will not have a significant adverse
impact on the Company. The Company has accrued the tax liabilities for the tax
assessments.
 E.
    
    The income tax returns of Siliconware Investment Company Ltd.
have been assessed and approved by the Tax Authority through 2004.
 F-39




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 F.
    
    According to the Income Tax Law of the Peoples Republic of China for Enterprises
with Foreign Investment and Foreign Enterprises, Siliconware Technology is entitled to
two years exemption from income taxes followed by three years of a 50% tax reduction,
commencing from the first cumulative profit-making year net of losses carried forward. 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, be refunded 40% of the income tax
already paid in relation to the reinvested amount.
  Nature of investment tax credit
    
    Deductible amount
    
    
    Unused amount
    
    
    Expiration YearsNT$
    
    
    NT$
    
    
    NT$Acquisition cost of qualifying machinery
and equipment
    
    $
    2,951,116
    
    
    $
    1,854,614
    
    
    
    2005 to 2009Qualifying research and development
expenditure
    
    
    637,159
    
    
    
    514,450
    
    
    
    2005 to 2009Qualifying investments in significant
technology companies
    
    
    224,296
    
    
    
    173,030
    
    
    
    2005 to 2009$
    3,812,571
    
    
    $
    2,542,094
 H.
    
    The Company is exempted from income tax for revenues arising from the assembly and
testing of certain integrated circuit products under the Statute for Upgrading
Industries, for five years through December 2008.
 F-40




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
 Earnings Per Share
 For the year ended December 31, 2003WeightedaverageIncome
    
    
    outstanding
    
    
    Earnings per shareBefore tax
    
    
    After tax
    
    
    common stock
    
    
    Before tax
    
    
    After taxNT$
    
    
    NT$
    
    
    (in thousand)
    
    
    NT$
    
    
    NT$Basic earnings per share
    
    $
    2,202,424
    
    
    $
    2,838,716
    
    
    
    2,182,101
    
    
    $
    1.09
    
    
    $
    1.40Dilutive effect of employee
stock option
    
    
    
    
    
    
    
    
    
    
    13,741Dilutive effect of 2nd Euro
convertible bonds
    
    
    52,384
    
    
    
    39,288
    
    
    
    252,260Diluted earnings per share
    
    $
    2,254,808
    
    
    $
    2,878,004
    
    
    $
    2,448,102
    
    
    $
    0.99
    
    
    $
    1.27
 For the year ended December 31, 2004WeightedaverageIncome
    
    
    outstanding
    
    
    Earnings per shareBefore tax
    
    
    After tax
    
    
    common stock
    
    
    Before tax
    
    
    After taxNT$
    
    
    NT$
    
    
    (in thousand)
    
    
    (in dollars)Basic earnings per share
    
    $
    3,825,219
    
    
    $
    4,282,177
    
    
    
    2,216,468
    
    
    $
    1.72
    
    
    $
    1.93Dilutive effect of employee
stock option
    
    
    
    
    
    
    
    
    
    
    27,681Dilutive effect of 2nd Euro
convertible bonds
    
    
    (116,658
    )
    
    
    (134,373
    )
    
    
    190,836Dilutive effect of 3rd Euro
convertible bonds
    
    
    (286,427
    )
    
    
    (214,820
    )
    
    
    168,668Diluted earnings per share
    
    $
    3,422,134
    
    
    $
    3,932,984
    
    
    $
    2,603,653
    
    
    $
    1.31
    
    
    $
    1.51
 For the year ended December 31, 2005WeightedaverageIncome
    
    
    outstanding
    
    
    Earnings per shareBefore tax
    
    
    After tax
    
    
    common stock
    
    
    Before tax
    
    
    After taxNT$
    
    
    NT $
    
    
    (in thousand)
    
    
    (in dollars)Basic EPS:Income from continuing operations
    
    $
    7,608,911
    
    
    $
    7,593,394
    
    
    
    
    
    
    $
    3.31
    
    
    $
    3.31Cumulative effects of changes in
accounting principles
    
    
    650,508
    
    
    
    650,508
    
    
    
    
    
    
    
    0.28
    
    
    
    0.28Net income
    
    
    8,259,419
    
    
    
    8,243,902
    
    
    
    2,294,413
    
    
    $
    3.59
    
    
    $
    3.59Dilutive effect of
employee stock option
    
    
    
    
    
    
    
    
    
    
    18,312Dilutive effect of
2nd Euro convertible bonds
    
    
    396,552
    
    
    
    424,053
    
    
    
    186,113Dilutive effect of
3rd Euro convertible bonds
    
    
    368,262
    
    
    
    349,696
    
    
    
    170,793Diluted EPS
    
    
    9,024,233
    
    
    
    9,017,651
    
    
    
    2,669,631
    
    
    $
    3.38
    
    
    $
    3.38
 F-41




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  PERSONNEL COSTS, DEPRECIATION AND AMORTIZATION
 For the year ended December 31, 2003Operating costs
    
    
    Operating expenses
    
    
    TotalPersonnel costsPayroll
    
    $
    2,901,902
    
    
    $
    777,646
    
    
    $
    3,679,548Labor and health insurance
    
    
    199,009
    
    
    
    59,358
    
    
    
    258,367Pension expense
    
    
    85,843
    
    
    
    28,431
    
    
    
    114,274Others
    
    
    231,629
    
    
    
    43,782
    
    
    
    275,411$
    3,418,383
    
    
    $
    909,217
    
    
    $
    4,327,600Depreciation
    
    $
    4,746,598
    
    
    $
    107,960
    
    
    $
    4,854,558Amortization
    
    $
    178,074
    
    
    $
    94,748
    
    
    $
    272,822
 For the year ended December 31, 2004Operating costs
    
    
    Operating expenses
    
    
    TotalNT$
    
    
    NT $
    
    
    NT $Personnel costsPayroll
    
    $
    3,490,892
    
    
    $
    1,006,299
    
    
    $
    4,497,191Labor and health insurance
    
    
    232,279
    
    
    
    70,448
    
    
    
    302,727Pension expense
    
    
    132,973
    
    
    
    41,254
    
    
    
    174,227Others
    
    
    347,540
    
    
    
    53,985
    
    
    
    401,525$
    4,203,684
    
    
    $
    1,171,986
    
    
    $
    5,375,670Depreciation
    
    $
    5,586,033
    
    
    $
    141,190
    
    
    $
    5,727,223Amortization
    
    $
    270,576
    
    
    $
    108,338
    
    
    $
    378,914
 For the year ended December 31, 2005Operating costs
    
    
    Operating expenses
    
    
    TotalNT$
    
    
    NT $
    
    
    NT $Personnel CostPayroll
    
    $
    4,097,484
    
    
    $
    1,145,219
    
    
    $
    5,242,703Labor and health insurance
    
    
    289,956
    
    
    
    80,644
    
    
    
    370,600Pension expense
    
    
    160,601
    
    
    
    46,144
    
    
    
    206,745Other
    
    
    493,121
    
    
    
    72,690
    
    
    
    565,811$
    5,041,162
    
    
    $
    1,344,697
    
    
    $
    6,385,859Depreciation
    
    $
    5,896,261
    
    
    $
    157,579
    
    
    $
    6,053,840Amortization
    
    $
    342,091
    
    
    $
    141,039
    
    
    $
    483,130
 F-42




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Related Party Transactions
  Name of related parties
    
    Relationship with the CompanyChipMOS Technologies Inc.
    
    Investee company under the equity methodSigard Microelectronics Corp.
    
    Investee company under the equity methodPhoenix Precision Technology Corporation
    
    The Company holds directorshipKing Yuan Electronics Co., Ltd.
    
    The Company holds directorship
  Sales
 For the years ended December 31,2003
    
    
    2004
    
    
    2005% of
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    % ofAmount
    
    
    net sale
    
    
    Amount
    
    
    net sale
    
    
    Amount
    
    
    net saleNT$
    
    
    
    
    
    
    NT $
    
    
    
    
    
    
    NT $ChipMOSTechnologies Inc.
    
    $
    101,960
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    
    Sigurd
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    31,218
    
    
    
    Corporation
    
    $
    101,960
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    31,218
    
    
    
    
  Purchases
 For the years ended December 31,2003
    
    
    2004
    
    
    2005% of net
    
    
    
    
    
    
    % of net
    
    
    
    
    
    
    % of netAmount
    
    
    purchase
    
    
    Amount
    
    
    purchase
    
    
    Amount
    
    
    purchaseNT$
    
    
    
    
    
    
    NT$
    
    
    
    
    
    
    NT $Phoenix Precision
Technology Corporation
    
    $
    2,610,008
    
    
    
    19
    
    
    $
    2,875,934
    
    
    
    18
    
    
    $
    3,600,039
    
    
    
    18
  F-43




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Accounts Receivable
 December 31,2004
    
    
    2005% of
    
    
    
    
    
    
    % ofaccounts
    
    
    
    
    
    
    accountsAmount
    
    
    receivable
    
    
    Amount
    
    
    receivableNT$
    
    
    
    
    
    
    NT $Sigurd Microelectronics
Corporation
    
    $
    
    
    
    
    
    
    
    $
    9,695
    
    
    
    
 Accounts payable
 December 31,2004
    
    
    2005% of
    
    
    
    
    
    
    % ofaccounts
    
    
    
    
    
    
    accountsAmount
    
    
    payable
    
    
    Amount
    
    
    payableNT $
    
    
    
    
    
    
    NT $Phoenix Precision Technology
Corporation
    
    $
    231,044
    
    
    
    11
    
    
    $
    694,261
    
    
    
    14
 Assets Pledged as Collaterals
  December 31,Assets
    
    2004
    
    
    2005
    
    
    Subject of collateralNT$
    
    
    NT $Buildings
    
    $
    1,144,896
    
    
    $
    
    
    
    Long-term loans and bonds payableMachinery and other
    
    
    818,788
    
    
    
    92,208
    
    
    Loan-term loansTime deposits (shown in other
financial assets  current)
    
    
    250,200
    
    
    
    215,905
    
    
    Guarantees for custom duties and income tax liabilities$
    2,213,884
    
    
    $
    308,113
 Commitments and Contingencies
 A.
    
    As of December 31, 2005, the Companys issued but unused letters of credit for
imported machinery and equipment were $427,503.
 F-44




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 B.
    
    The Company entered into contracts with five foreign companies for the use of
certain technologies and patents related to packaging system of integrated circuit
products. The Company agreed to pay royalty fees based on the total number of certain
products sold. Four contracts are valid through December 2007, November 2009, December
2010 and January 2011, respectively. For the other two contracts, one is valid through
when all patents included in the contract expire; the other is valid until both parties
agree to terminate the contract.
 Significant Disaster Loss
  Significant Subsequent Event
  F-45




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Other
  December 31,2004
    
    
    2005Book value
    
    
    Fair value
    
    
    Book value
    
    
    Fair valueNT$
    
    
    NT$
    
    
    NT$
    
    
    NT$Non-derivative financial
instruments:Financial assets
Financial assets with book value
equal to fair value
    
    $
    17,133,394
    
    
    $
    17,133,394
    
    
    $
    22,847,565
    
    
    $
    22,847,565Short-term investment
    
    
    1,942,970
    
    
    
    1,950,180
    
    
    
    
    
    
    
    Long-term investment in stocks
    
    
    6,816,338
    
    
    
    8,465,122
    
    
    
    7,200,676
    
    
    
    16,923,883$
    25,892,702
    
    
    $
    27,548,696
    
    
    $
    30,048,241
    
    
    $
    39,771,448Financial liabilitiesFinancial liabilities with book value
equal to fair value
    
    $
    8,741,676
    
    
    $
    8,741,676
    
    
    $
    11,642,928
    
    
    $
    11,642,928Bonds payable
    
    
    11,533,146
    
    
    
    11,245,337
    
    
    
    11,310,300
    
    
    
    15,528,396Long-term loans
    
    
    5,106,146
    
    
    
    5,106,146
    
    
    
    3,333,300
    
    
    
    3,333,300accrued pension cost
    
    
    30,898
    
    
    
    232,670
    
    
    
    32,799
    
    
    
    288,368$
    25,411,866
    
    
    $
    25,325,829
    
    
    $
    26,319,327
    
    
    $
    30,792,992
 (1)
    
    Financial assets and liabilities with book value equal to fair value are cash and
cash equivalents, notes receivable, accounts receivable, other current financial assets,
refundable deposits, notes payable, accounts payable, income tax payable, accrued
expenses, other payables, current portion of long-term loans and other liabilities because
of their short maturities.(2)
    
    The fair value of short-term investments and long-term investments in stocks is based
on the market value. If the market value of long-term investments is unavailable, the net
equity of the investee companies or other financial information is used as fair value.(3)
    
    The fair value of bonds payable is based on market value.(4)
    
    The book value of long-term loans is used as fair value because the loans bear
floating interest rate.
 F-46




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (5)
    
    The fair value of accrued pension cost is equal to the funded status as shown in the
actuarial report measured at December 31, 2005 and 2004.
 F-47




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
  Name of the counter party and amountSiliconwareSiliconware Precision
    
    
    Investment
    
    
    SPIL (B.V.I.)Transactions
    
    Industries Co., Ltd
    
    
    Company Ltd.
    
    
    Holding Limited
    
    
    Siliconware USA Inc.NT$
    
    
    NT$
    
    
    NT$
    
    
    NT$For the year ended December 31, 2003Eliminate long-term investment and stockholders equity
    
    $
    (2,278,920
    )
    
    $
    957,052
    
    
    $
    1,321,868
    
    
    $
    Eliminate subsidiarys long-term investment on parent company
    
    
    794,184
    
    
    
    (794,184
    )
    
    
    
    
    
    
    Eliminate accrued expense and accounts receivable
    
    
    42,259
    
    
    
    
    
    
    
    
    
    
    
    (42,259
    )Eliminate commission expense and revenue
    
    
    (288,869
    )
    
    
    
    
    
    
    
    
    
    
    288,869For the year ended December 31, 2004Eliminate long-term investment and stockholders equity
    
    $
    (2,586,396
    )
    
    $
    932,002
    
    
    $
    1,654,394
    
    
    $
    Eliminate subsidiarys long-term investment on parent company
    
    
    758,684
    
    
    
    (758,684
    )
    
    
    
    
    
    
    Eliminate accrued expense and accounts receivable
    
    
    42,078
    
    
    
    
    
    
    
    
    
    
    
    (42,078
    )Eliminate commission expense and revenue
    
    
    (414,501
    )
    
    
    
    
    
    
    
    
    
    
    414,501For the year ended December 31, 2005Eliminate long-term investment and stockholdersequity
    
    $
    (2,754,682
    )
    
    $
    960,363
    
    
    $
    1,794,319
    
    
    $
    Eliminate subsidiarys long-term investment on parent company
    
    
    794,184
    
    
    
    (794,184
    )
    
    
    
    
    
    
    Eliminate accrued expense and accounts receivable
    
    
    63,003
    
    
    
    
    
    
    
    
    
    
    
    (63,003
    )Eliminate commission expense and revenue
    
    
    (417,418
    )
    
    
    
    
    
    
    
    
    
    
    417,418
 
 F-48




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
 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.B.
    
    Operations in Different Geographic AreasThe Company has no significant foreign operations. Therefore, ROC FAS No. 20, Segmental
Information Disclosure, is not applicable.C.
    
    Export SalesSales by geographic region are identified by the location where the revenue is
generated.
 Geographic areas
    
    2003
    
    2004
    
    2005NT$
    
    NT$
    
    NT$Taiwan
    
    
    11,875,508
    
    
    
    14,127,011
    
    
    
    16,535,182U.S.
    
    
    12,176,500
    
    
    
    17,097,454
    
    
    
    19,925,903Canada
    
    
    2,598,424
    
    
    
    2,903,942
    
    
    
    4,423,182Other Countries
    
    
    760,995
    
    
    
    1,123,749
    
    
    
    2,603,61027,411,427
    
    
    
    35,252,156
    
    
    
    43,487,877
 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.
 2003
    
    
    2004
    
    
    2005% of
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    % ofCustomers
    
    Amount
    
    
    net sale
    
    
    Amount
    
    
    net sale
    
    
    Amount
    
    
    net saleNT$
    
    
    
    
    
    
    NT$
    
    
    
    
    
    
    NT$Customer A
    
    $
    3,652,541
    
    
    
    13
    
    
    $
    4,065,553
    
    
    
    12
    
    
    $
    4,125,562
    
    
    
    10Customer B
    
    
    3,533,487
    
    
    
    13
    
    
    
    3,002,669
    
    
    
    9
    
    
    
    2,559,125
    
    
    
    5Customer C
    
    
    2,619,265
    
    
    
    10
    
    
    
    4,068,676
    
    
    
    12
    
    
    
    4,762,838
    
    
    
    11$
    9,805,293
    
    
    
    36
    
    
    $
    11,136,898
    
    
    
    33
    
    
    $
    11,447,525
    
    
    
    26
 F-49




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 US GAAP Reconciliation
    For the year ended December 31, 2003As reported
    
    Restatement
    
    As restatedNet Income
    
    
    3,247,880
    
    
    
    (150,561
    )
    
    
    3,097,319Basic earning per share (in dollars)
    
    
    1.49
    
    
    
    (0.07
    )
    
    
    1.42Diluted earning per share (in dollars)
    
    
    1.32
    
    
    
    0.02
    
    
    
    1.34
 As of December 31, 2003As reported
    
    Restatement
    
    As restatedTotal Assets
    
    
    61,755,948
    
    
    
    
    
    
    
    61,755,948Total Liabilities
    
    
    25,321,956
    
    
    
    96,569
    
    
    
    25,418,525Shareholders equity
    
    
    36,433,992
    
    
    
    (96,569
    )
    
    
    36,337,423
 For the year ended December 31, 2004As reported
    
    Restatement
    
    As restatedNet Income
    
    
    3,667,147
    
    
    
    3,894
    
    
    
    3,671,041Basic earning per share (in dollars)
    
    
    1.65
    
    
    
    0.00
    
    
    
    1.65Diluted earning per share (in dollars)
    
    
    1.41
    
    
    
    (0.14
    )
    
    
    1.27
 As of December 31, 2004As reported
    
    Restatement
    
    As restatedTotal Assets
    
    
    65,118,245
    
    
    
    
    
    
    
    65,118,245Total Liabilities
    
    
    25,927,437
    
    
    
    92,675
    
    
    
    26,020,112Shareholders equity
    
    
    39,190,808
    
    
    
    (92,675
    )
    
    
    39,098,133
 F-50




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  2003
    
    
    2004
    
    
    2005[Restated]
    
    
    [Restated]Net Income
    
    
    3,247,880
    
    
    
    3,667,147
    
    
    
    3,971,302Restate
    
    
    (150,561
    )
    
    
    3,894
    
    
    
    Total Adjustments
    
    
    178,303
    
    
    
    (597,289
    )
    
    
    Numerator of diluted EPS calculation(1)
    
    
    3,275,622
    
    
    
    3,073,752
    
    
    
    3,971,302Shares(without retroactive adjustment):Basic
    
    
    2,020,464
    
    
    
    2,060,474
    
    
    
    2,276,626Employee stock option
    
    
    12,723
    
    
    
    25,631
    
    
    
    18,3122nd Euro convertible bonds (2)
    
    
    233,989
    
    
    
    
    
    
    
    3rd Euro convertible bonds (3)
    
    
    
    
    
    
    156,174
    
    
    
    Total shares(without retroactive adjustment)(4):
    
    
    2,267,176

(5)
    
    
    2,242,279

(5)
    
    
    Total shares
    
    
    2,448,550
    
    
    
    2,421,661
    
    
    
    2,294,938Diluted EPS
    
    
    1.34
    
    
    
    1.27
    
    
    
    1.73
        F-51




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Reconciliation of consolidated net income:
 For the years ended December 31,2003
    
    
    2004
    
    
    2005NT$
    
    
    NT$
    
    
    NT$
    
    
    US$[Restated]
    
    
    [Restated]Net income as reported under ROC GAAP
    
    $
    2,838,716
    
    
    $
    4,282,177
    
    
    $
    8,243,902
    
    
    $
    251,338US GAAP adjustments:Compensated absences
    
    
    (1,400
    )
    
    
    800
    
    
    
    (9,800
    )
    
    $
    (299
    )Compensation
    
    
    (341,324
    )
    
    
    (699,072
    )
    
    
    (1,234,862
    )
    
    $
    (37,648
    )Impairment on long-term investments
    
    
    
    
    
    
    
    
    
    
    13,260
    
    
    $
    404Embedded derivative
    
    
    86,231
    
    
    
    (80,154
    )
    
    
    (2,422,617
    )
    
    $
    (73,860
    )Adjustment to the gain on disposal of available
for sale marketable securities
    
    
    
    
    
    
    (1,431
    )
    
    
    
    
    
    
    Trading marketable securities
    
    
    5,536
    
    
    
    
    
    
    
    
    
    
    
    Treasury stock transferred to employee
    
    
    (154,342
    )
    
    
    (192,498
    )
    
    
    
    
    
    
    Equity investments:Timing difference
    
    
    630,697
    
    
    
    398,686
    
    
    
    (657,851
    )
    
    $
    (20,057
    )Net income (loss) variance between US
GAAP and ROC GAAP
    
    
    (29,515
    )
    
    
    (8,322
    )
    
    
    36,820
    
    
    $
    1,123Accounting for income (loss) in preferred stock
    
    
    87,291
    
    
    
    (28,885
    )
    
    
    
    
    
    
    Technology and know-how contributed to
a joint venture investee
    
    
    (6,000
    )
    
    
    
    
    
    
    
    
    
    
    Total US GAAP adjustments
    
    
    277,174
    
    
    
    (610,876
    )
    
    
    (4,275,050
    )
    
    $
    (130,337
    )Taxation effect
    
    
    (18,571
    )
    
    
    (260
    )
    
    
    2,450
    
    
    $
    75Net income under US GAAP
    
    $
    3,097,319
    
    
    $
    3,671,041
    
    
    $
    3,971,302
    
    
    $
    121,076Earnings (loss) per share under US GAAP (in dollars)Basic
    
    $
    1.42
    
    
    $
    1.65
    
    
    $
    1.74
    
    
    $
    0.05Diluted
    
    $
    1.34
    
    
    $
    1.27
    
    
    $
    1.73
    
    
    $
    0.05Weighted average number of common
stock outstanding (in thousands)Basic
    
    
    2,182,101
    
    
    
    2,225,312
    
    
    
    2,276,626
    
    
    
    2,276,626Effect of
dilutive securitiesEmployee stock option
    
    
    13,741
    
    
    
    27,681
    
    
    
    18,312
    
    
    
    18,3122nd Euro convertible bonds
    
    
    252,708
    
    
    
    168,6683rd Euro convertible bonds
    
    
    Diluted
    
    
    2,448,550
    
    
    
    2,421,661
    
    
    
    2,294,938
    
    
    
    2,294,938
 
 F-52




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
 Reconciliation of consolidated shareholders equity
 For the years ended December 31,2003
    
    
    2004
    
    
    2005NT$
    
    
    NT$
    
    
    NT$
    
    
    US$[Restated]
    
    
    [Restated]Total shareholders equity as reported under
ROC GAAP
    
    $
    29,698,209
    
    
    $
    33,493,043
    
    
    
    40,825,007
    
    
    $
    1,244,665US GAAP adjustments:Compensated absences
    
    
    (21,100
    )
    
    
    (20,300
    )
    
    
    (30,100
    )
    
    
    (918
    )Compensation
    
    
    (341,324
    )
    
    
    (437,841
    )
    
    
    (880,403
    )
    
    
    (26,842
    )Impairment on long-term investments
    
    
    (212,569
    )
    
    
    (212,569
    )
    
    
    (199,309
    )
    
    
    (6,077
    )Embedded derivative
    
    
    87,331
    
    
    
    7,177
    
    
    
    (2,415,440
    )
    
    
    (73,641
    )Available for sale marketable securities
    
    
    2,072,151
    
    
    
    852,678
    
    
    
    9,177,049
    
    
    
    279,788Equity investments:
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Timing difference
    
    
    259,167
    
    
    
    657,853
    
    
    
    
    
    
    
    Net income (loss) variance between US
GAAP and ROC GAAP
    
    
    96,732
    
    
    
    88,411
    
    
    
    125,160
    
    
    
    3,816Accounting for income (loss) in preferred stock
    
    
    28,885
    
    
    
    
    
    
    
    
    
    
    
    Technology and know-how contributed to
a joint venture investee
    
    
    (210,417
    )
    
    
    (210,417
    )
    
    
    (210,417
    )
    
    
    (6,415
    )Siguard merged Universal
    
    
    
    
    
    
    
    
    
    
    116,662
    
    
    
    3,557Acquisition of Siliconware Corp.
    
    
    4,873,500
    
    
    
    4,873,500
    
    
    
    4,873,500
    
    
    
    148,582Taxation effect
    
    
    6,858
    
    
    
    6,598
    
    
    
    9,048
    
    
    
    276Shareholders equity under US GAAP
    
    $
    36,337,423
    
    
    $
    39,098,133
    
    
    $
    51,390,757
    
    
    $
    1,566,791
 Movements in shareholders equity in accordance with US GAAP:
 2004
    
    
    2005NT$
    
    
    NT$
    
    
    US$[Restated]Balance at January 1, as reported
    
    $
    36,433,992
    
    
    $
    39,098,133
    
    
    $
    1,192,016Restatement
    
    
    (96,569
    )as restated
    
    $
    36,337,423Net income under US GAAP
    
    
    3,671,041
    
    
    
    3,971,302
    
    
    
    121,076Employee stock bonus
    
    
    471,729
    
    
    
    542,114
    
    
    
    16,528Adjustment for investee companies capital reserve
    
    
    (10,862
    )
    
    
    (40,009
    )
    
    
    (1,220
    )Gain on disposal of long-term investment
    
    
    
    
    
    
    (71
    )
    
    
    (2
    )Cumulative translation adjustment on long-term investment
    
    
    (144,331
    )
    
    
    90,947
    
    
    
    2,772Reverse of (Unrealized loss) on long-term investments
    
    
    
    
    
    
    (737
    )
    
    
    (22
    )Change in fair value of available for sale marketable securities
    
    
    (1,218,042
    )
    
    
    8,324,370
    
    
    
    253,792Employee stock option exercised
    
    
    
    
    
    
    121,457
    
    
    
    3,703Conversion of Euro convertible bonds
    
    
    307,161
    
    
    
    764,061
    
    
    
    23,295Sigurd merged Universal
    
    
    
    
    
    
    116,662
    
    
    
    3,557Treasury stock
    
    
    337,625
    
    
    
    
    
    
    
    Cash Dividends
    
    
    (663,066
    )
    
    
    (1,583,342
    )
    
    
    (48,273
    )Adjustment for investee companys unrecognized pension cost
    
    
    
    
    
    
    (1,828
    )
    
    
    (56
    )Adjustment for investee companys treasury stock variances
    
    
    
    
    
    
    (34,544
    )
    
    
    (1,053
    )Cash dividends for treasury stock held by subsidiaries
    
    
    9,455
    
    
    
    22,242
    
    
    
    678Balance at December 31
    
    $
    39,098,133
    
    
    $
    51,390,757
    
    
    $
    1,566,791
 F-53




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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:
 2004
    
    
    2005NT$
    
    
    NT$
    
    
    US$[Restated]Current AssetsCash and cash equivalents
    
    $
    10,722,351
    
    
    $
    12,274,391
    
    
    $
    374,219Short-term investments
    
    
    2,143,012
    
    
    
    66,442
    
    
    
    2,026Notes receivable, net
    
    
    72,083
    
    
    
    156,899
    
    
    
    4,783Accounts receivable, net
    
    
    5,720,274
    
    
    
    9,516,426
    
    
    
    290,135Inventories
    
    
    1,977,001
    
    
    
    2,805,287
    
    
    
    85,527Other current assets
    
    
    1,672,166
    
    
    
    2,145,608
    
    
    
    65,415$
    22,306,887
    
    
    $
    26,965,053
    
    
    $
    822,105Long-term investments
    
    
    8,092,145
    
    
    
    16,309,673
    
    
    
    497,246Property, plant and equipment
    
    
    27,188,884
    
    
    
    30,252,250
    
    
    
    922,325Intangible assets
    
    
    4,873,500
    
    
    
    4,873,500
    
    
    
    148,582Other assets
    
    
    2,656,829
    
    
    
    2,766,281
    
    
    
    84,338Total Assets
    
    $
    65,118,245
    
    
    $
    81,166,757
    
    
    $
    2,474,596Current liabilities
    
    
    10,458,068
    
    
    
    15,770,704
    
    
    
    480,814Long-term liabilities
    
    
    15,524,768
    
    
    
    13,766,135
    
    
    
    419,699Other liabilities
    
    
    37,276
    
    
    
    239,161
    
    
    
    7,292Total Liabilities
    
    
    26,020,112
    
    
    
    29,776,000
    
    
    
    907,805Total Stockholders Equity
    
    
    39,098,133
    
    
    
    51,390,757
    
    
    
    1,566,791Total Liabilities and Stockholders Equity
    
    $
    65,118,245
    
    
    $
    81,166,757
    
    
    $
    2,474,596
 Stock-based Compensation
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SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 For the years ended December 31,2003
    
    
    2004
    
    
    2005NT$
    
    
    NT$
    
    
    NT$
    
    
    US$(Restated)
    
    
    (Restated)Net income
    
    $
    3,097,319
    
    
    $
    3,671,041
    
    
    $
    3,971,302
    
    
    $
    121,076Less: Stock compensation expense
    
    
    (91,224
    )
    
    
    (95,870
    )
    
    
    (64,825
    )
    
    $
    (1,976
    )Pro forma
    
    $
    3,006,095
    
    
    $
    3,575,171
    
    
    $
    3,906,477
    
    
    $
    119,100
 For the years ended December 31,2003
    
    
    2004
    
    
    2005NT$
    
    
    NT$
    
    
    NT$
    
    
    US$Basic earnings per shareAs reported
    
    $
    1.42
    
    
    $
    1.65
    
    
    $
    1.74
    
    
    $
    0.05Pro forma
    
    $
    1.38
    
    
    $
    1.61
    
    
    $
    1.72
    
    
    $
    0.05Diluted earnings per shareAs reported
    
    $
    1.34
    
    
    $
    1.27
    
    
    $
    1.73
    
    
    $
    0.05Pro forma
    
    $
    1.30
    
    
    $
    1.23
    
    
    $
    1.70
    
    
    $
    0.05
  Volatility
    
    59.96% ~67.12 %Risk-free interest rate
    
    1.70% ~3.04 %Expected holding period
    
    3 -5 yearsDividend yield
    
    0%
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SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Net income impact of
    
    For the years ended December 31,compensation adjustment
    
    2003
    
    
    2004
    
    
    2005NT$
    
    
    NT$
    
    
    NT$
    
    
    US$US GAAP adjustment:Remuneration to directors
    
    $
    57,153
    
    
    $
    74,258
    
    
    $
    149,324
    
    
    $
    4,553Employee bonuses accrual
    
    
    284,171
    
    
    
    363,583
    
    
    
    731,079
    
    
    
    22,289Adjustment to fair market value
    
    
    
    
    
    
    261,231
    
    
    
    354,459
    
    
    
    10,807Total employee bonuses
    
    
    284,171
    
    
    
    624,814
    
    
    
    1,085,538
    
    
    
    33,096Total net income adjustment
to compensation
    
    $
    341,324
    
    
    $
    699,072
    
    
    $
    1,234,862
    
    
    $
    37,649
 Shareholders equity
    
    December 31,adjustment
    
    2003
    
    
    2004
    
    
    2005NT$
    
    
    NT$
    
    
    NT$
    
    
    US$US GAAP adjustment:Remuneration to directors
    
    $
    57,153
    
    
    $
    74,258
    
    
    $
    149,324
    
    
    $
    4,553Employee bonuses
    
    
    284,171
    
    
    
    363,583
    
    
    
    731,079
    
    
    $
    22,289Total shareholders equity
relating to compensation
    
    $
    341,324
    
    
    $
    437,841
    
    
    $
    880,403
    
    
    $
    26,842
 (i)
    
    Remuneration to DirectorsThe Companys Articles of Incorporation require a cash remuneration payment to its
directors. Under ROC GAAP, such payments are charged directly to retained earnings for
the period in which shareholders approve such payment. Under US GAAP, such cash payments
should be recorded as compensation expense in the period when services are rendered.
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SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (ii)
    
    Employee BonusesCertain employees of the Company are entitled to bonuses in accordance with applicable
provisions of the Companys Articles of Incorporation. Employee bonuses are set at 10%
of distributable retained earnings. Distributable retained earnings are calculated as
retained earnings after various reserves have been made in accordance with ROC
regulations and the Companys Articles of Incorporation and after appropriation for
remuneration to directors. Employee bonuses may be granted in cash, shares, or a
combination of both. Regardless of the form of the bonus, however, the shareholders are
required by the Article of Incorporation to approve a minimum 10% of distributable
earnings as the employee bonus whenever there is a dividend distribution. Under ROC
GAAP, such bonuses are appropriated from retained earnings in the
period shareholders approval is obtained. If such employee bonuses are settled through the issuance of
            shares of the Company, the amount charged against retained earnings is based on the par
value of the common shares issued. Under US GAAP, employee bonus expense is initially
accrued at the end of the period when services are rendered, at 10% of the distributable
retained earnings, which is considered the minimum liability the Company has to pay.
When bonuses are approved by the shareholders in the subsequent year, an additional
compensation expense is recorded for the difference between the par value and the fair
market value of shares granted to employees. The difference between US GAAP and ROC GAAP
in this area would result in adjustments to the Companys net income and shareholders
equity as shown in reconciliation tables set forth at the beginning of this note. This
accounting treatment for employees is based on the guidance of the International
Reporting and Disclosure Issues in the Division of Corporate Finance dated November 1,
2004. In 2003, the Board of Directors of the Company resolved to retain the 2002
earnings after setting aside the legal reserve and special reserve and not to pay
employee bonuses. The Board of Directors of the Company resolved to distribute employee
bonuses of NT$284,171 from 2003 earnings in 2004 and NT$363,583 from 2004 earnings in
2005. In addition to the adjustments to net income and shareholders equity as shown in
the above schedules, the application of US GAAP to employee bonuses would also result in
a reclassification from retained earnings to additional paid-in capital of NT$4,335
million and NT$4,690 million for the years ended December 31, 2004 and 2005,
respectively.(3)
    
    Equity InvestmentsUnder both ROC and US GAAP, investments representing at least twenty percent of the voting
interest of each investee for which the Company exercises significant influence over
operating and financial policies are generally accounted for under the equity method.
However, there are the following differences in applying equity accounting under ROC and
US GAAP.
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SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (i)
    
    Timing differenceUnder 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.
Under ROC GAAP, if financial statements of an investee are not prepared in a
sufficiently timely manner to enable the Company to apply the equity method
currently and such equity interests are below certain materiality thresholds, the
Company is permitted to delay the recognition of income (loss) until the subsequent
year. However, effective January 1, 2005, the Company ceased to delay in
recognizing investment income (loss) from certain equity-method investees in
accordance with the amended Statement of Financial Accounting Standards No. 5
Accounting for Long-term Equity Investment in the Republic of China. 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 adjustment is to
adjust the timing difference by deducting the delayed income/loss recognized under
ROC GAAP and adding the current years investment income/loss to arrive the net
income under US GAAP. No timing difference will occur for the year 2006 and
thereafter.(ii)
    
    Net income (loss) variance between US GAAP and ROC GAAPThe 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 US
GAAP, resulting in differences in the carrying amount of the equity investment
reported under ROC GAAP and US GAAP. The differences between ROC GAAP and US GAAP
for the equity investees include, but are not limited to, accounting for
compensation, joint venture accounting, investment in marketable securities,
embedded derivatives, deferred tax, and compensated absences. Such differences
would be recognized when the Company sells the equity investment.(iii)
    
    Accounting for income in preferred stockUnder ROC GAAP, when an investment is made in non-accumulative, convertible
preferred shares, investment income is recognized for the amount of actual
dividends when the dividend is declared. Investment loss is recognized to the
extent the investees net book value is less than the Companies liquidation
preference. Under US GAAP, if the preferred shareholders own at least 20% of the
voting rights, the investment is accounted for under the equity method and an
equity investor recognizes its proportionate share of both the investees income
and losses.
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SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (iv)
    
    Technology and know-how contributed to a joint venture investeeIn 1997, the Company established a joint venture, ChipMOS. Both SPIL and its joint
venture partner contributed cash as well as technological know-how to the joint
venture. The Company contributed cash in the amount of NT$1.4 billion. The
technological know-how contributed was not carried on the Companys balance sheet
and was valued at NT$0.1 billion, a deemed value agreed to by both parties.Under ROC GAAP, the Company recognized an initial cost of investment for NT$1.5
billion for cash and the value of know-how contributed. The value of know-how was
recognized as a deferred gain under other liabilities and was amortized over a
period during which the know-how transfer was completed and implemented.Under US GAAP, generally, an investor initially records its joint venture
investment at cost (i.e. the amount of cash contributed or net book value of
non-cash assets contributed) and a gain should not be recognized on receipt of an
interest in a joint venture if some or all of the investors interest was received
for the know-how contributed. Therefore, under US GAAP, the Company initially
recorded its joint venture investment of NT$1.4 billions, the amount of cash
contributed, and did not recognize the deemed value for the know-how contributed.
In addition, the excess of the Companys cost of investment of NT$1.4 billion over
the Companys proportionate share of fair value of ChipMOS identifiable net assets
is being amortized over a period of 5 years under US GAAP. Effective January 1,
2002, Statement of Financial Accounting Standards (SFAS) No. 142 requires that we
cease amortization for the difference between the cost of an investment accounted
for under the equity method and the amount of underlying equity in net assets of
the investee. The difference between the cost of the investment and the amount of
underlying equity in net assets of ChipMOS was fully written off in 2002.
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SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (4)
    
    Taxation EffectUnder ROC GAAP, a 10% tax on undistributed earnings is recognized as a tax expense
in the period when the amount of undistributed earnings is determined. In addition,
the effect of the 10% tax on temporary differences is not recognized for ROC GAAP
purpose. Under US GAAP, the 10% tax on undistributed earnings is accrued in the
period during which related income is generated and the impact of the 10% tax is
measured for both current and deferred tax perspectives.Separately, under US GAAP, deferred taxation is recognized for US GAAP adjustments that are
taxable or tax-deductible. Such adjustments relate to accruals for compensated
absences.(5)
    
    Earnings Per Share (EPS)In calculating 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 dividend, and are retroactively
adjusted to previous years calculation of weighted-average outstanding shares. Under
US GAAP, employee bonus shares have been considered separately from the stock dividend
or split and have been treated as outstanding from the date when they were issued.
The numbers of employee bonus shares issued in 2003, 2004 and 2005 were 0 shares,
21,049,700 shares, and 18,765,500 shares, respectively.In computing the dilutive effect of convertible bonds when calculating net
income available to common stockholders for diluted EPS, the after-tax results of
compensated interest expenses, unrealized foreign exchange gain/loss,
amortization of bond issuance costs are taken into consideration under ROC GAAP. However,
under US GAAP, in addition to the above three items, the after tax result of mark-to-market
gain or loss on embedded derivatives bifurcated from the host bonds is also taken into
consideration. Anti-dilutive effects are not adjusted for both under ROC GAAP and under US
GAAP.
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SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (6)
    
    Marketable SecuritiesUnder ROC GAAP, marketable equity securities and long-term equity investments in which the
Company owns less than 20% of the voting rights of a publicly listed investee company are
carried at the lower of cost or market value, and debt securities at cost. The market value
of listed stocks is determined by the average closing price during the last month of the
accounting period. Under US GAAP FAS 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 profits are classified as trading
securities and reported at fair value, with unrealized gains and losses included in earnings.
Debt and equity securities not classified as either held-to-maturity or trading are classified
as available-for-sale securities and reported at fair value, with unrealized gains and losses
excluded from earnings and reported as a separate component of shareholders equity. The fair
value of listed stock under US GAAP is generally determined by the closing price at the
balance sheet date. For individual securities classified as either available-for-sale or
held-to-maturity, the Company performs an analysis to determine whether a decline in fair
value below cost is other than temporary. No such impairment has been identified during the
periods presented.(7)
    
    Goodwill Acquired from MergerIn connection with acquisition of Siliconware Corporation in 2000, the Company recorded net
assets and goodwill of NT$5,415,439, respectively, based on independent appraisal report.
Prior to the adoption of SFAS No. 142, goodwill was amortized on straight-line basis over
ten years. Effective January 1, 2002, we adopted SFAS No. 142 and ceased amortization of
goodwill and performed the annual impairment analysis using a fair value approach. As of
December 31, 2005, the net carrying amount of goodwill was NT$4,873,500 and no impairment
of goodwill was identified during 2003 to 2005.(8)
    
    Stock DividendsUnder ROC GAAP, an issuance of stock dividend is recorded at par with a charge to
retained earnings. Under US GAAP, if the ratio of distribution is less than 25
percent of shares of the same class outstanding, the fair value of the shares issued
should be charged to retained earnings. This different treatment results, under US
GAAP, in a reclassification from retained earnings to additional paid-in capital of
NT$21,619,660 and NT$ 24,809,988 at December 31, 2004 and 2005, respectively. These
adjustments have no effect on shareholders equity.
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SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (9)
    
    Impairment of Long-lived AssetsThe ROC recently released an accounting standard to account for impairment of
long-lived assets which is effective for financial statements issued for fiscal years
ending on and after December 31, 2005 and interim periods within the fiscal year.
Prior to the adoption of this new accounting standard, the Company applied US GAAP to
evaluate whether long-lived assets were subject to impairment. Under US GAAP,
long-lived assets are required to be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not be
recoverable. The carrying value of a long-lived asset is considered impaired when the
anticipated undiscounted cash flows are less than the assets carrying value. In that
event, a loss is recognized based on the amount by which the carrying value exceeds
the fair value of the long-lived assets. The estimate of fair value is generally
based on quoted market prices or on the best available information, including prices
for similar assets and the results of using other valuation techniques. During 2002,
certain investees accounted for under the equity method, including ChipMOS
Technologies Inc., Double Win Enterprise Co., Ltd., and Artest Corporation, incurred
significant losses in the period following our investments and there is no indication
of recovery in the near future. Accordingly, we concluded that the impairment loss was
other than temporary and we recorded impairment charges totaling NT$212,569 on these
long-term equity investments to write off the carrying value of the investments to
their fair value. During 2005, the Company adopted ROC SFAS 35, Accounting for
Impairment of Assets, and recognized impairment loss for Double Win of NT$84,450 and
brought the investment balance down to nil. Therefore, the impairment loss of
NT$13,260 of Double Win, which was recognized during 2002 under US GAAP, is reversed
in 2005.(10)
    
    Embedded Derivative
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SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   F-63




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SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    F-64




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SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (11)
    
    Treasury Stock Transferred to EmployeeUnder ROC GAAP, treasury shares transferred to employees are recorded as capital
contributions for the cash amount received from the employees. Under US GAAP, in
addition to the capital contribution recorded for the cash amount received from the
employees, compensation expense would be recorded, for the difference between the shares transfer price and the fair market value of the shares issued at the issuance
date, during the period when such transfers were made.(12)
    
    Merger between Sigurd and UniversalUniversal Communication technology Inc. (Universal), an equity-method investee of the Company,
was merged into Sigurd Microelectronics Corp (Sigurd), another equity-method investee of the
Company, on March 1, 2005. Under ROC GAAP, the Company recognized its change of proportional
interest in Sigurd based on the fair value of Universals net assets at the acquisition date.
However, under US GAAP, the Company recognized its change of proportional interest in Sigurd
based on the fair value of Sigurds newly issued stocks at the acquisition date.
 Additional disclosure required by US GAAP
 (1)
    
    Risks and UncertaintiesThe Company is a provider of subcontract IC assembly and testing services. The
Companys revenues are derived primarily from precision dicing of silicon wafers into
individual ICs, mounting and wirebonding ICs to lead frames, and sealing ICs in molded
plastic packages. The Companys other products include a variety of turnkey services,
including the grinding of wafers to specified thickness, function testing of packaged
ICs, and drop shipment to customers of the IC manufactures. The Company distributes
its products on a global basis but mainly to customers in Taiwan of 38% and North
America of 56%. The Companys largest customer accounted for 12% and 11 % for 2004
and 2005, respectively, and its five largest customers accounted for 45% and 42% of
the Companys total sales in 2004 and 2005, respectively.In 2004 and 2005, significant portion of the Companys net operating revenue
were denominated in U.S. dollars. On the other hand, in 2004 and 2005, significant
portion the Companys purchase were incurred in U.S. dollars and in Japanese Yen. The
Companys capital expenditures are generally denominated in U.S. dollars and Japanese
Yen. The Company did not hedge any portion of the resulting net foreign exchange
position and would be affected by the fluctuations in U.S. dollar, the Japanese Yen
and other currencies.
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SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Substantially all of the Companys accounts receivables are due from companies in high
technology industries located primarily in Asia and North America. Further, the five
largest receivables amounted to NT$2,481,758 and NT$4,141,102 as of December 31, 2004
and 2005, respectively. The Company performs periodic credit evaluations of its
customers financial condition and generally does not require collateral. Receivables
are generally due within 90 days.Other factors that could affect the Companys future operating results and cause
actual results to vary materially from historical results include, but are not limited
to, dependence on the highly cyclical nature of both the semiconductor and the
personal computer industries, competitive pricing and declines in average selling
prices, availability of manufacturing capacity, dependence on raw materials and
competition.(2)
    
    Impairment of Long-lived AssetsProperty, plant and equipment are subject to review for impairment whenever events or
changes in circumstances indicate that the recoverability of the carrying amount of an
asset may be impaired. Measurement of an impairment loss for assets that the Company
expects to hold and use is based on the fair value of the asset. Idle assets and
long-lived assets to be disposed of are reported at the lower of carrying amount or
fair value less cost to sell. As of December 31, 2004 and 2005, the carrying amounts
of property, plant and equipment held for disposal were NT$460,539 and NT$68,766,
respectively. These assets held for disposal consist of die bonder, auto-molding
machine, laser marker, die saw and bar code workstation, which were mainly used for
production purposes. The factors leading to disposal include, among others, obsolete
technology, low efficiency and high repair cost. The Company periodically reviews the
status of idle assets and disposes such assets as buyers are identified. The
impairment losses on assets held for disposal for the years ended December 31, 2003,
2004 and 2005 were NT$131,828, NT$460,539 and NT$ 68,766, respectively. The impairment
charge in 2005 was mainly related to the Companys decision to dispose certain
machinery and equipment due to technology phase out and replacement.
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SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (3)
    
    Maturity of Long-term LiabilitiesAggregate maturities for the Companys bonds payable and long-term loans as of December 31,
2005 are as follows:
 Years ending December 31,
    
    AmountsNT$
    
    
    US$2006
    
    $
    1,790,895
    
    
    
    54,6002007
    
    
    7,922,266
    
    
    
    241,5332008
    
    
    5,843,868
    
    
    
    178,167$
    15,557,029
    
    
    $
    474,300
 (4)
    
    Cash and Cash Flow StatementUnder 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. Summarized cash flow information under US GAAP
would be presented as follows:
 For the years ended December 31,2004
    
    
    2005NT$
    
    
    NT$
    
    
    US$Net cash provided by operating activities
    
    $
    8,766,648
    
    
    $
    13,214,617
    
    
    $
    402,885Net cash used in investing activities
    
    
    (8,635,564
    )
    
    
    (6,263,357
    )
    
    
    (190956.00
    )Net cash provided by financing activies
    
    
    1,659,251
    
    
    
    (5,435,285
    )
    
    
    (165710.00
    )Effect on foreign exchange
    
    
    (85,734
    )
    
    
    36,065
    
    
    
    1100.00Net increase in cash and cash equivalents
    
    
    1,704,601
    
    
    
    1,552,040
    
    
    
    47318.00Cash and cash equivalents at beginning of the
    
    
    9,017,750
    
    
    
    10,722,351
    
    
    
    326901.00Cash and cash equivalents at the end of the year
    
    $
    10,722,351
    
    
    $
    12,274,391
    
    
    $
    374,219
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SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (5)
    
    Comprehensive IncomeComprehensive income under ROC GAAP for the years ended December 31, 2003, 2004, and 2005
and accumulated other comprehensive income balances as of December 31, 2004 and 2005
are summarized as follows:
 As of December 31,2003
    
    
    2004
    
    
    2005NT$
    
    
    NT$
    
    
    NT$
    
    
    US$Net income
    
    $
    2,838,716
    
    
    $
    4,282,177
    
    
    $
    8,243,902
    
    
    $
    251,338Other comprehensive income (loss), net of taxesCumulative translation adjustment on equity investment
    
    
    (32,405
    )
    
    
    (144,331
    )
    
    
    90,947
    
    
    
    2,773Remuneration to directors and supervisors
    
    
    
    
    
    
    (57,153
    )
    
    
    (74,258
    )
    
    
    (2,264
    )Employees cash bonus
    
    
    
    
    
    
    (73,674
    )
    
    
    (175,927
    )
    
    
    (5,364
    )Adjustment for unrealized loss on long-term investment
    
    
    302,780
    
    
    
    
    
    
    
    (737
    )
    
    
    (22
    )Adjustment for investee companies capital reserve
    
    
    617
    
    
    
    (10,862
    )
    
    
    (40,009
    )
    
    
    (1,220
    )Adjustment for investee companies unrecognized
pension liabilities
    
    
    
    
    
    
    
    
    
    
    (1,828
    )
    
    
    (56
    )Comprehensive income
    
    $
    3,109,708
    
    
    $
    3,996,157
    
    
    $
    8,042,090
    
    
    $
    245,186
 As of December 31,2004
    
    
    2005NT$
    
    
    NT$
    
    
    US$Accumulated other comprehensive income balances
    
    $
    (141,053
    )
    
    $
    (50,106
    )
    
    $
    (1,528
    )Adjustment for investee companies capital reserve
    
    
    (10,245
    )
    
    
    (50,254
    )
    
    $
    (1,532
    )Remuneration to directors and supervisors
    
    
    (57,153
    )
    
    
    (131,411
    )
    
    $
    (4,006
    )Employees cash bonus
    
    
    (73,674
    )
    
    
    (249,601
    )
    
    $
    (7,610
    )Adjustment for unrealized loss on long-term investment
    
    
    
    
    
    
    (737
    )
    
    $
    (22
    )Adjustment for change in equity investment holding ratio
    
    
    15,063
    
    
    
    15,063
    
    
    $
    459Adjustment for investee companies unrecognized pension
    
    
    
    
    
    
    (1,828
    )
    
    $
    (56
    )Accumulated other comprehensive income
    
    $
    (267,062
    )
    
    $
    (468,874
    )
    
    $
    (14,295
    )
 (6)
    
    Employers disclosure about pension benefitAdditional disclosures under FAS132 (R) regarding pension benefits are as follows:
 A.
    
    Estimated future benefit payments:The following benefit payments, which reflect expected future service, as
appropriate, are expected to be paid:
 AmountsNT $
    
    
    
    
    
    
    US$2006
    
    $
    3,998
    
    
    
    
    
    
    $
    1222007
    
    
    3,248
    
    
    
    
    
    
    $
    992008
    
    
    6,497
    
    
    
    
    
    
    $
    1982009
    
    
    13,521
    
    
    
    
    
    
    $
    4122010
    
    
    9,358
    
    
    
    
    
    
    $
    285Year 2011 to 2015
    
    
    233,407
    
    
    
    
    
    
    $
    7,116
 F-68




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 B.
    
    ContributionsThe Company expects to contribute NT$ 52,962 to its pension plan in 2006.
 (7)
    
    Indirect guarantees of indebtedness of othersIn July 1997, the Company entered a joint venture agreement with Mosel Vitelic, the primarily
shareholders of ChipMOS, to establish ChipMOS. Under the joint venture agreement, if ChipMOS
requires guarantees of its indebtedness to obtain financing, SPIL and Mosel Vitelic are
required to provide these guarantees in the ratios of 30% and 70%, respectively. As of
December 31, 2005, SPIL had not provided any guarantees with respect to ChipMOSs
indebtedness.(8)
    
    Inventory provisionThe Company evaluates its inventory based on the lower of cost or market value. Under ROC
GAAP, the recovery of write-downs from the lower of cost or market (LCM) is allowed. Under US
GAAP, no recovery from the LCM is permitted. There is no such recovery recognized in 2005 ROC
GAAP financial statements. The companys recovery results from the disposal and sales of idle
inventory, which has no impact on US GAAP reconciliation. Therefore, no adjustment is
required for the restoration of write-downs in 2005.(9)
    
    Revenue recognition accounting policyThe Company derives its revenues from the provision of independent assembly and testing
services, and recognizes service revenues upon shipment based upon transaction terms and when
collection is reasonable assured. If multiple services are negotiated in one contract, the
Company recognizes revenues based on their relative fair values when all of the revenue
recognition criteria are met.
 F-69




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##### Table of Contents



SILICONWARE
PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (10)
    
    Sales returnsThe Company derives revenues only from providing independent testing and assembly services
to semiconductor companies. As the company does not engage in product sales, it does not
account for sales returns.(11)
    
    Major debt covenantsThe major covenants of the Companys long-term loans are as follows:
 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%.
 (12)
    
    Valuation and Qualifying Accounts and ReservesThe information about our valuation and qualifying accounts and reserves are as follows:
 AdditionsBalance at
    
    Charges to
    
    
    
    
    
    Balance atbeginning of
    
    costs and
    
    
    
    
    
    end ofDescription
    
    period
    
    expenses
    
    Deductions
    
    periodFor the year ended 2003Allowance for doubtful accounts
    
    
    7,928
    
    
    
    4,834
    
    
    
    3,393
    
    
    
    9,369Allowance for sales discounts
    
    
    29,262
    
    
    
    27,294
    
    
    
    0
    
    
    
    56,556Allowance for loss on
obsolescence and decline in
market value
    
    
    168,105
    
    
    
    0
    
    
    
    109,910
    
    
    
    58,195For the year ended 2004Allowance for doubtful accounts
    
    
    9,369
    
    
    
    0
    
    
    
    0
    
    
    
    9,369Allowance for sales discounts
    
    
    56,556
    
    
    
    92,638
    
    
    
    56,556
    
    
    
    92,638Allowance for loss on
obsolescence and decline in
market value
    
    
    58,195
    
    
    
    0
    
    
    
    12,746
    
    
    
    45,449For the year ended 2005Allowance for doubtful accounts
    
    
    9,369
    
    
    
    14,269
    
    
    
    11,358
    
    
    
    12,280Allowance for sales discounts
    
    
    92,638
    
    
    
    184,159
    
    
    
    209,617
    
    
    
    67,180Allowance for loss on
obsolescence and decline in
market value
    
    
    45,449
    
    
    
    73,672
    
    
    
    69,775
    
    
    
    49,346
 F-70




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (13)
    
    Recent Accounting Pronouncements
 A.
    
    In March 2004, the FASB approved the consensus reached on the
EITF Issue No. 03-01, The Meaning of Other-Than-Temporary Impairment and Its
Application to Certain Investments¡ ̈providing the guidelines for the
identification of other-than-temporary impaired investments and the new
disclosure requirements for the temporary impairment. In September 2004, the
FASB issued a FASB Staff Position (FSP) EITF Issue No. 03-01 to delay the
effective date for the recognition and measurement guidance previously discussed
in EITF Issue No. 03-01 as included in paragraphs 10-20 until further notice.
In November 2005, the FASB issue a FASB Staff Position FAS 115-1 and FAS 124-1
to address the issues related to the determination and measurement of impairment
loss. This FSP also includes accounting considerations subsequent to the
recognition of an other-than-temporary impairment and disclosure requirements
for the unrealized losses that have not been recognized as other-than-temporary
impairments. The Company has evaluated the effect of these two FSP issues on
its financial position and results of operations and does not expect the
adoption of the accounting provisions of EITF 03-01 will have a significant
impact on the Company.B.
    
    In November 2004, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standard (SFAS) No. 151, Inventory
Costs  an amendment of ARB No. 43, Chapter 4. SFAS No. 151 clarifies the
accounting for abnormal amounts of idle facility expense, freight, handling
costs and wasted material. SFAS No. 151 requires that abnormal amounts be
recognized as current period charges regardless of whether they meet the
criterion of so abnormal. In addition, SFAS No. 151 requires that allocation
of fixed production overheads to the costs of conversion be based on the normal
capacity of the production facilities. This standard does not affect the
Companys financial position, cash flows or results of operations.
 F-71




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 C.
    
    In December 2004, the FASB issued FAS No. 123(R),
Share-Based Payment, (FAS 123 (R)). FAS 123(R) requires employee stock options and rights
to purchase shares under stock participation plans to be accounted for under the
fair-value method, and eliminates the use of the intrinsic-value method
prescribed by APB Opinion No. 25, which was allowed under the original
provisions of FAS 123. FAS 123(R) requires the use of an option-pricing model
for estimating fair value amortized to expenses over the requisite periods. The
requirements of FAS 123(R) were effective for interim periods beginning after
June 15, 2005. The Securities and Exchange Commission (SEC) has postponed the
effective date of FAS 123(R), giving companies more time to develop their
implementation strategies. Under the SECs rule, FAS 123(R) is now effective for
public companies for annual, rather than interim, periods that begin after June
15, 2005. The Company adopts FAS 123(R) beginning in fiscal 2006 and is
currently evaluating the various transition methods allowed under FAS 123(R).D.
    
    On December 31, 2004, the FASB issued SFAS No. 153, Exchanges of
Non-Monetary Assets, an Amendment of APB Opinion No. 29, effective for
non-monetary asset exchanges occurring in the fiscal year beginning January 1,
2006. SFAS No. 153 requires that exchanges of productive assets be accounted for
at fair value and gain or loss be recognized from the similar non-monetary asset
exchange unless fair value cannot be reasonably determined or the transaction
lacks commercial substance. The statement is effective for non-monetary asset
exchanges occurring in fiscal periods beginning after June 15, 2005. The
Company is currently evaluating the effects on the
Companys financial statements.E.
    
    In May 2005, FASB issued SFAS No. 154 Accounting Changes and
Error Corrections to replace APB Opinion No. 20,Accounting Changes,and FASB
Statement No. 3, Reporting Accounting Changes in Interim Financial Statements,
and change the requirements for the accounting for and reporting of a change in
accounting principle. This statement is applied to all voluntary changes in
accounting principle and changes required by an accounting pronouncement in the
unusual instance without specific transition provisions. SFAS No. 154 is
effective for accounting changes and corrections of errors made in fiscal years
beginning after December 15, 2005.
 F-72




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SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 F.
    
    In June 2005, the FASB ratified the 05-2 consensus reached by the
Emerging Issues Task Force The Meaning of Conventional Convertible Debt
Instrument in Issue No. 00-19 (EITF 05-2). The Task Force reached a consensus
on that the exception to the requirements of paragraphs 12-33 of Issue 00-19 for
conventional convertible debt instruments should be retained. The Task Force
also reached a consensus that instruments that provide the holder with an option
to convert into a fixed number of shares (or equivalent amount of cash at the
discretion of the issuer) for which the ability to exercise the option is based
on the passage of time or a contingent event should be considered conventional
for purposes of applying Issue 00-19. Instruments that contain standard
anti-dilution provisions would not preclude a conclusion that the instrument is
convertible into a fixed number of shares. The Task Force also reached a
consensus that convertible preferred stock with a mandatory redemption date may
qualify for the exception included in paragraph 4 of Issue 00-19 if the economic
characteristics indicate that the instrument is more akin to debt than equity.
The Company has evaluated the impact of this Issue and concludes that the
Companys currently outstanding convertible bonds are not conventional ones.
If the Company decides to issue convertible bonds in the future, the Company
will analyze its terms to see if the convertible bonds are conventional, and
apply applicable pronouncements and this Issue to account for its convertible
bonds.G.
    
    In February 2006, FASB issued SFAS No. 155, Accounting for
Certain Hybrid Financial Instruments- an amendment of FASB Statements No. 133
and 140. This statement allows financial instruments that have embedded
derivatives requiring bifurcation from the host to be accounted for as a whole,
if the holder irrevocably elects to account for the whole instrument on a fair
value basis. Subsequent changes in the fair value of the instrument would be
recognized in earnings. This statement is effective for all financial
instruments acquired, issued, or subject to a remeasurement (new basis) event
occurring after the beginning of an entitys first fiscal year that begins after
September 15, 2006. The Company currently believes that there is no material
effect after adopting SFAS No. 155.
 F-73




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 H.
    
    In September 2005, Accounting Research and development Foundation
issued SFAS No. 34, Accounting for Financial Instruments. This statement
eliminates the use of the phrase of short-term investment and lower of cost or
fair value for the valuation of financial instruments. Instead, financial
instruments are measured at fair value, except held-to-maturity securities,
equity securities without an active market or relative fair values, and
financial assets or derivatives linked to and settled in the aforementioned
exceptions. For financial instruments classified as trading, subsequent changes
in their fair values are recognized in earnings at each balance sheet date. For
financial instruments classified as available-for-sale, subsequent changes in
their fair values are recognized in shareholders equity. The requirements of
SFAS No. 34 were effective for fiscal periods beginning after January 1, 2006.
The changes in accounting principles above increased the Companys total assets
and total shareholders equity as of January 1, 2006 both by $8,912,555.
 F-74




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##### Table of Contents



(4)
    
    Securities of which total buying or selling exceeds the lower of NT$100,000 or 20
percent of the capital stock:For the years ended December 31, 2005:
 TheName
    
    relationship
    
    Beginning balance
    
    Addition
    
    
    
    
    
    Disposal
    
    Ending balanceof
    
    of the
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    GainGeneral
    
    the
    
    issuers
    
    Number
    
    
    
    
    
    Number
    
    
    
    
    
    Number
    
    
    
    
    
    
    
    
    
    (loss)
    
    NumberName of
    
    ledger
    
    counter
    
    with the
    
    of shares/unit
    
    
    
    
    
    of shares/unit
    
    
    
    
    
    of shares/unit
    
    
    
    
    
    
    
    
    
    from
    
    of shares/unitInvestor
    
    the security
    
    accounts
    
    party
    
    Company
    
    (in thousands)
    
    Amount
    
    (in thousands)
    
    Amount
    
    (in thousands)
    
    Sale price
    
    Book value
    
    disposal
    

(in thousands)
    
    AmountSiliconware Precision Industries Co., Ltd.
    
    Sigurd Microelectronics Corp. stock
    
    Long-term investment
    
    
    
    
    
    
    
    
    
    
    35,121
    
    
    $
    617,264
    
    
    
    (Note 1)6,595
    
    
    $
    133,879
    
    
    
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    
    44,428
    
    
    $
    (Note 3)724,140Siliconware Precision Industries Co., Ltd.
    
    Universal Communication stock
    
    Long-term investment
    
    
    
    
    
    
    
    
    
    
    32,975
    
    
    
    237,894
    
    
    
    
    
    
    
    
    
    
    
    32,975
    
    
    
    133,879
    
    
    
    226,330
    
    
    
    (Note 2)(92,452
    )
    
    
    
    
    
    
    Siliconware Precision Industries Co.,Ltd.
    
    SPIL (B.V.I.) Holding Limited stock
    
    Long-term investment
    
    
    
    
    
    
    
    
    
    
    57,800
    
    
    
    1,654,394
    
    
    
    5,000
    
    
    
    157,050
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    62,800
    
    
    
    (Note 3)1,794,319Siliconware Precision Industries Co., Ltd.
    
    Phoenix Precision Technology Corporation stock
    
    Long-term investment
    
    
    
    
    
    
    
    
    
    
    6,691
    
    
    
    190,512
    
    
    
    
    
    
    
    
    
    
    
    7,170
    
    
    
    192,060
    
    
    
    190,512
    
    
    
    1,548
    
    
    
    
    
    
    
    Siliconware Precision Industries Co., Ltd.
    
    JP Morgan Fleming Taiwan Bond Fund
    
    Short-term investment
    
    
    
    
    
    
    
    
    
    
    15,997
    
    
    
    237,051
    
    
    
    103,456
    
    
    
    1,541,000
    
    
    
    119,453
    
    
    
    1,779,917
    
    
    
    1,778,051
    
    
    
    1,866
    
    
    
    
    
    
    
    Siliconware Precision Industries Co., Ltd.
    
    JP Morgan Fleming First Bond Fund
    
    Short-term investment
    
    
    
    
    
    
    
    
    
    
    2,980
    
    
    
    40,558
    
    
    
    
    
    
    
    
    
    
    
    2,980
    
    
    
    40,834
    
    
    
    40,558
    
    
    
    277
    
    
    
    
    
    
    
    Siliconware Precision Industries Co., Ltd.
    
    ABN AMRO Bond Fund
    
    Short-term investment
    
    
    
    
    
    
    
    
    
    
    26,811
    
    
    
    391,836
    
    
    
    91,988
    
    
    
    1,353,500
    
    
    
    118,799
    
    
    
    1,747,643
    
    
    
    1,745,336
    
    
    
    2,307
    
    
    
    
    
    
    
    Siliconware Precision Industries Co., Ltd.
    
    ABN AMRO Selected Bond Fund
    
    Short-term investment
    
    
    
    
    
    
    
    
    
    
    44,388
    
    
    
    488,295
    
    
    
    99,848
    
    
    
    1,104,500
    
    
    
    144,236
    
    
    
    1,595,991
    
    
    
    1,592,795
    
    
    
    3,196
    
    
    
    
    
    
    
    Siliconware Precision Industries Co., Ltd.
    
    The First Global Investment Trust Duo Li Bond Fund
    
    Short-term investment
    
    
    
    
    
    
    
    
    
    
    12,420
    
    
    
    200,000
    
    
    
    
    
    
    
    
    
    
    
    12,420
    
    
    
    201,546
    
    
    
    200,000
    
    
    
    1,546
    
    
    
    
    
    
    
    Siliconware Precision Industries Co., Ltd.
    
    The First Global Investment Trust Duo Li-2 Bond Fund
    
    Short-term investment
    
    
    
    
    
    
    
    
    
    
    6,370
    
    
    
    90,230
    
    
    
    46,494
    
    
    
    665,000
    
    
    
    52,864
    
    
    
    756,141
    
    
    
    755,230
    
    
    
    911
    
    
    
    
    
    
    
    Siliconware Precision Industries Co., Ltd.
    
    Fuhwa Bond Fund
    
    Short-term investment
    
    
    
    
    
    
    
    
    
    
    38,287
    
    
    
    495,000
    
    
    
    8,441
    
    
    
    110,000
    
    
    
    46,728
    
    
    
    608,178
    
    
    
    605,000
    
    
    
    3,178
    
    
    
    
    
    
    
    
    F-75




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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 years ended December 31, 2005:
 Related party as counter partyOriginal
    
    Theowner which
    
    relationshipRelation-
    
    sold the
    
    of theship with
    
    property to
    
    original
    
    Date of theDate of
    
    Transaction
    
    Status of
    
    
    
    the
    
    the counter
    
    owner with
    
    originalName of the properties
    
    transaction
    
    amount
    
    payment
    
    Counter party
    
    Company
    
    party
    
    the Company
    
    transaction
    
    AmountConstruction in progress
    
    December 2003
    
    $
    354,430
    
    
    $
    354,430
    
    
    Chin-Biau Construction Corporation Ltd.
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    Construction in progress
    
    January 2004
    
    
    322,800
    
    
    
    322,800
    
    
    Chung-Rui Construction Corporation Ltd.
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Construction in progress
    
    August  2004
    
    
    207,000
    
    
    
    207,000
    
    
    Sheng-Hui Construction Corporation Ltd.
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 (6)
    
    Disposal of real estate with an amount exceeding the lower of NT$100,000 or 20 percent
of the capital stock:For the years ended December 31, 2005: None.
 F-76




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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 years ended December 31, 2005:
 Description ofand reasons fordifference intransaction termscompared tonon-related
    
    Notes or accountsDescription of the transaction
    
    party transactions
    
    receivable / payablePercentage
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Percentage ofRelationship
    
    
    
    
    
    
    
    
    
    of net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    notes or accountsPurchase / sales
    
    Name of
    
    with the
    
    Purchases
    
    
    
    
    
    purchases
    
    Credit
    
    Unit
    
    Credit
    
    
    
    
    
    receivable /company
    
    the counter parties
    
    counter parties
    
    / sales
    
    Amount
    
    / sales
    
    terms
    
    price
    
    terms
    
    Amount
    
    payableSiliconware
    
    Phoenix Precision
    
    The Company
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    AccountsPrecision
    
    Technology
    
    holds
    
    
    
    
    
    
    
    
    
    
    
    
    
    Three
    
    
    
    
    
    
    
    
    
    payableIndustries Co., Ltd.
    
    Corporation
    
    directorship
    
    Purchase
    
    $
    3,600,039
    
    
    
    18
    %
    
    months
    
    $
    
    
    
    
    
    
    
    $
    694,261
    
    
    
    14
    %
 (8)
    
    Receivables from related parties exceeding the lower of NT$100,000 or 20 percent of the
capital stock:As of December 31, 2005: None.(9)
    
    Transaction of derivative financial instruments:For the years ended December 31, 2005: None.
 F-77




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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 years ended December 31, 2005:
 Original investments
    

The
Company / majorityowned subsidiary owns
    
    
    
    
    
    Current periodShares
    
    
    
    
    
    
    
    
    
    Net income
    
    Income (loss)December 31,
    
    December 31,
    
    (in
    
    Ownership
    
    Book
    
    (loss) of
    
    recognized byInvestor
    
    Name of Investee
    
    Location
    
    Main activities
    
    2005
    
    2004
    
    thousands)
    
    Percentage
    
    value
    
    investee
    
    the Company
    
    Note(Note 3)Siliconware Precision Industries Co., Ltd.
    
    Siliconware Investment Company Ltd.
    
    Taipei
    
    Investment activities
    
    $
    1,770,000
    
    
    $
    1,770,000
    
    
    
    177,000
    
    
    
    100.00
    %
    
    $
    960,363
    
    
    $
    37,816
    
    
    $
    6,119
    
    
    (Note1,2,7)Siliconware Precision Industries Co., Ltd.
    
    Sigurd Microelectronics  Corp.
    
    Chu-tung, Hsin-Chu
    
    Testing and assembly of integrated circuits
    
    
    459,274
    
    
    
    325,395
    
    
    
    44,428
    
    
    
    23.92
    %
    
    
    724,140
    
    
    
    280,863
    
    
    
    62,563
    
    
    (Note1)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
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    (Note1)Siliconware Precision Industries Co., Ltd.
    
    ChipMOS Technologies Inc.
    
    Science-based Industrial Park, Hsin - Chu
    
    Testing and assembly of integrated circuits
    
    
    2,332,768
    
    
    
    2,332,768
    
    
    
    254,863
    
    
    
    28.75
    %
    
    
    3,924,937
    
    
    
    2,108,036
    
    
    
    432,715
    
    
    (Notes 1)Siliconware Precision Industries Co., Ltd.
    
    SPIL(B.V.I.) Holding Limited
    
    British Virgin Islands
    
    Investment activities
    
    
    2,133,819
    
    
    
    1,976,769
    
    
    
    62,800
    
    
    
    100.00
    %
    
    
    1,794,319
    
    
    
    (105,691
    )
    
    
    (105,691
    )
    
    (Note 1,2,7)Siliconware Precision Industries Co., Ltd.
    
    Universal Communication Technology Inc.
    
    Hsin - Chu
    
    RFIC test
    
    
    
    
    
    
    329,750
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (28,283
    )
    
    
    (9,775
    )
    
    (Note 1)SPIL(B.V.I.) Holding Limited
    
    Siliconware USA, Inc.
    
    San Jose, CA, USA
    
    Providing promotion and marketing services
    
    
    68,464
    
    
    
    68,464
    
    
    
    1,250
    
    
    
    100.00
    %
    
    
    75,455
    
    
    
    13,057
    
    
    
    13,057
    
    
    (Note 4,7)SPIL (B.V.I.)Holding Limited
    
    SPIL(Cayman) Holding Limited
    
    Cayman Islands, British West India
    
    Investment activities
    
    
    1,157,575
    
    
    
    998,954
    
    
    
    35,100
    
    
    
    100.00
    %
    
    
    826,252
    
    
    
    (144,303
    )
    
    
    (144,303
    )
    
    (Note 5,7)SPIL(Cayman) Holding Limited
    
    Siliconware Technology (Suzhou) Limited
    
    Suzhou Jiangsu, China
    
    Manufacturing of memory stick, DRAM module, transistor and electronic component
    
    
    1,154,330
    
    
    
    997,280
    
    
    (Note 6)
    
    
    100.00
    %
    
    
    824,617
    
    
    
    (143,834
    )
    
    
    (143,834
    )
    
    (Note 5,7)
        F-78




---



##### Table of Contents



(2)
    
    The ending balance of securities held by investee companies:As of December 31, 2005:
 The relationship
    
    General
    
    Number of
    
    
    
    
    
    
    
    
    
    Market valueType of
    
    Name of
    
    of the issuers with
    
    ledger
    
    shares
    
    Book value
    
    Ownership
    
    per shareInvestor
    
    securities
    
    securities
    
    the Company
    
    accounts
    
    (in thousands)
    
    (Note 2)
    
    percentage
    
    (in dollar)Siliconware Investment Company Ltd.
    
    Stock
    
    Siliconware Precision Industries Co., Ltd.
    
    The Company
    
    Long-term investments
    
    
    32,090
    
    
    $
    794,184
    
    
    
    1.38
    %
    
    $
    46.05Siliconware Investment Company Ltd.
    
    Stock
    
    Others (Note 1)
    
    
    
    Long-term investments
    
    
    20,798
    
    
    
    254,644
    
    
    
    
    
    
    
    SP IL (B.V.I.) Holding Limited
    
    Stock
    
    Siliconware USA, Inc.
    
    Indirect subsidiary of the Company
    
    Long-term investments
    
    
    1,250
    
    
    
    75,455
    
    
    
    100.00
    %
    
    
    52.69
    
    
    (Note 2,4)SP IL (B.V.I.) Holding Limited
    
    Stock
    
    SP IL (Cayman)  Holding Limited
    
    Indirect subsidiary of the Company
    
    Long-term investments
    
    
    35,100
    
    
    
    826,252
    
    
    
    100.00
    %
    
    
    23.54
    
    
    (Note 2,4)SP IL (Cayman) Holding Limited
    
    Stock
    
    Siliconware Technology (Suzhou) Limited
    
    Indirect subsidiary of the Company
    
    Long-term investments
    
    (Note 3)
    
    
    
    824,617
    
    
    
    100.00
    %
    
    
    
     F-79




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (3)
    
    Securities of which total buying or selling amount exceed the lower of NT$100,000 or 20 percent
of the capital stock:
  The
    
    
    Beginning balance
    
    
    Addition
    
    
    Disposal
    
    
    Ending balanceName of
    
    
    relationship
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    GainGeneral
    
    the
    
    
    of the
    
    
    Number of
    
    
    
    
    
    
    Number of
    
    
    
    
    
    
    Number of
    
    
    
    
    
    
    
    
    
    
    (loss)
    
    
    Number ofledger
    
    counter
    
    
    issuers with
    
    
    shares
    
    
    
    
    
    
    shares
    
    
    
    
    
    
    shares
    
    
    Sale
    
    
    Book
    
    
    from
    
    
    shares
    
    
    AmountInvestor
    
    Name of the security
    
    accounts
    
    party
    
    
    the Company
    
    
    (in thousands)
    
    
    Amount
    
    
    (in thousands)
    
    
    Amount
    
    
    (in thousands)
    
    
    price
    
    
    value
    
    
    disposal
    
    
    (in thousands)SPIL (B.V.I.) Holding Limited
    
    SPIL (Cayman) Holding Limited
    
    Long-term investment
    
    (Note 1)
    
    
    
    
    
    
    30,050
    
    
    $
    756,445
    
    
    
    5,050
    
    
    $
    158,621
    
    
    
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    
    35,100
    
    
    (Note 5,6)$826,252SPIL (Cayman) Holding Limited
    
    Siliconware Technology (Suzhou) Limited
    
    Long-term investment
    
    (Note 1)
    
    
    
    
    
    
    (Note 2
    )
    
    
    755,987
    
    
    
    (Note 3
    )
    
    
    157,050
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (Note 4
    )
    
    (Note 5,6)824,617
       F-80




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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:
  Accumulated
    
    Remitted or
    
    AccumulatedName of investee
    
    Main activities
    
    
    
    
    
    Investment
    
    remittance as of
    
    (collected)
    
    remittance as ofin Mainland China
    
    of investee
    
    Capital
    
    method
    
    December 31 ,2004
    
    this period
    
    December 31 , 2005Siliconware Technology (Suzhou) Limited
    
    Manufacture memory stick , DRAM module, transistor and electronic component
    
    $
    1,148,000
    
    
    (Note 1)
    
    $
    984,000
    
    
    $
    164,000
    
    
    $
    1,148,000(Note 2
    )
    
    
    
    
    
    
    (Note 2
    )
    
    
    (Note 2
    )
    
    
    (Note 2
    )
 InvestmentOwnership
    
    income (loss)
    
    
    
    
    
    The investment
    
    Accumulated
    
    The investment balance
    
    The ceiling of investmentheld by
    
    recognized by
    
    
    
    
    
    income (loss)
    
    remittance
    
    approved by
    
    in Mainland China according tothe Company
    
    the Company
    
    Ending balance
    
    remitted back as of
    
    from Taiwan to
    
    Investment Commissions,
    
    Investment Commissions,(Direct and indirect
    
    during the period
    
    of investment
    
    December 31 , 2005
    
    Mainland China
    
    Ministry of Economic Affairs
    
    Ministry of Economic Affairs100.00%
    
    
    ($143,834
    )
    
    $
    824,617
    
    
    $
    
    
    
    $
    1,148,000
    
    
    $
    1,640,000
    
    
    $
    9,665,001(Note 3
    )
    
    
    (Note 2
    )
    (1)
    
    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: None.
 F-81




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 D.
    
    Business relationships and significant transactions and amounts between
Parent Company and Subsidiary Company:
 RELATED PARTY TRANSACTIONSName of
    
    Name of the Company
    
    Relationship with
    
    
    
    
    
    
    
    % of consolidated revenuesNO.
    
    Related Parties
    
    Transactions
    
    Related Parties
    
    Account
    
    Amount
    
    Term
    
    or total assets0
    
    SPIL
    
    Siliconware USA, Inc.
    
    
    1
    
    
    Commission expense
    
    $417, 418
    
    as contract
    
    
    1
    %
 F-82




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##### Table of Contents



ChipMOS TECHNOLOGIES INC. and Subsidiaries
 Consolidated Financial Statements for the Years Ended
December 31, 2003, 2004 and 2005
Together with Report of Independent Registered Accounting Firm
 F-83




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##### Table of Contents



MOORE STEPHENS
  
 
 
 
 
     
 F-84




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##### Table of Contents



ChipMOS TECHNOLOGIES INC. AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
December 31, 2004 and 2005
(In Thousands of New Taiwan and U.S. Dollars, Except Par Value)
 December 312004
    
    2005NT$
    
    NT$
    
    US$(Note 3)ASSETSCURRENT ASSETSCash and cash equivalents (Note 2)
    
    
    2,818,156
    
    
    
    3,154,097
    
    
    
    96,015Restricted cash and cash equivalents (Note 19)
    
    
    87,041
    
    
    
    123,947
    
    
    
    3,773Short-term investments  net (Notes 2 and 4)
    
    
    2,815,127
    
    
    
    186,136
    
    
    
    5,666Notes receivable
    
    
    62,205
    
    
    
    30,581
    
    
    
    931Accounts receivable  net of allowance for doubtful receivables and
sales return allowances of NT$262,399 in 2004 and NT$373,597 in 2005
(Notes 2 and 5)
    
    
    1,825,845
    
    
    
    2,401,045
    
    
    
    73,091Receivables from related parties (Notes 2, 5 and 18):Notes and accounts  net of allowance for doubtful receivables and
sales return allowances of NT$13,353 in 2004 and NT$9,429 in 2005
    
    
    1,419,319
    
    
    
    1,419,976
    
    
    
    43,226Others receivable  net of allowance for doubtful receivables of
NT$5,914 in 2004 and NT$8,520 in 2005
    
    
    31,575
    
    
    
    5,315
    
    
    
    162Other receivable  net of allowance for doubtful receivables of
NT$10,385 in 2004 and NT$9,754 in 2005 (Notes 2 and 5)
    
    
    169,680
    
    
    
    169,337
    
    
    
    5,155Inventories  net (Notes 2 and 6)
    
    
    607,213
    
    
    
    540,422
    
    
    
    16,451Deferred income tax  net (Notes 2 and 17)
    
    
    590,475
    
    
    
    239,202
    
    
    
    7,282Prepaid expenses and other current assets (Note 18)
    
    
    121,991
    
    
    
    60,807
    
    
    
    1,851Total Current Assets
    
    
    10,548,627
    
    
    
    8,330,865
    
    
    
    253,603LONG-TERM INVESTMENTS (Notes 2 and 7)
    
    
    663,040
    
    
    
    413,125
    
    
    
    12,576PROPERTY, PLANT AND EQUIPMENT (Notes 2 and 8)CostLand
    
    
    530,862
    
    
    
    530,268
    
    
    
    16,142Buildings and auxiliary equipment
    
    
    4,251,564
    
    
    
    4,626,061
    
    
    
    140,824Machinery and equipment
    
    
    22,159,513
    
    
    
    23,510,371
    
    
    
    715,689Furniture and fixtures
    
    
    502,681
    
    
    
    579,390
    
    
    
    17,638Transportation equipment
    
    
    21,667
    
    
    
    30,351
    
    
    
    924Tools
    
    
    1,359,212
    
    
    
    1,390,087
    
    
    
    42,316Leasehold improvements
    
    
    50,574
    
    
    
    3,167
    
    
    
    96Total cost
    
    
    28,876,073
    
    
    
    30,669,695
    
    
    
    933,629Accumulated depreciation
    
    
    (14,451,706
    )
    
    
    (15,029,981
    )
    
    
    (457,534
    )Construction in progress and advance payment
    
    
    2,289,058
    
    
    
    3,346,985
    
    
    
    101,887Net Property, Plant and Equipment
    
    
    16,713,425
    
    
    
    18,986,699
    
    
    
    577,982INTANGIBLE ASSETS  NET (Notes 2 and 9)
    
    
    102,297
    
    
    
    103,371
    
    
    
    3,147OTHER ASSETSEmployee dormitory building  net of accumulated depreciation
of NT$50,611 in 2004 and NT$64,911 in 2005 (Note 2)
    
    
    112,208
    
    
    
    165,380
    
    
    
    5,034Refundable deposits
    
    
    14,858
    
    
    
    17,846
    
    
    
    543Idle assets
    
    
    27,011
    
    
    
    
    
    
    
    Restricted cash and cash equivalents (Note 19)
    
    
    59,705
    
    
    
    1,500
    
    
    
    46Goodwill
    
    
    
    
    
    
    75,773
    
    
    
    2,307Total Other Assets
    
    
    213,782
    
    
    
    260,499
    
    
    
    7,930TOTAL ASSETS
    
    
    28,241,171
    
    
    
    28,094,559
    
    
    
    855,238
  F-85




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##### Table of Contents



ChipMOS TECHNOLOGIES INC. AND SUBSIDIARIES
 CONSOLIDATED BALANCE SHEETS
December 31, 2004 and 2005
(In Thousands of New Taiwan and U.S. Dollars, Except Par Value)
 December 312004
    
    2005NT$
    
    NT$
    
    US$(Note 3)LIABILITIES AND SHAREHOLDERS EQUITYCURRENT LIABILITIESBank loans (Note 10)
    
    
    800,593
    
    
    
    467,834
    
    
    
    14,242Commercial paper payable (Note 11)
    
    
    
    
    
    
    149,413
    
    
    
    4,548Notes payable
    
    
    49,072
    
    
    
    3,927
    
    
    
    120Accounts payable
    
    
    526,003
    
    
    
    657,963
    
    
    
    20,029Payables to related parties (Note 18):Accounts payable
    
    
    17,428
    
    
    
    2,214
    
    
    
    67Others
    
    
    61,031
    
    
    
    45,490
    
    
    
    1,385Payables to contractors and equipment suppliers
    
    
    312,561
    
    
    
    372,329
    
    
    
    11,334Accrued expenses and other current liabilities
    
    
    916,889
    
    
    
    884,930
    
    
    
    26,939Current portion of long-term liabilities (Notes 12 and 13)
    
    
    3,026,974
    
    
    
    2,300,916
    
    
    
    70,043Total Current Liabilities
    
    
    5,710,551
    
    
    
    4,885,016
    
    
    
    148,707LONG-TERM LIABILITIESLong-term bonds payable (Note 12)
    
    
    333,195
    
    
    
    
    
    
    
    Long-term loans (Note 13)
    
    
    4,601,747
    
    
    
    4,433,851
    
    
    
    134,973Total Long-Term Liabilities
    
    
    4,934,942
    
    
    
    4,433,851
    
    
    
    134,973OTHER LIABILITIESDeferred income tax  net (Notes 2 and 17)
    
    
    546,050
    
    
    
    148,951
    
    
    
    4,534Accrued pension cost (Notes 2 and 14)
    
    
    102,674
    
    
    
    81,658
    
    
    
    2,486Deferred credits(Note 18)
    
    
    626,196
    
    
    
    593,666
    
    
    
    18,072Guarantee deposits
    
    
    1,124
    
    
    
    1,454
    
    
    
    44Total Other Liabilities
    
    
    1,276,044
    
    
    
    825,729
    
    
    
    25,136Total Liabilities
    
    
    11,921,537
    
    
    
    10,144,596
    
    
    
    308,816Minority Interests
    
    
    3,204,177
    
    
    
    3,494,210
    
    
    
    106,369COMMITMENTS AND CONTINGENCIES (Note 20)SHAREHOLDERS EQUITY (Notes 2 and 16)Capital stock  NT$10 par valueAuthorized - 970,000 thousand sharesIssued - 887,227 thousand shares in 2004 and
893,442 thousand shares in 2005
    
    
    8,872,272
    
    
    
    8,934,423
    
    
    
    271,976Capital surplus
    
    
    2,288,950
    
    
    
    2,145,998
    
    
    
    65,327Retained earnings:Appropriated as legal reserve
    
    
    424,007
    
    
    
    577,474
    
    
    
    17,579Unappropriated earnings
    
    
    1,534,667
    
    
    
    2,921,486
    
    
    
    88,934Unrealized loss on long-term investments
    
    
    (805
    )
    
    
    (1,673
    )
    
    
    (51
    )Cumulative translation adjustments
    
    
    (3,634
    )
    
    
    (1,803
    )
    
    
    (55
    )Treasury stock (Note 15)
    
    
    
    
    
    
    (120,152
    )
    
    
    (3,657
    )Total Shareholders Equity
    
    
    13,115,457
    
    
    
    14,455,753
    
    
    
    440,053TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
    
    
    28,241,171
    
    
    
    28,094,559
    
    
    
    855,238
  F-86




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##### Table of Contents



ChipMOS TECHNOLOGIES INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
December 31, 2003, 2004 and 2005
(In Thousands of New Taiwan and U.S. Dollars, Except Par Value)
 Year Ended December 312003
    
    2004
    
    2005NT$
    
    NT$
    
    NT$
    
    US$(Note 3)NET REVENUES (Notes 2 and 18)Related parties
    
    
    4,693,771
    
    
    
    4,847,570
    
    
    
    4,614,013
    
    
    
    140,457Third parties
    
    
    3,774,894
    
    
    
    10,020,307
    
    
    
    10,142,510
    
    
    
    308,752Total Net Revenues
    
    
    8,468,665
    
    
    
    14,867,877
    
    
    
    14,756,523
    
    
    
    449,209COST OF REVENUE (Note 18)Related parties
    
    
    3,405,646
    
    
    
    3,236,183
    
    
    
    3,435,771
    
    
    
    104,589Third parties
    
    
    3,505,392
    
    
    
    7,508,045
    
    
    
    7,401,916
    
    
    
    225,325Total Cost of Revenue
    
    
    6,911,038
    
    
    
    10,744,228
    
    
    
    10,837,687
    
    
    
    329,914GROSS PROFIT
    
    
    1,557,627
    
    
    
    4,123,649
    
    
    
    3,918,836
    
    
    
    119,295OPERATING EXPENSES (Note 18)Research and development
    
    
    295,033
    
    
    
    295,777
    
    
    
    274,433
    
    
    
    8,354General and administrative
    
    
    219,101
    
    
    
    480,596
    
    
    
    557,983
    
    
    
    16,986Marketing
    
    
    127,990
    
    
    
    323,300
    
    
    
    228,329
    
    
    
    6,951Total Operating Expenses
    
    
    642,124
    
    
    
    1,099,673
    
    
    
    1,060,745
    
    
    
    32,291INCOME FROM OPERATIONS
    
    
    915,503
    
    
    
    3,023,976
    
    
    
    2,858,091
    
    
    
    87,004NON-OPERATING INCOMEGain on sales of investments (Note 2)
    
    
    91,017
    
    
    
    
    
    
    
    
    
    
    
    Rental (Note 16)
    
    
    24,960
    
    
    
    28,467
    
    
    
    27,698
    
    
    
    843Interest
    
    
    50,844
    
    
    
    31,463
    
    
    
    45,584
    
    
    
    1,388Subsidy income
    
    
    12,057
    
    
    
    6,100
    
    
    
    9,769
    
    
    
    297Cash dividends
    
    
    
    
    
    
    
    
    
    
    16,897
    
    
    
    514Recovery of allowance for loss on
inventory
    
    
    
    
    
    
    67,002
    
    
    
    74,581
    
    
    
    2,270Recovery of allowance for loss on
short-term investment
    
    
    
    
    
    
    
    
    
    
    85,958
    
    
    
    2,617Investments income recognized by equity
method  net (Notes 2 and 7)
    
    
    22,364
    
    
    
    
    
    
    
    
    
    
    
    Gain on disposal of property, plant
and equipment (Note 2)
    
    
    100,101
    
    
    
    45,520
    
    
    
    41,511
    
    
    
    1,264Gain on disposal of idle assets
    
    
    
    
    
    
    
    
    
    
    29,846
    
    
    
    909Foreign exchange gain  net (Note2)
    
    
    
    
    
    
    
    
    
    
    61,501
    
    
    
    1,872Other
    
    
    36,042
    
    
    
    96,094
    
    
    
    117,596
    
    
    
    3,580Total Non-Operating Income
    
    
    337,385
    
    
    
    274,646
    
    
    
    510,941
    
    
    
    15,554
  F-87




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##### Table of Contents



ChipMOS TECHNOLOGIES INC. AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF OPERATIONS
December 31, 2003, 2004 and 2005
(In Thousands of New Taiwan and U.S. Dollars, Except Par Value)
 Year Ended December 312003
    
    2004
    
    2005NT$
    
    NT$
    
    NT$
    
    US$(Note 3)NON-OPERATING EXPENSESLoss on sales of investments (Note 2)
    
    
    
    
    
    
    6,561
    
    
    
    33,024
    
    
    
    1,005Interest
    
    
    237,357
    
    
    
    257,144
    
    
    
    223,389
    
    
    
    6,800Allowance for loss on short-term investments (Note 4)
    
    
    24,902
    
    
    
    52,274
    
    
    
    
    
    
    
    Investments loss recognized by equity
method  net (Notes 2 and 7)
    
    
    
    
    
    
    29,160
    
    
    
    126,802
    
    
    
    3,860Other investment loss
    
    
    
    
    
    
    49,833
    
    
    
    4,854
    
    
    
    148Impairment loss (Notes 2 and 7)
    
    
    
    
    
    
    214,403
    
    
    
    320,293
    
    
    
    9,750Financing cost
    
    
    14,623
    
    
    
    15,369
    
    
    
    6,474
    
    
    
    197Loss on disposal of property, plant and equipment
(Note 2)
    
    
    16,283
    
    
    
    21,447
    
    
    
    24,231
    
    
    
    738Foreign exchange loss  net (Note 2)
    
    
    93,940
    
    
    
    141,496
    
    
    
    
    
    
    
    Other
    
    
    10,776
    
    
    
    43,278
    
    
    
    156,370
    
    
    
    4,760Total Non-Operating Expenses
    
    
    397,881
    
    
    
    830,965
    
    
    
    895,437
    
    
    
    27,258INCOME BEFORE INCOME TAX AND
MINORITY INTERESTS
    
    
    855,007
    
    
    
    2,467,657
    
    
    
    2,473,595
    
    
    
    75,300INCOME TAX BENEFIT (EXPENSE) (Notes 2 and 17)
    
    
    5,550
    
    
    
    132,599
    
    
    
    (44,665
    )
    
    
    (1,359
    )INCOME FOR MINORITY INTERESTS
    
    
    
    
    
    
    (305,151
    )
    
    
    (320,894
    )
    
    
    (9,769
    )PRE-ACQUISITION EARNINGS
    
    
    
    
    
    
    27,655
    
    
    
    
    
    
    
    NET INCOME
    
    
    860,557
    
    
    
    2,322,760
    
    
    
    2,108,036
    
    
    
    64,172EARNINGS PER SHAREBased on weighted-average number of shares
outstanding of 887,227 thousand shares in 2003 and 2004
and 885,686 thousand shares in 2005
    
    
    0.97
    
    
    
    2.62
    
    
    
    2.38
    
    
    
    0.07Based on weighted-average number of shares
outstanding  retroactively adjusted
    
    
    0.97
    
    
    
    2.62
    
    
    
    2.38
    
    
    
    0.07
  F-88




---



##### Table of Contents

]

ChipMOS TECHNOLOGIES INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
December 31, 2003, 2004 and 2005
(In Thousands of New Taiwan and U.S. Dollars, Except Par Value)
 CAPITAL SURPLUS (Notes 2 and 16)
    
    RETAINED EARNINGS (Note 16)UNREALIZEDCUMULATIVE
    
    
    
    
    
    LOSS ONCAPITAL STOCK ISSUED
    
    Additional
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Unappropriated
    
    
    
    
    
    TRANSLATION
    
    TREASURY
    
    LONG-TERM
    
    TOTALShares
    
    
    
    
    
    Paid-in
    
    
    
    
    
    Long-term
    
    
    
    
    
    Legal
    
    Earnings (Accumulated
    
    
    
    
    
    ADJUSTMENT
    
    STOCK
    
    INVESTMENT
    
    SHAREHOLDERS(Thousand)
    
    Amount
    
    Capital
    
    Merger
    
    investments
    
    Total
    
    Reserve
    
    Deficits)
    
    Total
    
    (Note 2)
    
    (Note 15)
    
    (Note 2)
    
    EQUITYNT$
    
    NT$
    
    NT$
    
    NT$
    
    NT$
    
    NT$
    
    NT$
    
    NT$
    
    NT$
    
    NT$
    
    NT$
    
    NT$BALANCE, JANUARY 1, 2003
    
    
    887,227
    
    
    
    8,872,272
    
    
    
    2,084,757
    
    
    
    
    
    
    
    1,655
    
    
    
    2,086,412
    
    
    
    424,007
    
    
    
    (1,648,057
    )
    
    
    (1,224,050
    )
    
    
    (734
    )
    
    
    
    
    
    
    
    
    
    
    9,733,900Net income in 2003
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    860,557
    
    
    
    860,557
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    860,557Adjustment of equity method for long-term investment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,008
    
    
    
    12,008
    
    
    
    
    
    
    
    (593
    )
    
    
    (593
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,415Translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    115
    
    
    
    
    
    
    
    
    
    
    
    115BALANCE, DECEMBER 31, 2003
    
    
    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 market value decline of
long-term investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (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
    )
    
    
    14,455,753
  F-89




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##### Table of Contents



ChipMOS TECHNOLOGIES INC. AND SUBSIDIARIES
 ChipMOS TECHNOLOGIES INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
December 31, 2004 and 2005
(In Thousands of New Taiwan and U.S. Dollars, Except Par Value)
 Year Ended December 312003
    
    2004
    
    2005NT$
    
    NT$
    
    NT$
    
    US$CASH FLOWS FROM OPERATING ACTIVITIESNet income
    
    
    860,557
    
    
    
    2,322,760
    
    
    
    2,108,036
    
    
    
    64,172Adjustment to reconcile net income to net cash
provided by operating activities:Depreciation
    
    
    2,614,137
    
    
    
    3,353,537
    
    
    
    4,087,487
    
    
    
    124,429Amortization
    
    
    52,287
    
    
    
    104,150
    
    
    
    132,702
    
    
    
    4,039Investment
loss(gain)net
    
    
    (22,364
    )
    
    
    78,993
    
    
    
    131,656
    
    
    
    4,008Allowance for loss on short-term investments
    
    
    24,902
    
    
    
    52,274
    
    
    
    (85,958
    )
    
    
    (2,617
    )Loss on sales of investments
    
    
    
    
    
    
    6,561
    
    
    
    
    
    
    
    Gain on disposal of property, plant
and equipment  net
    
    
    (100,009
    )
    
    
    (60,997
    )
    
    
    (5,986
    )
    
    
    (182
    )Deferred
income tax  net
    
    
    (10,223
    )
    
    
    (174,527
    )
    
    
    (45,826
    )
    
    
    (1,395
    )Accrued pension cost
    
    
    16,672
    
    
    
    22,619
    
    
    
    (21,016
    )
    
    
    (640
    )Deferred credits
    
    
    91,785
    
    
    
    534,412
    
    
    
    (32,530
    )
    
    
    (990
    )Impairment losses
    
    
    
    
    
    
    214,403
    
    
    
    320,293
    
    
    
    9,750Changes in operating assets and liabilities:Notes receivable and accounts receivable
    
    
    (579,354
    )
    
    
    (420,188
    )
    
    
    (550,001
    )
    
    
    (16,743
    )Other receivables
    
    
    (1,507,744
    )
    
    
    1,630,417
    
    
    
    28,898
    
    
    
    880Inventories
    
    
    (145,105
    )
    
    
    (55,812
    )
    
    
    66,753
    
    
    
    2,032Prepaid expenses and other current assets
    
    
    206,779
    
    
    
    286,919
    
    
    
    61,899
    
    
    
    1,884Notes payable and accounts payable
    
    
    184,279
    
    
    
    (12,914
    )
    
    
    71,601
    
    
    
    2,180Other payables
    
    
    16,098
    
    
    
    (611,407
    )
    
    
    (15,541
    )
    
    
    (473
    )Accrued expenses and other current liabilities
    
    
    187,476
    
    
    
    222,988
    
    
    
    (49,085
    )
    
    
    (1,494
    )Minority interest
    
    
    
    
    
    
    139,575
    
    
    
    181,769
    
    
    
    5,533Net Cash Provided by Operating Activities
    
    
    1,890,173
    
    
    
    7,633,763
    
    
    
    6,385,151
    
    
    
    194,373CASH FLOWS FROM INVESTING ACTIVITIESDecrease in restricted cash and cash equivalents
    
    
    396,234
    
    
    
    146,632
    
    
    
    21,299
    
    
    
    648Decrease (increase) in short-term investments
    
    
    630,683
    
    
    
    (1,976,291
    )
    
    
    2,740,805
    
    
    
    83,434Proceeds from sales of:Property, plant and equipment
    
    
    424,644
    
    
    
    382,177
    
    
    
    201,369
    
    
    
    6,130Long-term investments
    
    
    
    
    
    
    869,421
    
    
    
    
    
    
    
    Acquisitions of:Long-term investments
    
    
    (33,024
    )
    
    
    (140,788
    )
    
    
    (116,400
    )
    
    
    (3,543
    )Property, plant and equipment
    
    
    (2,161,675
    )
    
    
    (7,568,722
    )
    
    
    (6,620,676
    )
    
    
    (201,543
    )Intangible assets
    
    
    (46,205
    )
    
    
    (89,795
    )
    
    
    (125,117
    )
    
    
    (3,809
    )Employee dormitory building
    
    
    
    
    
    
    (475
    )
    
    
    (3,304
    )
    
    
    (100
    )Decrease (increase) in refundable deposits
    
    
    (338,835
    )
    
    
    52,160
    
    
    
    (1,573
    )
    
    
    (48
    )Decrease (increase) in other financial assets
    
    
    (339,700
    )
    
    
    339,700
    
    
    
    
    
    
    
    Cash inflow from acquisition of subsidiary (Note 22)
    
    
    
    
    
    
    94,337
    
    
    
    7,261
    
    
    
    221Cash inflow from disposal of a subsidiary (Note 22)
    
    
    
    
    
    
    
    
    
    
    48,035
    
    
    
    1,462Net Cash Used in Investing Activities
    
    
    (1,467,878
    )
    
    
    (7,891,644
    )
    
    
    (3,848,301
    )
    
    
    (117,148
    )
  F-90




---



##### Table of Contents



Year Ended December 312003
    
    2004
    
    2005NT$
    
    NT$
    
    NT$
    
    US$CASH FLOWS FROM FINANCING ACTIVITIESPayments on:Bank loans
    
    
    (718,586
    )
    
    
    (863,204
    )
    
    
    (314,968
    )
    
    
    (9,588
    )Commercial papers
    
    
    (159,427
    )
    
    
    
    
    
    
    
    
    
    
    long-term bonds payable
    
    
    
    
    
    
    
    
    
    
    (333,195
    )
    
    
    (10,143
    )Long-term loans
    
    
    (352,133
    )
    
    
    
    
    
    
    (888,664
    )
    
    
    (27,052
    )Proceeds from:Commercial papers
    
    
    
    
    
    
    
    
    
    
    149,413
    
    
    
    4,548Long-term loans
    
    
    
    
    
    
    2,784,163
    
    
    
    
    
    
    
    Increase(Decrease) in guarantee deposits
    
    
    132
    
    
    
    (584
    )
    
    
    314
    
    
    
    10Employee bonus
    
    
    
    
    
    
    
    
    
    
    (138,120
    )
    
    
    (4,205
    )Dividends
    
    
    
    
    
    
    
    
    
    
    (532,336
    )
    
    
    (16,205
    )Remuneration paid to directors and supervisors
    
    
    
    
    
    
    
    
    
    
    (27,624
    )
    
    
    (841
    )Purchase of treasury stock
    
    
    
    
    
    
    
    
    
    
    (115,402
    )
    
    
    (3,513
    )Net Cash Provided by (Used in) Financing Activities
    
    
    (1,230,014
    )
    
    
    1,920,375
    
    
    
    (2,200,582
    )
    
    
    (66,989
    )Effect of Exchange Rate Changes
    
    
    
    
    
    
    
    
    
    
    (327
    )
    
    
    (10
    )NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS
    
    
    (807,719
    )
    
    
    1,662,494
    
    
    
    335,941
    
    
    
    10,226CASH AND EQUIVALENTS, BEGINNING OF THE YEAR
    
    
    1,963,381
    
    
    
    1,155,662
    
    
    
    2,818,156
    
    
    
    85,789CASH AND EQUIVALENTS, END OF THE YEAR
    
    
    1,155,662
    
    
    
    2,818,156
    
    
    
    3,154,097
    
    
    
    96,015SUPPLEMENTAL INFORMATIONIncome tax paid
    
    
    469
    
    
    
    834
    
    
    
    2,351
    
    
    
    72Interest paid (excluding the amounts of NT$34,972
capitalized in 2004 and NT$73,641 capitalized in 2005)
    
    
    237,567
    
    
    
    259,947
    
    
    
    210,327
    
    
    
    6,403NON-CASH INVESTING AND FINANCING ACTIVITIESCurrent portion of long-term loans
    
    
    650,090
    
    
    
    3,026,974
    
    
    
    2,300,916
    
    
    
    70,043Credit balances of long-term investments presented as
part of other receivables from related parties
    
    
    2,336
    
    
    
    5,429
    
    
    
    
    
    
    
    Reclassification of property, plant, and equipment into long-term
investments
    
    
    
    
    
    
    648,248
    
    
    
    
    
    
    
    Reclassification of property, plant, and equipment into other
assets
    
    
    
    
    
    
    36,846
    
    
    
    64,168
    
    
    
    1,953Reclassification of property, plant, and equipment into intangible assests
    
    
    
    
    
    
    
    
    
    
    1,263
    
    
    
    38Reclassification of long-term investment into short-term
investment
    
    
    218,099
    
    
    
    
    
    
    
    
    
    
    
    PARTIAL CASH PAID FOR INVESTING ACTIVITIESCash paid for acquisition of property, plant and equipment:Total acquisitions
    
    
    2,169,835
    
    
    
    7,633,275
    
    
    
    6,680,444
    
    
    
    203,362Increase in payables to contractors and
equipment suppliers
    
    
    (8,160
    )
    
    
    (64,553
    )
    
    
    (59,768
    )
    
    
    (1,819
    )2,161,675
    
    
    
    7,568,722
    
    
    
    6,620,676
    
    
    
    201,543
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ChipMOS TECHNOLOGIES INC. AND SUBSIDIARIES
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 1.
    
    GENERALChipMOS TECHNOLOGIES INC. (ChipMOS Taiwan) was incorporated on July 28, 1997 as a joint venture
company of Mosel Vitelic Inc. (MVI) and Siliconware Precision Industries Co. Ltd. (SPIL). Its
operations, which began on August 12, 1997, consist of research, development, manufacturing,
testing, and assembly of integrated circuits, LCD and other Flat-Panel Display Driver
Semiconductors. ChipMOS Taiwan also provides semiconductor testing and assembly services on a
turnkey basis, in which ChipMOS Taiwan purchases fabricated wafers and sells tested and
assembled semiconductors to application and system manufacturers.On January 12, 2001, the holders of an aggregate of 583,419 thousand common shares of ChipMOS
Taiwan executed a Purchase and Subscription Agreement whereby they transferred their shares to
ChipMOS TECHNOLOGIES (Bermuda) LTD. (ChipMOS Bermuda) in exchange for 58,342 thousand newly
issued common shares of ChipMOS Bermuda. The selling shareholders, who previously held in an
aggregate 70.25% of the outstanding common shares of ChipMOS Taiwan, thus, became the holders of
the entire outstanding common shares of ChipMOS Bermuda. As of December 31, 2005, ChipMOS
Bermuda owned 69.85% of the outstanding common shares of ChipMOS Taiwan.
 
 As of December 31, 2005, ChipMOS Taiwan owned 100% of the outstanding shares of both
ChipMOS Japan Inc. (ChipMOS Japan) and ChipMOS USA Inc. (ChipMOS USA), 34.13 % of ThaiLin
Semiconductor Corp. (ThaiLin)ChipMOS Japan was incorporated in Japan in June 1999, and ChipMOS USA was incorporated in the
United States of America in October 1999. The two companies engage in sales and customer
services and all the expenses incurred from these activities are charged to current income.
ChipMOS Japan began generating revenue in 2000, while ChipMOS USA began generating revenue in
2001.
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ThaiLin was incorporated on May 15, 1996 and is listed on the GreTai Securities Market in
Taiwan. ThaiLin is engaged in wafer and semiconductor testing services. On December 31,
2002, ChipMOS Taiwan acquired an equity interest of 41.8% in ThaiLin. On December 1, 2003,
ChipMOS Taiwan obtained controlling influence over ThaiLins decisions on its operations,
personnel and financial policies. On December 1, 2005, ChipMOS Logic TECHNOLOGIES INC.
(ChipMOS Logic) merged into ThaiLin pursuant to the merger agreement in August 2005. ChipMOS
Logic stock was exchanged for ThaiLin stock at the ratio of 2.8 to 1. After the merger and as
of December 31, 2005, ChipMOS Taiwan held a 34.13% (2004: 30.08%) equity interest in ThaiLin
(see above).ChipMOS Logic was incorporated in Taiwan on January 28, 2004, with ChipMOS Taiwan holding
62.5% interest and ThaiLin holding 37.5% interest. On March 29, 2004, ChipMOS Logic issued
additional shares to institutional investors. As a result, ChipMOS Taiwans interest in ChipMOS
Logic was diluted to 44.44% and ThaiLins interest was diluted to 26.67%. ChipMOS Logic is
engaged in logic testing services. On April 30, 2004, WORLD WIDE TEST Technologies Inc. (WWT)
merged into ChipMOS Logic, with ChipMOS Logic as the surviving entity, in a stock-for-stock
merger pursuant to which shareholders of WWT received one common share of ChipMOS Logic in
exchange for 10 common shares of WWT. As of December 31, 2004, ChipMOS Taiwan and ThaiLin owned
approximately 56.10% and 24.62%, respectively, of ChipMOS Logic. On December 1, 2005, ChipMOS
Logic merged into ThaiLin (see above).CHANTEK ELECTRONIC CO., LTD. (CHANTEK) was incorporated in Taiwan in May 1989, and is listed on
the GreTai Securities Market in Taiwan. It provides semiconductor assembly services for
low-density volatile and non-volatile memory semiconductors, consumer semiconductors and
microcontroller semiconductors. ChipMOS Taiwan acquired its 34% ownership interest in CHANTEK
on September 16, 2002. On April 1, 2004, PlusMOS was merged into CHANTEK in a stock-for-stock
merger pursuant to which shareholders of PlusMOS received 1.1 common shares of CHANTEK in
exchange for one common share of PlusMOS. Upon consummation of this merger, ChipMOS Taiwan
became the controlling shareholder of CHANTEK. ChipMOS Taiwan increased its ownership in
CHANTEK during 2004 and held 68.04% interest as of December 31, 2004. On Nov            ember 21,
2005, CHANTEK merged into ChipMOS Taiwan pursuant to the merger agreement entered into
between ChipMOS Taiwan and CHANTEK in June 2005. CHANTEK stock was exchanged for ChipMOS Taiwan
stock at the ratio of 3.6 to 1. As a result, ChipMOS Taiwan issued 6,215 thousand shares to
CHANTEK shareholders, reducing ChipMOS Bermuda and SPILs interests in ChipMOS Taiwan from
70.34% and 28.73% to 69.85% and 28.53%, respectively.FIRST SEMICONDUCTOR TECHNOLOGY, INC. (FST) was incorporated in the United States of America in
June 1998 and engaged in IC logic testing services. ChipMOS Taiwan acquired its 67.83% ownership
interest in FST on November 1, 2004 and held 67.83% as of December 31, 2004. On April 29, 2005,
ChipMOS Taiwan sold all its ownership of FST.
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2.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESBasis of presentationFor 2005, the consolidated financial statements include the accounts of ChipMOS Taiwan and all
subsidiaries (hereinafter, referred to individually or collectively as the Company), including
ThaiLin, ChipMOS USA, ChipMOS Japan; CHANTEK and ChipMOS Logic up to their respective dates of
merger, and FST up to the date of sale in which ChipMOS Taiwan holds a controlling interest or
voting interests in excess of 50% in accordance with the requirements of ROC Statement of
Financial Accounting Standards (SFAS No. 7) which was revised on December 9, 2004 and
effective on January 1, 2005. For 2004, among aforementioned entities, the accounts of ChipMOS
USA and ChipMOS Japan were too nominal, so they were not included in the consolidated financial
statement. ¡@All significant intercompany accounts and transactions have been eliminated.The consolidated financial statements were prepared in conformity with Guidelines for
Securities Issuers Financial Reporting, Commercial Accounting Law, accounting principles
generally accepted in Republic of China (ROC), other relevant laws and regulations. The
Company significant accounting policies are summarized as follows:Classification in the balance sheetA year is used to classify assets/liabilities as current or non-current in the balance
sheet.Cash equivalentsCommercial papers acquired under resale agreements with original maturity dates of less than
three months are classified as cash equivalents.Short-term investmentsShort-term investments are stated at the lower of cost or market value. An allowance of losses
is provided when the carrying value of the investments exceeds the total market value with the
related provision for losses charged to income for the current year. Any recovery of the market
value to the extent of the original carrying value is recognized as income.Costs of investments sold are determined using the weighted-average method.Allowance for doubtful receivables
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Allowance for doubtful accounts is provided based on evaluation of the collectibility of the
receivables evaluated based upon the overall financial condition and payment history of the
individual customers as well as the age of the receivables.Allowances for sales returns and discountsAllowances for sales returns and discounts are provided based on the sales returns from the past
experience; such provisions are deducted from sales and the related costs of products are
deducted from cost of products sold.InventoriesInventories are stated at the lower of standard cost (which approximates actual weighted average
cost) or market value. Market value represents replacement cost for raw materials and net
realizable value for other inventories.Long-term investmentsInvestments in shares of stock of companies wherein the company exercises significant influence
on their operating or financial decisions are accounted for using the equity method. Under the
equity method, the investment are initially carried at cost and subsequently adjusted for the
proportionate equity of the company in the net income or net loss of the investees.The Company will discontinue its recognition of its equity in the net loss of the investees when
the carrying value of the investment (including advances) is reduced to zero. However, in cases
where the Company exercises controlling interest over the investees; or guarantees the
obligations or is committed to provide further financial support to an investee company, or if
the investees losses are temporary and evidence sufficiently shows imminent return to
profitability in the foreseeable future, then, the Company continues to recognize its share in
the net loss of the investees. The resulting credit balances of the long-term investments are
presented as part of other receivable from related parties.Translation adjustments resulting from the process of translating the investees financial
statements into the functional currency of the company are recorded as cumulative translation
adjustments in the statement of changes in shareholders equity.Gains or losses on transactions with investee companies wherein the Company owned at least 20%
of the outstanding common stock but less than a controlling interest are deferred in proportion
to ownership percentage until realized through a subsequent transaction with a third party. The
entire amount of gains or losses on sales to majority-owned subsidiaries is deferred until such
gains or losses are realized through the subsequent sale of the related products to third
parties.
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Other stock investments (listed stocks or stocks traded over
the counter) are accounted for using the cost method. These investments are stated at cost less temporary declines in
market value, and a credit is made to an allowance for decline in value with a
corresponding debit to shareholders equity. The allowance is then reduced for any
subsequent recovery of the market value to the extent of the balance of the allowance.
However, if the decline in value is considered irrecoverable, the decline in values is
recorded as a charge to income.Cash dividends are recognized as income in the year received but are accounted for as a
reduction in the carrying value of the long-term investments if the dividends are received in
the same year that the related investments are acquired. Stock dividends are recognized only as
an increase in the number of shares held on the ex-dividend date.The costs of investments sold are determined using the weighted average method.Property, plant and equipment and non-operating propertiesProperty, plant and equipment and non-operating properties are stated at cost less accumulated
depreciation. Major additions, renewals and betterment are capitalized, while maintenance and
repairs are expensed currently.The initial estimate of the service lives of the property, plant and equipment is as
follows: Machinery and equipment, 1 to 9 years; buildings and auxiliary equipment, 1 to 55
years; furniture and fixtures, 1 to 9 years; tooling, 1 to 5 years; transportation
equipment, 5 to 6 years; and leasehold improvements, 1 to 10 years. The foregoing service
lives plus one year to represent the estimated salvage value are used to depreciate the
property, plant and equipment using the straight-line method. The carrying value of
property, plant and equipment, which were fully depreciated using the foregoing service
lives, but are still being used by the Company are depreciated over their remaining
estimated service lives.Upon sale or disposal of items of properties, the related cost and accumulated depreciation are
removed from the accounts, and any gain or loss is credited or charged to current income.GoodwillGoodwill arising on consolidation represents the excess of the cost of acquisition over the
groups interest in the fair value of the identifiable assets and liabilities of a subsidiary,
associate or jointly controlled entity at the date of acquisition. Goodwill is recognized as an
asset and amortized on a straight-line basis over its useful economic life.Goodwill arising on the acquisition of an associate or a jointly controlled entity is included
within the carrying amount of the associate or jointly controlled entity. Goodwill arising on
the acquisition of subsidiaries is presented separately in the balance sheet.Intangible assetsIntangible assets are amortized using the straight-line method over the following periods:
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Technology know-how, 5 years; technology license fee, and deferred charges, 3 to 5 years.Revenue recognitionSales are recognized when titles of products and risks of ownerships are transferred to
customers, primarily upon shipment.Pension costsPension costs are recorded based on actuarial calculations. Unrecognized net transition
obligation is amortized over 15 years.Retirement benefit contributions are made to independent pension funds, Contributions are made
based on a percentage of the employees salaries, and are charged to current income as
incurred.Income taxThe Company adopts inter-period income tax allocation method. Deferred income tax assets are
recognized for the tax effects of deductible temporary differences, unused tax credits, and
operating loss carry forwards and those of taxable temporary differences are recognized as
deferred income tax liabilities. Valuation allowance is provided for deferred tax assets that
are not certain to be realized. A deferred tax asset or liability is classified as current or
non-current based on the classification of the related asset or liability. However, if a
deferred asset or liability cannot be related to an asset or liability in the financial
statements, then it is classified as current or non-current based on the expected reversal dates
of the temporary difference.Any tax credit arising from the purchase of machinery, equipment and technology, research and
development expenditures, personnel training, investments in important technology-based
enterprise are recognized by the flow-through method.Adjustments of prior years tax liabilities are added to or deducted from the current years tax
provision.Income taxes (10%) on unappropriated earnings generated are recorded as expense in the year when
the stockholders have effectively resolved that earnings shall be retained.Derivative financial instrumentsForeign currency forward exchange contracts (forward contracts), entered into for purposes
other than trading, are recorded as follows: the differences in the New Taiwan dollar amounts
translated using the spot rates as of the contract date and the amounts translated using the
contracted forward rates are amortized over the terms of the forward contracts using the
straight-line method. At the balance sheet dates, the receivables or
payables arising from forward contracts are restated using the prevailing spot rates and the resulting differences
are recognized in income. Also, the receivables and payables related to the forward contract
are netted and the resulting net amount is presented as either an asset or liability.
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The aggregate amount of the foreign currency to be acquired or sold under European option
contracts, entered into as hedge of anticipated transactions, is not recorded as assets or
liabilities. The amounts received on options written and the amounts paid on options purchased
are amortized using the straight-line method over the term of the contract. The gains arising
from the exercise of the options or the losses arising from options not exercised are
recognized as adjustments to the carrying values when the hedged transaction occurs.Treasury stockThe Company adopted ROC SFAS No. 30, Accounting for Treasury Stock. The Company purchases its
own outstanding shares and the shares of parent company held by its subsidiaries are regarded
as treasury stock.Impairment losses of assetsThe Company adopted ROC SFAS No. 35, Accounting for asset impairment on January 1, 2005,
which requires that certain assets, including properties, assets leased to others and deferred
charges, are subject to an impairment review in order to look for any indication that the value
of assets might be impaired on the balance date. An impairment loss should be recognized
whenever the recoverable amount of the asset or the cash-generating unit is below the carrying
value of an asset.The recoverability is determined by comparing the carrying amount of the asset (or asset group)
on the date it is being tested for recoverability to the higher of the net fair value of the
assets or the sum of the expected net present value of future cash flows generated by the
assets and eventual disposal. A cash-generating unit, which includes allocation of goodwill,
shall be tested for impairment on an annual basis. The impairment loss shall first credit to
the portion of goodwill, then allocate to other assets according to the proportional ratio of
their book value. The recognized impairment losses of goodwill cannot be reversed.If any evidence indicates that the impairment loss recognized in previous years has decreased,
the Company shall re-perform the recoverability test and adjust the carrying value of the
assets to the extent of recoverable amount. However, the adjusted carrying value of the assets
due to loss reversal should not be in excess of the original book value, net of depreciation or
amortization, had the impairment loss not been recognized.After the recognition of an impairment loss, the depreciation (amortization) charged on the
assets shall be adjusted in future periods by the revised carrying values of the assets (net of
accumulated impairment), less their salvage value, on a systematic basis over their
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remaining useful lives.Foreign-currency transactionsForeign-currency transactions, except derivative financial instruments, are recorded in New
Taiwan dollars at the rates of exchange in effect when the transactions occur. Gains or losses
resulting from the application of different foreign exchange rates when cash in
foreign currency is converted into New Taiwan dollars, or when foreign-currency receivables or
payables are settled, are credited or charged to income in the year of conversion or settlement.
On the balance sheet dates, the balances of foreign-currency assets and liabilities are
restated at the prevailing exchange rates and the resulting differences are charged to current
income except those foreign currency denominated investments in shares of stock where such
differences are accounted for as translation adjustments under stockholders equity.ReclassificationsCertain accounts in 2003 and 2004 have been reclassified to conform to 2005 classifications.3.
    
    TRANSLATION INTO U.S. DOLLAR AMOUNTSThe Company maintains its accounts and expresses its consolidated financial statements in New
Taiwan dollars. For convenience purposes, U.S. dollar amounts presented in the accompanying
consolidated financial statements have been translated from New Taiwan dollars at the mid-price
of the USD as quoted by Bank of Taiwan as of December 31, 2005, which was NT$32.85 to US$1.00.
The convenience translations should not be construed as representations that the New Taiwan
dollar amounts have been, or could in the future be, converted into U.S. dollars at this or any
other rate of exchange.
 4.
    
    SHORT-TERM INVESTMENTS
 December 312004
    
    2005NT$
    
    NT$
    
    US$(In Thousands)Stocks
    
    
    494,593
    
    
    
    317,085
    
    
    
    9,652Open-ended funds
    
    
    2,570,442
    
    
    
    33,000
    
    
    
    1,005Allowance for loss
on short-term
investments
    
    
    (249,908
    )
    
    
    (163,949
    )
    
    
    (4,991
    )2,815,127
    
    
    
    186,136
    
    
    
    5,666Market value
    
    
    2,817,587
    
    
    
    186,136
    
    
    
    5,666
 The market value of open-ended funds is based on the market price at year-end.
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During 2005, ChipMOS Taiwan sold its investment in common stock of MVI and of ProMOS
Technologies Inc. (ProMOS) at a loss of NT$68,401 thousand and at a gain of NT$907 thousand,
respectively.As of December 31, 2005, ChipMOS Taiwan held 2,069 thousand (2004: 7,780 thousand) shares of
common stock of MVI and 701 thousand shares of common stock of ProMOS
(2004: 7,559 thousand.)5.
    
    ALLOWANCE FOR DOUBTFUL RECEIVABLES
 Year Ended December 312003
    
    2004
    
    2005NT$
    
    NT$
    
    NT$
    
    US$(In Thousands)Balance, beginning of year
    
    
    44,856
    
    
    
    97,288
    
    
    
    292,051
    
    
    
    8,890Additions
    
    
    52,432
    
    
    
    194,763
    
    
    
    109,249
    
    
    
    3,326Balance, end of year
    
    
    97,288
    
    
    
    292,051
    
    
    
    401,300
    
    
    
    12,216
 6.
    
    INVENTORIES  NET
 December 312004
    
    2005NT$
    
    NT$
    
    US$(In Thousands)Finished goods
    
    
    25,876
    
    
    
    25,672
    
    
    
    781Work in process
    
    
    155,501
    
    
    
    202,951
    
    
    
    6,178Raw materials
    
    
    536,910
    
    
    
    394,261
    
    
    
    12,002718,287
    
    
    
    622,884
    
    
    
    18,961Less  allowance for losses
    
    
    (111,074
    )
    
    
    (82,462
    )
    
    
    (2,510
    )607,213
    
    
    
    540,422
    
    
    
    16,451
 The changes in the inventory valuation allowance are summarized as follows:
 Year Ended December 312003
    
    2004
    
    2005NT$
    
    NT$
    
    NT$
    
    US$(In Thousands)Balance, beginning of year
    
    
    86,608
    
    
    
    41,546
    
    
    
    111,074
    
    
    
    3,381Additions
    
    
    
    
    
    
    150,231
    
    
    
    45,969
    
    
    
    1,399Reversals
    
    
    (45,062
    )
    
    
    (67,002
    )
    
    
    (74,581
    )
    
    
    (2,270
    )Write offs
    
    
    
    
    
    
    (13,701
    )
    
    
    
    
    
    
    Balance, end of year
    
    
    41,546
    
    
    
    111,074
    
    
    
    82,462
    
    
    
    2,510
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7.
    
    LONG-TERM INVESTMENTS
 December 312004
    
    2005Carrying
    
    % of
    
    Carrying
    
    % ofValue
    
    Ownership
    
    Value
    
    OwnershipNT$
    
    
    
    
    
    NT$
    
    US$(In Thousands)Equity method:ChipMOS Japan
    
    
    179
    
    
    
    100
    
    
    
    
    
    
    
    
    
    
    
    ChipMOS USA
    
    
    (1,984
    )
    
    
    100
    
    
    
    
    
    
    
    
    
    
    
    Ultima Technology Corp. (Ultima
Technology)
    
    
    374,625
    
    
    
    30
    
    
    
    246,434
    
    
    
    7,502
    
    
    
    30Chantek International Investment
Ltd. (Chantek International)
    
    
    19,588
    
    
    
    100
    
    
    
    
    
    
    
    
    
    
    
    Hua Shen Investment Co. (Hua Shen)
    
    
    922
    
    
    
    100
    
    
    
    
    
    
    
    
    
    
    
    Cost method:G-Link Technology Corp., Taiwan
    
    
    9,709
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    2DigiMedia Technology Co., Ltd.
    
    
    81,480
    
    
    
    19
    
    
    
    197,880
    
    
    
    6,024
    
    
    
    19Best Home Corp. Ltd. (Best Home)
    
    
    
    
    
    
    19
    
    
    
    
    
    
    
    
    
    
    
    19Sun Fund Securities Ltd. (Sun Fund)
    
    
    165,950
    
    
    
    17
    
    
    
    148,121
    
    
    
    4,509
    
    
    
    17CDIB High Tech Investment Inc.
(CDIB)
    
    
    9,000
    
    
    
    2
    
    
    
    9,000
    
    
    
    274
    
    
    
    2Vigour Technology Corp. (Vigour)
    
    
    
    
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    Integrated Silicon Solution Inc.
    
    
    1,587
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    661,056
    
    
    
    
    
    
    
    601,435
    
    
    
    18,309Credit
balances of long-term investments (presented as part
of other receivables from related parties) (Note 16)
    
    
    1,984
    
    
    
    
    
    
    
    
    
    
    
    Less: Accumulated impairment
    
    
    
    
    
    
    
    
    
    
    (188,310
    )
    
    
    (5,733
    )663,040
    
    
    
    
    
    
    
    413,125
    
    
    
    12,576
 The equity in net income or loss of investee companies which is based on audited financial
statements for the years ended December 31, 2003, 2004 and 2005 were as follows:
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Year Ended December 312003
    
    2004
    
    2005NT$
    
    NT$
    
    NT$
    
    US$(In Thousands)ChipMOS Japan
    
    
    445
    
    
    
    704
    
    
    
    
    
    
    
    ChipMOS USA
    
    
    1,776
    
    
    
    4,584
    
    
    
    
    
    
    
    PlusMOS Inc. (Plus MOS)
    
    
    32,386
    
    
    
    
    
    
    
    
    
    
    
    ThaiLin
    
    
    29,127
    
    
    
    
    
    
    
    
    
    
    
    CHANTEK
    
    
    (36,618
    )
    
    
    
    
    
    
    
    
    
    
    AMCT
    
    
    (4,752
    )
    
    
    (24,953
    )
    
    
    
    
    
    
    Hua Shen
    
    
    
    
    
    
    (84
    )
    
    
    
    
    
    
    Chantek International
    
    
    
    
    
    
    (9,411
    )
    
    
    
    
    
    
    Ultima Technology
    
    
    
    
    
    
    
    
    
    
    (126,802
    )
    
    
    (3,860
    )(22,364
    )
    
    
    (29,160
    )
    
    
    (126,802
    )
    
    
    (3,860
    )
 Certain changes on the shareholders equity of investee companies result in the
adjustments on ChipMOS Taiwans equity according to its ownership to the respective accounts,
which in 2005 increased unappropriated earnings by NT$130,330 thousand and increased capital
surplus by NT$227,402 thousand in 2004 and decreased NT$170,713 thousand in 2005 respectively.CHANTEK sold 3,846 thousand shares of AMCT during 2004. The gain from disposal of each
investment was NT$8,803 thousand.The difference between the costs of the investment and ChipMOS Taiwans proportionate share
in the net assets of the investees at the date of acquisition is amortized using the
straight-line method over five years.During 2004, Sun Fund and CDIB reduced their issued capital by 17% and 50%, respectively. A
loss of NT$49,833 thousand was recognized in respect of the reduction in capital in Sun Fund.
The investment of NT$9,000 thousand was returned to ThaiLin in respect of the reduction in
capital in CDIB.In 2005, G-Link reduced their issued capital. A loss of NT$4,854 thousand was recognized in
respect of the reduction in capital.The company has been recognized impairment losses for the years ended December 31, 2004 and
2005, which were summarized as follow:
 December 312004
    
    2005NT$
    
    NT$
    
    US$(In Thousands)Ultima Technology
    
    
    
    
    
    
    188,310
    
    
    
    5,732G-Link
    
    
    
    
    
    
    4,855
    
    
    
    148Sun Fund
    
    
    83,217
    
    
    
    17,830
    
    
    
    543Best Home
    
    
    89,850
    
    
    
    
    
    
    
    Vigour
    
    
    41,336
    
    
    
    
    
    
    
    214,403
    
    
    
    210,995
    
    
    
    6,423
 On May 5, 2004, ChipMOS Taiwan acquired a 30% interest in Ultima Technology for
US$11,250 thousand (NT$374,625 thousand). In accordance with ROC SFAS 5, ChipMOS
Taiwan deferred its recognition of the proportionate share of loss of Ultima Technology for
one year to 2005. Therefore, the share of net loss of Ultima Technology in 2005 also included
the share of 2004 loss of Ultima Technology.
 F-102




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The summarized financial information for equity investees is as follows:
 December 312004
    
    2005NT$
    
    NT$
    
    US$(In Thousands)ChipMOS USA:Current assets
    
    
    3,021
    
    
    
    
    
    
    
    Non-current assets
    
    
    9,333
    
    
    
    
    
    
    
    Current liabilities
    
    
    14,323
    
    
    
    
    
    
    
    Non-current liabilities
    
    
    16
    
    
    
    
    
    
    
    ChipMOS Japan:Current assets
    
    
    5,324
    
    
    
    
    
    
    
    Non-current assets
    
    
    1,280
    
    
    
    
    
    
    
    Current liabilities
    
    
    6,425
    
    
    
    
    
    
    
    Non-current liabilities
    
    
    
    
    
    
    
    
    
    
    Ultima Technology:Current assets
    
    
    1,411
    
    
    
    2,216
    
    
    
    67Non-current assets
    
    
    155,997
    
    
    
    53,015
    
    
    
    1,614Current liabilities
    
    
    608
    
    
    
    317
    
    
    
    10Non-current liabilities
    
    
    
    
    
    
    
    
    
    
    Hua Shen:Current assets
    
    
    3,900
    
    
    
    
    
    
    
    Non-current assets
    
    
    
    
    
    
    
    
    
    
    Current liabilities
    
    
    
    
    
    
    
    
    
    
    Non-current liabilities
    
    
    
    
    
    
    
    
    
    
    Chantek International:Current assets
    
    
    26,359
    
    
    
    
    
    
    
    Non-current assets
    
    
    
    
    
    
    
    
    
    
    Current liabilities
    
    
    103
    
    
    
    
    
    
    
    Non-current liabilities
    
    
    
    
    
    
    
    
    
    
    
 F-103




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##### Table of Contents



Year Ended December 312004
    
    2005NT$
    
    NT$
    
    US$(In Thousands)ChipMOS USA:Net revenue
    
    
    36,765
    
    
    
    
    
    
    
    Cost of revenue
    
    
    
    
    
    
    
    
    
    
    Gross profit
    
    
    36,765
    
    
    
    
    
    
    
    Net income
    
    
    4,584
    
    
    
    
    
    
    
    ChipMOS Japan:Net revenue
    
    
    15,212
    
    
    
    
    
    
    
    Cost of revenue
    
    
    
    
    
    
    
    
    
    
    Gross profit
    
    
    15,212
    
    
    
    
    
    
    
    Net income
    
    
    704
    
    
    
    
    
    
    
    Ultima TechnologyNet revenue
    
    
    
    
    
    
    
    
    
    
    Cost of revenues
    
    
    
    
    
    
    
    
    
    
    Gross loss
    
    
    
    
    
    
    
    
    
    
    Net loss
    
    
    (154,817
    )
    
    
    (111,624
    )
    
    
    (3,398
    )Hua Shen:Net revenue
    
    
    1
    
    
    
    
    
    
    
    Cost of revenues
    
    
    24,522
    
    
    
    
    
    
    
    Gross loss
    
    
    (24,521
    )
    
    
    
    
    
    
    Net loss
    
    
    (25,442
    )
    
    
    
    
    
    
    Chantek International:Net revenue
    
    
    17,301
    
    
    
    
    
    
    
    Cost of revenues
    
    
    26,501
    
    
    
    
    
    
    
    Gross loss
    
    
    (9,200
    )
    
    
    
    
    
    
    Net loss
    
    
    (11,189
    )
    
    
    
    
    
    
    
 8.
    
    PROPERTY, PLANT AND EQUIPMENT  NETAccumulated depreciation consists of the following:
 December 312004
    
    2005NT$
    
    NT$
    
    US$(In Thousands)Buildings and auxiliary equipment
    
    
    1,315,342
    
    
    
    1,543,312
    
    
    
    46,981Machinery and equipment
    
    
    11,840,591
    
    
    
    12,266,880
    
    
    
    373,421Furniture and fixtures
    
    
    305,968
    
    
    
    345,564
    
    
    
    10,519Transportation equipment
    
    
    13,944
    
    
    
    15,976
    
    
    
    486Tools
    
    
    969,819
    
    
    
    856,880
    
    
    
    26,085Leasehold improvements
    
    
    6,042
    
    
    
    1,369
    
    
    
    4214,451,706
    
    
    
    15,029,981
    
    
    
    457,534
 In 2005, the investee companies, in accordance with FABS No.35, recognized impairment
losses of NT$109,298 (US$3,327) for property, plant and equipment.As of December 31, 2005, certain of the above buildings and machinery were mortgaged as
collateral for the bonds and the long-term loans (Note 13).9.
    
    INTANGIBLE ASSETS  NET
 F-104




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December 312004
    
    2005NT$
    
    NT$
    
    US$(In Thousands)CostTechnology know-how
    
    
    750,000
    
    
    
    115,803
    
    
    
    3,525Technology license fee
    
    
    67,081
    
    
    
    
    
    
    
    Software and other deferred expense
    
    
    173,899
    
    
    
    314,330
    
    
    
    9,569Bond issuance costs
    
    
    28,526
    
    
    
    
    
    
    
    Goodwill
    
    
    2,099
    
    
    
    
    
    
    
    1,021,605
    
    
    
    430,133
    
    
    
    13,094Accumulated amortizationTechnology know-how
    
    
    (750,000
    )
    
    
    (105,402
    )
    
    
    (3,209
    )Technology license fee
    
    
    (51,480
    )
    
    
    
    
    
    
    Software and other deferred expense
    
    
    (102,459
    )
    
    
    (221,360
    )
    
    
    (6,738
    )Bond issuance costs
    
    
    (15,369
    )
    
    
    
    
    
    
    (919,308
    )
    
    
    (326,762
    )
    
    
    (9,947
    )Carrying value
    
    
    102,297
    
    
    
    103,371
    
    
    
    3,147
 Pursuant to a Joint Venture Agreement entered into between MVI and SPIL on July 28, 1997,
MVI and SPIL contributed, as payment for their subscription to shares of stock of ChipMOS
Taiwan, technologies related to testing and packaging integrated circuits at an agreed
valuation of NT$750,000 thousand.10.
    
    BANK LOANS
 December 312004
    
    
    2005NT$
    
    
    NT$
    
    
    US$(In Thousands)Unsecured loan:Working capital loansNT$50,000 thousand,
repayable by
January 2005,
annual interest at
1.65 - 1.9%
    
    
    50,000
    
    
    
    
    
    
    
    NT$52,000 thousand,
repayable by April
2005, annual
interest at 4.595%
    
    
    52,000
    
    
    
    
    
    
    
    NT$60,000 thousand,
repayable by March
2005, annual
interest at 4.5%
    
    
    60,000
    
    
    
    
    
    
    
    NT$65,000 thousand,
repayable by
October 2005,
annual interest at
1.5%
    
    
    65,000
    
    
    
    
    
    
    
    NT$50,000 thousand,
repayable by
December 2006,
annual interest at
3.75%
    
    
    
    
    
    
    50,000
    
    
    
    1,522NT$100,000 thousand,
repayable by
January 2006,
annual interest at
2.20%
    
    
    
    
    
    
    100,000
    
    
    
    3,044NT$100,000 thousand,
repayable by
January 2006,
annual interest at
1.55%
    
    
    
    
    
    
    100,000
    
    
    
    3,045
 F-105




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December 312004
    
    
    2005NT$
    
    
    NT$
    
    
    US$(In Thousands)Loan for imports of machinery
JPY$1,826,874 thousand,
repayable by June
2005, annual
interest at 0.5986%
 1.1628%
    
    
    565,052
    
    
    
    
    
    
    
    EUR$82 thousand
repayable by April
2005, annual interest
at 2.71%  2.8052%
    
    
    3,541
    
    
    
    
    
    
    
    JPY$779,090 thousand,
repayable by June
2006, annual
interest at 0.7505%
 0.90%
    
    
    
    
    
    
    217,834
    
    
    
    6,631Secured loans:Working capital loans:NT$5,000 thousand,
repayable by
October 2005,
annual interest at
1.5%,
collateralized by
land and buildings
(Note 12)
    
    
    5,000
    
    
    
    
    
    
    
    800,593
    
    
    
    467,834
    
    
    
    14,242
 Unused credit lines as of December 31, 2005 aggregated approximately NT$6,493,357 thousand,
which will expire from January 2006 to December 2006.11.
    
    COMMERCIAL PAPER PAYABLE
 December 312004
    
    2005NT$
    
    NT$
    
    US$(In Thousands)Commercial paper
    
    
    
    
    
    
    150,000
    
    
    
    4,566Discount on par value
    
    
    
    
    
    
    (587
    )
    
    
    (18
    )
    
    
    
    149,413
    
    
    
    4,548
 The commercial papers actual interest rate is 1.55%-1.622% in 2005 and it expires in
February 2006.12.
    
    LONG-TERM BONDS PAYABLE
 F-106




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December 312004
    
    2005NT$
    
    NT$
    
    US$(In Thousands)Long-term bonds payable
    
    
    1,200,000
    
    
    
    
    
    
    
    Convertible bonds
    
    
    333,195
    
    
    
    
    
    
    
    Less: current portion
    
    
    (1,200,000
    )
    
    
    
    
    
    
    333,195
    
    
    
    
    
    
    
    
 On August 3, 2004, ThaiLin issued a NT$1,000,000 thousand secured convertible bonds due on
August 3, 2009 with zero interest rates. Those bonds have been convertible since September 3,
2004 at conversion price NT$17.1 for each share. As of December 31, 2005, all of the bonds had
been converted. The compensation interest rates applicable are as follows:Redemption within one month to three years: 1.50% per annum;Redemption after three years until 40 days before the due date: NilChipMOS Taiwan on January 26, 2000 issued secured bonds with face Value of NT$1,200,000
thousand. Those bonds bear annual interest at 5.95% payable annually. The
bonds were fully repaid by ChipMOS Taiwan by cash on January 26, 2005.As of December 31, 2005, no assets were mortgaged as collateral for the long  term bonds.13.
    
    LONG-TERM LOANS
 December 312004
    
    2005NT$
    
    NT$
    
    US$(In Thousands)Bank loans,
repayable quarterly
from November 2004
to February 2007,
interest at fixed
rate (3.4% as of
December 31, 2004
and 2005
respectively)
    
    
    270,000
    
    
    
    150,000
    
    
    
    4,566Bank loans,
repayable quarterly
from February 2006
to November 2009,
interest at fixed
rate (4.69% as of
December 31, 2005)
    
    
    
    
    
    
    500,000
    
    
    
    15,221Bank loans,
repayable
semi-annually from
March 2005 to
September 2006,
interest at fixed
rate (3.3% and
3.645% as of
December 31, 2004
and 2005
respectively)
    
    
    200,000
    
    
    
    134,000
    
    
    
    4,079Syndicated bank
loans collateralized
by equipment,
repayable
semi-annually from
September 2004 to
September 2007,
interest at floating
rate (4.375% and
4.72% as of December
31, 2004 and 2005,
respectively)
    
    
    1,714,280
    
    
    
    1,142,840
    
    
    
    34,790Syndicated bank
loans, repayable
semi-annually from
September 2004 to
September 2007,
interest at floating
rate (4.50%
and 4.845% as of
December 31, 2004
and 2005,
respectively)
    
    
    428,570
    
    
    
    285,710
    
    
    
    8,697
 F-107




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##### Table of Contents



December 312004
    
    2005NT$
    
    NT$
    
    US$(In Thousands)Syndicated bank
loans collateralized
by equipment,
repayable quarterly
from June 2004 to
March 2008, interest
at floating rate
(3.7% and 3.97% as
of December 31, 2004
and 2005
respectively)
    
    
    1,845,000
    
    
    
    1,277,308
    
    
    
    38,883Syndicated bank
loans collateralized
by equipment,
repayable
semi-annually from
November 2006 to May
2010, interest rate
at floating rate
(3.72% as of December
31, 2005)
    
    
    
    
    
    
    1,000,000
    
    
    
    30,441Research 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
    
    
    18,522
    
    
    
    6,181
    
    
    
    188Research and
development subsidy
loan, repayable
quarterly from
January 2006 to
April 2010, interest
at fixed rate (1% as
of December 31, 2004
and 2005)
    
    
    29,120
    
    
    
    29,120
    
    
    
    887Syndicated bank
loans collateralized
by equipment,
repayable on
September 2009,
interest at floating
rate (3.195% as of
December 31, 2005)
    
    
    
    
    
    
    500,000
    
    
    
    15,221Bank loans
collateralized by
equipment, repayable
quarterly from
December 2004 to
September 2007,
interest at floating
rate (3.65% and
3.89% as of December
31, 2004 and 2005
respectively)
    
    
    180,000
    
    
    
    103,000
    
    
    
    3,136Bank loans
collateralized by
equipment, repayable
quarterly form
August 2005 to
August 2009,
interest at floating
rate. (3.7% as of
December 31, 2004)
    
    
    35,695
    
    
    
    
    
    
    
    General loans
collateralized
repayable quarterly
from August 2005 to
August 2009,
interest at floating
rate (3.7%as of
December 31, 2004)
    
    
    58,715
    
    
    
    
    
    
    
    Bank loans
collateralized by
equipment, repayable
quarterly form
August 2005 to
August 2009,
interest at floating
rate. (3.7% as of
December 31, 2004)
    
    
    285,000
    
    
    
    
    
    
    
    General loans
repayable quarterly
from July 2005 to
July 2009, interest
at floating rate.
(3.7% as of December
31, 2004)
    
    
    43,500
    
    
    
    
    
    
    
    Bank loans
collateralized by
equipment, repayable
quarterly from April
2001 to December
2005, interest at
floating rate.
(5.755% as of
December 31, 2004)
    
    
    17,500
    
    
    
    
    
    
    
    Bank loans
collateralized by
equipment, repayable
quarterly from
February 2005 to
November 2008,
interest at floating
rate (2.8% and 2.9%
as of March 31, 2004
and 2005
respectively)
    
    
    350,000
    
    
    
    262,505
    
    
    
    7,991
 F-108




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##### Table of Contents



December 312004
    
    2005NT$
    
    NT$
    
    US$(In Thousands)Bank loans
collateralized by
equipment, repayable
quarterly from March
2006 to December
2010, interest at
floating rate. (3.2%
as of December 31,
2005)
    
    
    
    
    
    
    440,000
    
    
    
    13,394Bank loans
collateralized by
property, repaid at
January 2006,
interest at floating
rate, (2.5% as of
December 31, 2005)
    
    
    
    
    
    
    130,000
    
    
    
    3,957Syndicated bank
loans collateralized
by equipment,
repayable quarterly
April 2005 to
January 2011,
interest at floating
rate (3.088% and
3.075% as of
December 31, 2004
and 2005
respectively)
    
    
    620,000
    
    
    
    539,131
    
    
    
    16,412Syndicated bank
loans collateralized
by equipment,
repayable quarterly
December 2003 to
September 2008,
interest at floating
rate (3.088% and
3.075% as of
December 31, 2004
and 2005
respectively)
    
    
    320,417
    
    
    
    234,972
    
    
    
    7,153General loans,
repayable from April
1, 2003 to March 31,
2007. Payable in 42
monthly
installments,
commencing on
October 1, 2003.
Effective interest
rate was 9.658%
    
    
    12,402
    
    
    
    
    
    
    
    6,428,721
    
    
    
    6,734,767
    
    
    
    205,016Less: current portion
    
    
    (1,826,974
    )
    
    
    (2,300,916
    )
    
    
    (70,043
    )4,601,747
    
    
    
    4,433,851
    
    
    
    134,973
    )
 According to the agreement signed by ChipMOS Taiwan with Industrial Development Bureau
(IDB) in respect to the research and development subsidy loan, ChipMOS Taiwan is obligated to
pay the IDB a certain percentage (2%) of sales of the product developed for 3 years after
completing the project.Under the syndicated bank loan facility agreement, ChipMOS Taiwan is required to:
 (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.
 Certain fixed assets with an aggregate net book value of NT$8,893,025 thousand and time deposits
in an aggregate amount of NT$54,356 thousand were mortgaged as collateral for the longterm and
shortterm loans.
 F-109




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##### Table of Contents



Future minimum principal payments under the Company long-term loans as of December 31, 2005 are
as follows:
 AmountNT$
    
    US$(In Thousands)2006
    
    
    2,300,916
    
    
    
    70,0432007
    
    
    2,123,184
    
    
    
    64,6332008
    
    
    892,808
    
    
    
    27,1782009 and thereafter
    
    
    1,417,859
    
    
    
    43,1626,734,767
    
    
    
    205,016
 14.
    
    PENSION PLANChipMOS Taiwan, ThaiLin, ChipMOS Logic and CHANTEK have established defined benefit pension
plans for all of their regular employees, which provide benefits based on the length of service
and the average monthly salary for the six months period immediately before retirement.ChipMOS Taiwan, ThaiLin, ChipMOS Logic and CHANTEK make monthly contributions, equal to 2% of
salaries and wages, to a pension fund that is administered by a pension fund monitoring
committee and deposited in its name in the Central Trust of China in the Republic of China.The new Labor Pension Act effective July 2005, required that ChipMOS Taiwan and ThaiLin make
monthly deposits, equal to 6% of salaries and wages of employees who chose to join new pension
scheme, into individual pension account in Bureau of Labor Insurance.Certain pension information is as follows:
 a.
    
    Net pension cost
 Year Ended December 312003
    
    2004
    
    2005NT$
    
    NT$
    
    NT$
    
    US$(In Thousands)Service cost
    
    
    32,102
    
    
    
    56,065
    
    
    
    30,021
    
    
    
    914Interest cost
    
    
    4,275
    
    
    
    8,038
    
    
    
    8,159
    
    
    
    248Projected return on plan assets
    
    
    (2,581
    )
    
    
    (5,304
    )
    
    
    (4,500
    )
    
    
    (137
    )Amortization
    
    
    689
    
    
    
    (143
    )
    
    
    1,031
    
    
    
    31Unrecognized net (gain)/loss
    
    
    
    
    
    
    655
    
    
    
    53
    
    
    
    234,485
    
    
    
    59,311
    
    
    
    34,764
    
    
    
    1,058
 F-110




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##### Table of Contents



b.
    
    Reconciliation of the fund status of the plan and accrued pension cost
 December 312003
    
    2004
    
    2005NT$
    
    NT$
    
    NT$
    
    US$(In Thousands)Actuarial present value of benefit
obligationsVested benefit obligation
    
    
    
    
    
    
    (374
    )
    
    
    (415
    )
    
    
    (13
    )Nonvested accumulated benefit
obligation
    
    
    (81,658
    )
    
    
    (169,835
    )
    
    
    (142,011
    )
    
    
    (4,323
    )Additional benefits based on
future salaries
    
    
    (86,321
    )
    
    
    (143,915
    )
    
    
    (140,827
    )
    
    
    (4,287
    )Projected benefit obligation
    
    
    (167,979
    )
    
    
    (314,124
    )
    
    
    (283,253
    )
    
    
    (8,623
    )Plan assets at fair value
    
    
    84,821
    
    
    
    174,349
    
    
    
    156,989
    
    
    
    4,779Projected benefit obligation
in excess of plan assets
    
    
    (83,158
    )
    
    
    (139,775
    )
    
    
    (126,264
    )
    
    
    (3,844
    )Unrecognized net transition obligation
    
    
    484
    
    
    
    3,043
    
    
    
    663
    
    
    
    20Unrecognized net loss
    
    
    39,808
    
    
    
    34,058
    
    
    
    43,943
    
    
    
    1,338Accrued pension cost
    
    
    (42,866
    )
    
    
    (102,674
    )
    
    
    (81,658
    )
    
    
    (2,486
    )
 c.
    
    Actuarial assumptions
 Year Ended December 312003
    
    2004
    
    2005Discount rate
    
    
    3.25
    %
    
    
    3.25
    %
    
    
    2.75
    %Future salary increase rate
    
    
    3.25
    %
    
    
    3.25
    %
    
    
    3.25
    %Expected rate of return on plan assets
    
    
    3.25
    %
    
    
    3.25
    %
    
    
    2.75
    %
 d.
    
    Changes in pension fund
 Year Ended December 312003
    
    2004
    
    2005NT$
    
    NT$
    
    NT$
    
    US$(In Thousands)Contributions
    
    
    17,813
    
    
    
    32,160
    
    
    
    29,892
    
    
    
    910Payment of benefits
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 F-111




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15.
    
    TREASURY STOCK
 December 312004
    
    2005NT$
    
    NT$
    
    US$(In Thousands)Outstanding shares held by subsidiaries
    
    
    
    
    
    
    4,750
    
    
    
    145Purchase of treasury stock
    
    
    
    
    
    
    115,402
    
    
    
    3,512
    
    
    
    120,152
    
    
    
    3,657
 F-112




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##### Table of Contents



As of December 31, 2005, ThaiLin held 254 thousand outstanding shares of ChipMOS Taiwan as
longterm investment. The treasury stocks were carried with an amount of NT$4,750 thousand,
according to ChipMOS Taiwans equity in the cost of the investment recorded by ThaiLin.In 2005, ChipMOS Taiwan purchased 7,098 thousand shares of treasury stock at the cost of
NT$115,402 thousand. These shares shall be transferred to employees, resold or deregistered
within three years. These shares do not possess shareholders equity.16.
    
    SHAREHOLDERS EQUITYUnder ROC Company Law, the capital surplus can only be used to offset deficits, except that
capital surplus generated from (1) donations (donated capital) or (2) the excess of the issue
price over the par value of capital stock (including stocks issued for new capital and mergers,
and the purchase of treasury stock) can be transferred to capital as stock dividends when no
deficit remains and shareholders approve such distribution.ChipMOS Taiwans Articles of Incorporation provides that the following may be appropriated, from
the accumulated net income after deducting any previously accumulated deficit and 10% legal
reserve, subject to shareholder approval: (a) 10% as bonus to employees, (b) not more than 2% as
remuneration to directors and supervisors, (c) a special reserve, if deemed necessary, and (d)
dividends to shareholders.These appropriations and the disposition of the remaining net income shall be resolved by the
shareholders in the following year and given effect in the financial statements of that year.The aforementioned appropriation for legal reserve shall be made until the reserve equals
aggregate par value of ChipMOS Taiwans outstanding capital stock. The reserve can only be used
to offset a deficit; or, when its balance has reaches 50% of the aggregate par value of the
outstanding capital stock of ChipMOS Taiwan, up to 50% thereof can be distributed as stock
dividend.Under the Integrated Income Tax System that became effective on January 1, 1998, ROC resident
individual shareholders are allowed a tax credit for the income paid by ChipMOS Taiwan on
earnings generated from the effective date. An Imputation Credit Account (ICA) is maintained by
ChipMOS Taiwan for such income tax and the tax credit allocated to each shareholder. The
maximum credit available for allocation to each resident shareholder cannot exceed the balance
shown in the ICA on the date of distribution of dividends.
 F-113




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##### Table of Contents



17.
    
    INCOME TAX EXPENSE (BENEFIT)
 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 312003
    
    2004
    
    2005NT$
    
    NT$
    
    NT$
    
    US$(In Thousands)Income tax expense on
income before income tax
at statutory rate
    
    
    213,742
    
    
    
    674,082
    
    
    
    709,515
    
    
    
    21,598Tax effects of adjustments:Loss carry forward
    
    
    
    
    
    
    (260,217
    )
    
    
    (489,380
    )
    
    
    (14,897
    )Tax-exempt income
    
    
    (30,472
    )
    
    
    (166,653
    )
    
    
    (157,808
    )
    
    
    (4,804
    )Permanent difference
    
    
    13,430
    
    
    
    (19,795
    )
    
    
    40,061
    
    
    
    1,220Temporary difference
    
    
    (9,000
    )
    
    
    175,091
    
    
    
    41,694
    
    
    
    1,269Income tax expense-current before tax credits
    
    
    187,700
    
    
    
    402,508
    
    
    
    144,082
    
    
    
    4,386
 b.
    
    Income tax expense (benefit) consists of:
 Year Ended December 312003
    
    2004
    
    2005NT$
    
    NT$
    
    NT$
    
    US$(In Thousands)Income tax
expense-current
before tax credits
    
    
    187,700
    
    
    
    402,508
    
    
    
    144,082
    
    
    
    4,386Tax on the unappropriated earnings
    
    
    
    
    
    
    
    
    
    
    163,838
    
    
    
    4,988Separate and foreign income tax
    
    
    1,309
    
    
    
    86
    
    
    
    746
    
    
    
    23Income tax credits
    
    
    (187,700
    )
    
    
    (355,923
    )
    
    
    (218,672
    )
    
    
    (6,657
    )Income tax for the current year
    
    
    1,309
    
    
    
    46,671
    
    
    
    89,994
    
    
    
    2,740Net change of deferred income tax
assets (liabilities) for the yearTax credits
    
    
    48,014
    
    
    
    (70,003
    )
    
    
    76,611
    
    
    
    2,332Temporary difference
    
    
    8,127
    
    
    
    (128,593
    )
    
    
    (234,688
    )
    
    
    (7,144
    )Valuation allowance
    
    
    (66,405
    )
    
    
    (560,053
    )
    
    
    (405,487
    )
    
    
    (12,344
    )Loss carry forward
    
    
    41
    
    
    
    584,122
    
    
    
    517,738
    
    
    
    15,761Adjustment of prior years taxes
and others
    
    
    3,364
    
    
    
    (4,743
    )
    
    
    497
    
    
    
    15Income tax expense (benefit)
    
    
    (5,550
    )
    
    
    (132,599
    )
    
    
    44,665
    
    
    
    1,360
 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.
 F-114




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c.
    
    Deferred income tax assets and liabilities are summarized as follows:
 December 312004
    
    2005NT$
    
    NT$
    
    US$(In Thousands)Net current deferred income tax assets:Unrealized foreign exchange loss
    
    
    16,599
    
    
    
    3,496
    
    
    
    106Unrealized loss provision on
sales allowance
    
    
    9,455
    
    
    
    9,455
    
    
    
    288Loss of market price decline and
obsolete and slow-moving
inventories
    
    
    27,768
    
    
    
    20,616
    
    
    
    628Allowance for bad-debts
    
    
    50,223
    
    
    
    81,424
    
    
    
    2,479Tax credits
    
    
    241,141
    
    
    
    110,103
    
    
    
    3,352Loss carry forward
    
    
    504,365
    
    
    
    
    
    
    
    Others
    
    
    23,842
    
    
    
    14,108
    
    
    
    429873,393
    
    
    
    239,202
    
    
    
    7,282Less: valuation allowance
    
    
    (282,918
    )
    
    
    
    
    
    
    590,475
    
    
    
    239,202
    
    
    
    7,282Net non-current deferred income tax
assets (liabilities):Tax credits for investment in
machinery and equipment and
R&D expenditures
    
    
    763,336
    
    
    
    801,450
    
    
    
    24,397Loss carry forwards
    
    
    756,419
    
    
    
    133,732
    
    
    
    4,071Depreciation differences
    
    
    (555,627
    )
    
    
    (556,316
    )
    
    
    (16,935
    )Other
    
    
    140,985
    
    
    
    266,057
    
    
    
    8,0991,105,113
    
    
    
    644,923
    
    
    
    19,632Less: Valuation allowance
    
    
    (1,651,163
    )
    
    
    (793,874
    )
    
    
    (24,166
    )(546,050
    )
    
    
    (148,951
    )
    
    
    (4,534
    )
 The rate at which deferred income tax components are measured was 25% as of December
31, 2004 and 2005.d.
    
    Integrated income tax informationChipMOS Taiwan, the balances of the ICA were NT$94,239 thousand and NT$96,852 thousand as
of December 31, 2004 and 2005, 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
6.19% and 4.30% for 2004 and 2005, respectively.
 F-115




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##### Table of Contents



d.
    
    The balance and year of expiry of unused investment tax credits and loss carry
forwards as of December 31, 2005 are as follows:
 Machinery &
    
    R&D
    
    Loss CarryYear of Expiry
    
    Equipment
    
    Expenditure
    
    ForwardsNT$
    
    NT$
    
    NT$(In Thousands)2006
    
    
    85,434
    
    
    
    24,669
    
    
    
    2007
    
    
    296,284
    
    
    
    35,003
    
    
    
    133,7322008
    
    
    374,456
    
    
    
    1,182
    
    
    
    2009
    
    
    94,525
    
    
    
    
    
    
    
    850,699
    
    
    
    60,854
    
    
    
    133,732
 The deferred tax assets related to the investment tax credits on R&D expenditures and
purchases of machinery and equipment will expire from 2006 to 2009. 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, 2004 and 2005.The tax authorities have examined and assessed the income tax returns of ChipMOS Taiwan and
ThaiLin through 2002.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, 2004 and 2005 were generated during and after 1998.
 F-116




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18.
    
    RELATED PARTY TRANSACTIONSThe Company engages in business transactions with the following related parties:
 Name
    
    RelationshipChipMOS Bermuda
    
    A major shareholderSPIL
    
    A major shareholderMVI
    
    An indirect major shareholderChipMOS Japan
    
    A 100% owned subsidiaryChipMOS USA
    
    A 100% owned subsidiaryPlusMOS
    
    A former 25% owned investee. It merged
with CHANTEK in April 2004.ThaiLin
    
    A 34% owned investee. It became a
subsidiary of ChipMOS Taiwan in 2004.CHANTEK
    
    A former subsidiary of ChipMOS Taiwan.
It merged with ChipMOS Taiwan on
November 21, 2005Ultima Electronics Corp.
(Ultima)
    
    The chairman of ChipMOS Taiwan was
a member of board of directors of Ultima
(resigned in June 2003).ProMOS Technology Inc. (ProMOS)
    
    An investee of MVIDenMOS Technology Inc. (DenMOS)
    
    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.
A subsidiary of ChipMOS Bermuda
(Note: It used to be called ChipMOS FARChipMOS TECHNOLOGIES (H.K.) Ltd.
(ChipMOS H.K.)
    
    EAST Ltd., and was renamed as ChipMOS
TECHNOLOGIES (H.K.) Ltd. in May 2005.)AMCT
    
    A former 100% owned investee. It was
liquidated in October 2004.Chantek
International


MouFu Investment Ltd.
(Mou-Fu)
    
    The chairman of ChipMOS Taiwan is a
former member of board of directors of
Chantek International. It was
liquidated in May 1, 2005.
An investee of MVIChipMOS TECHNOLOGIES (H.K.)
Ltd., Taiwan Branch (ChipMOS
(H.K.) Taiwan Branch)
    
    A subsidiary of ChipMOS Bermuda
 F-117




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The significant transactions with the aforementioned parties, other than those disclosed in
other notes, are summarized as follows:
 Year Ended December 312003
    
    2004
    
    2005NT$
    
    NT$
    
    NT$
    
    US$(In Thousands)During the yearSalesMVI
    
    
    1,680,986
    
    
    
    14,274
    
    
    
    6
    
    
    
    Ultima
    
    
    745,562
    
    
    
    
    
    
    
    
    
    
    
    PlusMOS
    
    
    19,642
    
    
    
    16,751
    
    
    
    
    
    
    
    ProMOS
    
    
    1,748,326
    
    
    
    4,231,658
    
    
    
    4,332,058
    
    
    
    131,874ThaiLin
    
    
    1,722
    
    
    
    
    
    
    
    
    
    
    
    CHANTEK
    
    
    469
    
    
    
    
    
    
    
    
    
    
    
    ChipMOS H.K.
    
    
    234
    
    
    
    17,845
    
    
    
    10,556
    
    
    
    321SPIL
    
    
    345
    
    
    
    
    
    
    
    
    
    
    
    AMCT
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    DenMOS
    
    
    496,480
    
    
    
    567,042
    
    
    
    271,393
    
    
    
    8,2624,693,771
    
    
    
    4,847,570
    
    
    
    4,614,013
    
    
    
    140,457Rental revenueMVI
    
    
    4,800
    
    
    
    4,800
    
    
    
    4,800
    
    
    
    146DenMOS
    
    
    922
    
    
    
    455
    
    
    
    30
    
    
    
    1ThaiLin
    
    
    8,118
    
    
    
    
    
    
    
    
    
    
    
    ProMOS
    
    
    
    
    
    
    14,057
    
    
    
    9,371
    
    
    
    28513,840
    
    
    
    19,312
    
    
    
    14,201
    
    
    
    432Other revenueThaiLin
    
    
    10,571
    
    
    
    
    
    
    
    
    
    
    
    DenMOS
    
    
    2,647
    
    
    
    
    
    
    
    
    
    
    
    CHANTEK
    
    
    900
    
    
    
    
    
    
    
    
    
    
    
    PlusMOS
    
    
    27
    
    
    
    41
    
    
    
    
    
    
    
    ChipMOS H.K.
    
    
    16
    
    
    
    4,455
    
    
    
    1,982
    
    
    
    60ChipMOS USA
    
    
    1,343
    
    
    
    526
    
    
    
    
    
    
    
    ProMOS
    
    
    
    
    
    
    507
    
    
    
    522
    
    
    
    AMCT
    
    
    
    
    
    
    126
    
    
    
    
    
    
    
    1615,504
    
    
    
    5,655
    
    
    
    2,504
    
    
    
    76PurchasesAMCT
    
    
    4,758
    
    
    
    10,732
    
    
    
    
    
    
    
    ChipMOS H.K.
    
    
    4,654
    
    
    
    89,599
    
    
    
    3,120
    
    
    
    95PlusMOS
    
    
    522
    
    
    
    
    
    
    
    
    
    
    
    MVI
    
    
    12
    
    
    
    637,089
    
    
    
    11,964
    
    
    
    364ChipMOS USA
    
    
    
    
    
    
    149
    
    
    
    
    
    
    
    SPIL
    
    
    
    
    
    
    
    
    
    
    75
    
    
    
    29,946
    
    
    
    737,569
    
    
    
    15,159
    
    
    
    461
 F-118




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##### Table of Contents



Year Ended December 312003
    
    2004
    
    2005NT$
    
    NT$
    
    NT$
    
    US$(In Thousands)Subcontract expensesSPIL
    
    
    101,847
    
    
    
    
    
    
    
    
    
    
    
    ChipMOS H.K.
    
    
    11,804
    
    
    
    214,127
    
    
    
    73,925
    
    
    
    2,250ThaiLin
    
    
    33,515
    
    
    
    
    
    
    
    
    
    
    
    CHANTEK
    
    
    230
    
    
    
    
    
    
    
    
    
    
    
    147,396
    
    
    
    214,127
    
    
    
    73,905
    
    
    
    2,250Operating expensesAdministrative expensesMVI
    
    
    4,387
    
    
    
    1,950
    
    
    
    
    
    
    
    Mou-Fu
    
    
    
    
    
    
    2,275
    
    
    
    3,900
    
    
    
    1194,387
    
    
    
    4,225
    
    
    
    3,900
    
    
    
    119Service feeChipMOS USA
    
    
    22,864
    
    
    
    32,175
    
    
    
    
    
    
    
    ChipMOS Japan
    
    
    11,851
    
    
    
    15,045
    
    
    
    
    
    
    
    34,715
    
    
    
    47,220
    
    
    
    
    
    
    
    Rental expenseMVI
    
    
    2,586
    
    
    
    2,218
    
    
    
    593
    
    
    
    18CHANTEK
    
    
    7,699
    
    
    
    
    
    
    
    
    
    
    
    ThaiLin
    
    
    8,125
    
    
    
    
    
    
    
    
    
    
    
    ProMOS
    
    
    
    
    
    
    
    
    
    
    1,245
    
    
    
    3818,410
    
    
    
    2,218
    
    
    
    1,838
    
    
    
    56Fee for stock registry serviceSun Fund
    
    
    540
    
    
    
    
    
    
    
    
    
    
    
    Mou-Fu
    
    
    
    
    
    
    1,977
    
    
    
    493
    
    
    
    15540
    
    
    
    1,977
    
    
    
    493
    
    
    
    15Consultation feeChipMOS Bermuda
    
    
    
    
    
    
    25,191
    
    
    
    32,014
    
    
    
    975Other expensePlusMOS
    
    
    
    
    
    
    88
    
    
    
    
    
    
    
    MVI
    
    
    
    
    
    
    148
    
    
    
    148
    
    
    
    5ProMOS
    
    
    
    
    
    
    1,027
    
    
    
    
    
    
    
    
    
    
    
    1,263
    
    
    
    148
    
    
    
    5
 December 312004
    
    2005NT$
    
    NT$
    
    US$(In Thousands)At the end of yearNotes and accounts receivableMVI
    
    
    1,098
    
    
    
    
    
    
    
    DenMOS
    
    
    120,043
    
    
    
    54,901
    
    
    
    1,671ProMOS
    
    
    1,303,250
    
    
    
    1,372,950
    
    
    
    41,795ChipMOS H.K.
    
    
    8,281
    
    
    
    1,554
    
    
    
    471,432,672
    
    
    
    1,429,405
    
    
    
    43,513
 F-119




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##### Table of Contents



December 312004
    
    2005NT$
    
    NT$
    
    US$(In Thousands)Other receivableChipMOS Bermuda
    
    
    3,733
    
    
    
    8,862
    
    
    
    270ChipMOS USA
    
    
    15,378
    
    
    
    
    
    
    
    MVI
    
    
    420
    
    
    
    852
    
    
    
    26ChipMOS Japan
    
    
    5,937
    
    
    
    
    
    
    
    DenMOS
    
    
    885
    
    
    
    317
    
    
    
    9ChipMOS H.K.
    
    
    7,776
    
    
    
    493
    
    
    
    15ProMOS
    
    
    5,344
    
    
    
    3,174
    
    
    
    97ChipMOS (H.K) Taiwan Branch
    
    
    
    
    
    
    137
    
    
    
    439,473
    
    
    
    13,835
    
    
    
    421Credit balances of
long-term investments
(Note 7)
    
    
    (1,984
    )
    
    
    
    
    
    
    37,489
    
    
    
    13,835
    
    
    
    421PrepaymentsChipMOS USA
    
    
    621
    
    
    
    
    
    
    
    Accounts payableChipMOS H.K.
    
    
    17,428
    
    
    
    2,214
    
    
    
    67Other payableChipMOS USA
    
    
    1,507
    
    
    
    
    
    
    
    MVI
    
    
    356
    
    
    
    28
    
    
    
    1ChipMOS Japan
    
    
    915
    
    
    
    
    
    
    
    ProMOS
    
    
    
    
    
    
    781
    
    
    
    24ChipMOS H.K.
    
    
    32,641
    
    
    
    3,191
    
    
    
    97SPIL
    
    
    
    
    
    
    79
    
    
    
    2ChipMOS Bermuda
    
    
    23,783
    
    
    
    41,063
    
    
    
    1,250Mou-Fu
    
    
    1,829
    
    
    
    348
    
    
    
    1061,031
    
    
    
    45,490
    
    
    
    1,384
 The payment terms for purchases from related parties are the same as those from other
suppliers.The collection term for MVI is 90 days after month end, ProMOS is 75 days after month end while
other related parties have the normal collection terms. The selling price is on the same basis
as those to other customers.As of October 11, 2002, ChipMOS Taiwan signed an agreement entrusting Best Home with the
construction for a central kitchen. ChipMOS Taiwan has paid NT$216,000 thousand in advance to
Best Home for the purpose of acquiring a place and equipment. However, ChipMOS Taiwan entered
into a contract to transfer the claim to Prudent Holdings Group Ltd. on December 17, 2003 and
collected on November 19, 2004.
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On April 7, 2004, ChipMOS Taiwan entered into a semiconductor packaging technology license
agreement with ChipMOS Bermuda. Under the agreement, ChipMOS Taiwan agreed to pay a license fee
of US$20,000 thousand in installments of US$250 thousand in every three months over 20 years,
starting from March 30, 2005.As of April 7, 2004, ChipMOS Taiwan entered into a technology transfer agreement with ChipMOS
Bermuda for a period of 20 years, starting from effective day. The total price was US$19,700
thousand, recorded as deferred credits. As of December 31, 2004 and 2005, the unamortized
amount was NT$626,196 thousand and NT$593,666.In 2004, ChipMOS Taiwan acquired 255 thousand shares of ChipMOS Logic from CHANTEK International
at the cost of NT$2,527 thousand.In 2004, ChipMOS Taiwan purchased machineries from ProMOS and AMCT at the cost of NT$46,284
thousand and NT$84,027 thousand respectively. ChipMOS Taiwan also sold machineries to ChipMOS
H.K. with the proceeds amounted to NT$5,574 thousand and recognized gain on disposal of
properties amounted to NT$2,834 thousand.In 2005, ChipMOS Taiwan acquired 8,085 thousand, 418 thousand, 710 thousand and 1,614 thousand shares of CHANTEK from MVI, Mou-Fu, Best Home and CHANTEK International at the cost of NT$49,804
thousand, 2,574 thousand, 4,372 thousand and 9,945 thousand.19.
    
    RESTRICTED CASH AND CASH EQUIVALENTS
 December 312004
    
    2005NT$
    
    NT$
    
    US$(In Thousands)Time deposits (matures
from January 2006 to
February 2007)
    
    
    146,746
    
    
    
    125,447
    
    
    
    3,819
 Time deposits are pledged as collateral for the Companys customs duties payable, letter
of credit, and research and development subsidy loans.
 20.
    
    SIGNIFICANT COMMITMENTS AND CONTINGENCIES AS OF DECEMBER 31, 2005
 a.
    
    As of December 31, 2005, 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.
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The future minimum lease payments under the above-mentioned leases as of December
31, 2005 are as follows:
 AmountYear
    
    NT$
    
    US$(In Thousands)2006
    
    
    19,302
    
    
    
    5882007
    
    
    19,302
    
    
    
    5882008
    
    
    19,302
    
    
    
    5872009
    
    
    19,302
    
    
    
    587Thereafter
    
    
    139,449
    
    
    
    4,245Total minimum lease payments
    
    
    216,657
    
    
    
    6,595
 b.
    
    Pursuant to the semiconductor packaging technology license agreement (see Note 18),
ChipMOS Taiwan is obligated to make future payments of license fee amounted to US$19,500
thousand to ChipMOS Bermuda as of December 31, 2005.c.
    
    The Company has unused letters of credit aggregating approximately USD$18,933
thousand, JPY 5,621,035 thousand, EUR$68 thousand, and GBP$212 thousand as of December 31,
2005.d.
    
    In 2004, 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.e.
    
    On November 27, 2005, ChipMOS Taiwan and Spansion LLC (Spansion) entered into an
assembly and testing services agreement, pursuant to which the parties will enter into one
or more statements of work, under which ChipMOS Taiwan will reserve capacity for Spansion
for the assembly and testing services and Spansion will place purchase orders in
accordance with the terms of the agreement. Pursuant to the first statement of work,
effective from September 15, 2005, ChipMOS Taiwan is obligated to purchase and to install
wafer sorting testers and probers in the agreed upon quantity and to provide the wafer
sorting services to Spansion. Based on forecasts provided by Spansion, ChipMOS Taiwan is
required to purchase wafer sorting testers and probers in an aggregate of approximately
US$110,000 thousand (NT$3,613,500 thousand) in 2006.
 21.
    
    SIGNIFICANT SUBSEQUENT EVENTS
 a.
    
    In January 2006, ChipMOS Taiwan obtained a five-year floating-rate syndicated loan
of NT$6,000,000 thousand.b.
    
    In February 2006, ThaiLin obtained a six-year floating-rate syndicated loan of
NT$3,000,000 thousand.
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c.
    
    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. The Companys counsel
has not formed an opinion as to the outcome of the case.
 22.
    
    NOTES TO THE CASH FLOW STATEMENT
 a.
    
    Acquisition of subsidiaries
 December 31,2004
    
    2005NT$
    
    NT$
    
    US$(In Thousands)Net assets acquired:Cash and bank balances
    
    
    280,910
    
    
    
    7,261
    
    
    
    221Current assets
    
    
    1,528,849
    
    
    
    27,519
    
    
    
    838Long term investment
    
    
    106,488
    
    
    
    
    
    
    
    Property, plant and equipment
    
    
    3,691,657
    
    
    
    9,197
    
    
    
    280Intangible assets
    
    
    71,614
    
    
    
    
    
    
    
    Other assets
    
    
    205,831
    
    
    
    1,415
    
    
    
    43Current liabilities
    
    
    (1,813,210
    )
    
    
    (20,925
    )
    
    
    (637
    )Long term liabilities
    
    
    (845,343
    )
    
    
    
    
    
    
    Other liabilities
    
    
    (38,303
    )
    
    
    (16
    )
    
    
    (1
    )Minority interest
    
    
    (2,206,550
    )
    
    
    
    
    
    
    981,943
    
    
    
    24,451
    
    
    
    744Goodwill on acquisition
    
    
    (51,623
    )
    
    
    
    
    
    
    930,320
    
    
    
    24,451
    
    
    
    744Satisfied by:Cash
    
    
    186,573
    
    
    
    
    
    
    
    Reclassification to interest in subsidiary
    
    
    743,747
    
    
    
    24,451
    
    
    
    744930,320
    
    
    
    24,451
    
    
    
    744
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An analysis of the net inflow of cash and cash equivalents in respect of the acquisition of
subsidiary is as follows:
 December 31,2004
    
    2005NT$
    
    NT$
    
    US$(In Thousands)Cash and bank balances acquired
    
    
    280,910
    
    
    
    7,261
    
    
    
    221Less: cash consideration
    
    
    (186,573
    )
    
    
    
    
    
    
    94,337
    
    
    
    7,261
    
    
    
    221
 b.
    
    Disposal of a subsidiary
 Year Ended December 312003
    
    2004
    
    2005NT$
    
    NT$
    
    NT$
    
    US$(In Thousands)Net assets disposed:Cash and bank balances
    
    
    
    
    
    
    
    
    
    
    35,909
    
    
    
    1,093Accounts receivable
    
    
    
    
    
    
    
    
    
    
    6,708
    
    
    
    204Inventories
    
    
    
    
    
    
    
    
    
    
    38
    
    
    
    1Prepayment and other assets
    
    
    
    
    
    
    
    
    
    
    619
    
    
    
    19Property, plant and equipment
    
    
    
    
    
    
    
    
    
    
    32,969
    
    
    
    1,004Intangible assets
    
    
    
    
    
    
    
    
    
    
    1,954
    
    
    
    59Bank loans
    
    
    
    
    
    
    
    
    
    
    (17,791
    )
    
    
    (542
    )Accrued and other liabilities
    
    
    
    
    
    
    
    
    
    
    (3,799
    )
    
    
    (116
    )Longterm loans
    
    
    
    
    
    
    
    
    
    
    (5,290
    )
    
    
    (161
    )Minority interest
    
    
    
    
    
    
    
    
    
    
    (30,303
    )
    
    
    (922
    )
    
    
    
    
    
    
    
    21,014
    
    
    
    639Goodwill
    
    
    
    
    
    
    
    
    
    
    66,786
    
    
    
    2,033Loss on disposal of a subsidiary
    
    
    
    
    
    
    
    
    
    
    (3,856
    )
    
    
    (117
    )
    
    
    
    
    
    
    
    83,944
    
    
    
    2,555Cash consideration
    
    
    
    
    
    
    
    
    
    
    83,944
    
    
    
    2,555
 An analysis of the net inflow of cash and cash equivalents in respect of the disposal of a subsidiary
is as follows:
 Cash consideration
    
    
    
    
    
    
    
    
    
    
    83,944
    
    
    
    2,555Less: cash and bank balances disposed
    
    
    
    
    
    
    
    
    
    
    (35,909
    )
    
    
    (1,093
    )
    
    
    
    
    
    
    
    48,035
    
    
    
    1,462
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23.
    
    DERIVATIVE FINANCIAL INSTRUMENTSChipMOS Taiwan had entered into forward exchange contracts or foreign currency options for the
years ended December 31, 2004 and 2005, to hedge its exchange rate risk on foreign-currency
assets or liabilities and anticipated transactions. Information on the derivative transactions
is as follows:
 a.
    
    Forward, exchange contractsAs of December 31, 2004 and 2005, there were no outstanding forward contracts. Net exchange
gains on forward exchange contracts were NT$4,710 thousand and NT$1,528 thousand for the year
ended December 31, 2004 and 2005.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, 2004
and 2005, ChipMOS Taiwan had no outstanding foreign currency option contracts. For the years
ended December 31, 2004 and 2005, ChipMOS Taiwan didnt realize premium income of nil and
NT$36 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 2004 and 2005 were NT$151 thousand and NT$11,190
thousand 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, 2004
    
    December 31, 2005Carrying
    
    
    
    
    
    CarryingValue
    
    Fair Value
    
    Value
    
    Fair ValueNT$
    
    NT$
    
    NT$
    
    NT$(In Thousands)Non-derivative financial instrumentsAssetsCash
    
    
    2,818,156
    
    
    
    2,818,156
    
    
    
    3,154,097
    
    
    
    3,154,097Restricted cash and cash equivalents
    
    
    146,746
    
    
    
    146,746
    
    
    
    125,447
    
    
    
    125,447Short-term investments
    
    
    2,815,127
    
    
    
    2,817,587
    
    
    
    186,136
    
    
    
    186,136Notes receivable
    
    
    62,205
    
    
    
    62,205
    
    
    
    30,581
    
    
    
    30,581Accounts receivable
    
    
    1,825,845
    
    
    
    1,825,845
    
    
    
    2,401,045
    
    
    
    2,401,045Receivables from related partiesNotes and accounts
    
    
    1,419,319
    
    
    
    1,419,319
    
    
    
    1,419,976
    
    
    
    1,419,976Others
    
    
    31,575
    
    
    
    31,575
    
    
    
    5,315
    
    
    
    5,315Other receivable
    
    
    169,680
    
    
    
    169,680
    
    
    
    169,337
    
    
    
    169,337Long-term investments
    
    
    663,040
    
    
    
    669,708
    
    
    
    413,125
    
    
    
    413,125Refundable deposits
    
    
    14,858
    
    
    
    14,858
    
    
    
    17,846
    
    
    
    17,846LiabilitiesBank loans
    
    
    800,593
    
    
    
    800,593
    
    
    
    467,834
    
    
    
    467,834Commercial paper payable
    
    
    
    
    
    
    
    
    
    
    149,413
    
    
    
    149,413Notes payable
    
    
    49,072
    
    
    
    49,072
    
    
    
    3,927
    
    
    
    3,927Accounts payable
    
    
    526,003
    
    
    
    526,003
    
    
    
    657,963
    
    
    
    657,963Payable to related partiesTrade
    
    
    17,428
    
    
    
    17,428
    
    
    
    2,214
    
    
    
    2,214Others
    
    
    61,031
    
    
    
    61,031
    
    
    
    45,490
    
    
    
    45,490Payables to contractors and
equipment suppliers
    
    
    312,561
    
    
    
    312,561
    
    
    
    372,329
    
    
    
    372,329Long-term loans (including current
portion)
    
    
    6,428,721
    
    
    
    6,428,721
    
    
    
    6,734,767
    
    
    
    6,734,767Convertible bonds (including
current portion)
    
    
    333,195
    
    
    
    333,195
    
    
    
    
    
    
    
    Long-term bonds payable (including
current portion)
    
    
    1,200,000
    
    
    
    1,200,000
    
    
    
    
    
    
    
    Guarantee deposits
    
    
    1,124
    
    
    
    1,124
    
    
    
    1,454
    
    
    
    1,454
  1)
    
    Short-term financial instruments  market values.2)
    
    Short-term investments  market values.3)
    
    Long-term investments  market value for listed companies and net equity value
for the others.4)
    
    Refundable deposits and guarantee deposits  future values.
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5)
    
    Long-term liabilities  based on forecasted cash flows discounted at current
interest rates of similar long-term liabilities. Bonds payable are discounted at
present value, using an annual interest rate of 5.95%. Other long-term liabilities are
their carrying values as they use floating interest rates.
 The fair values of non-financial instruments were not included in the fair values disclosed
above. Accordingly, the sum of the fair values of the financial instruments listed above does
not equal the fair value of the Company.24.
    
    SEGMENT AND GEOGRAPHIC INFORMATIONThe Company engages mainly in the research and development, manufacturing, assembly, testing and
turnkey of semiconductors. In accordance with Statement of Financial Accounting Standards
(SFAS) No. 131, Disclosure About Segments of an Enterprise and Related Information, the
Companys chief operating decision maker has been identified as the Chief Executive Officer, who
reviews these segment results by Testing, Assembly, Testing and Assembly for LCD and other
Flat-Panel Display Driver Semiconductors and Turnkey when making decisions about allocating
resources and assessing performance of the Company. Financial segment information required by
SFAS No. 131 is as follows:
 a.
    
    The Company provides semiconductor testing, assembly, turnkey services and LCD and
other flat-panel display driver semiconductors services.
 2003Corporate &Segment
    
    Other
    
    ConsolidatedTesting
    
    Assembly
    
    Turnkey
    
    LCD
    
    Totals
    
    Assets
    
    TotalsNT$
    
    NT$
    
    NT$
    
    NT$
    
    NT$
    
    NT$
    
    NT$(In Thousands)Revenues from customers
    
    
    3,072,739
    
    
    
    2,637,117
    
    
    
    1,075,319
    
    
    
    1,683,490
    
    
    
    8,468,665
    
    
    
    
    
    
    
    8,468,665Cost of revenues
    
    
    2,614,901
    
    
    
    2,079,706
    
    
    
    1,061,109
    
    
    
    1,155,322
    
    
    
    6,911,038
    
    
    
    
    
    
    
    6,911,038Segment gross profit
    
    
    457,838
    
    
    
    557,411
    
    
    
    14,210
    
    
    
    528,168
    
    
    
    1,557,627
    
    
    
    
    
    
    
    1,557,627Depreciation and amortization
    
    
    1,886,241
    
    
    
    313,850
    
    
    
    
    
    
    
    451,710
    
    
    
    2,651,801
    
    
    
    14,623
    
    
    
    2,666,424Segment assets
    
    
    4,656,948
    
    
    
    2,121,812
    
    
    
    
    
    
    
    2,150,940
    
    
    
    8,929,700
    
    
    
    7,690,240
    
    
    
    16,619,940Expenditure for segment assets
    
    
    1,382,018
    
    
    
    399,888
    
    
    
    
    
    
    
    387,929
    
    
    
    2,169,835
    
    
    
    
    
    
    
    2,169,835
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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
    
    Turnkey
    
    LCD
    
    Bumping
    
    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
    
    
    
    5,728,060
    
    
    
    27,886,610Expenditure for
segment assets
    
    
    3,412,550
    
    
    
    1,044,114
    
    
    
    1,613,308
    
    
    
    581,599
    
    
    
    28,873
    
    
    
    6,680,444
    
    
    
    
    
    
    
    6,680,444
 In providing turnkey services, the Company purchases fabricated wafers and sells
tested and assembled semiconductors to application and system manufacturers. The
process of conducting testing and assembling for the fabricated wafer is at a very
limited level, which only uses a very small portion of facility capacity. Therefore,
the Company allocated no specific assets to the turnkey segment and accordingly, no
related depreciation and amortization was allocated.The corporate and other assets constitute the total current assets, long-term
investments, long-term restricted cash equivalents, intangible assets of bond issuance
costs, employee dormitory building and refundable deposits.b.
    
    The Company has no significant foreign operations.
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c.
    
    Net revenues:
 Year Ended December 312003
    
    2004
    
    2005NT$
    
    NT$
    
    NT$(In Thousands)AreaROC
    
    
    7,061,812
    
    
    
    12,182,691
    
    
    
    
    
    
    
    11,924,655USA
    
    
    495,803
    
    
    
    1,597,962
    
    
    
    
    
    
    
    1,548,927JAPAN
    
    
    414,422
    
    
    
    541,747
    
    
    
    
    
    
    
    482,587OTHERS
    
    
    496,628
    
    
    
    545,477
    
    
    
    
    
    
    
    800,3548,468,665
    
    
    
    14,867,877
    
    
    
    
    
    
    
    14,756,523
 d.
    
    Net sales to customers representing at least 10% of net total sales:
 Year Ended December 312003
    
    2004
    
    2005Customer
    
    Amount
    
    %
    
    Amount
    
    %
    
    Amount
    
    %NT$
    
    
    
    
    
    NT$
    
    
    
    
    
    NT$(In
Thousands)MVI
    
    
    1,680,986
    
    
    
    20
    
    
    
    14,274
    
    
    
    
    
    
    
    6
    
    
    
    Ultima
    
    
    745,562
    
    
    
    9
    
    
    
    453,698
    
    
    
    3
    
    
    
    
    
    
    
    ProMOS
    
    
    1,748,326
    
    
    
    21
    
    
    
    4,231,658
    
    
    
    29
    
    
    
    4,332,058
    
    
    
    29PowerChip
    
    
    
    
    
    
    
    
    
    
    1,721,993
    
    
    
    12
    
    
    
    2,233,503
    
    
    
    15
 25.
    
    SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES            FOLLOWED BY CHIPMOS
TAIWAN AND ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED STATESThe accompanying financial statements have been prepared in accordance with accounting
principles generally accepted in the Republic of China (ROC GAAP), which differ in the
following respects from accounting principles generally accepted in the United States of
America (U.S. GAAP):
 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.
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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.
    
    Marketable securitiesUnder 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 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 adjustment below relates to the
Companys equity securities that are classified as trading and available-for-sale
securities under U.S. GAAP.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.
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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, there was no such difference.
 d.
    
    Technologies transferred in payment of capital stockAs discussed in Note 9, 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.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.
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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 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.k.
    
    Derivative financial instrumentsUnder ROC GAAP, there are no specific rules related to accounting for derivative
financial instruments, nor criteria for hedge accounting. Therefore, companies have the
flexibility in choosing when to recognize derivative financial instruments and when to
follow hedge accounting versus fair value accounting for such instruments. U.S. GAAP has
restrictive rules on hedge accounting under SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities and SFAS No. 138, Accounting for Certain Derivative
Instruments and Hedging Activities. SFAS No. 133 and SFAS No. 138 are effective for
fiscal years beginning after June 15, 2000, and establish accounting and reporting
standards for all derivative financial instruments. The Company adopted those statements
on January 1, 2001. The adoption of SFAS No. 133 and SFAS No. 138 had no material impact
on the Companys financial statements. Under U.S. GAAP, the Company did not apply hedge
accounting and derivatives have historically been, and
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continue to be, recorded on the balance sheets at fair value, with the changes in fair
values recorded through current period earnings. In addition, the Company has no embedded
derivatives from January 1 to December 31, 2005. The reconciling adjustments for all
periods presented reflect those reconciliations from hedge accounting under ROC GAAP to
non-hedge accounting under U.S. GAAP.
 l.
    
    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.m.
    
    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.n.
    
    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. Under
U.S. GAAP, SFAS No. 34 Capitalization of Interest Cost, interest is generally
capitalized on assets until they are available and ready for use.o.
    
    Goodwill and negative goodwillUnder 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.
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.
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p.
    
    Pension expensesSFAS No. 87, Accounting for Pensions, and the SFAS No. 88, Employers
Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for
Termination Benefits, were effective no later than the beginning of the first period
for which an U.S. GAAP reconciliation is required for foreign issuers. A portion of
the unrecognized net transition obligation on the adoption date is to be allocated
directly to equity. The Company started to adopt SFAS No. 87 and SFAS No. 88 in 1997
and 2002, respectively. ROC 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.q.
    
    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 (US$2,270 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 NT$75,602 thousand (US$2,301 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.The following reconciles net income (loss) and shareholders equity under ROC
GAAP as Reported in the accompanying financial statements to net income (loss) and
shareholders equity amounts determined under U.S. GAAP, giving effect to adjustments
for the differences listed above.
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Year Ended December 312003
    
    2004
    
    2005NT$
    
    NT$
    
    NT$
    
    US$(In Thousands)Net incomeNet income based on ROC GAAP
    
    
    860,557
    
    
    
    2,322,760
    
    
    
    2,108,036
    
    
    
    64,172Adjustments:Amortization of technology transfer in
payment of capital stocks
    
    
    18,334
    
    
    
    
    
    
    
    
    
    
    
    Amortization of start-up costs
    
    
    14,796
    
    
    
    9,916
    
    
    
    2,305
    
    
    
    70Depreciation of fixed assets and
employee dormitory building
    
    
    (14,206
    )
    
    
    (14,444
    )
    
    
    (14,957
    )
    
    
    (455
    )Transfer of building and facilities
from MVI
    
    
    2,104
    
    
    
    1,299
    
    
    
    1,075
    
    
    
    33Marketable securities-trading
    
    
    1,916
    
    
    
    10,567
    
    
    
    (3,956
    )
    
    
    (120
    )Depreciation of interest capitalization
    
    
    (5,728
    )
    
    
    (19,793
    )
    
    
    (19,793
    )
    
    
    (603
    )Equity accounting for long-term
investment
    
    
    (3,867
    )
    
    
    (3,358
    )
    
    
    (34,105
    )
    
    
    (1,038
    )Employee bonus and director
remuneration
    
    
    
    
    
    
    
    
    
    
    (460,044
    )
    
    
    (14,005
    )Effect of U.S. GAAP adjustment on
minority interest
    
    
    
    
    
    
    
    
    
    
    48,767
    
    
    
    1,484Effect of U.S. GAAP adjustment on
income taxes
    
    
    (3,825
    )
    
    
    5,755
    
    
    
    4,327
    
    
    
    132Net increase (decrease) in net income
    
    
    9,524
    
    
    
    (10,058
    )
    
    
    (476,381
    )
    
    
    (14,502
    )Net income based on U.S. GAAP
    
    
    870,081
    
    
    
    2,312,702
    
    
    
    1,631,655
    
    
    
    49,670Earnings per share
    
    
    0.98
    
    
    
    2.61
    
    
    
    1.84
    
    
    
    0.06Number of weighted average shares outstanding
under U.S. GAAP
    
    
    887,227
    
    
    
    887,227
    
    
    
    885,686
    
    
    
    885,686
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December 312004
    
    2005NT$
    
    NT$
    
    US$(In Thousands)Shareholders equityShareholders equity based on ROC GAAP
    
    
    13,115,457
    
    
    
    14,455,753
    
    
    
    440,053Adjustments:Technology transfer in payment of capital
stocksOriginal cost
    
    
    (750,000
    )
    
    
    (750,000
    )
    
    
    (22,831
    )Accumulated amortization of
technology transfer in payment of
capital stocks
    
    
    750,000
    
    
    
    750,000
    
    
    
    22,831Start-up costsOriginal cost
    
    
    (61,124
    )
    
    
    (61,107
    )
    
    
    (1,860
    )Accumulated depreciation of
start-up costs
    
    
    51,193
    
    
    
    53,400
    
    
    
    1,626Net effect on inventories
    
    
    (134
    )
    
    
    (53
    )
    
    
    (2
    )Depreciation of fixed assets and employee
dormitory buildingDepreciation of fixed assets and
employee dormitory building
    
    
    (85,648
    )
    
    
    (100,710
    )
    
    
    (3,066
    )Net effects on inventories
    
    
    217
    
    
    
    322
    
    
    
    10Transfer of building and facilities from MVIOriginal cost
    
    
    (173,174
    )
    
    
    (173,174
    )
    
    
    (5,271
    )Depreciation and gain on disposal
of building and facilities from
MVI
    
    
    168,076
    
    
    
    169,155
    
    
    
    5,149Net effects on inventories
    
    
    (22
    )
    
    
    (26
    )
    
    
    (1
    )Marketable securities  trading
    
    
    6,991
    
    
    
    3,035
    
    
    
    92Pension expenses
    
    
    (1,898
    )
    
    
    (1,898
    )
    
    
    (58
    )Interest capitalization
    
    
    118,757
    
    
    
    118,757
    
    
    
    3,615Depreciation of interest capitalization
    
    
    (31,976
    )
    
    
    (51,769
    )
    
    
    (1,576
    )Long-term investments
    
    
    (16,376
    )
    
    
    (25,470
    )
    
    
    (775
    )Employee bonus and director remuneration
    
    
    
    
    
    
    (294,300
    )
    
    
    (8,959
    )Effect of U.S.GAAP adjustment on minority
interest
    
    
    
    
    
    
    48,767
    
    
    
    1,485Effect of U.S. GAAP adjustment on income
taxes
    
    
    3,458
    
    
    
    7,785
    
    
    
    237Net decrease in shareholders equity
    
    
    (21,660
    )
    
    
    (307,286
    )
    
    
    (9,354
    )Shareholders equity based on U.S. GAAP
    
    
    13,093,797
    
    
    
    14,148,467
    
    
    
    430,699
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Year Ended December 312003
    
    2004
    
    2005NT$
    
    NT$
    
    NT$
    
    US$(In Thousands)Changes in shareholders equity
based on U.S. GAAPBalance, beginning of the year
    
    
    9,801,202
    
    
    
    10,593,316
    
    
    
    13,093,797
    
    
    
    398,593Reversal of unrealized loss (gain)
on available-for-sale securities
    
    
    (79,277
    )
    
    
    5,618
    
    
    
    805
    
    
    
    25Cash dividend
    
    
    
    
    
    
    
    
    
    
    (532,336
    )
    
    
    (16,205
    )Purchase of treasury stock
    
    
    
    
    
    
    
    
    
    
    (115,402
    )
    
    
    (3,513
    )Outstanding shares owned by
subsidiaries
    
    
    
    
    
    
    
    
    
    
    (4,750
    )
    
    
    (145
    )Issuance of new stock for merger
    
    
    
    
    
    
    
    
    
    
    89,912
    
    
    
    2,737Unrealized gain (loss) on
available-for-sale securities
    
    
    (5,618
    )
    
    
    (805
    )
    
    
    (1,673
    )
    
    
    (51
    )Cumulative translation adjustments
    
    
    115
    
    
    
    (7,564
    )
    
    
    6,380
    
    
    
    194Adjustment for long-term investments
    
    
    6,813
    
    
    
    190,530
    
    
    
    (19,921
    )
    
    
    (606
    )Net income for the year
    
    
    870,081
    
    
    
    2,312,702
    
    
    
    1,631,655
    
    
    
    49,670Balance, end of the year
    
    
    10,593,316
    
    
    
    13,093,797
    
    
    
    14,148,467
    
    
    
    430,699
 December 312004
    
    2005NT$
    
    NT$
    
    US$(In Thousands)Current assetsAs reported
    
    
    10,548,627
    
    
    
    8,330,865
    
    
    
    253,603U.S. GAAP adjustmentsMarketable securities  trading
    
    
    6,991
    
    
    
    3,035
    
    
    
    92Effect of inventory adjustments:Start-up costs
    
    
    (134
    )
    
    
    (53
    )
    
    
    (1
    )Depreciation of fixed
assets and employee
dormitory building
    
    
    217
    
    
    
    322
    
    
    
    10Transfer of building
and facilities from
MVI
    
    
    (22
    )
    
    
    (26
    )
    
    
    (1
    )As adjusted
    
    
    10,555,679
    
    
    
    8,334,143
    
    
    
    253,703Long-term investmentsAs reported
    
    
    663,040
    
    
    
    413,125
    
    
    
    12,576U.S. GAAP adjustmentsCumulative translation adjustments
    
    
    (4,549
    )
    
    
    
    
    
    
    Adjustment for investment income
    
    
    (11,827
    )
    
    
    53,893
    
    
    
    1,641Impairment loss
    
    
    
    
    
    
    (79,363
    )
    
    
    (2,416
    )As adjusted
    
    
    646,664
    
    
    
    387,655
    
    
    
    11,801
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December 312004
    
    2005NT$
    
    NT$
    
    US$(In Thousands)Property, plant and equipment  netAs reported
    
    
    16,713,425
    
    
    
    18,986,699
    
    
    
    577,982U.S. GAAP adjustmentsStart-up costs
    
    
    (9,931
    )
    
    
    (7,707
    )
    
    
    (235
    )Depreciation of fixed assets
    
    
    (75,747
    )
    
    
    (89,178
    )
    
    
    (2,715
    )Transfer of building and facilities from MVI
    
    
    (5,098
    )
    
    
    (4,019
    )
    
    
    (122
    )Interest capitalization
    
    
    86,781
    
    
    
    66,988
    
    
    
    2,039Negative goodwill of merging Chantek
    
    
    
    
    
    
    (20,275
    )
    
    
    (617
    )As adjusted
    
    
    16,709,430
    
    
    
    18,932,508
    
    
    
    576,332Other assetsAs reported
    
    
    213,782
    
    
    
    260,499
    
    
    
    7,930U.S. GAAP adjustmentsDepreciation of employee dormitory building
    
    
    (9,901
    )
    
    
    (11,532
    )
    
    
    (351
    )Goodwill
    
    
    
    
    
    
    20,275
    
    
    
    617As adjusted
    
    
    203,881
    
    
    
    269,242
    
    
    
    8,196Current liabilitiesAs reported
    
    
    5,710,551
    
    
    
    4,885,016
    
    
    
    148,707U.S, GAAP adjustmentsAccrued employee bonds and director
remuneration
    
    
    
    
    
    
    294,300
    
    
    
    8,959As adjusted
    
    
    5,710,551
    
    
    
    5,179,316
    
    
    
    157,666Other liabilitiesAs reported
    
    
    1,276,044
    
    
    
    825,729
    
    
    
    25,136U.S. GAAP adjustmentsPension expenses
    
    
    1,898
    
    
    
    1,898
    
    
    
    58Effect of U.S. GAAP adjustment on income
taxes
    
    
    (3,458
    )
    
    
    (7,785
    )
    
    
    (237
    )As adjusted
    
    
    1,274,484
    
    
    
    819,842
    
    
    
    24,957Minority interestAs reported
    
    
    3,204,177
    
    
    
    3,494,210
    
    
    
    106,369U.S. GAAP adjustmentsAccrued employee bonds and director
remuneration
    
    
    
    
    
    
    (48,767
    )
    
    
    (1,485
    )As adjusted
    
    
    3,204,177
    
    
    
    3,445,443
    
    
    
    104,884
 F-138




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As a result of the adjustments presented above, the approximate amounts of total assets
under U.S. GAAP were NT$28,217,951 thousand and NT$28,026,919 thousand as of December 31, 2004 and
2005, respectively.The following U.S. GAAP condensed statements of operation for the years ended December 31, 2003,
2004 and 2005 have been derived from the audited financial statements and reflect the
adjustments presented above. Certain accounts have been reclassified to conform to U.S. GAAP.
Reversal of allowance for doubtful receivables, gain (loss) on disposal of property, plant
and equipment and loss on lease rescission are included as operating expenses.
 Year Ended December 312003
    
    2004
    
    2005NT$
    
    NT$
    
    NT$
    
    US$(In Thousands)Net revenue
    
    
    8,468,665
    
    
    
    14,867,877
    
    
    
    14,756,523
    
    
    
    449,209Cost of revenue
    
    
    (6,911,268
    )
    
    
    (10,746,166
    )
    
    
    (10,848,673
    )
    
    
    (330,249
    )Gross profit
    
    
    1,557,397
    
    
    
    4,121,711
    
    
    
    3,907,850
    
    
    
    118,960Operating expenses
    
    
    (541,145
    )
    
    
    (1,095,053
    )
    
    
    (1,540,563
    )
    
    
    (46,896
    )Income from operations
    
    
    1,016,252
    
    
    
    3,026,658
    
    
    
    2,367,287
    
    
    
    72,064Non-operating expenses  net
    
    
    (147,896
    )
    
    
    (574,814
    )
    
    
    (423,167
    )
    
    
    (12,882
    )Income before income tax
    
    
    868,356
    
    
    
    2,451,844
    
    
    
    1,944,120
    
    
    
    59,182Net income
    
    
    870,081
    
    
    
    2,312,702
    
    
    
    1,631,655
    
    
    
    49,670
 26.
    
    ADDITIONAL DISCLOSURES REQUIRED BY U.S. GAAP
 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.In January 2003, FASB issued Interpretation No. 46, Consolidation of Variable
Interest Entities, an Interpretation of ARB No. 51 (FIN 46), FIN 46 clarifies when a
company should consolidate in its financial statements the assets, liabilities and
activities of a variable interest entity. FIN 46 provides general guidance as to the
definition of a variable interest entity and requires a variable interest entity to be
consolidated if a company absorbs the majority of the variable interest entitys
expected losses, or is entitled to receive a majority of the variable interest entitys
residual returns, or both. In December 2004, FASB issued a revised Interpretation of
FIN 46 (FIN 46-R), which replaces FIN 46 and clarifies and expands current accounting
guidance for variable interest entities. FIN 46 and FIN 46-R are effective immediately
for all variable interest entities created after January 31, 2004, and for variable
interest entities created prior to February 1, 2004, no later than the end of the first
reporting period after March 15, 2004. The adoption of FIN 46-R did not have a
material impact on the accompanying consolidated financial statements.
 F-139




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##### Table of Contents



In April 2003, FASB issued SFAS No. 149, Amendment of Statement 133 on Derivative
Instruments and Hedging Activities. SFAS No. 149 amends and clarifies accounting for
derivative instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities under SFAS No. 133. In particular, this
Statement clarifies under what circumstances a contract with an initial net investment
meets the characteristic of a derivative and when a derivative contains a financing
component that warrants special reporting in the statement of cash flows. This
Statement is generally effective for contracts entered into or modified after June 30,
2003. The adoption of SFAS No. 149 did not have a material impact on the Companys
financial reporting and disclosures.In May 2003, FASB issued SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity. SFAS No. 150 changes
the accounting for certain financial instruments that, under previous guidance, could
be classified as equity or mezzanine equity by now requiring those instruments to be
classified as liabilities (or assets in some circumstances) in the statement of
financial position. Further, SFAS No. 150 requires disclosure regarding the terms of
those instruments and settlement alternatives. The guidance in SFAS No. 150 generally
is effective for all financial instruments entered into or modified after May 31, 2003,
and is otherwise effective at the beginning of the first interim period beginning after
June 15, 2003. We have evaluated SFAS No. 150 and determined that it does not have an
impact on our financial reporting and disclosures.In December 2003, FASB issued SFAS No. 132  revised, Employers Disclosures
about Pensions and Other Postretirement Benefits. This Statement revises employers
disclosures about pension plans and other postretirement benefits plans. This
Statement requires additional disclosures about the assets, obligations, cash flows and
net periodic benefit cost of defined benefit pension plans and other defined benefit
postretirement plans. The required information should be provided separately for
pension plans and for other postretirement benefit plans. This Statement also requires
new disclosures for interim periods beginning after December 15, 2003. The Statement
was effective for fiscal years ending after December 15, 2003. The Company adopted
this Statement for the year ended December 31, 2003. (Refer to Note d, pension plans).In December 2003, the Staff of the Securities and Exchange Commission (SEC) issued
Staff Accounting Bulletin (SAB) No. 104, Revenue Recognition, which replaces SAB 101,
Revenue Recognition in Financial Statements. SAB 104s primary purpose is to rescind
accounting guidance contained in SAB 101 related to multiple element revenue
arrangements and revises the SECs Revenue Recognition in Financial Statements
Frequently Asked Questions and Answers that have been codified in Topic 13. SAB 104
was effective immediately and did not have a material impact on the Companys financial
reporting and disclosures.
 F-140




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The FASB has issued SFAS No. 148 Accounting for Stock-Based Compensation -
Transition and Disclosures. SFAS No. 148 amends SFAS No. 123, Accounting for
Stock-Based Compensation, to provide alternative methods of transition for a voluntary
change to the fair value based method of accounting for stock-based employee
compensation. In December 2004, the FASB issued Statement of Financial Accounting
Standard No. 123R (SFAS 123R) Share-Based Payment. Under previous practice, the
reporting entity could account for share-based payment under the provisions of
Accounting Principles Board Opinion No. 25 Accounting for Stock Issued to Employees
and disclose share-based compensation as if accounted for under the provisions of
Statement of Financial Accounting Standard No. 123 (SFAS No. 123), Accounting for
Stock-Based Compensation. Under the provisions of SFAS No. 123R, a public entity is
required to measure the cost of employee services received in exchange for an award of
equity instruments based on the grant-date fair value of the award. The cost is
recognized over the period during which an employee is required to provide service in
exchange for the award. As of December 31, 2005, the Company has no such stock-based
compensation. SFAS No. 123 is not applicable to the Company.b.
    
    Marketable securitiesOn December 31, 2004 and 2005, 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 Value2004
    
    2005
    
    2004
    
    2005NT$
    
    NT$
    
    NT$
    
    NT$(In Thousands)
    
    (In Thousands)Investment in
trading securities
(Note 4)
    
    
    2,815,127
    
    
    
    186,136
    
    
    
    2,822,118
    
    
    
    189,171
 The Company uses the weighted-average cost method for trading 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.
 F-141




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December 31, 2005Less 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
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    156,338
    
    
    
    4,760
    
    
    
    5,648
    
    
    
    172Open-ended funds
    
    
    32,833
    
    
    
    999
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    32,833
    
    
    
    999
    
    
    
    
    
    
    
    
    
    
    
    156,338
    
    
    
    4,760
    
    
    
    5,648
    
    
    
    172
 c.
    
    Income tax expense (benefit)
 Year Ended December 312003
    
    2004
    
    2005NT$
    
    NT$
    
    NT$
    
    US$(In Thousands)Income tax current payable
    
    
    1,309
    
    
    
    86
    
    
    
    87,643
    
    
    
    2,668Deferred income tax
    
    
    (6,398
    )
    
    
    (133,697
    )
    
    
    (47,802
    )
    
    
    (1,455
    )Adjustment of prior years
income taxes
    
    
    3,364
    
    
    
    (4,743
    )
    
    
    497
    
    
    
    15Income tax expense (benefit)
    
    
    (1,725
    )
    
    
    (138,354
    )
    
    
    40,338
    
    
    
    1,228
 Reconciliation between 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:
 F-142




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Year Ended December 312003
    
    2004
    
    2005NT$
    
    NT$
    
    NT$
    
    US$(In Thousands)Tax on pretax income at ROC
statutory rate (25%)
    
    
    217,079
    
    
    
    670,129
    
    
    
    196,559
    
    
    
    5,983SBIP tax exemption (5%)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Tax on pretax income at SBIP
statutory rate
    
    
    217,079
    
    
    
    670,129
    
    
    
    196,559
    
    
    
    5,983Other tax and assessed additional
income tax
    
    
    1,309
    
    
    
    86
    
    
    
    164,584
    
    
    
    5,010Tax effect of:Tax-exempt income
    
    
    (1,469
    )
    
    
    (426,870
    )
    
    
    (185,377
    )
    
    
    (5,643
    )Permanent differencesNon-taxable gain on sales
of investment
    
    
    (22,571
    )
    
    
    (12,557
    )
    
    
    (18,630
    )
    
    
    (567
    )Non-deductible
investment loss (gain)
    
    
    6,613
    
    
    
    (12,246
    )
    
    
    82,152
    
    
    
    2,501Others
    
    
    
    
    
    
    (714
    )
    
    
    
    
    
    
    Temporary differences
    
    
    
    
    
    
    50,418
    
    
    
    (169,637
    )
    
    
    (5,164
    )Tax credits  utilized
    
    
    (187,700
    )
    
    
    (355,923
    )
    
    
    (218,672
    )
    
    
    (6,657
    ) deferred
    
    
    48,014
    
    
    
    (70,003
    )
    
    
    76,611
    
    
    
    2,332Valuation allowance
    
    
    (66,405
    )
    
    
    (560,053
    )
    
    
    (405,487
    )
    
    
    (12,343
    )Loss carry forward
    
    
    41
    
    
    
    584,122
    
    
    
    517,738
    
    
    
    15,761Adjustment of prior years income
tax
    
    
    3,364
    
    
    
    (4,743
    )
    
    
    497
    
    
    
    15Income tax expense (benefit)
    
    
    (1,725
    )
    
    
    (138,354
    )
    
    
    40,338
    
    
    
    1,228
 F-143




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##### Table of Contents



December 312004
    
    2005NT$
    
    NT$
    
    US$(In Thousands)Deferred income tax assetsCurrentUnrealized foreign exchange loss
    
    
    16,599
    
    
    
    3,496
    
    
    
    106Loss of market price decline and obsolescence and slow-moving inventories
    
    
    27,768
    
    
    
    20,616
    
    
    
    628Sales allowance
    
    
    9,455
    
    
    
    9,455
    
    
    
    288Bad-debt allowance
    
    
    50,223
    
    
    
    81,424
    
    
    
    2,479Tax credits for investment in machinery and equipment and R&D expenditures
    
    
    241,141
    
    
    
    110,103
    
    
    
    3,352Loss carry forward
    
    
    504,365
    
    
    
    
    
    
    
    Others
    
    
    23,842
    
    
    
    14,108
    
    
    
    429873,393
    
    
    
    239,202
    
    
    
    7,282Valuation allowance
    
    
    (282,918
    )
    
    
    
    
    
    
    590,475
    
    
    
    239,202
    
    
    
    7,282Deferred income tax liabilitiesNon-currentTax credits for investment in machinery and equipment and R & D
expenditures
    
    
    763,336
    
    
    
    801,450
    
    
    
    24,397Depreciation differences
    
    
    (534,270
    )
    
    
    (531,219
    )
    
    
    (16,171
    )Interest capitalization
    
    
    (21,695
    )
    
    
    (16,747
    )
    
    
    (510
    )Loss carry forward
    
    
    756,419
    
    
    
    133,732
    
    
    
    4,071Transferred assets from MVI
    
    
    1,280
    
    
    
    1,011
    
    
    
    31Start-up costs
    
    
    2,516
    
    
    
    1,940
    
    
    
    59Others
    
    
    140,985
    
    
    
    262,541
    
    
    
    7,9921,108,571
    
    
    
    652,708
    
    
    
    19,869Valuation allowance
    
    
    (1,651,163
    )
    
    
    (793,874
    )
    
    
    (24,167
    )(542,592
    )
    
    
    (141,166
    )
    
    
    (4,298
    )47,883
    
    
    
    98,036
    
    
    
    2,984
 d.
    
    Pension plansIn accordance with to SFAS No. 132  Revised Employers Disclosures about
Pensions and Other Post-retirement Benefits, pension information is disclosed below:
 F-144




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##### Table of Contents



Year Ended December 312003
    
    2004
    
    2005NT$
    
    NT$
    
    NT$
    
    US$(In Thousands)Components of net periodic benefit costService cost
    
    
    32,102
    
    
    
    51,970
    
    
    
    30,021
    
    
    
    914Interest cost
    
    
    4,275
    
    
    
    7,599
    
    
    
    8,713
    
    
    
    265Projected return on plan assets
    
    
    (2,581
    )
    
    
    (4,892
    )
    
    
    (4,659
    )
    
    
    (142
    )Net amortization and deferral:Unrecognized net transition obligation
    
    
    28
    
    
    
    (477
    )
    
    
    (305
    )
    
    
    (9
    )Unrecognized net loss
    
    
    695
    
    
    
    809
    
    
    
    1,209
    
    
    
    37Curtailment (Gain)
/ Loss Recognition
    
    
    
    
    
    
    
    
    
    
    458
    
    
    
    14Net periodic benefit cost
    
    
    34,519
    
    
    
    55,009
    
    
    
    35,437
    
    
    
    1,079Changes in benefit obligationBenefit obligation at beginning of year
    
    
    122,148
    
    
    
    167,979
    
    
    
    314,124
    
    
    
    9,563Service cost
    
    
    32,102
    
    
    
    51,970
    
    
    
    30,021
    
    
    
    914Interest cost
    
    
    4,275
    
    
    
    7,599
    
    
    
    8,713
    
    
    
    265Actuarial loss (gain)
    
    
    9,454
    
    
    
    20,751
    
    
    
    (2,024
    )
    
    
    (62
    )Acquisition of subsidiary
    
    
    
    
    
    
    65,825
    
    
    
    
    
    
    
    Effect of merger
    
    
    
    
    
    
    
    
    
    
    (67,581
    )
    
    
    (2,057
    )Benefit obligation at end of year
    
    
    167,979
    
    
    
    314,124
    
    
    
    283,253
    
    
    
    8,623Changes in plan assetsFair value of plan assets at beginning of year
    
    
    66,005
    
    
    
    135,893
    
    
    
    174,349
    
    
    
    5,307Actual return on plan assets
    
    
    1,003
    
    
    
    1,796
    
    
    
    1,971
    
    
    
    60Employer contribution
    
    
    17,813
    
    
    
    32,160
    
    
    
    29,892
    
    
    
    910Effect of merger
    
    
    
    
    
    
    4,500
    
    
    
    (49,223
    )
    
    
    (1,498
    )84,821
    
    
    
    174,349
    
    
    
    156,989
    
    
    
    4,779Funds status
    
    
    (83,158
    )
    
    
    (139,775
    )
    
    
    (126,264
    )
    
    
    (3,844
    )Unrecognized actuarial loss (gain)
    
    
    38,352
    
    
    
    48,918
    
    
    
    42,708
    
    
    
    1,301Net amount recognized (recognized as
accrued pension cost)
    
    
    (44,806
    )
    
    
    (90,857
    )
    
    
    (83,556
    )
    
    
    (2,543
    )Actuarial assumptionsDiscount rate
    
    
    3.25
    %
    
    
    3.25
    %
    
    
    2.75
    %
    
    
    2.75
    %Rate of compensation increase
    
    
    3.25
    %
    
    
    3.25
    %
    
    
    3.25
    %
    
    
    3.25
    %Expected return on plan assets
    
    
    3.25
    %
    
    
    3.25
    %
    
    
    2.75
    %
    
    
    2.75
    %
 The Company has no other post-retirement or post-employment benefit plans. The
company expects to contribute NT$30,783 thousand to its pension plans during 2006. The
plan assets are all invested in the Central Trust of China.
 F-145




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##### Table of Contents



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 312003
    
    2004
    
    2005NT$
    
    NT$
    
    NT$
    
    US$(In Thousands)Net cash inflow (outflow) from:Operating activities
    
    
    1,842,453
    
    
    
    5,764,200
    
    
    
    8,958,953
    
    
    
    272,723Investing activities
    
    
    (1,816,260
    )
    
    
    (6,169,297
    )
    
    
    (6,587,533
    )
    
    
    (200,534
    )Financing activities
    
    
    (1,435,656
    )
    
    
    2,067,591
    
    
    
    (2,035,152
    )
    
    
    (61,953
    )Effect of exchange rate changes
    
    
    
    
    
    
    
    
    
    
    (327
    )
    
    
    (10
    )Change in cash and cash equivalents
    
    
    (1,409,463
    )
    
    
    1,662,494
    
    
    
    335,941
    
    
    
    10,226Cash and cash equivalents at the
beginning of year
    
    
    2,565,125
    
    
    
    1,155,662
    
    
    
    2,818,156
    
    
    
    85,789Cash and cash equivalents at the end
of year
    
    
    1,155,662
    
    
    
    2,818,156
    
    
    
    3,154,097
    
    
    
    96,015
 f.
    
    Statements of comprehensive income (loss)
 Year Ended December 312003
    
    2004
    
    2005NT$
    
    NT$
    
    NT$
    
    US$(In Thousands)Net income based on U.S. GAAP
    
    
    870,081
    
    
    
    2,312,702
    
    
    
    1,631,655
    
    
    
    49,670Other comprehensive income (loss):Reversal of unrealized
loss (gain) on
available-for-sale
security
    
    
    (79,277
    )
    
    
    5,618
    
    
    
    805
    
    
    
    25Unrealized gain (loss) on
available-for-sale
security
    
    
    (5,618
    )
    
    
    (805
    )
    
    
    (1,673
    )
    
    
    (51
    )Translation adjustment
    
    
    115
    
    
    
    (7,564
    )
    
    
    6,380
    
    
    
    194Comprehensive income
    
    
    785,301
    
    
    
    2,309,951
    
    
    
    1,637,167
    
    
    
    49,838
 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.
 F-146




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##### Table of Contents



g.
    
    Statements of accumulated comprehensive income (loss)
 Unrealized
    
    
    
    
    
    AccumulatedGain (Loss) on
    
    
    
    
    
    OtherLong-term
    
    Translation
    
    ComprehensiveInvestments
    
    Adjustment
    
    Income (Loss)NT$
    
    NT$
    
    NT$(In Thousands)Balance, as of January 1, 2003
    
    
    79,277
    
    
    
    (734
    )
    
    
    78,543Addition in 2003
    
    
    (84,895
    )
    
    
    115
    
    
    
    (84,780
    )Balance, as of December 31, 2003
    
    
    (5,618
    )
    
    
    (619
    )
    
    
    (6,237
    )Addition in 2004
    
    
    4,813
    
    
    
    (7,564
    )
    
    
    (2,751
    )Balance, as of December 31, 2004
    
    
    (805
    )
    
    
    (8,183
    )
    
    
    (8,988
    )Addition in 2005
    
    
    (868
    )
    
    
    6,380
    
    
    
    5,512Balance, as of December 31, 2005
    
    
    (1,673
    )
    
    
    (1,803
    )
    
    
    (3,476
    )
 F-147