##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549




---



FORM 20-F

(Mark One)

|  |  |                                                                                                 
|- |  | ------------------------------------------------------------------------------------------------
|o |  | Registration statement pursuant to Section 12(b) or 12(g) of the Securities Exchange Act of 1934
|  |  | or                                                                                              
|x |  | Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934            
|  |  | For the fiscal year ended December 31, 2002.                                                    
|  |  | or                                                                                              
|o |  | Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934        
|  |  | For the transition period from ____________________ to ____________________                     

Commission file number 1-14700



(CHINESE SYMBOLS)


(Exact Name of Registrant as Specified in Its Charter)Siliconware Precision Industries Co., Ltd.
(Translation of Registrants Name Into English)Taiwan, Republic of China
(Jurisdiction of Incorporation or Organization)No. 123, Sec. 3, Da Fong Road, Tantzu, Taichung, Taiwan, ROC
(Address of Principal Executive Offices)
Securities registered or to be registered pursuant to Section 12(b) of the Act:

|                    |  |                                           |  | 
|------------------- |  | ----------------------------------------- |  | 
|Title of Each Class |  | Name of Each Exchange On Which Registered
|                    |  |                                          
|None               

Securities registered or to be registered pursuant to Section 12(g) of the Act:



Common Shares, par value NT$10 per share

(Title of Class)





(Title of Class)


Securities for which there is a reporting obligation pursuant to Section 15(d)
of the Act:



None

(Title of Class)


Indicate the number of outstanding shares of each of the Issuers classes
of capital or common stock as of the close of the period covered by the annual
report.



1,853,907,683 shares


Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

Yes x    No o

Indicate by check mark which financial statement item the registrant has elected to follow.

Item 17 o    Item 18 x

(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PAST FIVE YEARS.)

Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.

Yes o    No o





---

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                                                              
|                                           | Item 4. Information on the Company                                                   
|                                           | Item 5. Operating and Financial Review and Prospects                                 
|                                           | Item 6. Directors, Senior Management and Employees                                   
|                                           | Item 7. Major Shareholders and Related Party Transactions                            
|                                           | Item 8. Financial Information                                                        
|                                           | Item 9. The Offer and Listing                                                        
|                                           | Item 10.Additional Information                                                       
|                                           | Item 11. Quantitative and Qualitative Disclosures About Market Risk                  
|                                           | Item 12. Description of Securities Other than Equity Securities                      
|PART II                                   
|                                           | Item 13. Defaults, Dividend Arrearages and Delinquencies                             
|                                           | Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds
|                                           | Item 15. Controls and Procedures                                                     
|                                           | Item 16A. Audit Committee Financial Expert.                                          
|                                           | Item 16B. Code of Ethics                                                             
|PART III                                  
|                                           | Item 17. Financial Statements                                                        
|                                           | Item 18. Financial Statements                                                        
|                                           | Item 19. Exhibit Index                                                               
|SIGNATURES                                
|CERTIFICATIONS                            
|Ex-13.1 Certification of President and CEO
|Ex-13.2 Certification of Director and CFO 



---



##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD.
FORM 20-F ANNUAL REPORT
FISCAL YEAR ENDED DECEMBER 31, 2002
TABLE OF CONTENTS

|               |  |                                                                              |  |      |    | 
|-------------- |  | ---------------------------------------------------------------------------- |  | ---- | -- | 
|               |  |                                                                              |  | Page
|               |  |                                                                              |  |     
|PART I         |  |                                                                              |  |      | 3  | 
|               |  |                                                                              |  |     
|Item 1.        |  | Identity Of Directors, Senior Management and Advisers                        |  |      | 3  | 
|Item 2.        |  | Offer Statistics and Expected Timetable                                      |  |      | 3  | 
|Item 3.        |  | Key Information                                                              |  |      | 3  | 
|Item 4.        |  | Information on the Company                                                   |  |      | 18 | 
|Item 5.        |  | Operating and Financial Review and Prospects                                 |  |      | 35 | 
|Item 6.        |  | Directors, Senior Management and Employees                                   |  |      | 62 | 
|Item 7.        |  | Major Shareholders and Related Party Transactions                            |  |      | 65 | 
|Item 8.        |  | Financial Information                                                        |  |      | 68 | 
|Item 9.        |  | The Offer and Listing                                                        |  |      | 69 | 
|Item 10.       |  | Additional Information                                                       |  |      | 72 | 
|Item 11.       |  | Quantitative and Qualitative Disclosures About Market Risk                   |  |      | 87 | 
|Item 12.       |  | Description of Securities Other than Equity Securities                       |  |      | 88 | 
|              
|PART II        |  |                                                                              |  |      | 89 | 
|               |  |                                                                              |  |     
|Item 13.       |  | Defaults, Dividend Arrearages and Delinquencies                              |  |      | 89 | 
|Item 14.       |  | Material Modifications to the Rights of Security Holders and Use of Proceeds |  |      | 89 | 
|Item 15.       |  | Controls and Procedures                                                      |  |      | 89 | 
|Item 16A       |  | Audit Committee Financial Expert                                             |  |      | 89 | 
|Item 16B.      |  | Code of Ethics                                                               |  |      | 89 | 
|              
|PART III       |  |                                                                              |  |      | 90 | 
|               |  |                                                                              |  |     
|Item 17.       |  | Financial Statements                                                         |  |      | 90 | 
|Item 18.       |  | Financial Statements                                                         |  |      | 90 | 
|Item 19.       |  | Exhibit Index                                                                |  |      | 92 | 
|               |  |                                                                              |  |     
|SIGNATURES     |  |                                                                              |  |      | 94 | 
|CERTIFICATIONS |  |                                                                              |  |      | 95 | 





---



##### Table of Contents



Forward Looking Statements In This Annual Report May Not Be Accurate

Our disclosure and analysis in this annual report contain or incorporate
by reference some forward-looking statements. Our forward-looking statements
contain information regarding, among other things, our financial condition,
future expansion plans and business strategy. We have based these
forward-looking statements on our current expectations and projections about
future events. You can identify these statements by the fact that they do not
relate strictly to historical or current facts. Although we believe that these
expectations and projections are reasonable, such forward-looking statements
are inherently subject to risks, uncertainties and assumptions about us,
including, among other things:



| |  |  | 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 severe acute
respiratory syndrome which reduced 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 SEC;
and                                                                                                                                                       
|
| |  |  | those other risks identified in Item 3. Key Information-D.
Risk Factors of this annual report.                                                                                                                                                                                       

The words anticipate, believe, estimate, expect, intend, plan,
will, shall and similar expressions, as they relate to us, are intended to
identify a number of these forward-looking statements. We undertake no
obligation to update or revise any forward-looking statements whether as a
result of new information, future events or otherwise. In light of these risks,
uncertainties and assumptions, the forward-looking events discussed in this
annual report might not occur and our actual results could differ materially
from those anticipated in these forward-looking statements.

2



---



##### Table of Contents






PART I




Item 1. Identity Of Directors, Senior Management and Advisers

Not applicable.




Item 2. Offer Statistics and Expected Timetable

Not applicable.




Item 3. Key Information

A. Selected Financial Data

The selected statement of income data for the years ended December 31,
2000, 2001 and 2002 and the selected balance sheet data as of December 31, 2001
and 2002 have been derived from our audited financial statements included
elsewhere in this annual report. The selected statement of income data for the
years ended December 31, 1998 and 1999 and the selected balance sheet data as
of December 31, 1998, 1999 and 2000 have been derived from our audited
financial statements not included in this annual report. The financial
statements have been prepared and presented according to generally accepted
accounting principles in the Republic of China, or ROC GAAP, which differs in
many important respects from generally accepted accounting principles in the
United States, or US GAAP. For a discussion of the material differences, see
note 26 to our financial statements included elsewhere in this annual report.
Some of our statement of income and balance sheet data items have been
reconciled to US GAAP as shown below. The selected financial data shown below
should be read in conjunction with Item 5. Operating and Financial Review and
Prospects, and the financial statements and the notes to those statements
included elsewhere in this annual report.

3



---



##### Table of Contents



|                       |                                                                |  |                                                                               |        |      |  |      |        |      |  |      |         |        |  |  |         |   |  |  |         |     |  |  |        |    
|---------------------- | -------------------------------------------------------------- |  | ----------------------------------------------------------------------------- | ------ | ---- |  | ---- | ------ | ---- |  | ---- | ------- | ------ |  |  | ------- | - |  |  | ------- | --- |  |  | ------ | ---
|                       |                                                                |  | Year ended December 31,                                                      
|                       |                                                                |  |                                                                              
|                       |                                                                |  | 1998                                                                          |        | 1999 |  | 2000 |        | 2001 |  | 2002
|                       |                                                                |  |                                                                               |        |      |  |      |        |      |  |     
|                       |                                                                |  | NT$                                                                           |        | NT$  |  | NT$  |        | NT$  |  | NT$  |         | US$(1)
|                       |                                                                |  |                                                                               |        |      |  |      |        |      |  |      |         |       
|                       |                                                                |  | (in millions, except earnings (loss) or dividends per share and per ADS data)
|Income Statement Data: |                                                                |  |                                                                               |        |      |  |      |        |      |  |      |         |        |  |  |         |   |  |  |         |     |  |  |       
|ROC GAAP               |                                                                |  |                                                                               |        |      |  |      |        |      |  |      |         |        |  |  |         |   |  |  |         |     |  |  |       
|                       | Net operating revenues                                         |  |                                                                               | 9,193  |      |  |      | 11,916 |      |  |      | 18,846  |        |  |  | 16,530  |   |  |  | 22,299  |     |  |  | 642.6  |    
|                       | Cost of goods sold                                             |  |                                                                               | (7,235 | )    |  |      | (9,611 | )    |  |      | (14,907 | )      |  |  | (15,109 | ) |  |  | (20,210 | )   |  |  | (582.4 | )  
|                       |                                                                |  |                                                                               |        |      |  |      |        |      |  |      |         |        |  |  |         |   |  |  |         |     |  |  |       
|                       | Gross profit                                                   |  |                                                                               | 1,958  |      |  |      | 2,305  |      |  |      | 3,939   |        |  |  | 1,421   |   |  |  | 2,089   |     |  |  | 60.2   |    
|                       |                                                                |  |                                                                               |        |      |  |      |        |      |  |      |         |        |  |  |         |   |  |  |         |     |  |  |       
|                       | Operating expenses                                             |  |                                                                               | (591   | )    |  |      | (737   | )    |  |      | (999    | )      |  |  | (1,428  | ) |  |  | (1,542  | )   |  |  | (44.4  | )  
|                       |                                                                |  |                                                                               |        |      |  |      |        |      |  |      |         |        |  |  |         |   |  |  |         |     |  |  |       
|                       | Operating income                                               |  |                                                                               | 1,367  |      |  |      | 1,568  |      |  |      | 2,940   |        |  |  | (7      | ) |  |  | 547     |     |  |  | 15.8   |    
|                       | Equity investment income (loss)                                |  |                                                                               | 405    |      |  |      | (167   | )    |  |      | 192     |        |  |  | (1,199  | ) |  |  | 61      | (2) |  |  | 1.8    | (2)
|                       | Other non-operating income                                     |  |                                                                               | 456    |      |  |      | 674    |      |  |      | 662     |        |  |  | 608     |   |  |  | 469     | (2) |  |  | 13.5   | (2)
|                       | Other non-operating expenses                                   |  |                                                                               | (443   | )    |  |      | (439   | )    |  |      | (599    | )      |  |  | (884    | ) |  |  | (797    | )   |  |  | (23.0  | )  
|                       |                                                                |  |                                                                               |        |      |  |      |        |      |  |      |         |        |  |  |         |   |  |  |         |     |  |  |       
|                       | Income (loss) before income tax and minority
interest          |  |                                                                               | 1,785  |      |  |      | 1,636  |      |  |      | 3,195   |        |  |  | (1,482  | ) |  |  | 280     | (2) |  |  | 8.1    | (2)
|                       | Income tax (expense)/benefit                                   |  |                                                                               | 19     |      |  |      | (129   | )    |  |      | 26      |        |  |  | 283     |   |  |  | 145     |     |  |  | 4.2    |    
|                       |                                                                |  |                                                                               |        |      |  |      |        |      |  |      |         |        |  |  |         |   |  |  |         |     |  |  |       
|                       | Minority Interest                                              |  |                                                                               |       |      |  |      |       |      |  |      |        |        |  |  | 16      |   |  |  |        |     |  |  |       |    
|                       | Net income (loss)                                              |  |                                                                               | 1,804  |      |  |      | 1,507  |      |  |      | 3,221   |        |  |  | (1,183  | ) |  |  | 425     | (2) |  |  | 12.3   | (2)
|                       |                                                                |  |                                                                               |        |      |  |      |        |      |  |      |         |        |  |  |         |   |  |  |         |     |  |  |       
|                       | Basic and diluted earnings (loss) per share(3)                 |  |                                                                               | 1.20   |      |  |      | 1.00   |      |  |      | 2.01    |        |  |  | (0.64   | ) |  |  | 0.23    | (2) |  |  | 0.01   | (2)
|                       |                                                                |  |                                                                               |        |      |  |      |        |      |  |      |         |        |  |  |         |   |  |  |         |     |  |  |       
|                       | Shares used in per share calculation
(average, as adjusted)(3) |  |                                                                               | 1,505  |      |  |      | 1,503  |      |  |      | 1,603   |        |  |  | 1,847   |   |  |  | 1,826   |     |  |  | 1,826  |    
|                       | Basic and diluted earnings (loss) per ADS(2)                   |  |                                                                               | 6.00   |      |  |      | 5.01   |      |  |      | 10.05   |        |  |  | (3.20   | ) |  |  | 1.16    | (2) |  |  | 0.03   | (2)
|                       |                                                                |  |                                                                               |        |      |  |      |        |      |  |      |         |        |  |  |         |   |  |  |         |     |  |  |       
|                       | Dividends per share(4)                                         |  |                                                                               | 3.60   |      |  |      | 2.30   |      |  |      | 1.40    |        |  |  | 1.45    |   |  |  |        |     |  |  |       |    
|                       | ADSs used in per ADS calculation (average, as
adjusted)(3)     |  |                                                                               | 301    |      |  |      | 301    |      |  |      | 321     |        |  |  | 369     |   |  |  | 365     |     |  |  | 365    |    
|US GAAP                |                                                                |  |                                                                               |        |      |  |      |        |      |  |      |         |        |  |  |         |   |  |  |         |     |  |  |       
|                       | Net income (loss)                                              |  |                                                                               |        |      |  |      | 754    |      |  |      | 1,982   |        |  |  | (1,790  | ) |  |  | (223    | )   |  |  | (6.4   | )  
|                       |                                                                |  |                                                                               |        |      |  |      |        |      |  |      |         |        |  |  |         |   |  |  |         |     |  |  |       
|                       | Basic and diluted earnings (loss) per share                    |  |                                                                               |        |      |  |      | 0.52   |      |  |      | 1.26    |        |  |  | (0.98   | ) |  |  | (0.12   | )   |  |  | (0.0   | )  
|                       |                                                                |  |                                                                               |        |      |  |      |        |      |  |      |         |        |  |  |         |   |  |  |         |     |  |  |       
|                       | Shares used in per share calculation
(average, as adjusted)(5) |  |                                                                               |        |      |  |      | 1,458  |      |  |      | 1,572   |        |  |  | 1,832   |   |  |  | 1,826   |     |  |  | 1,826  |    
|                       | Basic and diluted earnings (loss) per ADS                      |  |                                                                               |        |      |  |      | 2.59   |      |  |      | 6.30    |        |  |  | (4.89   | ) |  |  | (0.61   | )   |  |  | (0.02  | )  
|                       |                                                                |  |                                                                               |        |      |  |      |        |      |  |      |         |        |  |  |         |   |  |  |         |     |  |  |       
|                       | ADSs used in per ADS calculation (average, as
adjusted)(5)     |  |                                                                               |        |      |  |      | 292    |      |  |      | 314     |        |  |  | 366     |   |  |  | 365     |     |  |  | 365    |    

|                              |                                                       |  |                                  |        |      |  |       |        |      |  |       |        |        |  |       |        |  |  |       |        |  |  |       |         | 
|----------------------------- | ----------------------------------------------------- |  | -------------------------------- | ------ | ---- |  | ----- | ------ | ---- |  | ----- | ------ | ------ |  | ----- | ------ |  |  | ----- | ------ |  |  | ----- | ------- | 
|                              |                                                       |  | Year ended or as of December 31,
|                              |                                                       |  |                                 
|                              |                                                       |  | 1998                             |        | 1999 |  | 2000  |        | 2001 |  | 2002 
|                              |                                                       |  |                                  |        |      |  |       |        |      |  |      
|                              |                                                       |  | NT$                              |        | NT$  |  | NT$   |        | NT$  |  | NT$   |        | US$(1)
|                              |                                                       |  |                                  |        |      |  |       |        |      |  |       |        |       
|                              |                                                       |  | (in millions)                   
|Other Data:                   |                                                       |  |                                  |        |      |  |       |        |      |  |       |        |        |  |       |        |  |  |       |        |  |  |       |        
|ROC GAAP                      |                                                       |  |                                  |        |      |  |       |        |      |  |       |        |        |  |       |        |  |  |       |        |  |  |       |        
|Capital expenditures          |                                                       |  | 3,213                            |        |      |  | 3,478 |        |      |  | 6,535 |        |        |  | 5,474 |        |  |  | 6,445 |        |  |  | 185.7 |        
|Depreciation and amortization |                                                       |  | 1,215                            |        |      |  | 1,424 |        |      |  | 2,257 |        |        |  | 4,323 |        |  |  | 4,902 |        |  |  | 141.3 |        
|Balance Sheet Date:           |                                                       |  |                                  |        |      |  |       |        |      |  |       |        |        |  |       |        |  |  |       |        |  |  |       |        
|ROC GAAP                      |                                                       |  |                                  |        |      |  |       |        |      |  |       |        |        |  |       |        |  |  |       |        |  |  |       |        
|                              | Cash and cash equivalents                             |  |                                  | 3,302  |      |  |       | 1,601  |      |  |       | 6,566  |        |  |       | 6,310  |  |  |       | 5,970  |  |  |       | 172.0   | 
|                              | Working capital                                       |  |                                  | 4,990  |      |  |       | 2,480  |      |  |       | 8,361  |        |  |       | 6,176  |  |  |       | 6,856  |  |  |       | 197.6   | 
|                              | Total assets                                          |  |                                  | 19,087 |      |  |       | 23,546 |      |  |       | 41,740 |        |  |       | 42,566 |  |  |       | 46,236 |  |  |       | 1,332.4 | 
|                              | Short-term debt and current portion of
long-term debt |  |                                  | 266    |      |  |       | 959    |      |  |       | 1,272  |        |  |       | 2,667  |  |  |       | 2,968  |  |  |       | 85.5    | 
|                              | Long-term debt                                        |  |                                  | 5,165  |      |  |       | 5,207  |      |  |       | 9,291  |        |  |       | 10,640 |  |  |       | 14,143 |  |  |       | 407.6   | 
|                              | Total stockholders equity                            |  |                                  | 12,576 |      |  |       | 14,022 |      |  |       | 27,856 |        |  |       | 26,046 |  |  |       | 26,179 |  |  |       | 754.4   | 
|US GAAP                       |                                                       |  |                                  |        |      |  |       |        |      |  |       |        |        |  |       |        |  |  |       |        |  |  |       |        
|                              | Total assets                                          |  |                                  |        |      |  |       | 23,509 |      |  |       | 47,179 |        |  |       | 47,852 |  |  |       | 50,333 |  |  |       | 1,450.5 | 
|                              | Total liabilities                                     |  |                                  |        |      |  |       | 9,706  |      |  |       | 14,474 |        |  |       | 16,517 |  |  |       | 20,071 |  |  |       | 578.4   | 
|                              | Total stockholders equity                            |  |                                  |        |      |  |       | 13,803 |      |  |       | 32,705 |        |  |       | 31,335 |  |  |       | 30,262 |  |  |       | 872.1   | 



---

|(1) |  | Amounts translated for convenience at the Federal Reserve Bank of New
York noon buying exchange rate of NT$34.70 to US$1.00 on December 31,
2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Our operating results in 2002 did not include the financial results of
ChipMOS, which we owned 28.73% as of December 31, 2002. In 2000, our
investment income from ChipMOS was NT$401.9 million, which constituted
12.5% of our net income, respectively. In 2001, however, we recorded an
investment loss of NT$436.3 million for our investment in ChipMOS, which
constituted 36.9% of our net loss in 2001. Because ChipMOS did not provide
its financial statements to us in time to enable us to recognize its
financial results for the current period, effective from the fiscal years
subsequent to the year ended December 31, 2001, the Securities and Futures
Commission of the ROC allows us to delay the recognition of the income
(loss) of ChipMOS in our financial results until a subsequent year. Thus,
we recorded no investment

4



---



##### Table of Contents



|    |  | income (loss) of ChipMOS in our financial results under ROC GAAP for 2002.
The unaudit financial results of ChipMOS in 2002 were available to us in the
first quarter of 2003, and we recorded an investment loss amounting to
NT$365.7 million (US$10.5 million). This investment loss was included in
our financial results for the three months ended March 31, 2003. If this
investment loss had been included in our results for 2002, our non-operating
income (loss), income (loss) before income tax and net income for 2002 would
have been reduced by the same amount and our basis and diluted earnings
(loss) per share in 2002 would have been reduced by NT$0.2 (US$0.01). Under
US GAAP, however, there is no provision that allow us to delay recognition
of ChipMOSs income or loss. In 2002, our investment loss from ChipMOS was
NT$342.2 million (US$9.9 million) of our net loss under US GAAP. If
ChipMOSs operating results or financial condition do not improve or further
deteriorate, our future non-operating results would be seriously harmed.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(3) |  | Retroactively adjusted for all subsequent stock dividends and employee
share bonuses.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   
|(4) |  | Adjusted to reflect 143,924,000 shares, 134,720,138 shares, 123,980,637
shares and 235,421,212 shares distributed as stock dividends in 1998,
1999, 2000 and 2001, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   
|(5) |  | Retroactively adjusted for all subsequent stock dividends only.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

Currency Translations And Exchange Rates

In portions of this annual report, we have translated New Taiwan dollar
amounts into US dollars for the convenience of readers. The rate we used for
the translations was NT$34.70 = US$1.00, which was the noon buying rate
announced by the Federal Reserve Bank of New York on December 31, 2002. The
translation does not mean that New Taiwan dollars could actually be converted
into US dollars at that rate. The following table shows the noon buying rates
for New Taiwan dollars expressed in New Taiwan dollar per US$1.00.

|                        |          |                      |         |        |  |     |        |               |  |  |        |        |  |  |        |        | 
|----------------------- | -------- | -------------------- | ------- | ------ |  | --- | ------ | ------------- |  |  | ------ | ------ |  |  | ------ | ------ | 
|                        |          |                      | Average |        |  |     |        |               |  |  |        |        |  |  |       
|Year Ended December 31, |          | (of Month-End Rates) |         | High   |  | Low |        | At Period-End
|                        |          |                      |         |        |  |     |        |              
|1997                    |          |                      | 29.056  |        |  |     | 33.250 |               |  |  | 27.340 |        |  |  | 32.800 |       
|1998                    |          |                      | 33.498  |        |  |     | 35.000 |               |  |  | 32.050 |        |  |  | 32.270 |       
|1999                    |          |                      | 32.281  |        |  |     | 33.400 |               |  |  | 31.390 |        |  |  | 31.390 |       
|2000                    |          |                      | 31.366  |        |  |     | 33.250 |               |  |  | 30.350 |        |  |  | 33.170 |       
|2001                    |          |                      | 33.911  |        |  |     | 35.130 |               |  |  | 32.230 |        |  |  | 35.000 |       
|2002                    |          |                      | 34.526  |        |  |     | 35.160 |               |  |  | 32.850 |        |  |  | 34.700 |       
|2003 (through May 31)   |          |                      | 34.710  |        |  |     | 34.980 |               |  |  | 34.400 |        |  |  | 34.710 |       
|                        | January  |                      |         | 34.571 |  |     |        | 34.760        |  |  |        | 34.400 |  |  |        | 34.610 | 
|                        | February |                      |         | 34.734 |  |     |        | 34.819        |  |  |        | 34.610 |  |  |        | 34.780 | 
|                        | March    |                      |         | 34.721 |  |     |        | 34.800        |  |  |        | 34.580 |  |  |        | 34.750 | 
|                        | April    |                      |         | 34.824 |  |     |        | 34.980        |  |  |        | 34.790 |  |  |        | 34.850 | 
|                        | May      |                      |         | 34.697 |  |     |        | 34.850        |  |  |        | 34.600 |  |  |        | 34.710 | 

B.     Capitalization and Indebtedness

Not applicable.

C.     Reasons for the Offer and Use of Proceeds

Not applicable.

D.     Risk Factors

Our business and operations are subject to various risks, many of which
are beyond our control. If any of the risks described below actually occurs,
our business, financial condition or results of operations could be seriously
harmed.

5



---



##### Table of Contents



Risks Relating to Our Financial Condition and Business

Our operating results fluctuate significantly, which may affect the value of your investments

Our historical net operating revenues and results of operations have
varied, at times significantly, from quarter to quarter. Our future net
operating revenues, gross profit and operating income may vary significantly
due to a combination of factors. These factors include:



| |  |  | 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 allow our
competitors to seize the opportunities in developing new markets;            
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | 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; and                                                                                           
|
| |  |  | 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
sufficient enough to maintain the level of our capacity utilization.

Moreover, the growing demand for substrate packaging which uses higher
cost raw materials has caused the costs of production for semiconductor
packaging to rise significantly. If our revenues do not grow and we are unable
to reduce our expenses, our profitability will suffer.

The cyclical nature of the semiconductor industry makes us particularly
vulnerable to economic downturns and changes in the semiconductor industry

The semiconductor industry has historically been highly cyclical and
economic downturns in the past have caused reduced product demand, rapid
erosion of average selling prices, low capacity utilization and production
overcapacity in our industry. The markets for semiconductors are also
characterized by rapid technological change, evolving industry standards and
periods of heightened competition. If demand for semiconductor capacity does
not keep pace with the growth of supply, or further declines, our business
would be subject to more intense competition and our results of operations may
suffer because of the resulting downward pricing pressure and capacity
underutilization. The semiconductor industry has experienced a downturn since
late 2000. For the past several years, we also experienced intense competition
in the semiconductor industry worldwide and oversupply of packaging capacity in
the local market. This increased competition coupled with a general economic
downturn in the Asian region caused average selling prices of many of our
semiconductor packages to decrease significantly. Downward pressure on average
selling prices led to decreases in our gross margins which seriously harmed our
operating results. Future downturns in the semiconductor industry may be
severe. In the event of future downturns, our average selling prices may
decline without a corresponding decrease in our high fixed costs. This could
lead to a decline in our gross margins, which would seriously harm our
business.

Any recovery in the semiconductor industry from the current downturn could
be delayed by, among other things, the military actions by the United States
and its allies against Iraq, the

6



---



##### Table of Contents



outbreak of severe acute respiratory syndrome, as more fully described
below, or by general economic uncertainties created by the possibility of
future terrorist attacks, retaliatory actions, hostilities and outbreaks of
other contagious diseases. While we cannot predict results for 2003 and
subsequent periods with confidence at this time, our recent results may reflect
a continuation or worsening of the factors that adversely affected our 2002
results, as well as other factors.

We are highly dependent on the personal computer industry and the recent
downturn in the personal computer industry has harmed our operating results

A significant percentage of our net operating revenue is derived from
customers who use our manufacturing services to make semiconductors for
personal computers. In 2000, 2001 and 2002, more than a half of our net
operating revenues were attributable to customers whose products are primarily
used in personal computers or personal computer peripherals. Our results of
operations were negatively affected in 2001 due to reduced demand for personal
computer products as a result of the global economic downturn since late 2000.
However, our results of operations improved in 2002 compared to 2001 due
partially to increased demand for personal computers as the market conditions
in 2002 have generally improved compared to 2001. Any future decrease in the
demand for personal computers may decrease the demand for our services and
would likely seriously harm our operating results. In addition, the declining
average selling price of personal computers has placed significant pressure on
the prices of the components that are used in these personal computers. We
believe the average selling prices of personal computers will continue to
decrease, and the resulting pricing pressure on the semiconductor components we
package and test may reduce our net operating revenues and reduce our gross
profit margin significantly.

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

Our customers generally do not place purchase orders far in advance and
our contracts with major domestic customers do not require minimum purchase of
our products or services. In addition, our customers purchase orders have
varied significantly from period to period because demand for their products is
often volatile. As a result, we do not typically operate with any significant
backlog. The lack of a significant backlog makes it difficult for us to
forecast our net operating revenues in future periods and causes our operating
results to fluctuate from period to period. Moreover, our expense levels are
based in part on our expectations of future revenue and we may be unable to
adjust costs in a timely manner to compensate for revenue shortfalls. For
example, in 1999 and early 2000, we incurred significant costs in expectation
of strong demand in the semiconductor market, but this demand did not fully
materialize because of the current market downturn since late 2000. We expect
that in the future our net operating revenues in any quarter will continue to
be substantially dependent upon purchase orders received in that quarter. We
cannot assure you that any of our customers will continue to place orders with
us in the future at the same levels as in prior periods. We also cannot assure
you that our customers orders will be consistent with our expectations when we
made or will make the necessary investments in raw materials, labor and
equipment.

7



---



##### Table of Contents



Failure of ChipMOS to improve operating results would reduce our participation
in the memory chip package market and harm our financial performance

As of December 31, 2002, we owned a 28.73% equity interest in ChipMOS
Technologies Inc., or ChipMOS. In addition, a substantial part of our
participation in the memory chip packaging market is through our investment in
ChipMOS. If ChipMOS requires guarantees of its indebtedness to obtain
financing, we and Mosel Vitelic, the other major investor in ChipMOS, are
required under the joint venture agreement establishing ChipMOS to provide
these guarantees in the ratio of 30% and 70%, respectively. In 2000, our
investment income from ChipMOS was NT$401.9 million, which constituted 12.5% of
our net income, respectively. In 2001, however, we recorded an investment loss
of NT$436.3 million for our investment in ChipMOS, which constituted 36.9% of
our net loss in 2001. Because ChipMOS did not provide its financial statements
to us in time to enable us to recognize its financial results for the current
period, effective from the fiscal years subsequent to the year ended December
31, 2001, the Securities and Futures Commission of the ROC allows us to delay
the recognition of the income (loss) of ChipMOS in our financial results until
a subsequent year. Thus, we recorded no investment income (loss) of ChipMOS in
our financial results under ROC GAAP for 2002. The unaudit financial results of
ChipMOS in 2002 were available to us in the first quarter of 2003, and we
recorded an investment loss amounting to NT$365.7 million. This investment
loss was included in our financial results for the three months ended March 31,
2003. If this investment loss had been included in our results for 2002, our
net income for 2002 would have been decreased by the same amount. Under US
GAAP, however, there is no provision that allow us to delay recognition of
ChipMOSs income or loss. In 2002, our investment loss from ChipMOS was
NT$342.2 million (US$9.9 million) under US GAAP. If ChipMOSs operating results
or financial condition do not improve or further deteriorate, our future
non-operating results would be seriously harmed. If ChipMOSs operating
results or financial condition does not improve or further deteriorates, our
non-operating results and net income would be seriously harmed. See Item 5.
Operating and Financial Review and Prospects  A. Operating Results  Strategic
Equity Interest in ChipMOS.

Potential conflicts of interest with ChipMOS may cause us to lose opportunities
to expand and improve our operations

As of December 31, 2002, we owned a 28.73% equity interest in ChipMOS and
two directors, including one of our directors and one of our supervisors,
represent us on ChipMOSs seven-member board of directors. Since ChipMOS is a
provider of semiconductor packaging and test services, our substantial interest
in ChipMOS may lead to conflicts of interest in the expansion and development
of the semiconductor packaging and test markets. In addition, because one of
our directors is also a director of ChipMOS, conflicts of interest between his
duties to ChipMOS and us may arise. We cannot assure you that when conflicts of
interest arise, our director on ChipMOSs board will act completely in our
interest or that conflicts of interest will be resolved in our favor. These
conflicts may result in lost corporate opportunities or actions that may
prevent us from taking advantage of opportunities to expand and improve our
operations.

8



---



##### Table of Contents



If we are unable to maintain a steady return to our former capacity utilization
rates, our profitability would be adversely affected

For 2001, our capacity utilization rates were negatively affected by a
general global economic downturn and decreased market demand in the
semiconductor industry in general. As a result, our profitability suffered
severely in 2001. For 2002, our capacity utilization rates increased slightly
due to improved demand for our products and services as the market conditions
in 2002 have generally improved compared to 2001. We cannot assure you that we
will be able to achieve a high utilization rate in the future. Nor can we
assure you that declines in the semiconductor industry or other factors will
not continue to harm our capacity utilization or our profitability in the
future.

Given the high fixed costs of our business, high capacity utilization
allows us to maintain higher gross margins because it allows us to allocate
fixed costs over a greater number of units we package and test. Increases or
decreases in capacity utilization rates can have a significant effect on our
business. Accordingly, our ability to enhance our gross margins will depend, in
part, on our ability to continue to increase our capacity utilization rates.

In addition, in order to continue to increase our capacity utilization we must:



| |  |  | ensure that our packaging and test technologies meet our customers needs;                                 
| | - |  | -----------------------------------------------------------------------------------------------------------
|
| |  |  | install advanced equipment in anticipation of new business;                                                
|
| |  |  | prevent fire and mitigate the effects of natural disasters; and                                            
|
| |  |  | prevent disruption of operations due to expansion, introduction of new packages or relocation of equipment.

If demand for our services does not meet our expectations, our capacity
utilization would decrease and our gross margins would suffer.

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

We are dependent on a small group of customers for a substantial portion
of our business. In 2000, 2001 and 2002, 57.4%, 61.6% and 66.3% of our net
operating revenues, respectively, were derived from sales to our top ten
customers. In 2002, nVIDIA Corp. and MediaTek Incorporation accounted for 16.5%
and 13.0%, respectively, of our net operating revenues. We expect that we will
continue to depend on a relatively limited number of customers for a
significant portion of our net operating revenues because of the concentration
of demand in the semiconductor industry for our products and services. Our
ability to maintain close and satisfactory relationships with our customers is
important to the ongoing success and profitability of our business. Few of our
customers are presently obligated to purchase packaging or test services or to
provide us with binding forecasts of product purchases for any period. If any
of our significant customers reduces, delays or cancels its orders, our
business would be seriously harmed because each one of these customers accounts
for a significant part of our net operating revenues.

9



---



##### Table of Contents



If capital resources required for our future expansion plans are not available,
we may be unable to successfully implement our business strategy

Although the market conditions since late 2002 have been negatively
affected by a current market downturn, we continued to engage in substantial
equipment and facilities expansion in 2002 to continue to upgrade our
technology and equipment. We, however, expect to spend a lesser amount in
equipment purchases and facilities expansion in 2003, while continuing to aim
to improve the efficiency of our technology and equipment utilization. Our
business growth in the future may continue to require substantial capital
expenditures to fund such equipment and facilities expansions. The growing
demand for substrate products has and will continue to require significant
capital expenditures on substrate packaging technology and equipment. In making
these planned capital expenditures, we may need to obtain additional capital.
However, this additional capital may not be available. In addition, we may be
unable to accurately estimate the timing and amount of our capital
requirements, which depend on a number of factors including demand for our
services and availability of equipment and whether or when the market will
recover. Consequently, we cannot assure you that additional financing will be
available or available on satisfactory terms to us when we require additional
financing. If we are unable to obtain the necessary capital resources or
financing, we will not be able to achieve our future business growth.

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 business

The independent semiconductor packaging and test industry is very
competitive. We face substantial competition from established packaging and
test companies, including Advanced Semiconductor Engineering, Inc. (Taiwan),
ASE Test Limited (Taiwan and Malaysia), Amkor Technology Inc. (USA), ASAT, Ltd.
(Hong Kong), ST Assembly Test Services Ltd. (Singapore), Hana Microelectronics
Public Co. Ltd. (Thailand), Orient Semiconductor Electronics, Limited (Taiwan),
Astra International (Indonesia), Carsem Bhd. (Malaysia), ChipPAC Incorporated
(Korea) and Shinko Electric Industries Co., Ltd. (Japan). We may face
additional competition from new competitors in our industry in emerging
countries, such as the Peoples Republic of China, or the PRC, where demand is
expected to grow for our products and services. To a lesser extent, we also
compete with the internal packaging and test capabilities of our customers who
have in-house packaging and test capabilities. Some of our competitors have
already invested substantial resources in substrate technology and have been
able to market substrate packaging products for some time. Some of our
competitors have greater financial and other resources than we have, including
established relationships with many large semiconductor companies which are our
current or potential customers. These relationships and lengthy qualification
periods required by most of our potential customers may prevent us from
securing new customers.

If the outsourcing trend for packaging and test services does not continue, we
could lose a significant number of our current customers and we may be unable
to implement our business strategy plan in the future

We depend on outsourcing of packaging and test services by integrated
device manufacturers and fabless semiconductor companies. In recent years,
semiconductor companies have increasingly subcontracted parts of the
semiconductor production process, including packaging and test, to independent
companies to reduce costs and shorten production cycles. However, we cannot
assure you that the outsourcing trend will continue. If integrated device

10



---



##### Table of Contents



manufacturers become dissatisfied with the services of independent
semiconductor packaging and test companies, they may return to utilizing
in-house packaging and test capabilities. A reversal of, or slowdown in, the
outsourcing trend would seriously harm our business and make it difficult for
us to implement our growth 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 business

We depend on Taiwans independent wafer foundries to source our sales
orders. In recent years, more than a half of our net operating revenues were
derived from packaging and test semiconductor wafers manufactured at Taiwans
wafer foundries. If the demand for foundry services offered by Taiwans wafer
foundries decreases for any reason, including shifts in demand for these
services to wafer foundries in other countries, an important source of our
sales would be lost and our profitability would suffer.

If we are unable to obtain raw materials from our suppliers, our production
schedules would be delayed and we may lose customers

We must obtain sufficient quantities of raw materials at acceptable prices
in a timely manner. We source most of our raw materials, including critical
materials like leadframes and substrates, from a limited group of suppliers. We
purchase all of our materials on a purchase order basis and have no long-term
contracts with any of our suppliers. From time to time, suppliers have extended
lead times or limited the supply of required materials to us because of supply
capacity constraints during market upturns for the semiconductor industry.
Consequently, we have experienced from time to time difficulty in obtaining
acceptable quantities of raw materials on a timely basis. In addition, from
time to time, we may reject materials that do not meet our specifications,
resulting in declines in output or yield. We cannot assure you that we will be
able to obtain in the future sufficient quantities of raw materials and other
supplies of an acceptable quality. Our inability to obtain raw materials in a
timely and cost effective manner would cause us to delay our production and
delivery schedules, which may result in the loss of our customers and revenues.

If we are unable to obtain equipment from our suppliers, we may be forced to
delay any future expansion plans

We may need to purchase new packaging and test equipment if we decide to
expand our operations to anticipate a market recovery. From time to time,
increased demand for new equipment may cause lead times to extend beyond those
normally required by equipment vendors. For example, in the past, increased
demand for equipment caused some equipment suppliers to only partially satisfy
our equipment orders in the normal lead time frame during market upturns for
the semiconductor industry. The unavailability of equipment or failures to
deliver equipment could delay implementation of our future expansion plans and
impair our ability to meet customer orders. If we are unable to implement our
future expansion plans or meet customer orders, we could lose potential and
existing customers. Generally, we do not enter into binding equipment purchase
agreements and we acquire our equipment on a purchase order basis, which
exposes us to substantial risks. For example, sudden changes in foreign
currency exchange rates, particularly the US dollar and Japanese yen, could
result in increased prices for equipment purchased by us, which could seriously
harm our results of operations.

11



---



##### Table of Contents



If we are unable to manage our growth effectively, our expansion plans could be
jeopardized

We have in the recent past experienced growth in the scope and complexity
of our operations and in the number of our employees. This growth has strained
our managerial, financial, manufacturing and other resources. In order to
manage our future growth, we must continue to implement additional operating
and financial controls and hire and train additional personnel. We cannot
assure you that we will be able to do so in the future, and our failure to do
so could jeopardize our future expansion plans and seriously harm our
operations.

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

Many of our customers and foreign competitors have expanded their
operations to the Peoples Republic of China, or the PRC. In order to remain
competitive and to position our company to gain market share, we are exploring
potential opportunities for expansion to or investments in the PRC. In
December, 2001, we obtained foreign investment approval from the Investment
Commission of the ROC Ministry of Economic Affairs to invest up to US$20
million in a transistor manufacturing project in Suzhou, PRC. As of December
31, 2002, we had established a subsidiary named Siliconware Technology (Suzhou)
Limited, and had invested a total of US$6.5 million in the construction of our
plant in Suzhou, PRC. With this investment in the PRC, our financial condition,
results of operations and future prospects are subject, to a significant
degree, to the political and economic situation, regulatory control and general
legal developments in the PRC and other foreign investment risks. In addition,
these expansions or investments could be adversely affected if relations
between the PRC and the ROC deteriorate.

We depend on key management and the loss of any key management personnel may
disrupt our business

Our success depends upon the continued service of key senior management.
Most members of our senior management have served us for over 10 years and made
substantial contributions to our growth. We do not have employment contracts
with many of our senior management and none of our senior management is bound
by any non-competition agreement. If we lose the services of key senior
management it would be very difficult to find and integrate replacement
personnel, which would seriously harm our business.

We depend on our technical personnel and the inability to attract and retain
them would jeopardize our operations and future expansion plans

Our business depends on technology and, accordingly, our success depends
on our ability to attract, retain and motivate highly skilled employees,
particularly engineering and technical personnel. Without sufficient numbers of
skilled employees, our operations would suffer resulting in deteriorating
production standards and decreasing capacity utilization. Competition for
qualified engineering and technical employees in Taiwan is intense and
replacement of qualified employees is difficult. If we are unable to attract,
retain and motivate our technical personnel, our operations would be
jeopardized and our operating efficiency would deteriorate.

12



---



##### Table of Contents



Our failure to comply with environmental regulations or to defend against
environmental claims could expose us to serious liabilities

The semiconductor packaging and test processes require the use of
chemicals and gases which are regulated by the government. For example, liquid
waste is produced when silicon wafers are diced into chips using diamond saws
and cooled with running water. Liquid waste is also produced when leadframes
are plated onto wafer chips and cleansed with water. Moreover, excess material
on leads and moldings are removed from packaged semiconductors in the trim and
form process. Environmental claims or the failure to comply with any
environmental regulations could result in damages or fines against us or
suspension of production. We may be required by new regulations to acquire
costly equipment or to incur other significant expenses. If we fail to control
the use of hazardous substances, we could incur future liabilities, including
clean up costs.

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 business

Our operations and those of our customers and suppliers are particularly
vulnerable to fires, earthquakes, typhoons, droughts, floods, power losses, and
similar events. The occurrence of any of these events could interrupt services.
For instance, our operations were interrupted for approximately ten days in
September 1999 because of an earthquake. Our property and business interruption
insurance did not cover all damages incurred during the interruption.

Most of our customers and suppliers in Taiwan are located in the Hsin-Chu
Science-Based Industrial Park, and they are dependent on the infrastructure
supporting the Hsin-Chu Science Park. Occasionally, brief shortages or
stoppages in power to the Hsin-Chu Science-Based Industrial Park have affected
these customers and suppliers. In the first half of 2001, the operations of our
customers and suppliers located in Taiwan, particularly in the Hsin-Chu
Science-Based Industrial Park, were negatively affected by droughts in that
area. As a result, our operations were also affected. Any natural disaster or
infrastructure failure affecting the Hsin-Chu Science-Based Industrial Park in
the future could seriously harm our business and operations.

Disruptions in the international trading environment may seriously decrease our
international sales

A substantial portion of our net operating revenues are derived from sales
to customers located outside of Taiwan. In 2000, 2001 and 2002, sales to our
overseas customers accounted for 49.3%, 50.2% and 54.6%, respectively, of our
net operating revenues. We expect sales to customers outside of Taiwan to
continue to represent a significant portion of our net operating revenues. As a
result, our business will continue to be vulnerable to disruptions in the
international trading environment, including adverse changes in foreign
government regulations, political unrest and international economic downturns.

These disruptions in the international trading environment affect the
demand for our products and change the terms upon which we sell our products
overseas, which could seriously decrease our international sales.

13



---



##### Table of Contents



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

Our financial statements are prepared under ROC GAAP which differs in many
respects from US GAAP. For example, ROC GAAP does not require the recognition
of the fair market value of shares distributed as bonuses to employees when
calculating net income. Largely as a result of the differences in accounting
for employee bonuses and equity investments, our net income (loss) in 2000,
2001 and 2002 under US GAAP was NT$1,982.4 million, NT$(1,790.5) million and
NT$(223.0) million (US$(6.4) million), respectively, as compared to net income
(loss) under ROC GAAP of NT$3,221.4 million, NT$(1,183.2) million and NT$425.2
million (US$12.3 million), respectively.

Risks Relating to Our Technologies

If we cannot respond to rapid technology changes in the semiconductor industry,
our profitability will suffer

The semiconductor packaging and test industry is characterized by rapid
increases in the diversity and complexity of semiconductor packaging and test
products. As a result, we expect that we will need to continue to develop and
offer more advanced packaging and test processes in order to respond to our
customers requirements as industry conditions change. Developing and
maintaining advanced packaging and test processes requires significant research
and development and capital expenditures.

In addition, advances in technology typically lead to rapid and
significant price erosion and decreased margins for older products and services
and may cause our current products and services to become less competitive. Our
failure to develop or obtain advanced packaging or test designs will materially
and adversely affect our product mix which would seriously harm our
profitability.

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 semiconductor packaging and test processes are complex and involve a
number of precise steps. Defective packaging and test can result from a number
of factors, including:



| |  |  | the level of contaminants in the manufacturing environment;
| | - |  | -----------------------------------------------------------
|
| |  |  | human error;                                               
|
| |  |  | equipment malfunction;                                     
|
| |  |  | defective plating services;                                
|
| |  |  | use of defective raw materials; and                        
|
| |  |  | inadequate sample testing.                                 

14



---



##### Table of Contents



From time to time, we expect to experience lower than anticipated
production yields as a result of the above factors, particularly in connection
with the expansion of our capacity or change in our processing methods. In
addition, our yield on new products will be lower than average as we develop
the necessary expertise and experience to produce those products. If we fail to
maintain high quality production standards, our reputation may suffer and our
customers may cancel their orders or return our products for rework.

Disputes over intellectual property rights could be costly and could deprive us
of technologies to stay competitive

We may suffer legal liabilities and damages if we infringe on the
proprietary rights of others or incur costs resulting from legal claims and
adverse proceedings against us. Despite this, we have no means of knowing what
patent applications have been filed in the United States or elsewhere until
they are granted. The semiconductor packaging and test industry is
characterized by frequent litigation regarding patent and other intellectual
property rights. If any third party were to make valid intellectual property
infringement claims against us or our customers, we could be required to:



| |  |  | discontinue using disputed process technologies which would
prevent us from offering some of our packaging and test products;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------
|
| |  |  | 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.

We could also be required to expend substantial resources to defend any
claim alleging our infringement of patents or other intellectual property
rights. If we fail to obtain necessary licenses or if litigation relating to
patent infringement or other intellectual property matters occurs, it could
seriously harm our company.

In addition, we have acquired patents and trademarks to protect some of
our proprietary technologies and products. We cannot assure you, however, that
these measures will provide meaningful protection of our intellectual property.
For example, our competitors may be able to develop similar or superior
products, or we may not have sufficient financial and legal resources to
protect and enforce our rights.

Political and Economic Risks

Disruptions in Taiwans political environment could seriously harm our business

All our assets and operations are located in Taiwan and about half of our
net operating revenues are derived from customers in Taiwan. Accordingly, our
business and financial condition may be affected by changes in local
governmental policies, and political and social instability.

15



---



##### Table of Contents



Taiwan has a unique international political status. The Peoples Republic
of China asserts sovereignty over mainland China and Taiwan and does not
recognize the legitimacy of the Taiwan government. The government in the
Peoples Republic of China has indicated that it may use military force to gain
control over Taiwan if Taiwan declares independence or if a foreign power
interferes in Taiwans domestic affairs. Relations between Taiwan and the
Peoples Republic of China and other factors affecting Taiwans political
environment could affect our business.

If economic conditions in Taiwan deteriorate, our current business and future
growth would be materially and adversely affected

In recent years, the currencies of many East Asian countries, including
Taiwan, have experienced considerable volatility and depreciation. The Central
Bank of China, the central bank of Taiwan, has from time to time intervened in
the foreign exchange market to minimize the fluctuation of the US dollar/NT
dollar exchange rate and to prevent significant decline in the value of the New
Taiwan dollar. In October 1997, the Central Bank of China ceased its
interventions and in January 1998, US$1.00 exceeded NT$34.00 for the first time
since April 1987. New Taiwan dollars have depreciated against US dollars by
26.09% from US$1.00 = NT$27.52 on January 2, 1997 to US$1.00 = NT$34.70 on
December 31, 2002 based on the noon buying rates published by the Federal
Reserve Bank of New York.

In addition, the banking sector in Taiwan has been seriously harmed by the
general economic downturn in Asia and Taiwan which has caused a depressed
property market and an increase in the number of companies filing for corporate
reorganization and bankruptcy protection. As a result, financial institutions
are more cautious in providing credit to businesses in Taiwan. We cannot assure
you that we will continue to have access to credit at commercially reasonable
rates of interest or at all.

The terrorist attacks in the United States on September 11, 2001 and in
Indonesia in October 2002 and in Saudi Arabia in May 2003 may have long-term
effects on world economies and markets. The immediate impact of the September
11, 2001 attacks caused disruptions in the U.S. and global markets. The
immediate impact of the other terrorist attacks has been more muted. In early
2003, the United States and its allies completed military operations against
Iraq. Concerns about the war and possible acts of terrorism directed against
the United States and its interests, as well as political tensions in other
areas of the world, have effected, and will likely to affect the global economy
and consumer confidence.

Beginning March 2003, several economies in Asia, including China, Hong
Kong, Singapore and Taiwan have been affected by the outbreak of SARS, a highly
contagious form of atypical pneumonia. SARS has caused damages to trade and
tourism industries as well as on the economies and financial markets of the
affected countries, including Taiwan. Although this SARS outbreak did cause a
negative impact on our manufacturing yields and sales volume, its impact has
substantially reduced in recent weeks. Another SARS outbreak in the future may
have an adverse effect on consumer confidence, and may in turn result in a
decrease in the demand for our products and services, which would adversely and
materially affect our business and results of operations.

16



---



##### Table of Contents



The trading price of our American depositary shares may be adversely affected
by the general activities of the Taiwan Stock Exchange and U.S. stock
exchanges, the trading price of our shares, increases in interest rates and the
economic performance of Taiwan markets

Our shares are listed on the Taiwan Stock Exchange. The trading price of
our American depositary shares, or ADSs, may be affected by the trading price
of our shares on the Taiwan Stock Exchange. The Taiwan Stock Exchange is
smaller and, as a market, more volatile than the securities markets in the
United States and a number of European countries. The Taiwan Stock Exchange has
experienced substantial fluctuations in the prices and volumes of sales of
listed securities, and there are currently limits on the range of daily price
movements on the Taiwan Stock Exchange. In the past decade, the Taiwan Stock
Exchange Index peaked at 12,495.34 in February 1990 and subsequently fell to a
low of 2,560.47 in October 1990. On March 13, 2000, the Taiwan Stock Exchange
Index experienced a 617 point drop, which represented the single largest
decrease in the Taiwan Stock Exchange Index in its history. The Taiwan Stock
Exchange Index experienced a 12.5% increase in 2001 and a 20.5% decrease in
2002. From January 1, 2003 to May 30, 2003, daily closing values of our shares
ranged from NT$19.5 per share to NT$15.6 per share. The Taiwan Stock Exchange
is particularly volatile during times of political instability including when
relations between Taiwan and the Peoples Republic of China are strained.
Moreover, the Taiwan Stock Exchange has experienced problems including market
manipulation, insider trading and settlement defaults. The recurrence of these
or similar problems could decrease the market price and liquidity of our shares
and ADSs.

The market price of the ADSs may also be affected by general trading
activities on the U.S. stock exchanges, which have experienced significant
price volatility with respect to shares of technology companies. Increases in
interest rates and other general economic conditions may also have an effect on
the market price of our ADSs. Daily closing values of our ADSs ranged from
US$10.13 to US$2.04 between June 7, 2000, the date our ADSs were listed on
Nasdaq and May 30, 2003. Over the same period, the Nasdaq Index ranged from
4,274.67 to 1,114.11.

On May 31, 2003, the Taiwan Stock Exchange Index closed at 4,555.9, and
the daily closing value of our shares was NT$17.3 per share.

If New Taiwan dollars or any of the currencies we use for our operations
fluctuate significantly against US dollars or Japanese yen, our profitability
may be seriously reduced

Our net operating revenues and cost of goods sold are denominated in US
dollars, Japanese yen and New Taiwan dollars in varying amounts. In addition,
our capital expenditures are generally denominated in New Taiwan dollars,
Japanese yen and US dollars. As a result of our foreign currency exposure, we
are affected by fluctuations in exchange rates among the US dollar, the
Japanese yen, the New Taiwan dollar and other currencies.

17



---



##### Table of Contents






Item 4. Information on the Company

A.     History and Development of the Company

Our legal and commercial name is Siliconware Precision Industries Co.,
Ltd. We were incorporated under the ROC Company Law as a company limited by
shares in 1984 and our shares were listed on the Taiwan Stock Exchange in 1993.
On June 7, 2000, we issued 6,000,000 American depositary shares, or ADSs, each
representing five shares. Our ADSs were listed on the Nasdaq Stock Markets
National Market under the symbol SPIL on June 2, 2000. Our principal
executive offices are located at No. 123, Sec. 3, Da Fong Road, Tantzu,
Taichung, Taiwan, Republic of China, and our telephone number is
886-4-2534-1525. Our Internet website address is www.spil.com.tw.

We are one of the worlds leading independent providers of semiconductor
packaging and test services. We offer a full range of both standard and
customized packaging and test solutions, including advanced leadframe packages
and substrate packages including the flip chip package, and testing for logic,
mixed signal and embedded memory devices. We also offer our customers turnkey
solutions from packaging and test to direct shipment of semiconductor devices
to end users designated by our customers.

Our headquarters and packaging facilities are located in Taichung, Taiwan,
where we had 2,481 wire bonders on December 31, 2002. As of December 31, 2002,
we had 198 testers in Hsin-Chu and Taichung, Taiwan. Taiwan is home to the
worlds largest independent wafer foundries and as such is home to one of the
worlds leading suppliers of outsourcing semiconductor manufacturing. Our close
proximity to and relationships with Taiwans leading wafer foundries allow us
to benefit significantly from the trend towards outsourcing in the
semiconductor industry and to quickly respond to our customers needs. Our
location in Taiwan also enables our customers to secure seamless services
within Taiwan for all of their manufacturing needs, thereby minimizing the time
required to deliver finished semiconductor devices to the market.

We provide packaging and test services to more than 100 customers
worldwide. For 2002, our top customers included the following leading
semiconductor suppliers: nVIDIA Corp., MediaTek Corporation, VIA Technologies
Inc. and Xilinx, Inc. We currently target customers in the personal computer,
communications, consumer ICs and non-commodity memory semiconductor markets. We
strive to provide the highest level of customer service to meet and anticipate
our customers current and future needs. We have established technical and
sales teams near major customer facilities, including the Hsin-Chu
Science-Based Industrial Park, to work with our customers on developing and
implementing new packaging and test technologies as semiconductors become
smaller and more sophisticated.

Our objective is to be the leading worldwide, full service independent
provider of semiconductor packaging and test services. Key elements of our
strategy include:



| |  |  | leveraging our existing foundry relationships and Taiwan
location to enable our customers to easily integrate all of their
outsourced semiconductor manufacturing needs;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------

18



---



##### Table of Contents





| |  |  | focusing on customer service and working with our customers
on developing and fulfilling their current and future semiconductor
packaging and test needs;                                                                                                                                 
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | offering leading packaging and test technology to attract and
retain customers;                                                                                                                                                                                                           
|
| |  |  | providing a full range of packaging and test services
including turnkey capabilities to simplify our customers supply
chain management; 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.

B.     Business Overview

Our Packaging and Test Services

Our Packaging Services

We offer a broad range of package formats designed to provide our
customers with a full array of packaging solutions. The packaging solutions we
currently offer customers include leadframe packages and substrate packages,
which include ball grid array and module packages incorporating multiple
semiconductor chips and flip chip packages. Our flip chip packages, which we
began to offer in the first quarter of 2001, are based on the proprietary
Flex-On-Cap wafer bumping and redistribution technologies we license from Flip
Chip Technologies L.L.C. Semiconductor packaging serves to protect
semiconductor chips, facilitate their integration into electronic systems and
enable the dissipation of heat produced by the final product. The packaging
process begins when patterned silicon wafers received from our customers are
diced using diamond saws into separate die. Each die is attached to a leadframe
or substrate by silver paste made with epoxy resin, either directly in a
substrate package, or first to a die-attached pad in a leadframe package. Leads
on the leadframe or substrate are then connected by extremely fine gold wires
to the input/output terminals on the chips, using machines called wire bonders.
Each chip is then encapsulated, generally in a plastic casing molded from a
molding compound, with only the leads protruding from the finished casing. To
complete the packaging process, excess molding compound is eliminated from the
packaged semiconductor chip, and the leads are trimmed and formed into various
shapes.

Semiconductor packages have evolved from leadframe packages to substrate
packages in response to the increasing demands of todays high-performance
electronics products. The differentiating characteristics of these packages
include:



| |  |  | the size of the package;                                         
| | - |  | -----------------------------------------------------------------
|
| |  |  | the number of electrical connections the package can support; and
|
| |  |  | the thermal and electrical requirements of the package.          

19



---



##### Table of Contents



As modern applications for semiconductor devices require smaller chips,
the size of packages has also decreased. In leading-edge packages, the size of
the package is reduced to just slightly larger than the size of the individual
chip itself, in a process known as chip scale packaging.

As semiconductor devices increase in complexity, the number of electrical
connections required also increases. Our leadframe products have electrical
connections from the semiconductor device to the electronic product through
leads on the perimeter of the package. Our substrate products have balls on the
bottom of the package, which create the electrical connections with the
electronic system and can support larger numbers of electrical connections.

New methods of packaging have also enhanced the thermal and electrical
characteristics of semiconductor packages to meet the high bandwidth, high
speed and high power demands of modern semiconductor devices. Substrate
packages with cavity design considerably enhance heat-dissipation without
necessitating a change in substrate or chip layout. Flip chip packages enable
direct interconnection from the chip to the substrate. Electrical connection is
first deposited on one side of a chip, then the chip is flipped onto the
substrate. Flip chip technology eliminates the need for wirebonding and
provides superior electrical performance. Chip scale packages have been
designed for devices which require reduced height, board space and weight by
reducing the size of the package to be only slightly larger than the size of
the die and are ideally suited for the latest generation of wireless and
consumer electronics. Multi-chip module packages allow for the combination of
multiple chips into a single package enabling increased application
functionality, while minimizing overall size.

The following table shows, for the periods indicated, the amount of our
packaging and test revenues by product type and the products revenues as a
percentage of our total net operating revenues:

|                         |                              |  |                         |        |      |  |                                         |       |   |  |           |        |                |  |      |       |  |  |       |        |  |  |      |       | 
|------------------------ | ---------------------------- |  | ----------------------- | ------ | ---- |  | --------------------------------------- | ----- | - |  | --------- | ------ | -------------- |  | ---- | ----- |  |  | ----- | ------ |  |  | ---- | ----- | 
|                         |                              |  | Year ended December 31,
|                         |                              |  |                        
|                         |                              |  | 2000                    |        | 2001 |  | 2002                                   
|                         |                              |  |                         |        |      |  |                                        
|                         |                              |  | Revenues                |        | %    |  | Revenues                                |       | % |  | Revenues  |        | %             
|                         |                              |  |                         |        |      |  |                                         |       |   |  |           |        |               
|                         |                              |  |                         |        |      |  |                                         |       |   |  | (audited) |        | (consolidated) |  |      |       |  |  |       |        | 
|                         |                              |  |                         |        |      |  | (in NT$ million except for percentages) |       |   |  |          
|Quad flat packages       |                              |  | 6,945                   |        |      |  | 36.9                                    |       |   |  | 5,240     |        |                |  | 31.7 |       |  |  | 7,659 |        |  |  | 34.3 |      
|Small outline packages   |                              |  | 4,002                   |        |      |  | 21.2                                    |       |   |  | 2,507     |        |                |  | 15.1 |       |  |  | 2,744 |        |  |  | 12.3 |      
|Ball grid array packages |                              |  | 5,845                   |        |      |  | 31.0                                    |       |   |  | 6,460     |        |                |  | 39.1 |       |  |  | 8,576 |        |  |  | 38.5 |      
|Other Packages           |                              |  | 505                     |        |      |  | 2.7                                     |       |   |  | 290       |        |                |  | 1.8  |       |  |  | 677   |        |  |  | 3.0  |      
|Test and other revenue   |                              |  | 1,549                   |        |      |  | 8.2                                     |       |   |  | 2,033     |        |                |  | 12.3 |       |  |  | 2,643 |        |  |  | 11.9 |      
|                         |                              |  |                         |        |      |  |                                         |       |   |  |           |        |                |  |      |       |  |  |       |        |  |  |      |      
|                         | Total net operating revenues |  |                         | 18,846 |      |  |                                         | 100.0 |   |  |           | 16,530 |                |  |      | 100.0 |  |  |       | 22,299 |  |  |      | 100.0 | 
|                         |                              |  |                         |        |      |  |                                         |       |   |  |           |        |                |  |      |       |  |  |       |        |  |  |      |      

We price our packaging products on a per unit basis taking into account
the complexity of the product, the prevailing market conditions, the order
size, the strength and history of our relationship with a customer and our
capacity utilization at the time.

Leadframe Packages

Leadframe packages, including quad flat packages and small outline
packages, are the most widely used package category and are characterized by a
semiconductor chip encapsulated in a plastic molding compound with metal leads
on the perimeter. This package category has evolved

20



---



##### Table of Contents



from a design where the leads are plugged into holes on the circuit board
to a design where the leads are soldered to the surface of the circuit board.

To satisfy the demand for miniaturization of portable electronic products,
we are developing increasingly smaller versions of leadframe packages to keep
pace with continually shrinking semiconductor device sizes. Our advanced
leadframe packages are similar in design to our older leadframe packages.
However, our advanced leadframe packages generally are thinner and smaller,
have more leads and have advanced thermal and electrical characteristics. As a
result of continued product development, we offer leadframe products with a
wide range of lead counts and body sizes to satisfy variations in the size of
customers semiconductor devices.

The following diagram presents the basic component parts of a standard
leadframe package:

(DIAGRAM1)

Leadframe Package Profile

The following table presents our standard leadframe packages, includingthe number of leads in each package, a description of each package and the end
uses of each package.

Quad Flat Package

|                              |  |            |  |                                                                                                                                                                                                                                                |  |                                                                                                                  
|----------------------------- |  | ---------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -----------------------------------------------------------------------------------------------------------------
|Package                       |  | Lead-count |  | Major Applications                                                                                                                                                                                                                             |  | End Uses                                                                                                         
|                              |  |            |  |                                                                                                                                                                                                                                                |  |                                                                                                                  
|Plastic Leaded Chip Carrier   |  | 28-84      |  | Package with leads on two sides
used in consumer electronics and
products in which the size of the
package is not vital                                                                                                                        |  | Copiers, printers, scanners,
desktop personal computers,
electronics games, monitors                             
|                              |  |            |  |                                                                                                                                                                                                                                                |  |                                                                                                                  
|Quad Flat Package             |  | 44-256     |  | 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 systems
|                              |  |            |  |                                                                                                                                                                                                                                                |  |                                                                                                                  
|Low-Profile Quad Flat Package |  | 32-216     |  | 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 communications products,
laptop computers, digital cameras,
cordless/radiofrequency devices             

21



---



##### Table of Contents



|                               |  |            |  |                                                                                                                                                                         |  |                                                                                                                                
|------------------------------ |  | ---------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------
|Package                        |  | Lead-count |  | Major Applications                                                                                                                                                      |  | End Uses                                                                                                                       
|                               |  |            |  |                                                                                                                                                                         |  |                                                                                                                                
|Thin Quad Flat Package         |  | 44-128     |  | Designed for lightweight, portable electronics requiring broad performance characteristics                                                                              |  | Laptop computers, personal
computers, disk drives, office
equipment, audio and video
products, wireless communications
products
|                               |  |            |  |                                                                                                                                                                         |  |                                                                                                                                
|Quad Flat No-lead Package      |  | 20-104     |  | The small and light package with
improved thermal and electrical
performance makes it suitable for
wireless transmitters RF front end,
HD devices and micro-controllers |  | Wireless communications products, disk drives, portable products, consumer products                                            
|                               |  |            |  |                                                                                                                                                                         |  |                                                                                                                                
|Thin Quad Flat No-lead Package |  | 8-56       |  | This device offers similar features
to those of Quad Flat No-lead
Package, but can process smaller
and lighter packages                                                 |  | Wireless communications products, disk drives, portable products, consumer products                                            

Small Outline Package

|                                    |  |            |  |                                                                                                                                                                   |  |                                                                                                                                                                                        
|----------------------------------- |  | ---------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Package                             |  | Lead-count |  | Major Applications                                                                                                                                                |  | End Uses                                                                                                                                                                               
|                                    |  |            |  |                                                                                                                                                                   |  |                                                                                                                                                                                        
|Plastic Dual In-line Package        |  | 28-42      |  | General purpose plastic package used in consumer electronic products                                                                                              |  | Games, telephones, televisions, audio equipment, computer peripherals                                                                                                                  
|                                    |  |            |  |                                                                                                                                                                   |  |                                                                                                                                                                                        
|Plastic Dual In-line Skinny Package |  | 28-32      |  | General purpose plastic package used in consumer electronic products                                                                                              |  | Games, telephones, televisions, audio equipment, computer peripherals                                                                                                                  
|                                    |  |            |  |                                                                                                                                                                   |  |                                                                                                                                                                                        
|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 systems                                                       
|Shrink Small Outline Package        |  | 28-56      |  | Small lead frame
package designed for applications requiring reduced height                                                                                       |  | Pagers, cordless telephones, fax
machines, copiers, printers,
computer peripherals, audio and
video products, automotive systems                                                       
|Small Outline J-Bend Packages       |  | 24-70      |  | 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)
|                                    |  |            |  |                                                                                                                                                                   |  |                                                                                                                                                                                        
|Thin 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 computers                                                                    

22



---



##### Table of Contents



|                                    |  |            |  |                                                                                                                                                                                                                                                               |  |                                                                                                                    
|----------------------------------- |  | ---------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------
|Package                             |  | Lead-count |  | Major Applications                                                                                                                                                                                                                                            |  | End Uses                                                                                                           
|                                    |  |            |  |                                                                                                                                                                                                                                                               |  |                                                                                                                    
|Thin Shrink Small Outline Package
I |  | 32         |  | 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 computers
|                                    |  |            |  |                                                                                                                                                                                                                                                               |  |                                                                                                                    
|Thin 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 &electrically erasable
programmable read only memory, and
dynamic random access memory |  | Disk drives, recordable optical
disks, audio and video products,
consumer electronics,
communications products     

Substrate Packages

This family generally employs the ball grid array design which utilizes a
plastic or tape laminate substrate rather than a leadframe and places the
electrical connections on the bottom of the package rather than around the
perimeter.

The ball grid array format was developed to address the need for higher
lead counts required by advanced semiconductor devices. Benefits of ball grid
array packaging over leaded packaging include:



| |  |  | smaller size;                                
| | - |  | ---------------------------------------------
|
| |  |  | greater pin count;                           
|
| |  |  | greater reliability;                         
|
| |  |  | better electrical signal integrity; and      
|
| |  |  | easier attachment to a printed circuit board.

As the number of leads surrounding the package increased, the proximity of
the leads to one another became closer in an attempt to maintain the size of
the package. The close proximity of one lead to another resulted in electrical
shorting problems, and required the development of increasingly sophisticated
and expensive techniques for producing circuit boards to accommodate the high
number of leads.

The ball grid array format solved this problem by effectively creating
leads on the bottom of the package in the form of solder balls. These balls can
be evenly distributed across the entire bottom surface of the package, allowing
greater distance between the individual leads. For the highest lead count
devices, the ball grid array configuration can be manufactured less expensively
and requires less delicate handling at installation.

23



---



##### Table of Contents



The following diagram presents the basic component parts of a standard
ball grid array packages:

(DIAGRAM2)

To address the electronics market demand for higher frequency, higher
input/output, and better thermal performance, we have made efforts to develop
high value-added advanced packaging technologies, such as flip chip and wafer
bumping technologies. In addition to the development of the 8-inch wafer
bumping technology, in order to meet the trend of wafer size moving to 12-inch
from 8-inch, we have successfully established the first 12-inch wafer bumping
technology in the world. Flip chip ball grid array is a high-end, high-growth
product typically used in advanced semiconductor products such as
microprocessor units, micro peripherals, field programmable gate arrays and
application specific ICs. The flip chip technology enables direct
interconnection from the chip to the substrate, eliminates the need for wire
bonding and provides superior electrical performance. We licensed the flip chip
assembly technology from Flip Chip Technologies, L.L.C. to enhance our assembly
process capability in flip chip products. We have also developed thin and small
package, or CSPs, on flexible or rigid substrates as well as leadframes, which
are suitable for the portable consumer market. Furthermore, we have developed
module packages, with multiple chips integrated into one package, in order to
meet the growing demand for system-in-package, or SIP, for applications in
personal computers, communications devices and consumer products.

The following diagram presents the cross section of a flip chip ball grid
array package:

(DIAGRAM3)

Ball Grid Array Package Profile

The following table presents our substrate packages, including the number
of leads and the description of and uses for each package format:

24



---



##### Table of Contents



|                                 |  |            |  |                                                                                                                                                                                                                                                                                            |  |                                                                                                                                                                                                                 
|-------------------------------- |  | ---------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Package                          |  | Lead-count |  | Major Applications                                                                                                                                                                                                                                                                         |  | End Uses                                                                                                                                                                                                        
|                                 |  |            |  |                                                                                                                                                                                                                                                                                            |  |                                                                                                                                                                                                                 
|Flip Chip Ball Grid Array        |  | 36-1,936   |  | Much higher electrical
performance than traditional
ball grid array for modern, more
demanding applications                                                                                                                                                                                |  | Workstations, networking,
graphics, application specific
integrated circuits, personal
digital assistants, processors                                                                                           
|                                 |  |            |  |                                                                                                                                                                                                                                                                                            |  |                                                                                                                                                                                                                 
|Chip Scale Package               |  | 36-400     |  | 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,
cellular phones, laptop
computers, sub-notebooks,
wireless systems
|                                 |  |            |  |                                                                                                                                                                                                                                                                                            |  |                                                                                                                                                                                                                 
|Stacked-Die Chip Scale Package   |  | 21-400     |  | Low cost solution for low
input/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, analog, flash memory,
application specific integrated
circuits, radio frequency
devices, personal digital
assistants, communications,
cellular phones, laptop
computers, sub-notebooks,
wireless systems
|                                 |  |            |  |                                                                                                                                                                                                                                                                                            |  |                                                                                                                                                                                                                 
|Ball 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 communications
products, standard connections
for peripherals to computers                                                   
|                                 |  |            |  |                                                                                                                                                                                                                                                                                            |  |                                                                                                                                                                                                                 
|Thermal Enhanced Ball Grid Array |  | 256-1,152  |  | 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,
cellular phones, laptops,
sub-notebooks, boards                                            
|                                 |  |            |  |                                                                                                                                                                                                                                                                                            |  |                                                                                                                                                                                                                 
|Low Profile Ball Grid Array      |  | 196-352    |  | Low-profile and light weight
package designed for
applications which require high
performance                                                                                                                                                                                              |  | Laptop computers, wireless
communications products, computer
peripherals                                                                                                                                        
|                                 |  |            |  |                                                                                                                                                                                                                                                                                            |  |                                                                                                                                                                                                                 
|Land Grid Array                  |  | 23-68      |  | Land grid array package designed
for applications which require
high performance                                                                                                                                                                                                           |  | Laptop computers, disk drives,
video cameras, global positioning
systems, wireless communications
products, standard connections
for peripherals to computers                                                   

Our Test Services

Semiconductor testing measures and ensures the performance, functionality
and reliability of a packaged semiconductor device. Testing semiconductor
devices requires significant technical expertise and knowledge of the specific
applications and functions of the device under test. In addition to maintaining
different types of advanced testing equipment which enable us to test a

25



---



##### Table of Contents



variety of semiconductor device functions, we work closely with our
customers to develop and convert programs to test particular semiconductor
products on multiple equipment platforms effectively. The cost of any specific
test is dependent on test time, usually measured in seconds, required to run a
test which varies depending on the complexity of the semiconductor device and
the customers specification with the percentage of fault coverage.

We acquired Siliconware Corp. on December 30, 2000. Prior to the
acquisition, we outsourced all of our test services to Siliconware Corp. We
recognized the amount charged to our customers for test services provided by
Siliconware Corp. as revenues and recorded the fees charged by Siliconware
Corp. as cost of goods sold. The difference between our revenues and costs for
test services was typically a small handling charge.

We also conduct wafer probing and final test of digital logic and mixed
signal products. In addition, many of our customers request drop shipment of
their tested integrated circuits directly to designated final destinations.

Wafer Probing.Wafer probing is the step immediately before packaging of
integrated circuits and involves sorting the processed wafer for defects to
ensure that it meets customer acceptance criteria. Integrated circuits on an
accepted wafer are then individually inspected visually and with scanners
before packaging and final testing.

Logic and Mixed Signal Final Testing.We conduct final test of a wide
variety of logic and mixed signal integrated circuits, including complex,
high-performance, as well as lower performance integrated circuits.
High-performance products include personal computer-related components
including audio chipsets and graphic processors, while major lower performance
products include integrated circuits used in consumer electronics products.

Other Test Services.In addition to wafer probing and final test services,
we also provide dynamic burn in test services to screen out device infant
mortality, laser repair to modify device connection structure for saving
expensive wafer area, lead/ball scanner to screen out abnormal products,
including bent lead or ball defective devices from being shipped to end
customers, marking to specify the unique customer logo and batch
identification on product for traceabiliy and tape and reel to packing
devices into one complete reel for surface mount operation.

We offer drop shipment services by providing for shipment of integrated
circuits directly to final destinations designated by our customers. Since drop
shipment eliminates the additional step of inspection by the customer before
shipment to the customer, quality of service is a key consideration. We believe
that our ability to successfully execute our full range of services, including
drop shipment services, is an important factor in maintaining existing
customers as well as attracting new customers.

Customers

We currently have more than 100 customers worldwide, and our customers include
many of the largest semiconductor companies in the world. In 2000, 2001 and
2002, 37.9%, 44.6%, and 48.3%, respectively, of our net operating revenues were
derived from sales to our top five customers, and 57.4%, 61.6% and 66.3%,
respectively, of our net operating revenues were derived from sales to

26



---



##### Table of Contents



our top ten customers. In 2002, nVIDIA Corp. and MediaTek Incorporation
provided 16.5% and 13.0%, respectively, of our net operating revenues.

Industry-leading companies require early access to advanced packages
because they manufacture products which have first-to-market technologies. Our
close relationships with industry leading customers help us to further develop
their technology and position us to benefit from the high unit volumes of these
major semiconductor customers.

Relationships with Independent Semiconductor Wafer Foundries in Taiwan

We believe we have benefited from our location in Taiwan where outsourced
semiconductor manufacturing infrastructure is well established. Our long-term
relationships with the worlds two largest independent wafer foundries are
important to the continued growth of our business. The majority of the
semiconductor devices we package and test have been manufactured in Taiwans
leading wafer foundries. As these wafer foundries grow, we expect that their
demand for our services will continue to grow. Moreover, we believe that we can
leverage these relationships to jointly market seamless outsourced
semiconductor manufacturing services from design to drop shipment and remain at
the forefront in semiconductor technology. We also believe that our close
proximity and close relationships to wafer foundries enables our customers to
more efficiently manage their supply chains and find comprehensive solutions to
their semiconductor needs.

Backlog

Due to the ever-changing technology and functionality of semiconductor
chip design, customers requiring semiconductor packaging and test services
generally do not place purchase orders far in advance. However, we engage
customers in advance of the placement of purchase orders based on each
customers expected packaging and test requirements. In addition, our customers
generally agree to purchase from us any unused materials that we purchase to
meet their forecasted demand.

Although we have long term sales relationships with a number of customers,
our customers generally may cancel or reschedule orders without significant
penalty. In the past, very few customers have cancelled firm orders for our
packaging and test services. This is due in part to the fact that firm orders
usually immediately precede shipment of wafers to be packaged by us. Our
customers do, however, routinely change their forecasts for future purchases
from us, and we adjust our production plans accordingly. We do not maintain
reserves for customer cancellations and variations in customer orders.
Accordingly, our backlog as of any particular date may not be indicative of
future sales.

Sales and Marketing

Our sales and marketing strategy is focused on providing high quality
advanced semiconductor device packaging and test services, consistent on-time
delivery and competitive pricing. We believe that this strategy is best
implemented by servicing a select number of customers whom we consider to have
a high level of anticipated growth. We work on a cooperative basis with these
customers so that we can best meet their needs.

27



---



##### Table of Contents



We engage in semi-annual and quarterly reviews of all of our customers; we
regularly collect data from different segments of the semiconductor industry
and, when possible, we work closely with our customers to design and develop
packaging and test solutions for their new products. These co-development or
sponsorship projects can be critical when customers seek large scale early
market entry with a significant new product.

Our sales and marketing efforts are primarily carried out by our sales
team in Taichung and Hsin-Chu near many of Taiwans leading domestic
semiconductor companies. In addition, our subsidiary Siliconware U.S.A., with
sales offices in San Jose and Irvine, California, Boston, Massachusetts and
Lewisville, Texas, is responsible for our sales in the United States.

Set forth below is a geographic breakdown of our net operating revenues
for the periods presented below:

|                |  |                         |       |      |  |                                                  |      |   |  |           |       |                |  |  |      |  |  |  |        |  |  |  |      | 
|--------------- |  | ----------------------- | ----- | ---- |  | ------------------------------------------------ | ---- | - |  | --------- | ----- | -------------- |  |  | ---- |  |  |  | ------ |  |  |  | ---- | 
|                |  | Year Ended December 31,
|                |  |                        
|                |  | 2000                    |       | 2001 |  | 2002                                            
|                |  |                         |       |      |  |                                                 
|                |  | Revenues                |       | %    |  | Revenues                                         |      | % |  | Revenues  |       | %             
|                |  |                         |       |      |  |                                                  |      |   |  |           |       |               
|                |  |                         |       |      |  |                                                  |      |   |  | (audited) |       | (consolidated) |  |  |      |  |  |  |        | 
|                |  |                         |       |      |  | (revenues in NT$ million except for percentages) |      |   |  |          
|Taiwan          |  |                         | 9,549 |      |  |                                                  | 50.7 |   |  |           | 8,227 |                |  |  | 49.8 |  |  |  | 10,123 |  |  |  | 45.4 | 
|U.S. and Canada |  |                         | 9,114 |      |  |                                                  | 48.4 |   |  |           | 8,006 |                |  |  | 48.4 |  |  |  | 11,525 |  |  |  | 51.7 | 
|Others (1)      |  |                         | 183   |      |  |                                                  | 0.9  |   |  |           | 297   |                |  |  | 1.8  |  |  |  | 650    |  |  |  | 2.9  | 



---

|(1) |  | Includes primarily Japan, Germany and Hong Kong.
|--- |  | ------------------------------------------------

Sales from outside of Taiwan accounted for 49.3%, 50.2% and 54.6% of our
total net operating revenues in 2000, 2001 and 2002, respectively. We primarily
target those U.S. and Canadian semiconductor companies that contract their
wafer foundry services to major independent ROC foundries. Our U.S. and
Canadian customers, including ATI Technologies, Inc. and nVIDIA Corp., are
world-leading suppliers of graphic chipsets. Our U.S. customers mainly require
quad flat packages and substrate packages. We also focus on marketing our
packaging and test services in Japan, and expect sales to Japan to increase in
the near future.

We have signed annual or two-year contracts with our major domestic
customers. These contracts normally provide that the quantities of products
furnished by us are updated by the customer every month, generally through
three-month non-binding rolling forecasts. We have such formal contracts with
some of our overseas customers.

Quality Control

We employ quality control procedures at every critical manufacturing
stage, with the aim of identifying and solving problems at the earliest
possible stage of the production process. Our quality control procedures
include statistical process control, which involves sampling tests to control
and monitor the production process. Tests include optical scanning and
reliability tests including temperature and humidity tests, pressure and stress
tests and testing for resistance to solvents. If a problem is detected, failure
analysis will be used to determine the cause. Visual inspection and optical
scanning are performed on all assembled semiconductor devices to test for

28



---



##### Table of Contents



lead coplanarity and integrity. Final products are tested on a sample
basis for open shorts in wire connections. To ensure that our quality control
procedures are effectively applied, production line employees are provided with
periodic training.

Our comprehensive quality control and environmental protection programs
have received numerous accredited International Standards Organization (ISO)
certifications, including ISO 9002 in 1992, ISO 9001 in 1994, QS 9000 in 1998
and ISO 14001 in May 1999. We undergo periodic audits to maintain our ISO
certifications. Although some semiconductor companies view the ISO
certification as a basis for initiating contact with a potential subcontractor,
they generally perform separate production and quality audits of the
subcontractor themselves.

As a result of our ongoing focus on quality, we achieved average quarterly
packaging yields of 99.90% for leader frame base, 99.80% for substrate base,
99.52% for flip chip and 99.50% for wafer bumping products for 2002. Packaging
yield, which is the industry standard for measuring production yield, is equal
to the number of integrated circuit packages that are shipped for packaging
divided by the number of individual integrated circuits that are attached to
leadframes or substrates.

In addition, packaging and test service customers generally require that
our facilities undergo a stringent qualification process during which the
customer evaluates our operations and production processes. The qualification
process can take many weeks. Due to this lengthy qualification process, we
believe semiconductor manufacturers are generally reluctant to switch
semiconductor packaging and test companies once these companies have been
qualified.

As part of our overall focus on quality service, we also closely monitor
our product delivery performance against scheduled delivery times.

Material and Equipment

Our packaging operations require adequate supplies of materials and
equipment on a timely basis. The principal raw materials used in packaging are
leadframes, substrate, gold wire and molding compound.

We purchase materials based on customer forecasts, and our customers are
generally responsible for any unused materials in excess of the quantity that
they indicated they would need.

Our major suppliers of raw materials, including Sumitomo Metal Mining Asia
Pacific Pte Ltd., Shinko Electric Industries Co., Ltd., Phoenix Precision
Technology Corporation, Sumitomo Bakelite (Taiwan) Co., Ltd, and Tanaka
Kikinzoku International K.K., are leading companies in the types of materials
they supply. We work closely with them, providing them with rolling forecasts,
weekly requirement schedules and updating them on statuses of our new products.

Due to the growth of substrate packaging products, our raw material costs
have increased. For 2000, 2001 and 2002, our raw material costs were 41.9%,
43.1% and 44.1%, respectively, of our net operating revenues. We expect that
raw materials will continue to constitute a significant portion of our cost of
goods sold as demand for substrate packaging products continues to increase. We
do not maintain large inventories of raw materials; usually only enough for one
months production based upon regular estimates of orders from customers. Our
principal suppliers usually

29



---



##### Table of Contents



dedicate portions of their inventories as reserves to meet our production
requirements. Nevertheless, on occasion when customer orders have exceeded the
supply of raw materials, we have typically been able to obtain extensions from
our customers to allow sufficient supply to become available. Such arrangements
help us remain cost competitive in todays market. In the past, prices of our
principal raw materials have not been volatile.

In addition to raw materials, the availability of packaging and test
equipment is critical to our business. We generally seek to maintain equipment
from different suppliers with broad functionality and flexibility for different
packaging types to enhance capacity utilization. We purchase packaging
equipment from major international manufacturers, including Apic Yamada
Corporation, Kulicke & Soffa Industries Inc., ASM Assembly Automation Ltd., and
Shinkawa Ltd. As of December 31 2002, we operated 2,481 wire bonders. We also
had 198 testers in Taichung and Hsin-Chu, Taiwan. We must order equipment in
advance of customer demand to expand our capacity, based on our expectation of
future demand for our packaging and test services.

Competition

We face substantial competition from established packaging and test
service providers, including companies with greater manufacturing, financial
and other resources. These companies include Advanced Semiconductor
Engineering, Inc. (Taiwan), ASE Test Limited (Taiwan and Malaysia), Amkor
Technology Inc. (USA), ASAT, Ltd. (Hong Kong), ST Assembly Test Services, Ltd.
(Singapore), Hana Microelectronics Public Co. Ltd. (Thailand), Orient
Semiconductor Electronics, Limited (Taiwan), Astra International (Indonesia),
Carsem Bhd. (Malaysia), ChipPAC Incorporated (Korea) and Shinko Electric
Industries Co., Ltd. (Japan). These companies have also established
relationships with many large semiconductor companies that are our current or
potential customers. To a lesser extent, we also compete with the internal
semiconductor packaging and test capabilities of many of our customers.

The principal elements of competition in the independent semiconductor
packaging and test market include:



| |  |  | the breadth of package and test offerings;
| | - |  | ------------------------------------------
|
| |  |  | technical competence;                     
|
| |  |  | manufacturing yields;                     
|
| |  |  | manufacturing cycle times;                
|
| |  |  | customer service; and                     
|
| |  |  | price.                                    

Strategic Investments

We, together with Siliconware Investment Company Ltd., our subsidiary,
make equity joint venture and strategic investments in companies located in
Taiwan and the United States engaged in

30



---



##### Table of Contents



semiconductor packaging and test businesses. We believe that our
participation in these companies allows us to enhance and compliment our
product offerings, secure access to raw materials and keep up-to-date with
technological changes in the semiconductor industry. We are able to maintain
close relationships with these companies and influence strategic management
decisions through representation on the boards of many of these companies.
These participations include:



| |  |  | Taiwan Hi-Tech Corporation.We owned a 38.75% equity interest
in Taiwan Hi-Tech Corporation as of December 31, 2002, which is
engaged in the business of solder plating. One of our supervisors,
Mr. Jerome Tsai, is a director of Taiwan Hi-Tech.                                                                                                                                                       
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Sigurd Microelectronics Corp.We owned a 33.58% equity
interest in Sigurd Microelectronics Corp. as of December 31, 2002.
Sigurd provides lower-end packaging and test services.                                                                                                                                                                                                                         
|
| |  |  | Artest Corporation. We owned a 30.09% equity interest in
Artest Corp. as of December 31, 2002. Artest is engaged in the
business of testing and developing integrated circuits.                                                                                                                                                                                                                         
|
| |  |  | ChipMOS.We owned a 28.73% equity interest in ChipMOS as of
December 31, 2002. We acquired this equity interest in 1997 as part
of a joint-venture arrangement with Mosel Vitelic Inc. to create a
company concentrating on the packaging and test of memory chips. One
of our directors, Mr. Bough Lin, is a director of ChipMOS, and one
of our supervisors, Mr. Jerome Tsai, is a director of ChipMos.
|
| |  |  | Double Win Enterprise Co. Ltd.We owned a 24.14% equity
interest in Double Win as of December 31, 2002, which is engaged in
PCB and SMT processes and manual inserting. One of our supervisors,
Mr. Jerome Tsai, is a director of Double Win.                                                                                                                                                            
|
| |  |  | Phoenix Precision Technology Corporation.We owned a 17.48%
equity interest in Phoenix Precision as of December 31, 2002, a
supplier of semiconductor raw materials, including substrates. One
of our directors, Mr. Bough Lin, is a director of Phoenix Precision.
Two of our supervisors, Ms. Teresa Wang and Mr. Jerome Tsai, are a
director and a supervisor, respectively, of Phoenix Precision.    
|
| |  |  | Universal Communication Technology Inc.We owned a 42.82%
equity interest in Universal Communication Technology Inc. as of
December 31, 2002, which is an IC testing company. One of our
supervisors, Mr. Jerome Tsai, is a director of Universal
Communication.                                                                                                                                         
|
| |  |  | ThaiLin Technology Corporation.We owned a 5.43% equity
interest in ThaiLin as of December 31, 2002, which is engaged in the
business of memory testing.                                                                                                                                                                                                                                                 

Environmental Matters

The principal pollutants created during semiconductor packaging are waste
water and gases from solder plating, and waste water from the wafer dicing and
solder dipping processes. During

31



---



##### Table of Contents



these processes, waste water is produced when water is used to cool wafers
after they are diced or to cleanse semiconductor chips after leadframes are
plated. Solid waste materials include metal leadframe scrap and excess moulding
resin. To mitigate environmental claims, we maintain pollution control
facilities at all of our facilities. As part of our pollution control program,
we subcontract the waste disposal and resource recycling of our Hsin-Chu
facilities to a third party company specializing in these measures. All of our
facilities subcontract the removal of solid waste to certified waste removal
companies. We believe that we are in compliance with the existing environmental
laws and regulations in Taiwan in all material respects.

Insurance

Our insurance policies on our buildings, equipment and inventories only
covered damage due to fire in 2002. We maintain insurance policies on both our
old and new production facilities in Taichung and Hsin-Chu, Taiwan and on
inland transit of inventories. Our property insurance covers either replacement
costs or actual cash value for our assets. Our insurance also includes
protection from losses caused by business interruption for seven to fourteen
consecutive working days and, as of December 31, 2002, had a maximum coverage
of NT$49,961.7 million (US$1,439.8 million) and other specified limits and
exclusions.

We also maintain limited insurance on the silicon wafers delivered to us.
These insurance policies cover the risk of loss of the silicon wafers while
they are in our possession and/or during inland transportation.

Capital Expenditures and Divestitures

Our capital expenditures amounted to NT$6,535.2 million, NT$5,474.2
million and NT$6,444.5 million (US$185.7 million) for 2000, 2001 and 2002,
respectively. See Item 5. Operating and Financial Review and ProspectsB.
Liquidity and Capital Resources.

We have made, and expect to continue to make, capital expenditures in
connection with the expansion of our production capacity. The table below sets
forth our principal capital expenditures, paid or committed, for the periods
indicated.

|                                                      |  |                         |         |      |  |               |         |     |  |  |         |  |  |  |       | 
|----------------------------------------------------- |  | ----------------------- | ------- | ---- |  | ------------- | ------- | --- |  |  | ------- |  |  |  | ----- | 
|                                                      |  | Year Ended December 31,
|                                                      |  |                        
|                                                      |  | 2000                    |         | 2001 |  | 2002         
|                                                      |  |                         |         |      |  |              
|                                                      |  | NT$                     |         | NT$  |  | NT$           |         | US$
|                                                      |  |                         |         |      |  |               |         |    
|                                                      |  |                         |         |      |  | (in millions) |         |     |  | 
|Equipment purchases                                   |  |                         | 4,569.3 |      |  |               | 4,697.1 |     |  |  | 6,308.2 |  |  |  | 181.8 | 
|Land and building purchases                           |  |                         | 516.8   |      |  |               | 1,144.4 |     |  |  | 1,117.4 |  |  |  | 32.2  | 
|Construction in progress and
prepayment for equipment |  |                         | 473.3   |      |  |               |        |     |  |  | 654.9   |  |  |  | 18.9  | 

We budget approximately NT$3,000 million to NT$5,000 million for our
capital expenditures for 2003. We may adjust the amount of our capital
expenditures upward or downward based on cash flow from operations, the
progress of our capital projects and market conditions.

Litigation

We are not involved in any material litigation or other proceedings.

32



---



##### Table of Contents



C.     Organizational Structure

For the year ended December 31, 2000, Siliconware Investment was our only
consolidated subsidiary. For the years ended December 31, 2001 and 2002,
Siliconware Investment and SPIL (B.V.I.) Holding Limited were our consolidated
subsidiaries. As of December 31, 2002, we own 100% and 100% equity interest in
Siliconware Investment and SPIL (B.V.I.) Holding Limited, respectively.

The following table sets forth certain information as of December 31, 2002
regarding certain companies in which we held equity interests and the principal
business of each such entity.

|                                         |  |                                                                  |  |                                    |  |               |  |          |        |  
|---------------------------------------- |  | ---------------------------------------------------------------- |  | ---------------------------------- |  | ------------- |  | -------- | ------ | -
|                                         |  |                                                                  |  |                                    |  | Total Paid-in |  | Direct  
|                                         |  |                                                                  |  |                                    |  | Capital of    |  | Equity  
|Company                                  |  | Main Activities                                                  |  | Location                           |  | such Entity   |  | Interest
|                                         |  |                                                                  |  |                                    |  |               |  |         
|                                         |  |                                                                  |  |                                    |  | (in millions) |  |          |        |  
|Siliconware U.S.A. Inc                   |  | Sale agent                                                       |  | San Jose, CA, USA                  |  | US$1.3        |  |          | 100.00 | %
|SPIL (Cayman) Holding
Limited            |  | Investment activities                                            |  | Cayman Islands, British
West India |  | US$6.6        |  |          | 100.00 | %
|SPIL (B.V.I.) Holding
Limited            |  | Investment activities                                            |  | British Virgin Islands             |  | US$34.3       |  |          | 100.00 | %
|Slilconware Technology (Suzhou)
Limited  |  | Design and manufacture of
transistor and electronic
components   |  | Suzhou Jiangsu, China              |  | RMB$53.8      |  |          | 100.00 | %
|Siliconware Investment Company
Ltd       |  | Investment activities                                            |  | Taipei, Taiwan                     |  | NT$1,770.0    |  |          | 100.00 | %
|Taiwan Hi-tech
Corporation               |  | Plating of integrated circuit
lead frame                         |  | Hsin-Chu, Taiwan                   |  | NT$246.6      |  |          | 38.75  | %
|Sigurd Microelectronics Corp.            |  | Testing and assembly of
integrated circuits                      |  | Hsin-Chu, Taiwan                   |  | NT$910.9      |  |          | 33.58  | %
|Artest Corporation                       |  | Testing and development of
integrated circuits                   |  | Sunnyvale, CA, USA                 |  | US$15.6       |  |          | 30.09  | %
|ChipMOS Technologies Inc                 |  | Testing and assembly of
integrated circuits                      |  | Hsin-Chu, Taiwan                   |  | NT$8,872.3    |  |          | 28.73  | %
|Double Win Enterprise Co., Ltd.          |  | PCB, SMT process and hand
insert                                 |  | Taoyuan, Taiwan                    |  | NT$350.0      |  |          | 24.14  | %
|Phoenix Precision Technology
Corporation |  | Researching, developing,
manufacturing and selling
BGA substrate |  | Hsin-Chu, Taiwan                   |  | NT$ 3,868.9   |  |          | 17.48  | %
|Universal Communication
Technology Inc   |  | IC testing                                                       |  | Hsin-Chu, Taiwan                   |  | NT$770.0      |  |          | 42.82  | %
|ThaiLin Technology Corporation           |  | IC memory testing                                                |  | Hsin-Chu, Taiwan                   |  | NT$2,000.0    |  |          | 5.43   | %

D.     Property, Plants and Equipment

We provide packaging services through our three facilities in Taichung,
Taiwan. In addition, we provide test services through our facilities in
Hsin-Chu and Taichung, Taiwan. We own all of our packaging and test facilities.

33



---



##### Table of Contents



The following table shows the location, size and wirebonding or test
capacity of each of our facilities and the property on which each facility is
located as of December 31, 2001.

|             |  |                  |  |                    |  |                    |  |                  |  |  |  |                     |  |           |  | 
|------------ |  | ---------------- |  | ------------------ |  | ------------------ |  | ---------------- |  |  |  | ------------------- |  | --------- |  | 
|             |  | Location         |  |                    |  |                    |  |                  |  |  |  | Wirebonding or Test
|Facility     |  | of Facility      |  | Size of Facility   |  | Size of Land       |  | Capacity        
|             |  |                  |  |                    |  |                    |  |                 
|Facility I   |  | Taichung, Taiwan |  | 6,755squaremeters  |  | 7,881squaremeters  |  | 264wirebonders  
|Facility II  |  | Taichung, Taiwan |  | 85,338squaremeters |  | 31,502squaremeters |  | 1,750wirebonders
|             |  |                  |  |                    |  |                    |  |                  |  |  |  |                     |  | 38testers
|Facility III |  | Taichung, Taiwan |  | 77,210squaremeters |  | 39,289squaremeters |  | 467wirebonders  
|Facility IV  |  | Hsin-Chu, Taiwan |  | 33,535squaremeters |  | 12,773squaremeters |  | 160testers      

In 2002, we completed the construction of our third facility in Taichung,
which consists of two separate plants with a combined facility size of 77,210
square meters. This facility has been used for test and 12-inch wafer bumping
and certain other limited assembly purposes. Both plants at our third Taichung
facility can become fully operational in response to increased market demand.
We also have plans to expand our operations to the Peoples Republic of China
in anticipation of future market demand sourced from our existing and new
customers based in China. Many of our customers and competitors have announced
plans to begin operation in the Peoples Republic of China. We believe that, as
a leading packaging and test company, we are in a competitive position to gain
a significant market share in this developing market. On December 24, 2001, we
obtained approval from the Investment Commission of the ROC Ministry of
Economic Affairs to invest up to US$20 million in a transistor manufacturing
project in Suzhou, PRC. As of December 31, 2002, we had established a
subsidiary named Siliconware Technology (Suzhou) Limited, and had invested a
total of US$6.5 million in the construction of our plant in Suzhou as of
December 31, 2002, the construction of which began on April 23, 2002.

Our principal executive offices are located at Facility II in Taichung,
Taiwan. Our research and development activities are also located at this
facility.

34



---



##### Table of Contents






Item 5. Operating and Financial Review and Prospects

Unless stated otherwise, the discussion and analysis of our financial
condition and results of operations in this section apply to our financial
information as prepared according to ROC GAAP. You should read the following
discussion of our financial condition and results of operations together with
the financial statements and the notes to these statements included in this
annual report. Our financial statements are prepared according to ROC GAAP,
which differ from US GAAP. For a discussion of the material differences, see
note 26 to our financial statements included elsewhere in this annual report.

A.     Operating Results

Overview

We are one of the worlds leading independent providers of semiconductor
packaging services. We also provide semiconductor test services to our
customers. We offer a complete portfolio of packaging and test solutions,
including advanced lead-frame and substrate packages such as flip chip
packages, and test services for logic, mixed signal and embedded memory
devices. We also offer our customers complete turnkey solutions, including
packaging, test and direct shipment of semiconductor devices to end users
designated by our customers.

The semiconductor industry has experienced moderate recovery in 2002. As a
result, in 2002 we recorded an operating income of NT$546.7 million (US$15.8
million), which was offset by net non-operating loss of NT$266.8 million
(US$7.7 million) in 2002. Our operating income was mainly attributable to
increases in provisions of more advanced packaging services and testing of more
complex, high-performance semiconductors products.

Intense competition in the semiconductor industry worldwide resulted in
decreases in the average selling prices of our products. We expect that average
selling prices for most of our semiconductor packages to continue to decline in
the future. A decline in average selling prices of our semiconductor packages,
coupled with high depreciation cost resulting from our purchase of additional
equipment during the previous periods, if not offset by reductions in the other
cost of producing those packages, would decrease our gross margins.

To counter the effects of decreasing average selling prices, we will
continue to attempt to:



| |  |  | 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.                                        

We do not maintain reserves for cancellations or variations in customer
orders.

35



---



##### Table of Contents



Our Acquisition of Siliconware Corp.

On December 30, 2000, we acquired Siliconware Corp., in which we directly
and indirectly owned 40.1% immediately before the acquisition. We issued an
aggregate of 173.71 million new shares to acquire the remaining equity interest
in Siliconware Corp., 18.55 million of which were issued to Siliconware
Investment Company Ltd., a consolidated entity. Immediately after the
acquisition, Siliconware Investment held a total of 23.59 million of our
shares. Prior to the acquisition, Siliconware Corp. held an aggregate of 0.30
million of our shares, which were cancelled upon the consummation of the
acquisition.

Prior to our acquisition of Siliconware Corp., we generally outsourced
test services to Siliconware Corp. When we outsourced test services to
Siliconware Corp., we recognized the amount charged to our customers for test
services provided by Siliconware Corp. plus a small handling charge as revenues
and we recorded the fees charged by Siliconware Corp. as cost of goods sold.
Siliconware Corp. charged us for their services based on the specific test and
the time, usually measured in seconds, to run a test, taking into account the
complexity of the semiconductor device and the customers test program. Since
the completion of the acquisition, we have continued to recognize similar
revenue streams, consisting of charges to our customers for test services,
while eliminating the incurrence of cost of goods sold attributable to
Siliconware Corp.s test services to our company that would have been a result
of the previous out-sourcing of test services.

Consolidation

Under ROC GAAP, we are required to consolidate the financial results of
any subsidiary whose total assets or net sales exceed 10% of our unconsolidated
total assets or net sales, as the case may be. In addition, the ROC Securities
and Futures Commission requires us to consolidate the financial statements of
each subsidiary whose total assets or net sales exceed 3% of our unconsolidated
total assets or net sales, as the case may be, if the total assets or net sales
of all unconsolidated subsidiaries exceed 30% of our unconsolidated total
assets or net sales, as the case may be. We are only required to prepare our
consolidated financial statements on an annual basis. For 2000, Siliconware
Investment was our only consolidated subsidiary. For 2001, we also consolidated
the financial results of SPIL (B.V.I.) Holding Limited, which owns a 100%
equity interest in Siliconware U.S.A Inc., our sales entity in the United
States. For 2002, we consolidated five subsidiaries: Siliconware Investment
Company Ltd., SPIL (B.V.I.) Holding Limited, Siliconware U.S.A. Inc., SPIL
(Cayman) Holding Limited and Siliconware Technology (Suzhou) Limited, each of
which we own a 100% equity interest.

Strategic Equity Interest in ChipMOS

As of December 31, 2002, we owned a 28.73% equity interest in ChipMOS, a
semiconductor packaging and test and LCD driver integrated circuit
manufacturing company, located in Hsin-Chu, Taiwan.

We entered into a joint venture agreement with Mosel Vitelic Inc. in July
1997 to establish ChipMOS. We contributed NT$1,400.0 million in the form of
cash and NT$100.0 million in the form of packaging technology know-how in
exchange for a 30% equity interest in ChipMOS. Mosel Vitelic received a 48%
interest in ChipMOS and the remaining ownership interests in

36



---



##### Table of Contents



ChipMOS were allocated to several institutions and individuals selected by
Mosel Vitelic. We are entitled to appoint two out of the seven-member board of
directors of ChipMOS.

Pursuant to the joint venture agreement, we must maintain a minimum 18%
equity interest in ChipMOS for five years from the date of any initial public
listing of ChipMOS. If ChipMOS requires guarantees of its indebtedness to
obtain financing, we and Mosel Vitelic are required under the joint venture
agreement to provide these guarantees in the ratio of 30% and 70%,
respectively. As of December 31, 2002, we had not provided any guarantees with
respect to ChipMOSs indebtedness.

In 2000, our investment income from ChipMOS was NT$401.9 million, which
constituted 12.5% of our net income, respectively. In 2001, however, we
recorded an investment loss of NT$436.3 million for our investment in ChipMOS,
which constituted 36.9% of our net loss in 2001. Because ChipMOS did not
provide its financial statements to us in time to enable us to recognize its
financial results for the current period, effective from years subsequent to
the year ended December 31, 2001, the Securities and Futures Commission of the
ROC allows us to delay the recognition of the income (loss) of ChipMOS in our
financial results until a subsequent year. Thus, we recorded no investment
income (loss) of ChipMOS in our financial results under ROC GAAP for 2002. The
unaudit financial results of ChipMOS in 2002 were available to us in the first
quarter of 2003, and we recorded an investment loss amounting to NT$365.7
million (UST$10.5 million). This investment loss was included in our financial
results for the three months ended March 31, 2003. If this investment loss had
been included in our results for 2002, our non-operating income (loss), income
(loss) before income tax and net income for 2002 would have been reduced by the
same amount and our basis and diluted earnings (loss) per share in 2002 would
have been reduced by NT$0.2 (US$0.01). Under US GAAP, however, there is no
provision that allow us to delay recognition of ChipMOSs income or loss. In
2002, our investment loss from ChipMOS was NT$342.2 million (US$9.9 million)
under US GAAP. If ChipMOSs operating results or financial condition do not
improve or further deteriorate, our future non-operating results would be
seriously harmed.

Equity Interest in CAESAR

CAESAR was dissolved on December 26, 2001. At the time of its dissolution,
we owned a 34.65% equity interest in CAESAR, the financial results of which
were accounted for under the equity method. We incurred an investment loss of
NT$715.5 million for 2001 for CAESAR. Under ROC GAAP, we were required to
recognize a one-time write-off of our investment loss on the day of dissolution
subject to further write off or reversal, depending on the residual value of
CAESAR upon the completion of the liquidation procedure, which was still
continuing as of the date of this annual report.

Under US GAAP, Statement of Financial Accounting Standards, or SFAS, No.
121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of, we are required to review the carrying value of an
asset for impairment whenever events or changes in circumstances indicate that
the carrying amount of an asset might not be recoverable. When such an event
occurs, we estimate the future undiscounted cash flows expected to result from
the use of the asset and our eventual disposition. If the undiscounted expected
future cash flows are less than the carrying amount of the asset, an impairment
loss is recognized. Accordingly, US GAAP has also required that an impairment
review be performed for our

37



---



##### Table of Contents



investment in CAESAR in 2001 and an impairment loss could also be
recognized for the amount not recoverable.

Change in Product Mix

Since January 1, 1998, our leadframe products including quad flat packages
have made a substantial contribution to our net operating revenues. However,
substrate packages have been accounting for an increasing proportion of our net
operating revenues. We expect this trend to continue in the future and, we also
expect substrate packages to become our highest-revenue product.

The following tables show, for the periods indicated, the amount of our
packaging and test revenues by product type (which are more fully described in
Item 4. Information on the CompanyB. Business OverviewOur Packaging and
Test Services) and each products revenues as a percentage of our total net
operating revenues:

|                         |                              |  |                         |        |      |  |                                                   |       |   |  |           |        |                |  |      |       |  |  |       |        |  |  |      |       | 
|------------------------ | ---------------------------- |  | ----------------------- | ------ | ---- |  | ------------------------------------------------- | ----- | - |  | --------- | ------ | -------------- |  | ---- | ----- |  |  | ----- | ------ |  |  | ---- | ----- | 
|                         |                              |  | Year ended December 31,
|                         |                              |  |                        
|                         |                              |  | 2000                    |        | 2001 |  | 2002                                             
|                         |                              |  |                         |        |      |  |                                                  
|                         |                              |  | Revenues                |        | %    |  | Revenues                                          |       | % |  | Revenues  |        | %             
|                         |                              |  |                         |        |      |  |                                                   |       |   |  |           |        |               
|                         |                              |  |                         |        |      |  |                                                   |       |   |  | (audited) |        | (consolidated) |  |      |       |  |  |       |        | 
|                         |                              |  |                         |        |      |  | (revenues in NT$ millions except for percentages) |       |   |  |          
|Quad flat packages       |                              |  | 6,945                   |        |      |  | 36.9                                              |       |   |  | 5,240     |        |                |  | 31.7 |       |  |  | 7,659 |        |  |  | 34.3 |      
|Small outline packages   |                              |  | 4,002                   |        |      |  | 21.2                                              |       |   |  | 2,507     |        |                |  | 15.1 |       |  |  | 2,744 |        |  |  | 12.3 |      
|Ball grid array packages |                              |  | 5,845                   |        |      |  | 31.0                                              |       |   |  | 6,460     |        |                |  | 39.1 |       |  |  | 8,576 |        |  |  | 38.5 |      
|Other packages           |                              |  | 505                     |        |      |  | 2.7                                               |       |   |  | 290       |        |                |  | 1.8  |       |  |  | 677   |        |  |  | 3.0  |      
|Test and others          |                              |  | 1,549                   |        |      |  | 8.2                                               |       |   |  | 2,033     |        |                |  | 12.3 |       |  |  | 2,643 |        |  |  | 11.9 |      
|                         |                              |  |                         |        |      |  |                                                   |       |   |  |           |        |                |  |      |       |  |  |       |        |  |  |      |      
|                         | Total net operating revenues |  |                         | 18,846 |      |  |                                                   | 100.0 |   |  |           | 16,530 |                |  |      | 100.0 |  |  |       | 22,299 |  |  |      | 100.0 | 
|                         |                              |  |                         |        |      |  |                                                   |       |   |  |           |        |                |  |      |       |  |  |       |        |  |  |      |      

Expansion and Utilization Rate

In 2000 we expanded our packaging capacity significantly, increasing the
number of wire bonders to 1,829, and added test capacity to our operations
through our acquisition of Siliconware Corp., through which acquisition we
acquired 140 testers. However, in 2001, our capacity utilization rate declined
significantly due to a downturn in the semiconductor industry. Because our
capacity utilization rates in 2001 and 2002 were lower than our capacity
utilization rate in 2000, we have expanded less aggressively than we did in
2000. Our wire bonders and testers slightly increased to 2,481 and 198,
respectively, as of December 31, 2002, from2,056 and 167, respectively, as of
December 31, 2001, following an increase from 1,829 and 140, respectively, as
of December 31, 2000. Our operating results are characterized by relatively
high fixed costs. For example, a wire bonder typically costs between US$80,000
and US$85,000. As a result, capacity utilization rates can significantly affect
margins as the unit cost of packaging and test services generally decreases as
fixed charges, including depreciation expenses on our equipment, are allocated
over a larger number of units. Our utilization rates have varied from period to
period as we have expanded our production capacity. We have been successful in
minimizing the industry-wide fluctuation in capacity utilization rates by
deploying flexible packaging equipment for use in the production of different
packages and by utilizing our test equipment also for the probing purposes. Our
ability to maintain or enhance our margins will continue to depend in part on
our ability to effectively manage capacity utilization rates. The capacity
utilization of our facilities

38



---



##### Table of Contents



decreased significantly in the first eight months of 2001 but has since
slightly increased through 2002.

Applications of Critical Accounting Policies

The discussion and analysis of our financial condition and results of
operations are based upon our consolidated financial statements included
elsewhere in this annual report, which have been prepared in accordance with
ROC GAAP. ROC GAAP vary in certain significant respects from US GAAP. These
differences and their effects on our financial statements are described in note
26 to our audited consolidated financial statements included in this annual
report. The preparation of our audited consolidated financial statements
requires us to make estimates and judgments that affect the reported amounts of
assets and liabilities, revenues and expenses, and related disclosure of
contingent assets and liabilities. On an on-going basis, we evaluate our
estimates, including those related to revenue recognition, accounts receivable
and allowance for doubtful accounts, inventory, marketable securities, deferred
tax asset valuation allowance, employee bonuses, impairment of long-live assets
and goodwill impairment. We base our estimates on historical experience and on
various other assumptions that are believed to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent
from other sources. Actual results may differ from these estimates using
different assumptions or conditions.

We believe the following critical accounting policies involve significant
judgments and estimates used in the preparation of our audited consolidated
financial statements.

Revenue recognition

We principally provide assembly and test services of integrated circuits,
which may be assembly only, test only or turnkey solutions. Revenues are
recognized when services have been provided based on transaction terms and when
collectibility is reasonably assured. We also record sales allowances for
estimated pricing discounts and sales returns. These estimates are based on
historical experiences and the managements judgment. Actual returns and
discounts may differ from the estimates.

Accounts receivable and allowances for doubtful accounts

The allowances for doubtful accounts are provided based on evaluations of
collectibility, aging analyses of the accounts and the managements judgment. A
considerable amount of judgment is required in assessing the ultimate
realization of these receivable including the current credit-worthiness and the
past collection history of each customer. If the financial conditions of our
customers were to deteriorate, resulting in an impairment of their ability to
make payments, additional allowances may be recorded.

Inventory reserves

In general, raw materials are purchased based on the customers forecasted
demand. If our customers change their forecasted requirements and we are unable
to cancel our excess raw material orders, we would experience a build-up in our
raw material inventory. We could either seek to recover the cost of the
materials from our customers or utilize the inventory in production.

39



---



##### Table of Contents



However, we may not be successful in recovering the cost from our customers
or in using such excess inventory in production, which we would consider as
part of our reserve estimate. Our reserve for excess and obsolete inventory is
based on forecasted demand we receive from our customers. When a determination
is made that the inventory would not be utilized in production, it is
written-off and disposed of. Actual demand may differ from our forecast and may
result in additional reserve.

We also recognize losses from declines in the market value of inventories.
The market value of raw materials and supplies are determined on the basis of
replacement cost. The market value of finished goods and work in progress are
determined on the basis of net realizable value. If the market value of
inventories further drops, additional loss may be recorded.

Impairment of long-lived assets

We review equity investments and other long-lived assets for the purpose
of determining the amount of 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 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.

We evaluate our equity investments for impairment due to declines in the
market value that are considered other than temporary. Such evaluations include
an assessment of general economic and company-specific considerations, such as
customer forecasts and regularly updated projections of operating results. In
the event of a determination that a decline in market value is non-temporary,
loss is recognized in the current years income. The evaluation of whether a
decline in market value is other than temporary requires considerable
management judgment. For an investee who resolves to liquidate or dissolve, a
one-time write-off would be recorded to the extent that the estimated proceeds
would be obtained and the amount of investment balance would not be recovered.
During 2002, as several of our investees accounted for under the equity method
incurred significant losses since the dates of our investments and there is no
indication of recovery in the near future, we concluded that the impairment
loss was other than temporary. Accordingly, in 2002, we recorded impairment
charges totaling NT$212.6 million (US$6.1 million) on these long-term equity
investments and wrote off the carrying value of the investments to their fair
value, which approximated the amount of underlying equity in their net assets
as (1) there is no quoted market value to determine their fair value; and (2)
based on our evaluation, the carrying value of the assets and liabilities of
the investees approximated their fair value. If the fair value of the investees
were lower than their carrying value, additional impairment may be recorded.

In 2002, we also recognized an impairment charge of NT$17.2 million
(US$0.5 million) for test and packaging assets to be disposed of to reduce the
carrying value of the assets to their estimated fair value less cost to sell.
The fair value of the assets to be disposed of was determined by the estimated
net realizable value of the assets.

40



---



##### Table of Contents



Provision for income taxes and deferred tax asset valuation allowances

As of December 31, 2002, we had approximately NT$1,213.7 million (US$35.0
million) of net deferred tax assets related principally to investment tax
credits that expire at various dates through 2006, the unrealized loss on
long-term investments, unrealized foreign currency exchange loss arising from
bonds payable and loss carryforward. Valuation allowance was provided to reduce
the deferred tax assets to the amount that we believe is more likely than not
to be realized. We have considered future taxable income and ongoing prudent
and feasible tax planning strategies in assessing the need for the valuation
allowances. In the event we determined that we would be able to realize our
deferred tax assets in the future in excess of our net recorded amount, an
adjustment to our deferred tax assets would increase income in the period such
determination was made. Similarly, should we determine that we would not be
able to realize all or part of our net deferred tax assets in the future, an
adjustment of our deferred tax assets would be charged to income in the period
such determination was made.

Employee bonuses

Some of our employees are entitled to bonuses in accordance with
applicable provisions of our articles of incorporation. Employee bonuses are
determined at 10% of distributable retained earnings. Distributable retained
earnings are calculated as retained earnings after various reserves are made in
accordance with ROC law and our articles of incorporation and after
appropriation for remuneration to directors are made. Employee bonuses may be
granted in cash, shares or a combination of both. Under ROC GAAP, such bonuses
are appropriated from retained earnings during the period the shareholders
approval is obtained. If such employee bonuses are settled through the issuance
of our shares, the amount charged against retained earnings would be based on
the par value of the common shares issued. Under US GAAP, the employee bonus
expense is initially accrued at the end of the period when services are
rendered, at 10% of the distributable retained earnings. 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.

Goodwill

Goodwill arising from business combination is recognized under US GAAP as
the difference between the fair market value of shares issued and the fair
market value of net assets acquired. Before the adoption of Statement of
Financial Accounting Standards, or SFAS, No. 142 on January 1, 2002, goodwill
is amortized on a straight-line basis over its economic useful life. Actual
life may differ from estimated life and may result in additional amortization
expenses. Under US GAAP, we also assess the impairment of goodwill whenever
events or changes in circumstances indicate that the carrying value may not be
recoverable. Goodwill amounted to, after amortization, NT$4,873.5 million as of
December 31, 2001 under US GAAP. We did not recognize any goodwill under ROC
GAAP.

Effective January 1, 2002, SFAS No. 142 requires that we cease
amortization of goodwill and perform an impairment review upon adoption and at
least annually thereafter. Since we operate on an integrated basis, we have
only one reporting unit. Based on the comparison of the fair value and carrying
value of our company, we concluded that goodwill was not impaired as of the
adoption of SFAS No. 142 and as of December 31, 2002.

41



---



##### Table of Contents



Description of Revenue and Cost Items

Net operating revenues

We generate our net operating revenues primarily from semiconductor
packaging and test operations. Net operating revenues from our semiconductor
packaging activities consist of our service fees and cost of raw materials we
purchase to provide semiconductor packaging services. Our net operating
revenues do not include the cost of semiconductors, which are our customers
properties.

We price our packaging products on a per unit basis taking into account
the complexity of the product, the prevailing market conditions, the order
size, the strength and history of our relationship with the customer and our
capacity utilization.

We charge our test services based on the specific test and the time,
usually measured in seconds, to run a test taking into account the complexity
of the semiconductor device and the customers test program.

We also generate net operating revenues from the provision of
semiconductor turnkey services, which include packaging, test and drop shipment
services.

Net operating revenues are recognized when services are rendered and the
payment is realized or realizable. Our customers are generally invoiced at the
time services are rendered, with varying terms of credit between 30 and 90 days
from the time of billing.

Cost of Goods Sold

Our cost of goods sold consists principally of:



| |  |  | 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.

Due to the growth of substrate packaging products, our raw material costs
as a percentage of total cost of goods sold have increased significantly
because of high costs of substrate. For 2000, 2001 and 2002, raw materials were
approximately 41.9%, 43.1% and 44.1%, respectively, of our net operating
revenues, while substrates accounted for approximately 40.6%, 51.2% and 45.7%,
respectively, of our raw material costs. We expect that raw material costs will
continue to constitute an increasingly large portion of our cost of goods sold.

Due to our capacity expansion, depreciation expense has increased
significantly. For 2000, 2001 and 2002, depreciation, included in overhead, was
NT$2,051.6 million, NT$3,895.2 million and NT$4,450.2 million (US$128.2
million), respectively, and was approximately 13.8%, 25.8% and 22.0%,
respectively, of our cost of goods sold. The increases in depreciation expenses
in 2000,

42



---



##### Table of Contents



2001 and 2002 were the result of putting into operation additional 498,
233 and 425 wire bonders during 2000, 2001 and 2002, respectively. Increasing
depreciation expense increases our cost of goods sold and decreases our gross
profit and gross margin. Although we may not expand our packaging capacity as
aggressively as we did before the recent downturn in the semiconductor
industry, we expect our depreciation costs to increase in absolute terms in the
future.

Operating Expenses

Our operating expenses consist of the following:



| |  |  | Selling expenses. Selling expenses consist primarily of
salaries and related personnel expenses and other marketing
expenses.                                                                                                                                                                                                                                                                                                                                                                                           
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Administrative expenses. 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.                                                                                                                                                                                                                                                                            
|
| |  |  | 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

The following table shows some of our results of operations data as a
percentage of our net operating revenues for the periods indicated.

|                                                      |                                   |  |                         |     |                |  |       |     |  |  |       |     | 
|----------------------------------------------------- | --------------------------------- |  | ----------------------- | --- | -------------- |  | ----- | --- |  |  | ----- | --- | 
|                                                      |                                   |  | Year Ended December 31,
|                                                      |                                   |  |                        
|                                                      |                                   |  | 2000                    |     | 2001           |  | 2002 
|                                                      |                                   |  |                         |     |                |  |      
|                                                      |                                   |  | (audited)               |     | (consolidated) |  |       |     | 
|                                                      |                                   |  | %                       |     | %              |  | %    
|Net operating revenues                                |                                   |  | 100.0                   |     |                |  | 100.0 |     |  |  | 100.0 |    
|Cost of goods sold                                    |                                   |  | 79.1                    |     |                |  | 91.4  |     |  |  | 90.6  |    
|                                                      |                                   |  |                         |     |                |  |       |     |  |  |       |    
|Gross profit                                          |                                   |  | 20.9                    |     |                |  | 8.6   |     |  |  | 9.4   |    
|                                                      |                                   |  |                         |     |                |  |       |     |  |  |       |    
|Operating expenses:                                   |                                   |  |                         |     |                |  |       |     |  |  |       |    
|                                                      | Selling expenses                  |  |                         | 1.9 |                |  |       | 1.5 |  |  |       | 1.1 | 
|                                                      | Administrative expenses           |  |                         | 2.0 |                |  |       | 4.1 |  |  |       | 3.5 | 
|                                                      | Research and development expenses |  |                         | 1.4 |                |  |       | 3.0 |  |  |       | 2.3 | 
|                                                      |                                   |  |                         |     |                |  |       |     |  |  |       |    
|                                                      |                                   |  | 5.3                     |     |                |  | 8.6   |     |  |  | 6.9   |    
|                                                      |                                   |  |                         |     |                |  |       |     |  |  |       |    
|Operating income (loss)                               |                                   |  | 15.6                    |     |                |  | 0     |     |  |  | 2.5   |    
|                                                      |                                   |  |                         |     |                |  |       |     |  |  |       |    
|Investment income (loss)                              |                                   |  | 1.0                     |     |                |  | (7.2  | )   |  |  | 0.3   |    
|Net non-operating income (loss)                       |                                   |  | 0.4                     |     |                |  | (1.7  | )   |  |  | (1.5  | )  
|                                                      |                                   |  |                         |     |                |  |       |     |  |  |       |    
|Income (loss) before income tax
and minority interest |                                   |  | 17.0                    |     |                |  | (8.9  | )   |  |  | 1.3   |    
|Income tax benefit (expense)                          |                                   |  | 0.1                     |     |                |  | 1.7   |     |  |  | 0.6   |    
|                                                      |                                   |  |                         |     |                |  |       |     |  |  |       |    
|Net income (loss)                                     |                                   |  | 17.1                    |     |                |  | (7.2  | )   |  |  | 1.9   |    
|                                                      |                                   |  |                         |     |                |  |       |     |  |  |       |    

43



---



##### Table of Contents



For the Years Ended December 31, 2001 and 2002

Net operating revenues.Net operating revenues increased by 34.9% from
NT$16,530.4 million in 2001 to NT$22,298.5 million (US$642.6 million) in 2002.
This increase was primarily due to increases in the sales of ball grid array
packages and quad flat packages, and our test revenue.

Ball grid array package sales increased by 32.8% from NT$6,460.0 million
in 2001 to NT$8,575.9 million (US$247.1 million) in 2002. The increase in the
sales of ball grid array packages was attributable to increases in unit sales
of ball grid array package products. Unit sales of ball grid array packages
increased by 32.5% from 117.4 million units in 2001 to155.5 million units in
2002. In 2002, ball grid array package products accounted for 38.5% of our net
operating revenues, down from 39.1% in 2001. We, however, expect sales of ball
grid array packages to continue to constitute a large proportion of our net
operating revenues for the foreseeable future.

Quad flat package sales increased by 46.2% from NT$5,239.8 million in 2001
to NT$7,659.5 million (US$220.7 million) in 2002. The increase in sales of our
quad flat packages was attributable to an increase in unit sales, which was
slightly offset by a decrease of 7.8% in the average selling price of quad flat
packages products. Unit sales of quad flat packages increased by 58.7% from
358.8 million units in 2001 to 569.3 million units in 2002. In 2001, quad flat
package products accounted for 31.7% of our net operating revenues, up to 34.3%
in 2002.

Sales of small outline packages increased by 9.4% from NT$2,507.3 million
in 2001 to NT$2,743.7 million (US$79.1 million) in 2002. The increase in sales
of our small outline packages was attributable to an increase in unit sales,
which was partially offset by a decrease of 15.6% in average selling price of
these products. Unit sales of small outline packages increased by 29.5% from
358.2 million units in 2001 to 463.9 million units in 2002. In 2001, small
outline package products accounted for 15.2% of our net operating revenues,
down to 12.3% in 2002.

Gross profit and gross margin.Our gross profit increased by 47.0% from
NT$1,420.9 million in 2001 to NT$2,088.6 million (US$60.2 million) in 2002. Our
gross margin (gross profit as a percentage of net operating revenues) increased
from 8.6% in 2001 to 9.4% in 2002. Our cost of goods sold increased by 33.8%
from NT$15,109.5 million in 2001 to NT$20,209.9 million (US$582.4 million) in
2002, primarily due to increases in costs of raw materials for our increased
production of ball grid array, small outline and quad flat packages and higher
depreciation cost from year to year as a result of our additional purchase of
wire bonders and testers. We experienced increases in gross profit and gross
margin in 2002 because of a significant increase in net operating revenues,
resulting from increases in sales of quad flat packages, ball grid array
packages and small outline packages, despite a relatively minor decrease in the
average selling price of quad flat packages and small outline packages.

Operating expenses.Operating expenses increased by 8.0% from NT$1,427.9
million in 2001 to NT$1,541.9 million (US$44.4 million) in 2002. Operating
expenses as a percentage of net operating revenues decreased from 8.6% in 2001
to 6.9% in 2002.

44



---



##### Table of Contents





| |  | Selling expenses. Selling expenses increased by 4.2% from NT$245.1
million in 2001 to NT$255.5 million (US$7.4 million) in 2002 due to
additional hiring of sales personnel.
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | Administrative expenses.Administrative expenses increased by
15.2% from NT$676.7 million in 2001 to NT$779.4 million (US$22.5
million) in 2002 due to:                      



| |  |  | additional hiring of supporting personnels; and                                                                                  
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | increases in depreciation due to the purchase and
enhancement of computer systems and equipment used for
administrative purposes.



| |  | Research and development expenses.Research and development
expenses slightly increased by 0.2% from NT$506.1 million in 2001 to
NT$507.0 million (US$16.4 million) in 2002.
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Operating income and operating margin.We recorded an operating loss of
NT$7.0 million and a negative operating margin (operating income as a
percentage of net operating revenues) in 2001 and generated operating income of
NT$546.7million (US$15.8 million) and operating margin of 2.5% in 2002. The
increase in operating income was primarily due to an increase in our gross
profit mentioned above. The increase in operating margin was primarily due to
decreases of selling expenses and research and development expenses as
percentages of net operation revenues.

Net non-operating loss.Our net non-operating loss decreased by 81.9% from
NT$1,474.6 million in 2001 to NT$266.8 million (US$7.7 million) in 2002. The
larger net non-operating loss in 2001 was primarily due to an investment loss
of NT$1,198.8 million (US$34.3 million) attributable principally to investment
losses in CAESAR and ChipMOS. In 2001, we recorded an investment loss of
NT$436.3 million for our investment in ChipMOS, which constituted 36.9% of our
net loss in 2001. Because ChipMOS did not provide its financial statements to
us in time to enable us to recognize its financial results for the current
period, effective from the fiscal years subsequent to the year ended December
31, 2001, the Securities and Futures Commission of the ROC allows us to delay
the recognition of the income (loss) of ChipMOS in our financial results until
a subsequent year. Thus, we recorded no investment income (loss) of ChipMOS in
our financial results under ROC GAAP for 2002. The unaudit financial results of
ChipMOS in 2002 were available to us in the first quarter of 2003, and we
recorded an investment loss amounting to NT$365.7 million (UST$10.5 million).
This investment loss was included in our financial results for the three months
ended March 31, 2003. If this investment loss had been included in our results
for 2002, our non-operating income (loss) for 2002 would have been reduced by
the same amount. Under US GAAP, however, there is no provision that allow us
to delay recognition of ChipMOSs income or loss.

Income tax benefit.We recognized an income tax benefit of NT$282.6
million and NT$145.4 million (US$4.2 million) in 2001 and 2002, respectively,
because of the deferred tax benefit on certain tax credits primarily resulting
from the purchases of certain machinery and equipment, expenditures on research
and development and personnel training. A valuation allowance has been provided
against the deferred tax assets to the extent that the tax benefit will more
likely not be realized.

45



---



##### Table of Contents



Net Income.As a result of the factors discussed above, we recorded a net
loss of NT$1,183.2 million in 2001, compared with a net income of NT$425.2
million (US$12.3 million) in 2002. As stated above, we recorded no investment
income (loss) in ChipMOS under ROC GAAP for 2002. If such loss of NT$365.7
million (UST$10.5 million) were included in our financial result for 2002, our
net income for 2002 would have been reduced by the same amount.

For the Years Ended December 31, 2000 and 2001

Net operating revenues.Net operating revenues decreased by 12.3% from
NT$18,845.8 million in 2000 to NT$16,530.4 million in 2001, resulting from the
general downturn in the semiconductor industry since the beginning of 2001. The
sales of our quad flat packages and small outline packages suffered more
severely in 2001 primarily because of the increasing demand for more advanced
ball grid array package products. The decrease in our net operating revenues
resulting from the decreased sales of quad flat and small outline packages was
slightly offset by the stronger sales of our ball grid array packages between
these two periods, resulting from an increase in the unit sales of ball grid
array packages.

Ball grid array package sales increased by 10.5% from NT$5,844.7 million
in 2000 to NT$6,460.0 million in 2001. The increase in the sales of ball grid
array packages was attributable to increases in unit sales of these products.
Unit sales of ball grid array packages increased by12.9% from 104.0 million
units in 2000 to 117.4 million units in 2001. In 2001, ball grid array package
products accounted for 39.1% of our net operating revenues, up from 31.0% in
2000.

Quad flat package sales decreased by 24.6% from NT$6,945.1 million in 2000
to NT$5,239.8 million in 2001. The decrease in sales of our quad flat packages
was attributable to decreases in both unit sales and average selling price of
these products. Unit sales of quad flat packages decreased by 13.0% from 412.6
million units in 2000 to 358.8 million units in 2001. In addition, in 2001, the
average selling price of our quad flat package products decreased by 13.3%. In
2000, quad flat package products accounted for 36.9% of our net operating
revenues, down to 31.7% in 2001.

Sales of small outline packages decreased by 37.3% from NT$4,002.0 million
in 2000 to NT$2,507.3 million in 2001. The decrease in sales of our small
outline packages was attributable to decreases in both unit sales and average
selling price of these products. Unit sales of small outline packages decreased
by 28.4% from 500.3 million units in 2000 to 358.2 million units in 2001. In
addition, in 2001, the average selling price of our small outline package
products decreased by 12.5%. In 2000, small outline package products accounted
for 21.2% of our net operating revenues, down to 15.2% in 2001.

Gross profit and gross margin.Our gross profit decreased by 63.9% from
NT$3,939.2 million in 2000 to NT$1,420.9 million in 2001. Our gross margin
(gross profit as a percentage of net operating revenues) decreased from 20.9%
in 2000 to 8.6% in 2001. Our cost of goods sold increased by 1.4% from
NT$14,906.6 million in 2000 to NT$15,109.5 million in 2001, primarily due to
higher depreciation cost from year to year as a result of our additional
purchase of wire bonders, particularly for wafer bumping packages, prior to and
during 2001. We experienced substantial decreases in gross profit and gross
margin in 2001 because of a significant decrease in net operating revenues,
resulting from decreases in the unit sales of quad flat packages and small

46



---



##### Table of Contents



outline packages, despite relatively minor increases in the unit sales and
average selling prices of ball grid array packages.

Operating expenses.Operating expenses increased by 43.0% from NT$998.8
million in 2000 to NT$1,427.9 million in 2001. Operating expenses as a
percentage of net operating revenues increased from 5.3% in 2000 to 8.6% in
2001.



| |  | Selling expenses. Selling expenses decreased by 29.7% from NT$348.8
million in 2000 to NT$245.1 million in 2001 due largely to the fact
that commissions paid to Siliconware U.S.A. Inc., a wholly-owned
subsidiary of our company since August 2001, has been eliminated for
consolidated purpose in 2001.
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | Administrative expenses.Administrative expenses increased by 77.5%
from NT$381.2 million in 2000 to NT$676.7 million in 2001 due to
increases in depreciation due to the purchase and enhancement of
computer systems and equipment used for administrative purposes.                                      
| 
| |  | Research and development expenses.Research and development expenses
increased by 88.2% from NT$268.9 million in 2000 to NT$506.1 million
in 2001 due to:                                                                                                                                                   



| |  |  | increases in the hiringof additional research and
development personnel and the purchase of equipment for research and
development purposes; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | royalty payment for our flip chip technology.                                                                                                   



| |  | Operating income and operating margin.We generated operating income
of NT$2,940.4 million and operating margin (operating income as a
percentage of net operating revenues) of 15.6% in 2000 while we
recorded an operating loss of NT$7.0 million and a negative operating
margin in 2001. The reverse between these two periods was primarily
due to a decrease in net operating revenues and increases in our cost
of goods sold and operating expenses.
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Net non-operating income (loss).Net non-operating income was NT$254.8
million in 2000, compared with a net non-operating loss of NT$1,474.6 million
in 2001. The reasons for the reversal were primarily due to:



| |  |  | an investment loss of NT$1,198.8 million in 2001 attributable
principally to investment losses in CAESAR and ChipMOS, compared
with an investment income of NT$191.9 million in 2000 primarily as a
result of our investment in ChipMOS; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | an increase of NT$338.8 million in net interest and other
expenses from year to year largely due to the increase in long-term
debt.                                                                                                         

Income tax benefit.We recognized an income tax benefit of NT$26.2 million
and NT$282.6 million in 2000 and 2001, respectively, because of the deferred
tax benefit on certain tax credits primarily resulting from the purchases of
certain machinery and equipment,

47



---



##### Table of Contents



expenditures on research and development and personnel training. A
valuation allowance has been provided against the deferred tax assets to the
extent that the tax benefit will more likely not be realized.

Net Income.As a result of the factors discussed above, net income was
NT$3,221.4 million in 2000, compared with a net loss of NT$1,183.2 million in
2001.

Summary Unaudited Historical Quarterly Results of Operations

The unaudited unconsolidated financial data of Siliconware Precision shown
below for the eight fiscal quarters ended December 31, 2002 was prepared under
ROC GAAP governing interim financial reporting. The preparation of the
unaudited financial data presented below differs from the preparation of the
consolidated financial data and financial statements included elsewhere in this
annual report because, pursuant to the Rules Governing Preparation of the
Financial Statements by Securities Issuers issued by the Securities and
Futures Commission of the ROC, it does not consolidate the financial results of
Siliconware Investment Company Ltd., SPIL (B.V.I.) Holding Limited, Siliconware
U.S.A. Inc., SPIL (Cayman) Holding Limited and Siliconware Technology (Suzhou)
Limited, our subsidiaries. In addition, the net incomes for the quarters ended
March 31, 2001, September 30, 2001, March 31, 2002 and September 30, 2002, did
not generally recognize, pursuant to ROC SFAS No. 23 Disclosure and
Presentation for Interim Financial Reporting, any income (loss) in investee
companies in which we owned 20% to 50% voting right. Such income (loss) were
recognized on a semi-annual basis in the quarters ended June 30, 2001, December
31, 2001, June 30, 2002, and December 31, 2002, thereby creating a difference
in net income (loss) between ROC GAAP and US GAAP. See US GAAP
Reconciliation for a description of other differences between ROC GAAP and US
GAAP. Accordingly, the unaudited unconsolidated financial data shown below are
not indicative of the results of operations for Siliconware Precision on a
consolidated basis and do not conform to US GAAP.

Our results of operations have varied and may continue to vary from
quarter to quarter and are therefore not necessarily indicative of the results
for the full fiscal year or for any future period. Our future revenues and
results of operations may vary significantly due to a combination of factors,
including the factors described in Item 3. Key InformationD. Risk FactorsOur
operating results fluctuate significantly, which may affect the value of your
investment. In addition, we believe that you should not rely on
period-to-period comparisons as an indication of our future performance.

We believe that we have included in the amounts stated below all necessary
adjustments, consisting only of normal recurring adjustments, to fairly
represent our selected quarterly data. You should read our selected quarterly
data in conjunction with our financial statements and the notes thereto
included elsewhere in this annual report.

48



---



##### Table of Contents



|                        |  |                              |        |               |  |                    |        |                   |  |                |        |               |  |                    |        |                   |  |  |        |   |  |  |        |   |  |  |        |   |  |  |        |  
|----------------------- |  | ---------------------------- | ------ | ------------- |  | ------------------ | ------ | ----------------- |  | -------------- | ------ | ------------- |  | ------------------ | ------ | ----------------- |  |  | ------ | - |  |  | ------ | - |  |  | ------ | - |  |  | ------ | -
|                        |  | Quarter ended               
|                        |  |                             
|                        |  | March 31, 2001               |        | June 30, 2001 |  | September 30, 2001 |        | December 31, 2001 |  | March 31, 2002 |        | June 30, 2002 |  | September 30, 2002 |        | December 31, 2002
|                        |  |                              |        |               |  |                    |        |                   |  |                |        |               |  |                    |        |                  
|                        |  | (unaudited) (unconsolidated)
|Net operating revenues  |  |                              | 4,558  |               |  |                    | 3,480  |                   |  |                | 3,804  |               |  |                    | 4,688  |                   |  |  | 5,252  |   |  |  | 5,398  |   |  |  | 5,510  |   |  |  | 6,139  |  
|Cost of goods sold      |  |                              | (3,919 | )             |  |                    | (3,323 | )                 |  |                | (3,569 | )             |  |                    | (4,299 | )                 |  |  | (4,699 | ) |  |  | (4,853 | ) |  |  | (5,046 | ) |  |  | (5,612 | )
|Gross profit            |  |                              | 639    |               |  |                    | 157    |                   |  |                | 235    |               |  |                    | 389    |                   |  |  | 553    |   |  |  | 545    |   |  |  | 464    |   |  |  | 527    |  
|Operating expenses      |  |                              | (351   | )             |  |                    | (364   | )                 |  |                | (339   | )             |  |                    | (343   | )                 |  |  | (370   | ) |  |  | (355   | ) |  |  | (372   | ) |  |  | (437   | )
|Operating income (loss) |  |                              | 288    |               |  |                    | (207   | )                 |  |                | (104   | )             |  |                    | 46     |                   |  |  | 183    |   |  |  | 190    |   |  |  | 92     |   |  |  | 90     |  

B.     Liquidity and Capital Resources

We need cash primarily for capacity expansion, equipment purchases and
working capital. Although we have historically been able to satisfy our working
capital needs from cash flow from operations, our ability to expand our
capacity has been largely dependent upon, and will continue to depend upon, our
ability to finance these activities through the issuance of equity securities,
long-term borrowings and the issuance of convertible and other debt securities.
If adequate funds are not available, whether on satisfactory terms or at all,
we may be forced to curtail our expansion plans. Our ability to meet our
working capital needs from cash flow from operations will be affected by the
demand for our services and products, which in turn may be affected by several
factors. Many of these factors are outside of our control, such as economic
downturns and declines in the average selling prices of our products caused by
oversupply in the market. To the extent that we do not generate sufficient
cash flow from our operations to meet our cash requirements, we may rely on
external borrowings and securities offerings. Other than as described in
Off-Balance Sheet Arrangements, we have not historically relied, and we do
not plan to rely in the foreseeable future, on off-balance sheet financing
arrangements to finance our operations or expansion.

As of December 31, 2002, our primary source of liquidity was NT$5,969.6
million (US$172.0 million) of cash and cash equivalents. As of December 31,
2002, we had total availability under existing short-term lines of credit,
trade facilities and short-term commercial paper facilities of NT$6,351.8
million (US$183.0 million) available from seven domestic and foreign financial
institutions, of which we had borrowed NT$1,137.5 million (US$32.8 million).
The weighted average interest rate for borrowings denominated in NT dollars
under these facilities was 3.0% as of December 31, 2002, and ranged from 2.325%
to 3.400% per year between January 1, 2002 and December 31, 2002. All of our
short-term loans are revolving facilities with a term of one year, which may be
extended for terms of one year each with lender consent. We are subject to
restrictions on the sale, lease, transfer or other disposal of our assets under
some of our short-term loan facilities. None of our current short-term
commercial paper facilities has received a credit rating. As of December 31,
2002, we had a total amount of NT$499.8 million (US$14.4 million) outstanding
under these short-term commercial paper facilities. The weighted average annual
effective interest rate under these facilities was 2.35% as of December 31,
2002, and ranged from 2.05% to 3.10% annually between January 1, 2002 and
December 31, 2002. Our obligations under our short-term loan and commercial
paper facilities are unsecured. We believe that our existing credit lines under
our short-term loan and commercial paper facilities, together with cash
generated from our operations, are sufficient to finance our current working
capital needs.

As of December 31, 2002, we had outstanding long-term borrowings of
NT$9,171.7 million (US$264.3 million) owed to 30 domestic financial
institutions under 33 credit facilities. The interest rates of these long-term
borrowings denominated in NT dollars are variable rates, and as of December 31,
2002 ranged from 2.75% to 4.94% per year. We have pledged a substantial

49



---



##### Table of Contents



portion of our assets, with a carrying value of NT$9,091.3 million
(US$262.0 million) as of December 31, 2002, to secure our obligations under
these three facilities.

Our long-term foreign debts consist of US$138.0 million of the convertible
bonds due 2004 we issued in 1997, and US$200 million zero coupon convertible
bonds due 2007 we issued in early 2002. As of December 31, 2002, we had
redeemed and cancelled the bonds at the principal amount of US$135.5 million of
the convertible bonds due 2004 and the remainder of the bonds at the principal
amount of US$2.5 million had been converted into 1,225 thousand shares of our
company. On January 28, 2002, we issued another series of 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, the
convertible bonds due 2004. The zero coupon convertible bonds due 2007 are
convertible into our shares or ADSs. None of these convertible bonds had been
converted as of December 31, 2002. These bonds are scheduled to mature in
January 2007 and will be redeemable by us at the option of the bondholder on
July 28, 2004.

We entered into a multiple purpose credit facility on December 26, 2001 in
the aggregate principal amount of NT$3,470 million (US$99.1 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. As of December 31, 2002, we had drawn NT$1,015
million (US$29.3 million) from this facility to redeem our convertible bonds
due 2004, and NT$2,455 million (US$70.8 million) for our working capital
purposes.

Due to rapid changes in technology in the semiconductor industry, we
frequently need to invest in new manufacturing technologies. We cannot assure
you that we will be able to raise additional capital should it become necessary
on terms acceptable to us or at all.

Set forth below are the aggregate amounts, as of December 31, 2002, of our
future cash payment obligations under our existing debt arrangements.

|                                   |  |                        |         |                  |  |           |         |           |  |               |         |  |  |  |   |  |  |  |   | 
|---------------------------------- |  | ---------------------- | ------- | ---------------- |  | --------- | ------- | --------- |  | ------------- | ------- |  |  |  | - |  |  |  | - | 
|                                   |  | Payments Due by Period
|                                   |  |                       
|Contractual Obligations            |  | Total                  |         | Less than 1 year |  | 1-3 years |         | 4-5 years |  | After 5 years
|                                   |  |                        |         |                  |  |           |         |           |  |              
|                                   |  | (in NT$ millions)     
|Short-term borrowings              |  |                        | 801.8   |                  |  |           | 801.8   |           |  |               |         |  |  |  |   |  |  |  |   | 
|Long-term debt(1)                  |  |                        | 6,121.7 |                  |  |           | 1,916.2 |           |  |               | 4,205.5 |  |  |  |  |  |  |  |  | 
|Other long-term obligations(2)     |  |                        | 3,050.0 |                  |  |           | 250.0   |           |  |               | 2,800.0 |  |  |  |  |  |  |  |  | 
|                                   |  |                        |         |                  |  |           |         |           |  |               |         |  |  |  |   |  |  |  |   | 
|Total contractual cash obligations |  |                        | 9,973.5 |                  |  |           | 2,968.0 |           |  |               | 7,005.6 |  |  |  |  |  |  |  |  | 
|                                   |  |                        |         |                  |  |           |         |           |  |               |         |  |  |  |   |  |  |  |   | 



---

|(1) |  | Includes principal payment obligations only, as our interest obligations
relating to the majority of our long-term debt are floating rate
obligations.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------

50



---



##### Table of Contents



|(2) |  | Includes our payment obligations under the long-term commercial paper
facilities we established in December 31, 2001, but excludes our payment
obligation under the convertible bonds due 2004, because we cannot
determine the number of bondholders that will elect conversion or early
redemption of their bonds within the periods specified above.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In addition to the contractual obligations set forth above, we also have
continuing obligations to make cash royalty payments under our technology
license agreements, the amount of which are determined based on net sales of
our products.

We have entered into agreements with third parties in connection with our
expansion plans in the aggregate amount of approximately NT$571.3 million. As
of December 31, 2002, we had outstanding obligations of approximately NT$159.8
million (US$4.6 million) pursuant to these agreements. We do not have any
written options on nonfinancial assets.

Our long-term loan and commercial paper facilities include certain
provisions that would trigger a requirement for early payment. Under the terms
of our credit facilities for long-term borrowings, we are required to comply
with financial covenants, including current ratio and debt-equity ratio and
other technical requirements. Our debt under these facilities may be
accelerated if there is a default, including defaults triggered by failure to
comply with these financial covenants and other technical requirements. As of
December 31, 2001, we complied with all financial covenants of existing
facilities.

Net cash provided by (used in) operating activities amounted to NT$5,021.2
million in 2000, NT$4,944.3 million in 2001 and NT$5,006.2 million (US$144.3
million) in 2002. Our depreciation and amortization was NT$2,257.0 million in
2000, NT$4,322.6 million in 2001 and NT$4,901.7 million (US$141.3 million) in
2002. The increases in depreciation and amortization were primarily due to
increased capital investment in package service-related capital equipment. See
Results of Operations. Net cash used for investing activities was NT$8,609.2
million in 2000, NT$6,699.9 million in 2001 and NT$8,805.6 million (US$253.8
million) in 2002. Net cash used for investing activities primarily reflected
capital expenditures for property, plant and equipment of NT$6,535.2 million in
2000, NT$5,474.2 million in 2001 and NT$6,444.5 million (US$185.7 million) in
2002. These capital expenditures were primarily funded with net cash provided
by operating activities.

Cash provided by financing activities totaled NT$8,553.1 million in 2000
reflecting primarily our issuance of ADSs totaling NT$7,493.7 million. In 2001,
cash provided by financing activities was NT$1,499.1 million reflecting
primarily our borrowing of short-term loans of NT$7,305.9 million and long term
loans of NT$4,421.1 million, the repayments of short-term loans of NT$7,487.1
million and long-term loans of NT$301.0 million and early redemption of
convertible bond due 2004 of NT$1,917.3. In 2002, cash provided by financing
activities was NT$3,459.1 million (US$99.7 million) reflecting primarily our
issuance of US$200 million zero coupon convertible bonds due 2007 in 2002,
partially offset by our redemption of the remaining outstanding convertible
bonds due 2004 in the amount of US$94.0 million.

We have made, and expect to continue to make, substantial capital
expenditures in connection with the expansion of our production capacity in
Taichung, Hsin-Chu and Suzhou. See Item 4. Information on the CompanyB.
Business OverviewCapital Expenditures and Divestitures.

51



---



##### Table of Contents



We are sometimes required to prepay our purchases of land and equipment.
Prepayments for purchases of land are the result of a standard processing
procedure by the Republic of China government related to the transfer of legal
title. As of December 31, 2001 and 2002 we did not have any outstanding balance
of any prepayments for purchases of land. Prepayments for purchases of
equipment result from contractual agreements involving down payments to
suppliers when we place an order for the equipment. As of December 31, 2001 and
2002, outstanding balances of prepayments for purchases of equipment amounted
to NT$2,199.6 million and NT$735.7 million (US$21.2 million), respectively.

We expect our capital expenditures to be approximately range from NT$3,000
million to NT$5,000million for 2003, which we expect to use primarily to
purchase equipment to expand our existing plants. We may adjust the amount of
our capital expenditures upward or downward based on cash flow from operations,
the progress of our expansion plans and market conditions. We frequently need
to invest in new capacity to improve our economies of scale and reduce our
production costs, which may require us to raise additional capital. We cannot
assure you that we will be able to raise additional capital should it become
necessary on terms acceptable to us or at all. The sale of additional equity or
equity-linked securities may result in additional dilution to our shareholders.

Transactions with Related Parties

We have not extended any loans or credit to any of our directors,
supervisors or executive officers, and we have not provided guarantees for
borrowings by any of these persons. We have not entered into any fee-paying
contract with any of these persons for him to provide services not within his
capacity as a director, supervisor or executive officer of the company.

We have, from time to time, purchased raw materials and sold our services
and products to our affiliated companies. We believe that these transactions
with related parties have been conducted on arms-length terms, or on terms
more favorable to us than arms-length terms. See Item 7. Major Shareholders
and Related Party TransactionsB. Related Party Transactions.

Inflation/Deflation

The inflation rate in Taiwan was 1.3% in 2000, (0.01)% in 2001 and (0.2)%
in 2002. We do not believe that inflation in Taiwan has had a material impact
on our results of operations.

Taxation

The corporate income tax rate in Taiwan which applies to us is 25%. Based
on our status as a company engaged in the semiconductor packaging business in
Taiwan, we have been granted exemptions from income taxes in Taiwan because we
used the proceeds raised through the offering of global depository receipts in
1995 to purchase packaging equipment. As permitted by Taiwan tax regulation, we
can use these exemptions for five years from the date when we begin to generate
income from the use of this packaging equipment. As a result, we began to use
these exemptions in 1998. These tax exemptions resulted in tax savings of
approximately NT$159.6 million in 2000. Because we incurred net loss for income
tax return purposes in 2001 and 2002, we cannot take advantage of these tax
exemptions for year 2001 and 2002. These tax exemptions expired at the end of
2002. We are also entitled to apply for exemptions from income taxes for the
proceeds of

52



---



##### Table of Contents



ADSs we issued in early 2000. We intend to begin using these exemptions in
year 2003 or year 2004 for a period of five years. The ROC government enacted
new tax regulations applicable to several industries, including the
semiconductor industry. The new regulations exclude certain products in the
semiconductor industry, including some of our products, from these tax
exemptions. For example, our quad flat packaging products and small outline
packaging products would no longer be tax-exempt. However, our other products
and services, including our substrate packaging products and test services, are
expected to continue to enjoy tax exemptions under the new regulations.

We also benefit from other tax incentives generally available to
technology companies, including tax credits of no more than 35% for research
and development and employee training expenses and tax credits ranging from 5%
to 20% for investment in automation equipment and technology and certain
qualifying investments. According to the amended Statute for Upgrading
Industries and relevant regulations effective in 2002, the tax credit for
research and development and employee training expenses is 30%. Historically,
these tax incentives have resulted in decreases of income tax payable by
approximately NT$376.2 million, NT$12.3 million and nil in 2000, 2001 and 2002,
respectively. In 2000, 2001 and 2002, our effective income tax rates were
-1.0%, -19.07% and -51.95%, respectively as tax benefits more than offset
income taxes payable. According to the ROC tax credit rules, we currently enjoy
a tax credit of 13% for the purchase of equipment.

In 1997, the ROC Income Tax Law was amended to integrate the corporate
income tax and shareholder dividend tax to eliminate the double taxation effect
for resident shareholders of ROC companies. Under the amendment, all retained
earnings generated beginning January 1, 1998 and not distributed to
shareholders as dividends in the following year are assessed a 10% retained
earning tax. As a result, if we do not distribute all of our annual retained
earnings as dividends in the following year, our effective tax rate would
exceed 25%.

US GAAP Reconciliation

Our financial statements have been prepared in accordance with ROC GAAP,
which differs in certain significant respects from US GAAP. The US GAAP
information in note 26 to the consolidated financial statements summarize the
principal differences between the amounts determined in accordance with our
accounting policy, which is based on ROC GAAP, and determined in accordance
with US GAAP together with reconciliation of net income and shareholders
equity from a ROC GAAP basis to a US GAAP basis. The following table shows a
comparison of our net income and stockholders equity according to ROC GAAP and
US GAAP for the periods indicated.

Reconciliation of consolidated net income:

|                                      |                      |  |       |                                  |   |      |        |      |   |     |     |    |   |  |    |   |  | 
|------------------------------------- | -------------------- |  | ----- | -------------------------------- | - | ---- | ------ | ---- | - | --- | --- | -- | - |  | -- | - |  | 
|                                      |                      |  |       | For the years ended December 31,
|                                      |                      |  |       |                                 
|                                      |                      |  |       | 2000                             |   | 2001 |        | 2002
|                                      |                      |  |       |                                  |   |      |        |     
|                                      |                      |  |       | NT$                              |   | NT$  |        | NT$  |   | US$
|                                      |                      |  |       |                                  |   |      |        |      |   |    
|                                      |                      |  |       | (in millions)                   
|Net income as reported under ROC GAAP |                      |  | 3,221 |                                  |   |      | (1,183 | )    |   |     | 425 |    |   |  | 12 |  
|US GAAP adjustments:                  |                      |  |       |                                  |   |      |        |      |   |     |     |    |   |  |    |  
|                                      | Compensated absences |  |       | (2                               | ) |      |        | (3   | ) |     |     | (7 | ) |  |    |  | 
|                                      | Compensation         |  |       | (997                             | ) |      |        | (257 | ) |     |     |   |   |  |    |  | 

53



---



##### Table of Contents



|                         |                                     |                                                                 |        |                                  |      |      |        |      |     |     |      |      |      |   |     |    |     |  
|------------------------ | ----------------------------------- | --------------------------------------------------------------- | ------ | -------------------------------- | ---- | ---- | ------ | ---- | --- | --- | ---- | ---- | ---- | - | --- | -- | --- | -
|                         |                                     |                                                                 |        | For the years ended December 31,
|                         |                                     |                                                                 |        |                                 
|                         |                                     |                                                                 |        | 2000                             |      | 2001 |        | 2002
|                         |                                     |                                                                 |        |                                  |      |      |        |     
|                         |                                     |                                                                 |        | NT$                              |      | NT$  |        | NT$  |     | US$
|                         |                                     |                                                                 |        |                                  |      |      |        |      |     |    
|                         |                                     |                                                                 |        | (in millions)                   
|                         | Earthquake losses                   |                                                                 |        | 53                               |      |      |        |     |     |     |      |     |      |   |     |   |    
|                         | Goodwill amortization               |                                                                 |        |                                 |      |      |        | (542 | )   |     |      |     |      |   |     |   |    
|                         | Impairment on long-term investments |                                                                 |        |                                  |      |      |        |      |     |     |      | (213 | )    |   |     | (6 | )  
|                         | Embeded derivative                  |                                                                 |        |                                  |      |      |        |      |     |     |      | (53  | )    |   |     | (2 | )  
|                         | Marketable securities               |                                                                 |        |                                  |      |      |        |      |     |     |      | (6   | )    |   |     |   |    
|                         | Equity investments:                 |                                                                 |        |                                  |      |      |        |      |     |     |      |      |      |   |     |    |    
|                         |                                     | Timing differences                                              |        |                                  | 5    |      |        |      | (15 | )   |      |      | (362 | ) |     |    | (11 | )
|                         |                                     | Net income/(loss) variance between US
GAAP and ROC GAAP         |        |                                  | (43  | )    |        |      | 54  |     |      |      | 22   |   |     |    | 1   |  
|                         |                                     | Accounting for income in preferred stock                        |        |                                  | (3   | )    |        |      | (34 | )   |      |      | (45  | ) |     |    | (1  | )
|                         |                                     | Technology and know-how contributed
to a joint venture investee |        |                                  | (31  | )    |        |      | (31 | )   |      |      | (6   | ) |     |    |    |  
|                         |                                     |                                                                 |        |                                  |      |      |        |      |     |     |      |      |      |   |     |   
|                         |                                     |                                                                 | (1,018 | )                                |      |      | (828   | )    |     |     | (670 | )    |      |   | (19 | ) 
|                         |                                     | Taxation effect                                                 |        |                                  | (221 | )    |        |      | 221 |     |      |      | 22   |   |     |    | 1   |  
|                         |                                     |                                                                 |        |                                  |      |      |        |      |     |     |      |      |      |   |     |   
|Net income under US GAAP |                                     |                                                                 | 1,982  |                                  |      |      | (1,790 | )    |     |     | (223 | )    |      |   | (6  | ) 
|                         |                                     |                                                                 |        |                                  |      |      |        |      |     |     |      |      |      |   |     |   

Reconciliation of consolidated shareholders equity:

|                                                      |                                     |                                                                 |        |                    |       |      |        |      |       |     |        |      |       |   |     |    |     |  
|----------------------------------------------------- | ----------------------------------- | --------------------------------------------------------------- | ------ | ------------------ | ----- | ---- | ------ | ---- | ----- | --- | ------ | ---- | ----- | - | --- | -- | --- | -
|                                                      |                                     |                                                                 |        | As of December 31,
|                                                      |                                     |                                                                 |        |                   
|                                                      |                                     |                                                                 |        | 2000               |       | 2001 |        | 2002
|                                                      |                                     |                                                                 |        |                    |       |      |        |     
|                                                      |                                     |                                                                 |        | NT$                |       | NT$  |        | NT$  |       | US$
|                                                      |                                     |                                                                 |        |                    |       |      |        |      |       |    
|                                                      |                                     |                                                                 |        | (in millions)     
|Total shareholders equity as reported
Under ROC GAAP |                                     |                                                                 | 27,856 |                    |       |      | 26,046 |      |       |     | 26,179 |      |       |   | 754 |   
|US GAAP adjustments:                                  |                                     |                                                                 |        |                    |       |      |        |      |       |     |        |      |       |   |     |   
|                                                      | Compensated absences                |                                                                 |        | (9                 | )     |      |        | (13  | )     |     |        | (20  | )     |   |     | (1 | )  
|                                                      | Compensation                        |                                                                 |        | (314               | )     |      |        |     |       |     |        |     |       |   |     |   |    
|                                                      | Impairment on long-term investments |                                                                 |        |                   |       |      |        |     |       |     |        | (213 | )     |   |     | (6 | )  
|                                                      | Embeded derivative                  |                                                                 |        |                   |       |      |        |     |       |     |        | (53  | )     |   |     | (2 | )  
|                                                      | Earthquake losses                   |                                                                 |        |                   |       |      |        |     |       |     |        |     |       |   |     |   |    
|                                                      | Equity investments:                 |                                                                 |        |                    |       |      |        |      |       |     |        |      |       |   |     |    |    
|                                                      |                                     | Timing differences                                              |        |                    | 6     |      |        |      | (9    | )   |        |      | (372  | ) |     |    | (11 | )
|                                                      |                                     | Net income variance between US
GAAP and ROC GAAP                |        |                    | 51    |      |        |      | 104   |     |        |      | 126   |   |     |    | 4   |  
|                                                      |                                     | Accounting for income in preferred
stock                        |        |                    | 39    |      |        |      | (14   | )   |        |      | (66   | ) |     |    | (2  | )
|                                                      |                                     | Technology and know-how contributed
to a joint venture investee |        |                    | (167  | )    |        |      | (198  | )   |        |      | (204  | ) |     |    | (6  | )
|                                                      |                                     | Marketable securities                                           |        |                    | 46    |      |        |      | 542   |     |        |      | (14   | ) |     |    |    |  
|                                                      |                                     | Acquisition of Siliconware Corp.                                |        |                    | 5,415 |      |        |      | 4,873 |     |        |      | 4,873 |   |     |    | 141 |  
|                                                      |                                     | Taxation effect                                                 |        |                    | (218  | )    |        |      | 4     |     |        |      | 26    |   |     |    | 1   |  
|                                                      |                                     |                                                                 |        |                    |       |      |        |      |       |     |        |      |       |   |     |   
|Shareholders equity under US GAAP                    |                                     |                                                                 | 32,705 |                    |       |      | 31,335 |      |       |     | 30,262 |      |       |   | 872 |   
|                                                      |                                     |                                                                 |        |                    |       |      |        |      |       |     |        |      |       |   |     |   

The following are the most significant differences between ROC GAAP and US
GAAP as they relate to our net income and shareholders equity. For other GAAP
differences, please refer to note 26 to our consolidated financial statements
included elsewhere in this annual report.

Employee Bonuses

Certain employees of our company are entitled to bonuses in accordance
with applicable provisions of our articles of incorporation. Employee bonuses
are determined at 10% of distributable retained earnings. Distributable
retained earnings are calculated as retained earnings after various reserves in
accordance with ROC regulations and our articles of incorporation and after
appropriation for remuneration to directors. Employee bonuses may be granted in
cash, shares

54



---



##### Table of Contents



or a combination of both. Under ROC GAAP, such bonuses are appropriated
from retained earnings in the period shareholders approval is obtained. If
such employee bonuses are in the form of our shares, the amount charged against
retained earnings is based on the par value of the shares issued. Under US
GAAP, any employee bonus expense is initially accrued at the end of the period
when services are rendered, at 10% of the distributable retained earnings. 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 net income and
shareholders equity as shown in the above schedules. In addition to the
adjustments to net income and shareholders equity as shown in the above
schedules, application of US GAAP on employee bonuses would also result in a
reclassification from retained earnings to additional paid in capital.

Equity Investments

Under the equity method, our proportionate share of the income (loss) of
the investee is generally recognized in the year the income (loss) is earned.
However, under ROC GAAP, if financial statements of an investee are not
sufficiently timely for us to apply the equity method in the current period and
such equity interests are below certain materiality threshold, we are permitted
to delay the recognition of income (loss) until the subsequent year. US GAAP,
however, does not allow the investor company to delay recognition of its equity
in the investees income or loss. The US GAAP adjustment deducts the delayed
income from subsequent years net income and adds it back to the prior year to
arrive at net income under US GAAP.

Our 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.

Under ROC GAAP, when an investment is made in non-accumulative,
convertible preferred shares, investment income is recognized for the amount of
actual dividends when dividends are declared. Investment loss is recognized to
the extent that the investees net book value is less than our liquidation
preference. Under US GAAP, we recognize the proportionate share of both the
investees income and losses.

Under a joint venture agreement with Mosel Vitelic Inc., we contributed
cash as well as technological know-how in exchange for an equity interest in
ChipMOS. Under ROC GAAP, we recognized as initial cost of investment for cash
and the value of know-how contributed. Under US GAAP, the technological
know-how transfer is not valued and not recognized as cost of investment.

Taxation Effect

Under 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 purposes. 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.

55



---



##### Table of Contents



Goodwill Acquired through Acquisition

The fair value of the net assets we received was used as the value of the
consideration for the acquisition of the remaining interests in Siliconware
Corp. on December 31, 2000 and reflected in the common stock and capital
reserve in our balance sheet. As the consideration is equal to the fair value
of the net assets received, no goodwill is recorded under ROC GAAP. Under US
GAAP, the acquisition has been accounted for using the purchase method of
accounting, and the purchase price was determined using the market value of our
shares issued in connection with the acquisition. The difference between the
fair value of our shares issued in connection with the acquisition and the fair
value of the net assets acquired results in goodwill. Goodwill is amortized on
a straight-line basis over ten years.

In accordance with SFAS No. 142, Goodwill and Other Intangible Assets,
we no longer amortize goodwill beginning 2003. We have elected to perform our
annual impairment review in each fiscal year. We have completed our annual
goodwill impairment test for fiscal 2003 and concluded that there was no
impairment.

Impairment of Long-lived Assets

There are no specific standards under ROC GAAP that address impairment of
long-lived assets. US GAAP, however, requires that long-lived assets be
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. During 2002,
several of our investees accounted for under the equity method, including
ChipMOS Technologies Inc., Double Win Enterprise Co., Ltd. and Artest
Corporation, incurred significant losses since the dates of our investments and
there is no indication of recovery in the near future, we concluded that the
impairment loss was other than temporary. Accordingly, we recorded impairment
charges totaling NT$212.6 million (US$6.1 million) on these long-term equity
investments and wrote off the carrying value of the investments to their fair
value.

Embedded Derivatives

Under ROC GAAP, investment in convertible or exchangeable bonds is carried
at the lower of cost of market value. Under US GAAP, the convertible or
exchangeable option is considered an embedded derivative instrument and must be
separated from the host contract and accounted for separately as a derivative
instrument. The bifurcated derivative would be measured at fair value with
changes in fair value reported in earnings as they occur. If an entity were
unable to reliably identify and measure the embedded derivative instrument for
separation from the host contract, the entire contract would have to be
measured at fair value, with gains and losses recognized in earnings.

Stock Dividends

Under ROC GAAP, an issuance of stock dividends is recorded at par with a
charge to retained earnings. Under US GAAP, if the ratio of distribution is
less than 25% of shares of the same class outstanding, the fair value of the
shares issued should be charged to retained earnings. This different treatment
will result in, under US GAAP, a reclassification from retained earnings to

56



---



##### Table of Contents



additional paid-in capital of NT$19,268.6 million on December 31, 2002.
This adjustment has no effect on our shareholders equity.

Recent Accounting Pronouncements

In June 2002, the Financial Accounting Standards Board, or FASB, issued
Statement of Financial Accounting Standards No. 146, or SFAS No. 146,
Accounting for Costs Associated with Exit or Disposal Activities. SFAS No.
146 addresses financial accounting and reporting for costs associated with exit
or disposal activities and nullifies Emerging Issues Task Force Issue No. 94-3,
Liability Recognition for Certain Employee Termination Benefits and Other
Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring). SFAS No. 146 requires that a liability for costs associated
with an exit or disposal activity be recognized and measured initially at fair
value only when the liability is incurred, rather than at the date of
commitment to an exit or disposal plan. SFAS No. 146 is effective for exit or
disposal activities that are initiated after December 31, 2002. We do not
expect that the adoption of SFAS No. 146 will have a material impact on our
financial position or results of operations.

In December 2002, the FASB issued Statement of Financial Accounting
Standards No. 148, or SFAS No. 148, Accounting for Stock-Based
CompensationTransition and DisclosureAn Amendment of FASB Statement No. 123.
SFAS No. 148 amends Statement of Financial Accounting Standards No. 123, or
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. SFAS No. 148 amends the
disclosure requirements of SFAS No. 123 to require prominent disclosures both
in annual and interim financial statements about the method of accounting for
stock-based employee compensation and the effect of the method used on reported
results. We do not expect that the adoption of SFAS No. 148 will have a
material impact on our financial position or results of operations, although
SFAS No. 148 may impact the disclosure of future stock-based compensation.

In November 2002, the FASB issued Interpretation No. 45, or FIN No. 45,
Guarantors Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others. FIN No. 45 elaborates on the
existing disclosure requirements for most guarantees, including loan
guarantees. It also clarifies that at the time a company issues a guarantee,
the company must recognize an initial liability for the fair value, or market
value, of the obligations it assumes under that guarantee. However, the
provisions related to recognizing a liability at inception of the guarantee for
the fair value of the guarantors obligations does not apply to product
warranties or to guarantees accounted for as derivatives. The initial
recognition and initial measurement provisions apply on a prospective basis to
guarantees issued or modified after December 31, 2002. The disclosure
requirements of FIN No. 45 are effective for financial statements of interim or
annual periods ending after December 15, 2002. We do not believe the adoption
of FIN No. 45 will have a material impact on our financial position or results
of operations.

In November 2002, the Emerging Issues Task Force reached a consensus on
Issue No. 00-21, or EITF 00-21, Revenue Arrangements with Multiple
Deliverables. EITF 00-21 provides guidance on how to account for arrangements
that involve the delivery or performance of multiple products, services and/or
rights to use assets. The provisions of EITF 00-21 will apply to revenue

57



---



##### Table of Contents



arrangements entered into in fiscal periods beginning after June 15, 2003.
We do not believe the adoption of EITF 00-21 will have a material impact on our
financial position or results of operations.

In January 2003, the FASB issued Interpretation No. 46, or FIN No.46,
Consolidation of Variable Interest Entities. Until this interpretation, a
company generally included another entity in its consolidated financial
statements only if it controlled the entity through voting interests. FIN No.
46 requires a variable interest entity, as defined, to be consolidated by a
company if that company is subject to a majority of the risk of loss from the
variable interest entitys activities or entitled to receive a majority of the
entitys residual returns. We are currently evaluating the effect of adopting
FIN No. 46 on our results of operations and financial position.

On May 15, 2003, the Financial Accounting Standards Board issued Statement
No. 150, or SFAS No. 150, Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity. SFAS No. 150 establishes
standards for how an issuer classifies and measures certain financial
instruments with characteristics of both liabilities and equity. It requires
that certain financial instruments be presented as liabilities that were
previously presented as equity or as temporary equity. Such instruments include
mandatory redeemable preferred and common stocks and certain options and
warrants. SFAS No. 150 is effective for financial instruments entered into or
modified after May 31, 2003 and is generally effective at the beginning of the
first interim period beginning after June 15, 2003. We are currently evaluating
the impact that SFAS No. 150 will have on our consolidated financial position
and results of operations when adopted.

C.     Research and Development, Patents and Licenses, etc.

Research and Development

We focus our research and development efforts on developing new package
designs and improving the efficiency and capabilities of our production process
technologies. Production process enhancement includes:



| |  |  | 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 wirebonding process;                               
|
| |  |  | increasing packaging yields;                                                                        
|
| |  |  | shortening cycle times; and                                                                         
|
| |  |  | investigating the use of new or replacement raw materials.                                          

58



---



##### Table of Contents



We believe that technology development is one of the key success factors
in the semiconductor packaging and test industry. We work with our customers,
equipment manufacturers and materials suppliers to develop advanced processing
capabilities and materials for use in our production process. For example, we
are currently conducting a research project with Kinsus Interconnect Technology
Corp., a substrate developer in Taiwan, to develop the advanced flip chip
substrate technology. In addition, we and Sumitomo Bakelite Co., Ltd., a raw
material supplier in Japan, are jointly developing low cost and high
performance underfill materials. Moreover, we work with customers including
Xilinx, Inc. early in the process of wafer design to ensure that their
packaging needs are met and that our packaging products provide our customers
with the flexibility they require when designing their products.

Our research and development personnel are divided among our design
department, characterization department and product development department. In
addition, our quality assurance and manufacturing personnel also participate in
research and development activities. For 2000, 2001 and 2002, we spent NT$268.9
million, NT$506.1 million and NT$507.0 million (US$14.6 million), respectively,
on research and development.

We maintain laboratory facilities to analyze the characteristics of
semiconductor device packages by computer-simulation, and verify their
performance by measurement devices. The use of computer-aided engineering tools
substantially reduces the time required to validate the proper function of
packages, as compared with physical test methods.

Intellectual Property

As of December 31, 2002, we had been granted 200 Taiwan patents and 96
U.S. patents related to various semiconductor packaging technologies, including
patents for improvements of thermal and electrical performance used in the
semiconductor packaging process. As of December 31, 2002, we also had a total
of 112 pending patent applications in the United States, 85 in Taiwan and 56 in
the Peoples Republic of China. In addition, we had registered SPIL as a
trademark and as a servicemark in Taiwan.

We have licensed from Motorola, Inc. and NEC Corporation various BGA
technologies for which we make royalty payments based upon the number of pads
or balls used in our packages. We are also implementing new package designs by
entering into technology alliances and by licensing leading-edge package
technologies, including:



| |  |  | Tessera, Inc.s TCC technology which enables us to produce
micro ball grid array products. This license will expire in April
2016.                                                                                                                                                                         
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Flip chip package design technology, whereby silicon die is
directly attached to the substrate using solder bump rather than
wire bonding, from Flip Chip Technologies, L.L.C. A flip chip
package can support semiconductor devices with more than 1,000
leads. This license will expire in November 2009.
|
| |  |  | Industrial Technology Research Institutes thermally
enhanced-PBGA technology, which enables us to produce small sized,
high speed and high density devices to provide PBGA the capability
of spreading heat more effectively. We acquired this license in
December 2000.                                  

59



---



##### Table of Contents





| |  |  | 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.                                                  
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Flip Chip Technologies, L.L.C.s flip chip wafer bumping
technology and technology of redistributing bond pads on IC using a
redistribution layer enables us to facilitate wafer bumping in the
manufacturing of flip chip ICs. This license will expire in January
2011.
|
| |  |  | FujiTsu Limiteds electroplating bump 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.

In 2000, 2001 and 2002, ongoing royalty payments to the companies from
which we license intellectual property were NT$252.9 million, NT$257.8 million
and NT$426.2 million (US$12.3 million), respectively, which accounted for 1.3%,
1.6% and 1.9%, respectively, of our net operating revenues. With the increasing
pace of technological change in the semiconductor industry, we expect that
royalty payments will increase in the future.

We expect to continue to file patent applications where appropriate to
protect our proprietary technologies. We may need to enforce our patents or
other intellectual property rights or to defend ourselves against claimed
infringement of the rights of others through litigation, which could result in
substantial cost and diversion of our resources.

Although we are not currently and have not been a party to any material
litigation, the semiconductor industry is characterized by frequent claims
regarding patent and other intellectual property rights. If a third party were
to bring a valid legal claim against us, we could be required to:



| |  |  | discontinue the use of disputed process technologies;              
| | - |  | -------------------------------------------------------------------
|
| |  |  | pay substantial damages;                                           
|
| |  |  | develop non-infringing technologies; or                            
|
| |  |  | acquire licenses to the technology that we had allegedly infringed.

D.     Trend Information

Please
refer to A. Overview for a discussion of the most significant
recent trends in our production, sales and inventory, costs and selling prices
since the end of 2002. In addition, please refer to discussions included in
this Item for a discussion of known trends, uncertainties, demands, commitments
or events that we believe are reasonably likely to have a material effect on
our net sales or operating revenues, income from continuing operations,
profitability, liquidity or capital resources, or that would cause reported
financial information not necessarily to be indicative of future operating
results or financial condition.

60



---



##### Table of Contents



E.     Off-Balance Sheet Arrangements

As of December 31, 2002, we had unused letters of credit for imported
machinery and equipment in the aggregate amount of approximately NT$351.8
million (US$10.1 million). See note 22 to our consolidated financial statements
included elsewhere in this annual report. We do not engage in trading
activities involving non-exchange traded contracts or enter into any other
off-balance sheet arrangements.

61



---



##### Table of Contents






Item 6. Directors, Senior Management and Employees

A.     Directors and Senior Management

The following table shows information regarding all of our directors,
supervisors and executive officers as of May 31, 2003.

|                 |  |     |    |          |  |                                    |  |             |    |  |  |                                                                                                                                                                                                                                                                                                                             
|---------------- |  | --- | -- | -------- |  | ---------------------------------- |  | ----------- | -- |  |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                 |  |     |    |          |  |                                    |  |             |    |  |  | Principal Business                                                                                                                                                                                                                                                                                                          
|                 |  |     |    |          |  |                                    |  |             |    |  |  | Activities                                                                                                                                                                                                                                                                                                                  
|                 |  |     |    |          |  |                                    |  |             |    |  |  | Performed Outside                                                                                                                                                                                                                                                                                                           
|Name             |  | Age |    | Position |  | Years With Us                      |  | Our Company
|                 |  |     |    |          |  |                                    |  |            
|Bough Lin        |  |     | 51 |          |  | Chairman; Executive
Vice President |  |             | 20 |  |  | Director of
Siliconware
Investment Company
Ltd., Artest
Corporation, Aptos
Corporation,
ChipMOS
Technologies Inc.,
Phoenix Precision
Technology
Corporation, SPIL
(B.V.I.) Holding
Limited and
Integrated
Technology Express,
Inc.                                                                                          
|Chi Wen Tsai     |  |     | 55 |          |  | Vice Chairman;
President           |  |             | 20 |  |  | Director of
Siliconware USA,
Inc.                                                                                                                                                                                                                                                                                           
|Li Ping Wang     |  |     | 48 |          |  | Director                           |  |             | 20 |  |  | None                                                                                                                                                                                                                                                                                                                        
|Yen Chun Chang   |  |     | 48 |          |  | Director                           |  |             | 20 |  |  | None                                                                                                                                                                                                                                                                                                                        
|Wen Jung Lin     |  |     | 55 |          |  | Director
Director; Chief           |  |             | 14 |  |  | None
Director of
Siliconware USA,                                                                                                                                                                                                                                                                                           
|Wen Chung Lin    |  |     | 49 |          |  | Financial Officer                  |  |             | 19 |  |  | Inc.                                                                                                                                                                                                                                                                                                                        
|Hsiu Li Liu      |  |     | 48 |          |  | Director                           |  |             | 13 |  |  | None                                                                                                                                                                                                                                                                                                                        
|C.Y. Lin (1)     |  |     | 50 |          |  | Director                           |  |             | 11 |  |  | None                                                                                                                                                                                                                                                                                                                        
|Johnson Tien (1) |  |     | 49 |          |  | Director                           |  |             | 7  |  |  | None                                                                                                                                                                                                                                                                                                                        
|Wen Lung Cheng   |  |     | 55 |          |  | Supervisor                         |  |             | 2  |  |  | None                                                                                                                                                                                                                                                                                                                        
|Teresa Wang (1)  |  |     | 47 |          |  | Supervisor                         |  |             | 12 |  |  | Director of Phoenix
Precision
Technology
Corporation                                                                                                                                                                                                                                                                        
|Jerome Tsai (2)  |  |     | 50 |          |  | Supervisor                         |  |             | 6  |  |  | Director of Sigurd
Microelectronics
Corp., Universal
Communication
Technology Inc.,
ChipMOS
Technologies Inc,
Double Win
Enterprise Co.
Ltd., King Yuan
Electronics Co.
Ltd., TPIC
Microelectronics
Co. Ltd., Taiwan
High-Tech
Corporation and
NanoDynanics Inc.,
and supervisor of
Phoenix Precision
Technology
Corporation



---

|(1) |  | Representing Siliconware Investment Company Ltd.                                                                                   
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Representing Joinwin Investment Company Ltd. Mr. Tsai was
officially appointed by Joinwin to be its representative on June 6,
2002.

62



---



##### Table of Contents



Bough Linis the Chairman of Siliconware Precision. He has been a director
of Siliconware Precision since 1984. Mr. Lin is also currently a director of
ChipMOS Technologies Inc., Phoenix Precision Technology Corporation, Aptos
Corporation, Siliconware Investment Company Ltd., SPIL (B.V.I.) Holding Limited
and Integrated Technology Express, Inc., all as a representative of Siliconware
Precision. Mr. Lin also serves on the board of Siliconware USA, Inc. as a
representative of SPIL (B.V.I.) Holding Limited. Mr. Lin is also the chairman
of Phoenix Precision Technology Corporation. In addition, Mr. Lin serves on the
boards of Artest Corporation and Integrated Technology Express Inc. as a
representative of Siliconware Investment Company Ltd. He graduated from
National Chiao Tung University in Taiwan in 1973 with a B.A. degree in
electronic physics. In addition, Mr. Lin is a cousin of Messrs. Wen Chung Lin
and Wen Jung Lin, all our directors. Wen Lung Cheng, a supervisor of our
company, is the brother-in-law of our chairman.

Chi Wen Tsaiis currently the Vice Chairman and President of Siliconware
Precision and has been a director of Siliconware Precision since 1984. Mr. Tsai
is also a director of Siliconware USA, Inc. as a representative of SPIL
(B.V.I.) Holding Limited. He received a B.A. degree in electrical engineering
from National Taipei Institute of Technology in Taiwan in 1969.

Li Ping Wanghas been a director of Siliconware Precision since 1984. She
graduated from Hsin Min Commerce and Industry College in Taiwan in 1973.

Yen Chung Changis a director of Siliconware Precision and one of two
officers of our Manufacturing Group. Mr. Chang received a B.A. degree in
electronic engineering from Nan Tai College in Taiwan in 1976.

Wen Jung Linis a director of Siliconware Precision. Mr. Lin is also
currently a director of Ber Gee Brother Co., Ltd. He received a B.A. degree in
agriculture from Feng Chia University in Taiwan in 1970. Mr. Lin is a cousin of
Mr. Bough Lin, our Chairman. Mr. Lin is also a cousin of Mr. Wen Chung Lin, our
director.

Wen Chung Linhas been a director of Siliconware Precision since 1993. Mr.
Lin is also our chief financial officer. Mr. Lin is also a director of
Siliconware USA, Inc. Mr. Lin studied in the MBA program of Sanno College in
Japan in 1984. Mr. Lin is a cousin of Mr. Bough Lin, our Chairman. Mr. Lin is
also a cousin of Mr. Wen Jung Lin, our director.

Hsiu Li Liuis a director of Siliconware Precision. She received a B.A.
degree in international trade from Ming Chuang College in Taiwan in 1975.

C.Y. Linhas been a Director of Siliconware Precision since June, 2002.
Mr. Lin received his B.A degree in Electronic Engineering from Nan-Jeon
College.

Johnson Tienhas been a Director of Siliconware Precision since June,
2002. Mr. Tien is senior vice president of our company in charge of the
Hsin-Chu branch. He received a B.A degree in industrial engineering from
Chung-Yuan Christian University in 1976.

Wen Lung Chenghas been a Supervisor of Siliconware Precision since June,
2002. Mr. Cheng received a B.A degree in bank and insurance from Tamkang
University in Taiwan in 1969. He is the brother-in-law of Mr. Bough Lin, our
chairman.

63



---



##### Table of Contents



Teresa Wanghas been a Supervisor of Siliconware Precision since June,
2002. Ms. Wang is the chief financial officer of Phoenix Precision Technology
Corporation. She received a B.A degree in accounting and statistics from Ming
Chuang College in 1978.

Jerome Tsaihas been a Supervisor of Siliconware Precision since June,
2002. He received his Bachelors degree in statistics from National Cheng Kung
University and a Masters degree in Management of Technology from National Chiao
Tung University.

B.     Compensation of Directors, Supervisors and Executive Officers

The following table sets forth cash and other compensation paid to our
directors and supervisors in 2002 in the capacities indicated below in that
fiscal year.

|               |  |                                   |  |                     |    |                    |  |  |       |    
|-------------- |  | --------------------------------- |  | ------------------- | -- | ------------------ |  |  | ----- | ---
|               |  |                                   |  | Compensation in the |    | Other             
|               |  |                                   |  | Form of Cash        |    | Compensation(1)   
|Name           |  | Position                          |  | (in NT$ thousands)  |    | (in NT$ thousands)
|               |  |                                   |  |                     |    |                   
|Bough Lin      |  | Chairman                          |  |                     | 30 |                    |  |  | 3,250 | (1)
|Chi Wen Tsai   |  | Vice Chairman; President          |  |                     | 30 |                    |  |  | 3,250 | (1)
|Li Ping Wang   |  | Director                          |  |                     | 30 |                    |  |  |       |    
|Yen Chun Chang |  | Director                          |  |                     | 30 |                    |  |  |       |    
|Wen Jung Lin   |  | Director                          |  |                     | 30 |                    |  |  |       |    
|Wen Chung Lin  |  | Director; Chief Financial Officer |  |                     | 30 |                    |  |  |       |    
|Hsiu Li Liu    |  | Director                          |  |                     | 30 |                    |  |  |       |    
|C.Y. Lin       |  | Director                          |  |                     | 15 |                    |  |  |       |    
|Johnson Tien   |  | Director                          |  |                     | 15 |                    |  |  |       |    
|Wen Lung Cheng |  | Supervisor                        |  |                     | 15 |                    |  |  |       |    
|Teresa Wang    |  | Supervisor                        |  |                     | 15 |                    |  |  |       |    
|Jerome Tsai    |  | Supervisor                        |  |                     | 15 |                    |  |  |       |    



---

|(1) |  | Representing cost of providing transportation.
|--- |  | ----------------------------------------------

C.     Board Practices

All of our directors and supervisors were elected on June 3, 2002 for a
term of three years. Neither we nor any of our subsidiaries has entered into a
contract with any of our directors and supervisors by which our directors or
supervisors are expected to receive benefits upon termination of their
employment. As permitted by law in Taiwan, our board does not maintain an audit
committee or remuneration committee.

D.     Employees

As of December 31, 2002, we had 8,153 full-time employees. Of these
employees, 4,608 were engaged in packaging and test production, 2,012 were
engaged in engineering and other technical operations and 1,533 were engaged in
finance, business management and administration.

Employee salaries are reviewed once a year. Salaries are adjusted based on
industry standards, inflation and individual performance. As an incentive,
additional bonuses in cash may be paid at the discretion of the management
based on the performance of individuals. In addition,

64



---



##### Table of Contents



Taiwan law requires that employees be given preemptive rights to subscribe
to between 10% and 15% of any of our rights issues or share offerings.

Our employees participate in our profits distribution under our articles
of incorporation. Employees are entitled to receive bonus shares based on a
percentage of our allocable surplus income. Due to the companys net loss in
2001, we did not pay any employee bonus in 2002.

We do not have any collective bargaining arrangement with our employees,
and we have never experienced a work stoppage caused by our employees. We
believe we have good relations with our employees.

E.     Share Ownership

Each of our directors, supervisors and executive officers holds our
shares, either directly for their own account or indirectly as the
representative of another legal entity on our board of directors. The following
table sets forth the share ownership of our directors, supervisors and
executive officers as of December 31, 2002.

|                |  |                                   |  |       |            |                  |  |               |      |     |  | 
|--------------- |  | --------------------------------- |  | ----- | ---------- | ---------------- |  | ------------- | ---- | --- |  | 
|                |  |                                   |  |       |            | Number of Shares |  | Percentage of
|Name            |  | Position                          |  | Owned |            | Shares Owned    
|                |  |                                   |  |       |            |                 
|Bough Lin       |  | Chairman                          |  |       | 70,080,423 |                  |  |               | 3.72 | %  
|Chi Wen Tsai    |  | Vice Chairman; President          |  |       | 32,203,272 |                  |  |               | 1.71 | %  
|Li Ping Wang    |  | Director                          |  |       | 42,037,367 |                  |  |               | 2.23 | %  
|Yen Chun Chang  |  | Director                          |  |       | 12,619,327 |                  |  |               |     | (1)
|Wen Jung Lin    |  | Director                          |  |       | 6,099,115  |                  |  |               |     | (1)
|Wen Chung Lin   |  | Director; Chief Financial Officer |  |       | 29,583,161 |                  |  |               | 1.57 | %  
|Hsiu Li Liu     |  | Director                          |  |       | 12,527,237 |                  |  |               |     | (1)
|C.Y. Lin(2)     |  | Director                          |  |       | 27,015,776 |                  |  |               | 1.43 | %  
|Johnson Tien(2) |  | Director                          |  |       |           |                  |  |               |     |    
|Wen Lung Cheng  |  | Supervisor                        |  |       | 8,306,594  |                  |  |               |     | (1)
|Teresa Wang(2)  |  | Supervisor                        |  |       |           |                  |  |               |     |    
|Jerome Tsai(3)  |  | Supervisor                        |  |       | 2,500,000  |                  |  |               |     |    



---

|(1) |  | Less than 1%.                                   
|--- |  | ------------------------------------------------
|   
|(2) |  | Representing Siliconware Investment Company Ltd.
|   
|(3) |  | Representing Joinwin Investment Company Ltd.    




Item 7. Major Shareholders and Related Party Transactions

A.     Major Shareholders

The following table presents information known to us concerning the record
ownership of our shares as of December 31, 2000, 2001 and 2002 by (i) the ten
largest shareholders of our company (as of December 31, 2002) and (ii) all
directors, supervisors and executive officers as a group. Other than Citibank
as the record owner of our American depositary shares, we are not aware that
any of our shareholders beneficially own more than 5% of our shares.

65



---



##### Table of Contents



|                                                            |  |                         |             |                         |  |                         |                      |       |                  |                      |             |       |  |  |       |   |  |  |             |  |  |  |       |  
|----------------------------------------------------------- |  | ----------------------- | ----------- | ----------------------- |  | ----------------------- | -------------------- | ----- | ---------------- | -------------------- | ----------- | ----- |  |  | ----- | - |  |  | ----------- |  |  |  | ----- | -
|                                                            |  | As of December 31, 2000 |             | As of December 31, 2001 |  | As of December 31, 2002
|                                                            |  |                         |             |                         |  |                        
|                                                            |  | Number of shares        |             | Percentage of shares    |  | Number of shares        | Percentage of shares |       | Number of shares | Percentage of shares
|Name of beneficial owner                                    |  | owned                   |             | owned                   |  | owned                   |                      | owned |                  | owned                |             | Owned
|                                                            |  |                         |             |                         |  |                         |                      |       |                  |                      |             |      
|Citibank(1)                                                 |  |                         | 183,650,172 |                         |  |                         | 11.31                | %     |                  |                      | 124,776,936 |       |  |  | 7.69  | % |  |  | 99,194,619  |  |  |  | 5.26  | %
|Bough Lin(2)                                                |  |                         | 59,496,065  |                         |  |                         | 3.66                 | %     |                  |                      | 60,856,265  |       |  |  | 3.75  | % |  |  | 70,080,423  |  |  |  | 3.72  | %
|Directorate General of Postal
Remittances and Savings Banks |  |                         | 28,602,337  |                         |  |                         | 1.76                 | %     |                  |                      | 65,047,337  |       |  |  | 4.01  | % |  |  | 51,534,200  |  |  |  | 2.73  | %
|Emerging Imarket Growth Fund                                |  |                         |            |                         |  |                         |                     |       |                  |                      |            |       |  |  |      |   |  |  | 50,667,000  |  |  |  | 2.69  | %
|Kuming Investment Company Ltd.(3)                           |  |                         | 33,807,884  |                         |  |                         | 2.08                 | %     |                  |                      | 43,055,200  |       |  |  | 2.65  | % |  |  | 48,583,204  |  |  |  | 2.58  | %
|Li Ping Wang(4)                                             |  |                         | 38,935,264  |                         |  |                         | 2.40                 | %     |                  |                      | 38,897,264  |       |  |  | 2.40  | % |  |  | 42,037,367  |  |  |  | 2.23  | %
|Chi Wen Tsai                                                |  |                         | 29,940,063  |                         |  |                         | 1.84                 | %     |                  |                      | 34,408,272  |       |  |  | 1.83  | % |  |  | 33,895,272  |  |  |  | 1.80  | %
|Siliconware Investment Company
Ltd.(5)                      |  |                         | 23,594,565  |                         |  |                         | 1.45                 | %     |                  |                      | 27,015,776  |       |  |  | 1.43  | % |  |  | 27,015,776  |  |  |  | 1.43  | %
|Wen Chung Lin(6)                                            |  |                         | 26,186,167  |                         |  |                         | 1.61                 | %     |                  |                      | 30,583,161  |       |  |  | 1.62  | % |  |  | 26,186,167  |  |  |  | 1.39  | %
|Chung Li Lin(7)                                             |  |                         | 22,088,769  |                         |  |                         | 1.36                 | %     |                  |                      | 25,797,125  |       |  |  | 1.37  | % |  |  | 25,797,125  |  |  |  | 1.37  | %
|Directors, supervisors and executive
Officers as a group    |  |                         | 236,861,089 |                         |  |                         | 14.59                | %     |                  |                      | 266,694,438 |       |  |  | 14.15 | % |  |  | 243,002,272 |  |  |  | 14.32 | %



---

|(1) |  | as record owner of our American depositary shares.                                                                                                                                                              
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Mr. Lin is a cousin of Mr. Wen Jung Lin, the ownership of whom in our
company is disclosed below. In addition, Mr. Lin is a son of Mr. Chung Li
Lin, the ownership of whom in our company is disclosed below.   
|   
|(3) |  | The president of Kuming Investment Company Ltd. is the husband of Ms. Li
Ping Wang, the ownership of whom in our company is disclosed below.                                                                    
|   
|(4) |  | Ms. Wangs husband also serves as the president of Kuming Investment
Company Ltd., the ownership of which in our company is disclosed above.                                                                    
|   
|(5) |  | a wholly-owned subsidiary of our company.                                                                                                                                                                       
|   
|(6) |  | Mr. Lin is a cousin of Mr. Bough Lin, the ownership of whom in our
company is disclosed above. In addition, Mr. Lin is a nephew of Mr. Chung
Li Lin, the ownership of whom in our company is disclosed below.   
|   
|(7) |  | Mr. Lin is the father of Mr. Bough Lin, the ownership of whom in our
company is disclosed above. In addition, Mr. Lin is an uncle of Mr. Wen
Chung Lin, the ownership of whom in our company is disclosed above.

None of our major shareholders have different voting rights from those of
other shareholders.

As of May 31, 2003, a total of 13,958,690 ADSs and 1,853,907,683 of our
shares (including the shares represented by these ADSs) were outstanding. With
certain limited exceptions, holders of common shares that are not ROC person
are required to hold these commons shares through a brokerage or custodial
account in the ROC. As of May 31, 2003, 69,793,450 common shares were
registered in the name of a nominee of Citibank, N.A., the depositary of our
ADS facility. Citibank, N.A. has advised us that, as of May 31, 2003,
69,792,880 common shares were held of record by Cede & Co. We have no further
information as to common shares held, or beneficially owned, by U.S. persons.

None of our major shareholders have different voting rights from those of
other shareholders.

B.     Related Party Transactions

Related Party Transactions Policies

We from time to time have engaged in a variety of transactions with our
affiliates. We conduct transactions with our affiliates on terms substantially
as favorable to us as would be obtainable at the time in a comparable
arms-length transaction with non-affiliate.

66



---



##### Table of Contents



ChipMOS Technologies Inc.

Prior to 2002, we provide packaging services to ChipMOS. These packaging
services were rendered directly to ChipMOSs customers through customer
referrals from ChipMOS. In 2001, we had total sales to ChipMOS of NT$3.9
million.

We are obligated under a joint venture agreement with Mosel Vitelic Inc.
to severally guarantee up to 30% of ChipMOSs indebtedness if ChipMOS require a
guarantee to secure financing. We currently do not guarantee any of ChipMOSs
indebtedness. Our director, Mr. Bough Lin, is a director of ChipMOS. One of our
supervisors, Mr. Jerome Tsai, is a director of ChipMOS.

Phoenix Precision Technology Corporation

We purchased semiconductor raw materials from Phoenix Precision Technology
Corporation totaling NT$1,051.1 million, NT$1,353.9 million and NT$1,716.3
million (US$49.5 million) in 2000, 2001 and 2002, respectively. The purchase
price and payment terms for such purchases were generally comparable to those
provided by non-related parties. The average payment period is approximately
three months from the date of completion of service or purchase. As of December
31, 2001 and 2002, we owed NT$162.8 million and NT$195.0 million (US$5.6
million), respectively, in accounts payable to Phoenix Precision Technology.

Our director, Mr. Bough Lin, is Chairman of Phoenix Precision Technology.
Two of our supervisors, Ms. Teresa Wang and Mr. Jerome Tsai, are a director and
a supervisor, respectively, of Phoenix Precision.

CAESAR Technology Inc.

In 2001 and 2002, we purchased machinery and equipment from CAESAR
totaling NT$70.5 million and NT$59.5 million (US$1.7 million) before tax,
respectively.

C.     Interests of Experts and Counsel

Not applicable.

67



---



##### Table of Contents






Item 8. Financial Information

A.     Consolidated Statements and Other Financial Information

Please refer to Item 18 for a list of all financial statements filed as
part of this annual report on Form 20-F.

B.     Significant Changes

Our net operating revenues on a non-consolidated basis for the first five
months of 2003 amounted to NT$9,972.0 million, representing a 13.4% increase
from NT$8,792.0 million of our net operating revenues on a non-consolidated
basis for the first five months of 2002. Our net operating revenues for the
first five months of 2003 are not indicative of our financial performance on
either a non-consolidated or a consolidated basis for the remaining months of
2003. In addition, we cannot predict whether the demand for our products and
services will continue to improve in the near future.

68



---



##### Table of Contents






Item 9. The Offer and Listing

A.     Offer and Listing Details

Market Price Information for Our Shares

Our shares have been listed on the Taiwan Stock Exchange since April 7,
1993. The table below shows, for the periods indicated, the high and low
closing prices and the average daily volume of trading activity on the Taiwan
Stock Exchange for our shares and the highest and lowest of the daily closing
values of the Taiwan Stock Exchange Index.

|       |                                 |          |  |                        |      |         |  |                       |      |            |  |               |        |  |  |           |          |  |  |          |          | 
|------ | ------------------------------- | -------- |  | ---------------------- | ---- | ------- |  | --------------------- | ---- | ---------- |  | ------------- | ------ |  |  | --------- | -------- |  |  | -------- | -------- | 
|       |                                 |          |  | Closing Price for Each |      | Average |  | Taiwan Stock Exchange
|       |                                 |          |  | Share1(1)              |      | Daily   |  | Index                
|       |                                 |          |  |                        |      |         |  |                       |      |           
|       |                                 |          |  | High                   |      | Low     |  | Trading               |      | High       |  | Low          
|       |                                 |          |  |                        |      |         |  |                       |      |            |  |              
|       |                                 |          |  | NT$                    |      | NT$     |  | Volume                |      |            |  |               |        |  |  |          
|       |                                 |          |  |                        |      |         |  |                       |      |            |  |               |        |  |  |          
|       |                                 |          |  |                        |      |         |  |                       |      |            |  | (in thousands |        |  |  |           |          |  |  |         
|Period |                                 |          |  |                        |      |         |  |                       |      | of shares) |  |               |        |  |  |           |          | 
|1998:  |                                 |          |  |                        |      |         |  |                       |      |            |  |               |        |  |  |           |          |  |  |         
|       | First Quarter                   |          |  | 46.71                  |      |         |  | 30.68                 |      |            |  | 22,559        |        |  |  | 9,277.09  |          |  |  | 7,375.14 |         
|       | Second Quarter                  |          |  | 47.17                  |      |         |  | 28.71                 |      |            |  | 23,691        |        |  |  | 9,266.68  |          |  |  | 7,117.11 |         
|       | Third Quarter                   |          |  | 38.62                  |      |         |  | 27.03                 |      |            |  | 17,762        |        |  |  | 8,047.67  |          |  |  | 6,251.38 |         
|       | Fourth Quarter                  |          |  | 41.73                  |      |         |  | 27.03                 |      |            |  | 14,936        |        |  |  | 7,435.84  |          |  |  | 6,418.43 |         
|1999:  |                                 |          |  |                        |      |         |  |                       |      |            |  |               |        |  |  |           |          |  |  |         
|       | First Quarter                   |          |  | 46.71                  |      |         |  | 34.57                 |      |            |  | 15,574        |        |  |  | 7,043.23  |          |  |  | 5,474.79 |         
|       | Second Quarter                  |          |  | 52.10                  |      |         |  | 33.95                 |      |            |  |               |        |  |  | 8,608.91  |          |  |  | 7,018.68 |         
|       | Third Quarter                   |          |  | 55.33                  |      |         |  | 36.39                 |      |            |  | 20,970        |        |  |  | 8,593.35  |          |  |  | 6,823.52 |         
|       | Fourth Quarter                  |          |  | 61.29                  |      |         |  | 38.69                 |      |            |  | 17,315        |        |  |  | 8,448.84  |          |  |  | 7,362.69 |         
|2000:  |                                 |          |  |                        |      |         |  |                       |      |            |  |               |        |  |  |           |          |  |  |         
|       | First Quarter                   |          |  | 59.76                  |      |         |  | 43.67                 |      |            |  | 17,899        |        |  |  | 10,202.20 |          |  |  | 8,536.05 |         
|       | Second Quarter                  |          |  | 56.69                  |      |         |  | 47.50                 |      |            |  | 17,491        |        |  |  | 10,186.17 |          |  |  | 8,120.89 |         
|       | Third Quarter                   |          |  | 54.39                  |      |         |  | 26.46                 |      |            |  | 13,278        |        |  |  | 8,643.21  |          |  |  | 6,155.65 |         
|       | Fourth Quarter                  |          |  | 29.69                  |      |         |  | 15.55                 |      |            |  | 19,655        |        |  |  | 6,425.09  |          |  |  | 4,555.91 |         
|2001:  |                                 |          |  |                        |      |         |  |                       |      |            |  |               |        |  |  |           |          |  |  |         
|       | First Quarter                   |          |  | 27.07                  |      |         |  | 16.59                 |      |            |  | 27,121        |        |  |  | 6,104.24  |          |  |  | 4,894.79 |         
|       | Second Quarter                  |          |  | 25.85                  |      |         |  | 16.59                 |      |            |  | 16,966        |        |  |  | 5,608.50  |          |  |  | 4,768.50 |         
|       | Third Quarter                   |          |  | 23.00                  |      |         |  | 14.25                 |      |            |  | 11,845        |        |  |  | 4,886.86  |          |  |  | 3,493.78 |         
|       | Fourth Quarter                  |          |  | 30.90                  |      |         |  | 16.20                 |      |            |  | 14,750        |        |  |  | 5,521.24  |          |  |  | 3,446.26 |         
|2002:  |                                 |          |  |                        |      |         |  |                       |      |            |  |               |        |  |  |           |          |  |  |         
|       | First Quarter                   |          |  | 35.70                  |      |         |  | 24.90                 |      |            |  | 21,953        |        |  |  | 6,242.64  |          |  |  | 5,488.33 |         
|       | Second Quarter                  |          |  | 38.4                   |      |         |  | 21.9                  |      |            |  | 17,157        |        |  |  | 5,071.60  |          |  |  | 6,462.30 |         
|       | Third Quarter                   |          |  | 26.2                   |      |         |  | 16.7                  |      |            |  | 14,925        |        |  |  | 4,185.95  |          |  |  | 5,416.50 |         
|       | Fourth Quarter                  |          |  | 21.7                   |      |         |  | 15.6                  |      |            |  | 19,606        |        |  |  | 4,823.67  |          |  |  | 3,850.04 |         
|       |                                 | December |  |                        | 21.7 |         |  |                       | 16.7 |            |  |               | 17,881 |  |  |           | 4,832.67 |  |  |          | 4,452.45 | 
|2003:  |                                 |          |  |                        |      |         |  |                       |      |            |  |               |        |  |  |           |          |  |  |         
|       | First Quarter                   |          |  | 18.6                   |      |         |  | 15.6                  |      |            |  | 16,648        |        |  |  | 5,078.80  |          |  |  | 4,260.45 |         
|       |                                 | January  |  |                        | 17.2 |         |  |                       | 19.5 |            |  |               | 18,189 |  |  |           | 5,078.80 |  |  |          | 4,524.87 | 
|       |                                 | February |  |                        | 17.3 |         |  |                       | 15.6 |            |  |               | 15,710 |  |  |           | 4,833.58 |  |  |          | 4,432.46 | 
|       |                                 | March    |  |                        | 18.6 |         |  |                       | 15.6 |            |  |               | 15,967 |  |  |           | 4,599.25 |  |  |          | 4,260.45 | 
|       | Second Quarter
(through May 31) |          |  |                        |      |         |  |                       |      |            |  |               |        |  |  |           |          |  |  |          |         
|       |                                 | April    |  |                        | 18.4 |         |  |                       | 16.1 |            |  |               | 14,934 |  |  |           | 4,658.30 |  |  |          | 4,139.50 | 
|       |                                 | May      |  |                        | 17.7 |         |  |                       | 16.3 |            |  |               | 13,617 |  |  |           | 4,555.90 |  |  |          | 4,187.82 | 

69



---



##### Table of Contents





---

|    |  |                                                                                                
|--- |  | -----------------------------------------------------------------------------------------------
|   
|    |  | Sources: Taiwan Stock Exchange Statistical Data 1998-2003, Taiwan Stock
Exchange and Bloomberg.
|   
|(1) |  | As reported.                                                                                   

There is no public market outside Taiwan for our shares. The Taiwan Stock
Exchange has experienced significant fluctuations in the prices of listed
securities and there are currently limits on the range of daily price
movements.

Market Price Information for Our American Depositary Shares

Our ADSs have been listed on the Nasdaq Stock Markets National Market
since June 7, 2000. The table below shows, for the periods indicated, the high
and low closing prices and the average daily volume of trading activity on the
Nasdaq Stock Markets National Market.

|       |                                 |          |  |                  |       |                |  |       |       |  |  |         |         | 
|------ | ------------------------------- | -------- |  | ---------------- | ----- | -------------- |  | ----- | ----- |  |  | ------- | ------- | 
|       |                                 |          |  | Closing Price    |       | Average Daily 
|       |                                 |          |  | for Each ADS (1) |       | Trading Volume
|       |                                 |          |  |                  |       |               
|       |                                 |          |  | High             |       | Low            |  |       |       | 
|Period |                                 | US$      |  | US$              |       |                |  |      
|       |                                 |          |  |                  |       |                |  |      
|2000:  |                                 |          |  |                  |       |                |  |       |       |  |  |        
|       | June (since June 7)             |          |  | 10.130           |       |                |  | 9.130 |       |  |  | 578,683 |        
|       | Third Quarter                   |          |  | 9.940            |       |                |  | 4.590 |       |  |  | 362,556 |        
|       | Fourth Quarter                  |          |  | 4.750            |       |                |  | 2.400 |       |  |  | 395,444 |        
|2001:  |                                 |          |  |                  |       |                |  |       |       |  |  |        
|       | First Quarter                   |          |  | 4.150            |       |                |  | 2.460 |       |  |  | 372,579 |        
|       | Second Quarter                  |          |  | 3.890            |       |                |  | 2.480 |       |  |  | 197,467 |        
|       | Third Quarter                   |          |  | 3.470            |       |                |  | 2.040 |       |  |  | 160,168 |        
|       | Fourth Quarter                  |          |  | 4.340            |       |                |  | 2.440 |       |  |  | 271,024 |        
|       |                                 | December |  |                  | 4.340 |                |  |       | 3.500 |  |  |         | 527,360 | 
|2002:  |                                 |          |  |                  |       |                |  |       |       |  |  |        
|       | First Quarter                   |          |  | 5.200            |       |                |  | 3.630 |       |  |  | 469,277 |        
|       | Second Quarter                  |          |  | 5.480            |       |                |  | 3.375 |       |  |  | 515,089 |        
|       | Third Quarter                   |          |  | 3.960            |       |                |  | 2.400 |       |  |  | 368,135 |        
|       | Fourth Quarter                  |          |  | 3.090            |       |                |  | 2.230 |       |  |  | 242,027 |        
|       |                                 | December |  |                  | 3.090 |                |  |       | 2.400 |  |  |         | 247,810 | 
|2003:  |                                 |          |  |                  |       |                |  |       |       |  |  |        
|       | First Quarter                   |          |  | 2.850            |       |                |  | 2.190 |       |  |  | 230,100 |        
|       |                                 | January  |  |                  | 2.850 |                |  |       | 2.400 |  |  |         | 267,543 | 
|       |                                 | February |  |                  | 2.480 |                |  |       | 2.190 |  |  |         | 208,589 | 
|       |                                 | March    |  |                  | 2.650 |                |  |       | 2.260 |  |  |         | 212,119 | 
|       | Second Quarter (through May 31) |          |  |                  |       |                |  |       |       |  |  |         |        
|       |                                 | April    |  |                  | 2.699 |                |  |       | 2.350 |  |  |         | 191,790 | 
|       |                                 | May      |  |                  | 2.620 |                |  |       | 2.300 |  |  |         | 335,988 | 



---

|    |  | Sources: NASDAQ Stock Exchange.
|--- |  | -------------------------------
|   
|(1) |  | As reported.                   

B.     Plan of Distribution

Not applicable.

70



---



##### Table of Contents



C.     Markets

Not applicable.

D.     Selling Shareholders

Not applicable.

E.     Dilution

Not applicable.

F.     Expenses of the Issue

Not applicable.

71



---



##### Table of Contents






Item 10. Additional Information

A.     Share Capital

Not applicable.

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

The scope of business of our company as set forth in Article 2 of our
articles of incorporation includes:



| | (a) |  | The production, processing, and purchase and sale of products
including integrated circuit, transistor, light emitting diode
digital display, light emitting diode display lamp, liquid crystal
clock core, photo diode, hybrid circuit, and thin film circuit and
thick film circuit; and
| | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (b) |  | The import and export of the products mentioned in the
preceding paragraph.                                                                                                                                                                                                               

Directors

The Taiwan Company Law and our articles of incorporation provide that our
board of directors are elected by shareholders and is responsible for the
management of our business. Our board of directors is composed of nine
directors. The Chairman of our board is elected by our directors. The Chairman
presides at all meetings of our board of directors, and also has the authority
to represent us. The term of office for our directors is three years, and our
directors are elected by our shareholders by means of cumulative voting. The
next election for all of the directors and supervisors is expected to be held
in June 2005. In addition, our shareholders also elect three supervisors whose
duties include investigating our business and financial condition, inspecting
corporate records, calling shareholders meetings when our board of directors
does not or cannot convene a shareholders meeting and/or when such a meeting
is necessary for the benefit of the shareholders, representing us in
negotiations with our directors and notifying our board of directors to cease
acting in contravention of law, our articles of incorporation or the
resolutions of our shareholders meetings. The supervisors cannot concurrently
serve as our directors or officers. A person may serve as our director or
supervisor in his personal capacity or as the representative of one of our
shareholder entities. A director or supervisor who serves as the representative
of a legal entity may be removed or replaced at any time, and the replacement
director or supervisor may serve the remainder of the term of office of the
replaced director or supervisor.

Shares

As of May 31, 2003, our authorized share capital was NT$26 billion,
divided into 2.6 billion shares of which NT$18,539,076,830, divided into
1,853,907,683 shares, were issued and outstanding. In January 2002, we issued
US$200 million of zero coupon convertible bonds, all of

72



---



##### Table of Contents



which remained outstanding as of May 31, 2003. These bonds are convertible
into 42,553,191 ADSs or 212,765,955 shares, or a combination of ADSs and
shares. Other than our shares and our convertible bonds, we do not have any
other equity interests outstanding as of the date of this annual report.

All shares presently issued are fully paid and in registered form, and
existing shareholders are not obligated to contribute additional capital. The
shares underlying your ADSs are fully paid, in registered form and will not be
obligated by any capital calls. We generally may not directly acquire our
shares except under limited circumstances as permitted by ROC law. Except for
the 31,266,000 shares of treasury stock, which we hold for employee bonuses, we
did not directly hold any of our own shares as of May 31, 2003.

New Shares and Preemptive Rights

New shares may only be issued with the prior approval of our board of
directors. If our issuance of any new shares will result in any change in our
authorized share capital, we are required under ROC law to amend our articles
of incorporation and obtain approval of our shareholders in a shareholders
meeting. We must also obtain the approval of, or submit a registration with,
the Securities and Futures Commission and the Ministry of Economic Affairs.
According to the ROC Company Law, when a company issues capital stock for cash,
10% to 15% of the issue must be offered to its employees. In addition, if a
listed company intends to offer new shares for cash, at least 10% of the issue
must also be offered to the public. This percentage can be increased by a
resolution passed at a shareholders meeting, which will reduce the number of
new shares in which existing shareholders may have preemptive rights. Unless
the percentage of the shares offered to the public is increased by a
resolution, existing shareholders of the company have a preemptive right to
acquire the remaining 75% to 80% of the issue in proportion to their existing
shareholdings.

Shareholders

We only recognize persons registered in our register as our shareholders.
We may set a record date and close our register of shareholders for specified
periods to determine which shareholders are entitled to various rights
pertaining to our shares.

Transfer of Shares

Under the ROC Company Law, as amended effective November 14, 2001, a
public company, such as us, may issue individual share certificates, one master
certificate or no certificate at all to evidence common shares. Shares in
registered form are transferred by endorsement and delivery of the related
share certificates. Transferees must have their names and addresses registered
on our register in order to assert shareholders rights against us. Our
shareholders are required to file their respective specimen seals with our
share registrar, Chinatrust Commercial Bank. If we decide to issue one master
certificate or no share certificates at all, the transfer of our shares will be
carried out on the book-entry system maintained by Taiwan Securities Central
Depository Co., Ltd.

73



---



##### Table of Contents



Shareholders Meetings

We are required to hold an annual ordinary shareholders meeting once
every calendar year and within six months after the end of each calendar year.
Our board of directors may convene an extraordinary meeting whenever the
directors think fit, and they must do so if requested in writing by
shareholders holding not less than 3% of our paid-in share capital who have
held these shares for more than a year. In addition, any of our supervisors may
convene a shareholders meeting when our board of directors do not or cannot
convene a shareholders meeting and/or when such a meeting is necessary for the
benefit of the shareholders. At least 15 days advance written notice must be
given of every extraordinary shareholders meeting and at least 30 days advance
written notice must be given of every annual ordinary shareholders meeting.
Unless otherwise required by law or by our articles of incorporation, voting
for an ordinary resolution requires an affirmative vote of a simple majority of
those present. A distribution of cash dividends would be an example of an
ordinary resolution. The ROC Company Law also provides that in order to approve
certain major corporate actions, including any amendment of our articles of
incorporation, dissolution, merger or spin-off, the transfer of the whole of
the business or assets to any other company which would have a significant
impact in our operations, removing directors or the distribution of any stock
dividend, a special resolution may be adopted by the holders of at least
two-thirds of our shares represented at a meeting of shareholders at which
holders of at least a majority of our issued and outstanding shares are
present. However, if we are the controlling company and hold not less than 90%
of our subordinate companys outstanding shares, our merger with the
subordinate company can be approved by a board resolution adopted by majority
consent at a meeting with two-thirds of our directors present without
shareholders approval.

Voting Rights

Except for treasury shares, each share is generally entitled to one vote.
Except as otherwise provided by law or our articles of incorporation, a
resolution can be adopted by the holders of a simple majority of the total
issued and outstanding shares represented at a shareholders meeting. The
quorum for a shareholders meeting to discuss the ordinary resolutions is a
majority of the total issued and outstanding shares. The election of directors
and supervisors by our shareholders may be conducted by means of cumulative
voting or other voting mechanisms adopted in our articles of incorporation. In
all other matters, a shareholder must cast all his votes in the same manner
when voting on any of these matters.

Our shareholders may be represented at an ordinary or extraordinary
shareholders meeting by proxy if a valid proxy form is delivered to us five
days before the commencement of the ordinary or extraordinary shareholders
meeting. Voting rights attached to our shares exercised by our shareholders
proxy are subject to the proxy regulation promulgated by the ROC Securities and
Futures Commission.

Any shareholder who has a personal interest in a matter to be discussed at
our shareholders meeting, the outcome of which may impair our interests, shall
not vote or exercise voting rights on behalf of another shareholder on such
matter.

Any holder of our ADSs generally will not be able to exercise voting
rights on the shares underlying its holding of ADSs on an individual basis.

74



---



##### Table of Contents



Dividends and Distributions

We may distribute dividends in any year in which we have current or
retained earnings (excluding reserves). Before distributing a dividend to
shareholders, we must recover any past losses, pay all outstanding taxes and
set aside a legal reserve equivalent to 10% of our net income until our legal
reserve equals our paid-in capital.

At the shareholders annual ordinary meeting, our board of directors
submits to the shareholders for their approval proposals for the distribution
of a dividend or the making of any other distribution to shareholders from our
net retained earnings or reserves. Dividends are paid to shareholders
proportionately. Dividends may be distributed either in cash or in shares or a
combination of cash and shares, as determined by the shareholders at such
meeting. Distribution of stock dividends requires approvals from the ROC
Securities and Futures Commission and the Ministry of Economic Affairs, as
necessary.

Beginning in 1999, our articles of incorporation provide that our earnings
after payment of all income taxes and deduction of any past losses shall be
distributed as follows:



| |  |  | 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.

Before 1999, our articles of incorporation provided that our earnings after:



| |  |  | deduction of any past losses;                                       
| | - |  | --------------------------------------------------------------------
|
| |  |  | payment of all income taxes;                                        
|
| |  |  | allocation of 10% of our net income as legal reserve; and           
|
| |  |  | allocation of an interest on our capital at a rate not to exceed 3%,

shall be allocated as follows:



| | (1) |  | 10% is distributable as bonus shares for employees.          
| | --- |  | -------------------------------------------------------------
|
| | (2) |  | 4% is set aside as remuneration of directors and supervisors.
|
| | (3) |  | 86% is allocated as a dividend to shareholders.              

In addition to permitting dividends to be paid out of net income, we are
permitted under the ROC Company Law to make distributions to our shareholders
of additional shares by capitalizing reserves, including the legal reserve and
capital surplus of premiums from issuing stock and earnings from gifts received
if we do not have losses. However, the capitalized portion payable out of our
legal reserve is limited to 50% of the total accumulated legal reserve, and is
payable only if and to the extent the accumulated legal reserve exceeds 50% of
our paid-in capital.

75



---



##### Table of Contents



Acquisition of Our Shares by Us

An ROC company may not acquire its own common shares, except under certain
exceptions provided in the ROC Company Law or the ROC Securities and Exchange
Law.

Under Article 28-2 of the Securities and Exchange Law, we may, by a board
resolution adopted by majority consent at a meeting with two-thirds of our
directors present, purchase up to 10% of our issued shares on the Taiwan Stock
Exchange or by a tender offer, in accordance with the procedures prescribed by
the Securities and Futures Commission, for the following purposes:



| |  |  | 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.                                       

In addition, we may not spend more than the aggregate amount of the
retained earnings, the premium from issuing stock and the realized portion of
the capital reserve to purchase our shares.

We may not pledge or hypothecate any purchased shares. In addition, we may
not exercise any shareholders rights attaching to such shares. In the event
that we purchase our shares on the Taiwan Stock Exchange, our affiliates,
directors, supervisors, managers and their respective spouses and minor
children and/or nominees are prohibited from selling any of our shares during
the period in which we purchase our shares.

Liquidation Rights

In the event of our liquidation, the assets remaining after payment of all
debts, liquidation expenses, taxes and distributions to holders of preferred
shares, if any, will be distributed pro rata to our shareholders in accordance
with the ROC Company Law.

Other Rights of Shareholders

Under the ROC Company Law, dissenting shareholders are entitled to
appraisal rights in the event of a spin-off or a merger and various other major
corporate actions. Dissenting shareholders may request us to redeem all their
shares at a fair price to be determined by mutual agreement. If no agreement
can be reached, the valuation will be determined by a court. Subject to
applicable law, dissenting shareholders may, among other things, exercise their
appraisal rights by notifying us before the related shareholders meeting
and/or by raising and registering their dissent at the shareholders meeting.

One or more shareholders who have held more than 3% of the issued and
outstanding shares for more than one year may require our board of directors to
call an extraordinary shareholders meeting by sending a written request to our
board of directors.

76



---



##### Table of Contents



C.     Material Contracts

License Agreement with Flip Chip

We entered into a license agreement with Flip Chip Technologies, L.L.C. on
November 28, 1999 in which Flip Chip agreed that within thirty days of the
effective date of the license agreement, it shall disclose to us certain
confidential information regarding certain Flex-on-Cap process to enable us to
practice such process on a scale suitable for commercial solder bumping of
semiconductor wafers ranging from four inches in diameter to eight inches in
diameter on a production basis.

Merger Agreement with Siliconware Corp.

On August 22, 2000, we entered into a merger agreement with Siliconware
Corporation. Pursuant to the merger agreement, Siliconware Corp. would be
merged into our company with our company as the surviving entity.

Pursuant to the agreement, all consideration for this merger was to be
paid in the form of our shares. At the share exchange ratio of one Siliconware
Corp. share for 0.6 share of our company (except that shares of the parties
held by each other would be canceled), we were required to issue an aggregate
of 173,711,701 shares with a par value of NT$10 to all Siliconware Corp.s
shareholders.

We were also required under the merger agreement to assume all the assets
and debts of Siliconware Corp. prior to December 30, 2000.

D.     Exchange Controls

ROC Foreign Exchange Control Statute and regulations provide that all
foreign exchange transactions must be executed by banks designated to handle
such business by the Ministry of Finance or by the Central Bank of China.
Current regulations favor trade-related foreign exchange transactions.
Consequently, foreign currency earned from exports of merchandise and services
may now be retained and used freely by exporters, and all foreign currency
needed for the importation of merchandise and services may be purchased freely
from the designated foreign exchange banks.

Trade aside, ROC companies and resident individuals may, without foreign
exchange approval, remit outside the ROC foreign currency of up to US$50
million (or its equivalent) and US$5 million (or its equivalent), respectively,
in each calendar year. In addition, ROC companies and resident individuals may,
without foreign exchange approval, remit into the ROC foreign currency of up to
US$50 million (or its equivalent) and US$5 million (or its equivalent),
respectively, in each calendar year. Furthermore, any remittance of foreign
currency into ROC by and ROC company or resident individual in a year will be
offset by the amount remitted out of ROC by the company or individual (as
applicable) within its annual quota and will not use up its annual inward
remittance quota to the extent of such offset. The above limits apply to
remittances involving a conversion of New Taiwan dollars to a foreign currency
and vice versa. A requirement is also imposed on all enterprises to register
medium- and long-term foreign debt with the Central Bank of China.

77



---



##### Table of Contents



In addition, foreign persons may, subject to certain requirements but
without foreign exchange approval of the Central Bank of China, remit outside
and into the ROC foreign currencies of up to US$100,000 (or its equivalent) for
each remittance. The above limit applies to remittances involving a conversion
of New Taiwan dollars to a foreign currency and vice versa. The above limit
does not, however, apply to the conversion of New Taiwan dollars into other
currencies, including US dollars, in respect of the proceeds of sale of any
underlying shares withdrawn from a depositary receipt facility.

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.

You will be considered a non-resident of Taiwan for the purposes of this
section if:



| |  |  | you are an individual and you are not physically present in
Taiwan for 183 days or more during any calendar year, or                                                      
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | you are an entity and you are organized under the laws of a
jurisdiction other than Taiwan and have no fixed place of business
or other permanent establishment in Taiwan.

You should consult your own tax advisers concerning the tax consequences
of owning ADSs or shares in Taiwan and any other relevant taxing jurisdiction
to which you are subject.

Dividends

Dividends, whether in cash or shares, declared by us out of retained
earnings and paid out to a holder that is not a Taiwan resident in respect of
shares represented by ADSs are normally subject to Taiwan withholding tax at
the time of distribution. The current rate of withholding for non-residents is
20% of the amount of the distribution, in the case of cash dividends, or of the
par value of the shares distributed in the case of stock dividends. As
discussed below in Tax Reform, certain of our retained earnings will be
subject to an undistributed retained earnings tax. To the extent dividends are
paid out of retained earnings which have been subject to the retained earnings
tax, the amount of such tax will be used by us to offset a non-residents
withholding tax liability on such dividend. Consequently, the effective rate of
withholding on dividends paid out of retained earnings previously subject to
the retained earnings tax may be less than 20%. It is not clear whether there
is any withholding tax with respect to stock dividends declared out of our
capital reserve.

78



---



##### Table of Contents



Capital Gains

Gains realized on securities transactions in Taiwan are exempt from Taiwan
income tax. In addition, transfers of ADSs by non-resident holders are not
regarded as sales of Taiwan securities and, as a result, any gains on such
transactions are currently not subject to Taiwan income tax.

Securities Transaction Tax

The Taiwan government imposes a securities transaction tax that will apply
to sales of shares, but not to sales of ADSs. The transaction tax is payable by
the seller and is generally equal to 0.3% of the sales proceeds.

Preemptive Rights

Distributions of statutory preemptive rights for shares in compliance with
the Taiwan Company Law are not subject to Taiwan tax. Proceeds derived from
sales of statutory preemptive rights evidenced by securities are subject to
Taiwan securities transaction tax, currently at the rate of 0.3% of the gross
amount received. Proceeds derived from sales of statutory preemptive rights
which are not evidenced by securities are subject to income tax at the rate of:



| |  |  | 25% of the gains realized for non-Taiwan entities; and
| | - |  | ------------------------------------------------------
|
| |  |  | 35% of the gains realized for non-Taiwan individuals. 

We have the sole discretion to determine whether statutory preemptive
rights are evidenced by securities or not.

Tax Reform

The Taiwan Income Tax Laws have been recently amended to integrate the
corporate income tax and the shareholder dividend tax with the goal of
eliminating the double taxation effect.

Under this amendment, we are subject to a 10% retained earnings tax on our
after-tax earnings generated after January 1, 1998 which are not distributed in
the following year. The retained earnings tax so paid will further reduce the
retained earnings available for future distribution. When we declare dividends
out of those retained earnings, a maximum amount of up to 10% of the declared
dividends will be credited against the 20% withholding tax imposed on the
non-resident holders of our shares.

U.S. Federal Income Tax Considerations For U.S. Persons

The following is a summary of the material U.S. federal income tax
consequences for beneficial owners of our shares or ADSs that have purchased
such shares or ADSs, that hold the shares or ADSs as capital assets, and that
are U.S. holders and non-residents of the ROC. You are a U.S. holder if you
are:



| |  |  | a citizen or resident of the United States;
| | - |  | -------------------------------------------

79



---



##### Table of Contents





| |  |  | a corporation or partnership created or organized in or under
the laws of the United States or any political subdivision thereof;     
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | 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 the control of one or more U.S.
persons; or
|
| |  |  | a trust that has a valid election in effect under applicable
U.S. Treasury regulations to be treated as a U.S. person.                

This summary is based on current law, which is subject to change, perhaps
retroactively. It is for general purposes only and you should not consider it
to be tax advice. In addition, it is also based in part on representations by
the depositary and assumes that each obligation under the deposit agreement and
any related agreement will be performed in accordance with its terms. This
summary does not represent a detailed description of all the U.S. federal
income tax consequences to you in light of your particular circumstances. In
addition, it does not represent a detailed description of the U.S. federal
income tax consequences applicable to you if you are subject to special
treatment under the U.S. federal income tax laws including if you are:



| |  |  | a dealer in securities or currencies;                                                                             
| | - |  | ------------------------------------------------------------------------------------------------------------------
|
| |  |  | a trader in securities if you elect to use a mark-to-market
method of accounting for your securities holdings;    
|
| |  |  | a financial institution or an insurance company;                                                                  
|
| |  |  | a tax-exempt organization;                                                                                        
|
| |  |  | a regulated investment company;                                                                                   
|
| |  |  | a real estate investment trust;                                                                                   
|
| |  |  | a person liable for alternative minimum tax;                                                                      
|
| |  |  | a person holding shares as part of a hedging, integrated or
conversion transaction, constructive sale or straddle;
|
| |  |  | 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.                                        

We cannot assure you that a later
change in law will not alter significantly the tax considerations
that we describe in this summary.

80



---



##### Table of Contents



If a partnership holds our shares or ADSs, the tax treatment of a partner
will generally depend upon the status of the partner and the activities of the
partnership. If you are a partner of a partnership holding our shares or ADSs,
you should consult your tax advisor.

You should consult your own tax advisor concerning the particular U.S.
federal income tax consequences to you of the ownership and disposition of the
shares or ADSs, as well as the consequences to you arising under the laws of
any other taxing jurisdiction.

In general, for U.S. federal income tax purposes, a U.S. person who is the
beneficial owner of an ADS will be treated as the owner of the shares
underlying its ADS. However, the U.S. Treasury has expressed concerns that
parties involved in transactions in which depositary shares are pre-released
may be taking actions that are inconsistent with the claiming of foreign tax
credits by the holders of ADSs. Accordingly, the analysis of the creditability
of ROC taxes described below could be affected by future actions that may be
taken by the U.S. Treasury. Deposits or withdrawals of shares by U.S. holders
for ADSs will not be subject to U.S. federal income tax.

Taxation of Dividends

Except as discussed below with respect to the passive foreign investment
company rules, the amount of distributions (other than certain pro rata
distributions of shares to all shareholders) you receive on your shares or
ADSs, including net amounts withheld in respect of ROC withholding taxes, will
generally be treated as dividend income to you if the distributions are made
from our current and accumulated earnings and profits as calculated according
to U.S. federal income tax principles. In determining the net amounts withheld
in respect of ROC taxes, any reduction in the amount withheld on account of a
ROC credit in respect of the 10% retained earnings tax imposed on us is not
considered a withholding tax and will not be treated as distributed to you or
creditable by you against your U.S. federal income tax. Such income will be
includible in your gross income as ordinary income on the day you actually or
constructively receive it, which in the case of an ADS will be the date
received by the depositary. The amount of any distribution of property other
than cash will be the fair market value of such property on the date it is
distributed. You will not be entitled to claim a dividends received deduction
with respect to distributions you receive from us.

With respect to U.S. holders who are individuals, certain dividends
received from a foreign corporation before January 1, 2009, on shares (or ADSs
backed by such shares) that are readily tradable on an established securities
market in the United States may be subject to reduced rates of taxation. We
believe that our ADSs, which are listed on the NASDAQ, are readily tradable on
an established securities market in the United States. There can be no
assurance that our ADSs will continue to be regularly tradable on an
established securities market in later years (or that our shares will be
readily tradable on an established securities market in any given year).
Individuals that do not meet a minimum holding period requirement during which
they are not protected from the risk of loss or that elect to treat the
dividend income as investment income pursuant to section 163(d)(4) of the
Code will not be eligible for the reduced rates of taxation regardless of the
trading status of our shares or ADSs. Holders should consult their own tax
advisors regarding the application of these rules given their particular
circumstances.

The amount of any dividend paid in a currency other than the United States
dollar, which we refer to as foreign currency, will equal the US dollar value
of the foreign currency you

81



---



##### Table of Contents



receive, calculated by reference to the exchange rate in effect on the
date you actually or constructively receive the dividend, which in the case of
an ADS will be the date received by the depositary, regardless of whether the
foreign currency is actually converted into US dollars. If the foreign currency
received as a dividend is not converted into US dollars on the date of receipt,
you will have a basis in the foreign currency equal to its US dollar value on
the date of receipt. Any gain or loss you realize if you subsequently sell or
otherwise dispose of the foreign currency will be ordinary income or loss from
sources within the United States for foreign tax credit limitation purposes.

Subject to certain limitations under the Internal Revenue Code, you may be
entitled to a credit or deduction against your federal income taxes for the net
amount of any ROC taxes that are withheld from dividend distributions made to
you. The election to receive a credit or deduction must be made annually, and
applies to all foreign taxes for the applicable tax year. The limitation on
foreign taxes eligible for credit is calculated separately with respect to
specific classes of income. For this purpose, dividends we pay with respect to
shares or ADSs will generally be considered passive income (which also
includes certain interest, royalties, rents, annuities or income from property
transactions) or, for certain holders, financial services income. You may be
subject to special rules if your foreign source income during the taxable year
consists entirely of qualified passive income and if you have $300 or less,
or $600 or less if you file a joint return, of creditable foreign taxes which
you have paid or accrued during the taxable year. Furthermore, you will not be
allowed a foreign tax credit for foreign taxes imposed on dividends paid on
shares or ADSs if you (1) have held shares or ADSs for less than a specified
minimum period during which you are not protected from risk of loss, (2) are
obligated to make payments related to the dividends or (3) hold the shares or
ADSs in arrangements in which your expected economic profit, after non-U.S.
taxes, is insubstantial. The rules governing the foreign tax credit are
complex. We therefore urge you to consult your tax advisor regarding the
availability of the foreign tax credit under your particular circumstances.

To the extent that the amount of any distribution you receive exceeds our
current and accumulated earnings and profits for a taxable year, the
distribution will first be treated as a tax-free return of capital, causing a
reduction in your adjusted basis in the shares or ADSs and thereby increasing
the amount of gain, or decreasing the amount of loss, you will recognize on a
subsequent disposition of the shares or ADSs. The balance in excess of adjusted
basis, if any, will be taxable to you as capital gain recognized on a sale or
exchange.

It is possible that pro rata distributions of shares to all shareholders
may be made in a manner that is not subject to U.S. federal income tax. In the
event that such distributions are tax-free, the basis of any new shares so
received will be determined by allocating the U.S. holders basis in the old
shares between the old shares and the new shares, based on their relative fair
market values on the date of distribution. For U.S. tax purposes, any such
tax-free share distribution and any distributions in excess of current and
accumulated earnings and profits and distributions of shares generally would
not result in foreign source income to you. Consequently, you may not be able
to use the foreign tax credit associated with any ROC withholding tax imposed
on such distributions unless you can use the credit against United States tax
due on other foreign source income in the appropriate category for foreign tax
credit purposes.

82



---



##### Table of Contents



Taxation of Capital Gains

Except as discussed below with respect to the passive foreign investment
company rules, when you sell or otherwise dispose of your shares or ADSs, you
will recognize capital gain or loss in an amount equal to the difference
between the US dollar value of the amount realized for the shares or ADSs and
your basis in the shares or ADSs, determined in US dollars. For foreign tax
credit limitation purposes, such gain or loss will generally be treated as U.S.
source. If you are an individual, and the shares or ADSs being sold or
otherwise disposed of are capital assets that you have held for more than one
year, your gain recognized will be taxed at a maximum rate of 15%. Your ability
to deduct capital losses is subject to limitations.

If you pay any ROC securities transaction tax, such tax is not treated as
an income tax for U.S. federal income tax purposes, and therefore will not be a
creditable foreign tax for U.S. federal income tax purposes. However, subject
to limitations under the Internal Revenue Code, such tax may be deductible.
You are urged to consult your tax advisors regarding the U.S. federal income
tax consequences of these taxes.

Passive Foreign Investment Company

Based on the composition of our income and valuation of our assets,
including goodwill, we do not believe we were a passive foreign investment
company for 2001 and do not expect to become one in the future, although there
can be no assurance in this regard.

In general, a company is considered a passive foreign investment company
for any taxable year if either:



| |  |  | at least 75% of its gross income is passive income, which is
income derived from certain dividends, interest, royalties, rents,
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 50% of value test is based on the average of the value of our assets
for each quarter during the taxable year. If we own at least 25% by value of
another companys stock, we will be treated, for purposes of the passive
foreign investment company rules, as owning our proportionate share of the
assets and receiving our proportionate share of the income of that company.

In determining that we do not expect to be a passive foreign investment
company, we are relying on our projected capital expenditure plans and
projected revenue for the current year and for future years. In addition, our
determination is based on a current valuation of our assets, including
goodwill. In calculating goodwill, we have valued our total assets based on our
total market value, which is based on the market value of our shares and is
subject to change. In addition, we have made a number of assumptions regarding
the amount of this value allocable to goodwill. We believe our valuation
approach is reasonable. However, it is possible that the Internal Revenue
Service will challenge the valuation of our goodwill, which may also result in
us being classified as a passive foreign investment company.

83



---



##### Table of Contents



In addition, the determination of whether we are a passive foreign
investment company is made annually. Accordingly, it is possible that we may
become a passive foreign investment company in the current or any future
taxable year due to changes in our asset or income composition. Because we have
valued our goodwill based on the market value of our shares, a decrease in the
price of our shares may result in our becoming a passive foreign investment
company.

If we are a passive foreign investment company for any taxable year during
which you hold our shares or ADSs, you will be subject to special tax rules
with respect to any excess distribution that you receive and any gain you
realize from a sale or other disposition (including a pledge) of our shares or
ADSs. Distributions you receive in a taxable year that are greater than 125% of
the average annual distributions you received during the shorter of the three
preceding taxable years or your holding period for our shares or ADSs will be
treated as excess distributions. Under these special tax rules:



| |  |  | the excess distribution or gain will be allocated ratably
over your holding period for our shares or ADSs;                                                                                                                                              
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | the amount allocated to the current taxable year, and any
taxable year prior to the first taxable year in which we were a
passive foreign investment company, 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.

If you hold our shares or ADSs in any year in which we are a passive
foreign investment company, you are required to file Internal Revenue Service
Form 8621.

In certain circumstances, a U.S. holder, in lieu of being subject to the
passive foreign investment company rules discussed above, may make an election
to include gain on the stock of a passive foreign investment company as
ordinary income under a mark-to-market method provided that such stock is
regularly traded on a qualified exchange. Under this method, any difference
between the stocks fair market value and its adjusted basis at the end of the
year is accounted for by either an inclusion in income or a deduction from
income. Under current law, the mark-to-market election may be available to you
because the ADSs are listed on the Nasdaq Stock Markets National Market which
constitutes a qualified exchange as designated in the Code, although there can
be no assurance that the ADSs will be regularly traded. You should also note
that only the ADSs and not the shares are listed on the Nasdaq Stock Markets
National Market. The shares are listed on the Taiwan Stock Exchange and must
meet certain trading, listing, financial disclosure and other requirements to
be treated as a qualified exchange under applicable U.S. Treasury regulations
for purposes of the mark-to-market election, and no assurance can be given that
the shares will be regularly traded for purposes of the mark-to-market
election.

If you make an effective mark-to-market election, you will include in
income each year as ordinary income the excess of the fair market value of your
passive foreign investment company shares or ADSs at the end of the year over
your adjusted tax basis in the shares. You will be entitled to deduct as an
ordinary loss each year the excess of your adjusted tax basis in the shares

84



---



##### Table of Contents



or ADSs over their fair market value at the end of the year, but only to
the extent of the net amount previously included in income as a result of the
mark-to-market election.

Your adjusted tax basis in passive foreign investment company shares or
ADSs will be increased by the amount of any income inclusion and decreased by
the amount of any deductions under the mark-to-market rules. If you make a
mark-to-market election it will be effective for the taxable year for which the
election is made and all subsequent taxable years unless the shares or ADSs
cease to be passive foreign investment company stock that is regularly traded
on a qualified exchange or the Internal Revenue Service consents to the
revocation of the election. You should consult your tax advisor about the
availability of the mark-to-market election, and whether making the election
would be advisable in your particular circumstances.

Alternatively, a U.S. holder of shares or ADSs in a passive foreign
investment company can sometimes avoid the rules described above by electing to
treat the company as a qualified electing fund under section 1295 of the
Internal Revenue Code. This option is not available to you because we do not
intend to comply with the requirements necessary to permit you to make this
election.

U.S. holders who are individuals will not be eligible for reduced rates of
taxation on any dividends received from us prior to January 1, 2009, if we are
a passive foreign investment company in the taxable year in which such
dividends are paid or in the preceding taxable year. You should consult your
own tax advisors concerning the U.S. federal income tax consequences of holding
our shares or ADSs if we are considered a passive foreign investment company in
any taxable year.

Information Reporting and Backup Withholding

In general, unless you are an exempt recipient such as a corporation,
information reporting will apply to dividends in respect of the shares or ADSs
and to the proceeds from the sale of your shares or ADSs paid within the United
States (and in some cases, outside of the United States). Additionally, if you
fail to provide your taxpayer identification number, or fail either to report
in full dividend and interest income or to make the necessary certifications,
you will be subject to backup withholding.

Any amounts withheld under the backup withholding rules will be allowed as
a refund or a credit against your U.S. federal income tax liability, provided
you furnish the required information to the Internal Revenue Service.

Inheritance and Gift Tax

As discussed in Taiwan Taxation Considerations, certain ROC inheritance
and gift taxes may be imposed on holders of ADSs. You should consult your own
tax advisor regarding the effect of such taxes on your particular situation.

F.     Dividends and Paying Agents

Not applicable.

85



---



##### Table of Contents



G.     Statement by Experts

Not applicable.

H.     Documents on Display

We have filed this annual report on Form 20-F, including exhibits, with
the SEC. As allowed by the SEC, in Item 19 of this annual report, we
incorporate by reference certain information we filed with the SEC. This means
that we can disclose important information to you by referring you to another
document filed separately with the SEC. The information incorporated by
reference is considered to be part of this annual report.

You may read and copy this annual report, including the exhibits
incorporated by reference in this annual report, at the SECs Public Reference
Room at 450 Fifth Street, N.W., Washington, D.C. 20549 and at the SECs
regional offices in New York, New York and Chicago, Illinois. You can also
request copies of this annual report, including the exhibits incorporated by
reference in this annual report, upon payment of a duplicating fee, by writing
information on the operation of the SECs Public Reference Room.

The SEC also maintains a website at www.sec.gov that contains reports,
proxy statements and other information regarding registrants that file
electronically with the SEC. Our annual report and some of the other
information submitted by us to the SEC may be accessed through this web site.

I.     Subsidiary Information

As of December 31, 2002, we had five subsidiaries: Siliconware Investment
Company Ltd., SPIL (B.V.I.) Holding Limited, Siliconware U.S.A. Inc., SPIL
(Cayman) Holding Limited and Siliconware Technology (Suzhou) Limited, each of
which we owned 100% equity interest. The principal activity of Siliconware
Investment is to invest in companies mostly in IC design industries. The
principal activity of SPIL (B.V.I.) Holding Limited is to own the equity
interest in Siliconware U.S.A. Inc and SPIL (Cayman) Holding Limited. The
principal activity of Siliconware U.S.A. Inc. is to be our sales agent in the
United States. The principal activity of SPIL (B.V.I.) Holding Limited is to
own the equity interest in Siliconware Technology (Suzhou) Limited. The
principal activity of Siliconware Technology (Suzhou) Limited is the design and
manufacture of transistors and electronic components.

86



---



##### Table of Contents






Item 11. Quantitative and Qualitative Disclosures About Market Risk

Market risk is the risk of loss related to adverse changes in market
prices, including interest rates and foreign exchange rates, of financial
instruments. We are exposed to various types of market risks, including
changes in interest rates and foreign currency exchange rates, in the normal
course of business.

Foreign Exchange Risk

Substantial portions of our revenues and expenses are denominated in
currencies other than the NT dollar. In 2002, sales in the amount of US$368.5
million were denominated in US dollars. In 2002, material purchases from our
overseas vendors in the amounts of US$120.5 million and ¥2,279.6 million were
denominated in US dollars and the Japanese yen, respectively. As of December
31, 2002, we had certificates of deposit, bank deposits and accounts receivable
denominated in US dollars of US$167.7 million. As of December 31, 2002, we also
had accounts payable, bonds payable and other liabilities denominated in US
dollars and the Japanese yen of US$224.0 million and of ¥508.3 million,
respectively. However, we did not utilize any derivative financial instrument
to hedge our currency exposure.

Interest Rate Risk

Our major market risk exposure is changing interest rates. Our exposure to
market risk for changes in interest rates relates primarily to our long-term
debt obligations. We primarily enter into debt obligations to support general
corporate purposes including capital expenditures and working capital needs. We
have not entered into any interest rate swaps, caps or any contracts hedge to
modify our exposure to interest rate movements.

The table below presents annual principal amounts due and related weighted
average interest rates by year of maturity for our debt obligations outstanding
as of December 31, 2002.

|                        |  |                                   |         |      |  |      |         |      |  |            |         |   |  |  |   |  |  |          |         | 
|----------------------- |  | --------------------------------- | ------- | ---- |  | ---- | ------- | ---- |  | ---------- | ------- | - |  |  | - |  |  | -------- | ------- | 
|                        |  |                                   |         |      |  |      |         |      |  |            |         |   |  |  |   |  |  | 2007 and
|Contractual Obligations |  | 2003                              |         | 2004 |  | 2005 |         | 2006 |  | thereafter
|                        |  |                                   |         |      |  |      |         |      |  |           
|                        |  | (in millions, except percentages)
|Long-term debt          |  |                                   |         |      |  |      |         |      |  |            |         |   |  |  |   |  |  |          |         | 
|US$-denominated debt    |  |                                   |         |      |  |      |         |      |  |            |         |   |  |  |   |  |  |          |         | 
|Fix rate                |  |                                   |        |      |  |      |        |      |  |            |        |   |  |  |  |  |  |          | 7,147.8 | 
|Interest rate           |  |                                   |        |      |  |      |        |      |  |            |        |   |  |  |  |  |  |          |        | 
|NT$-denominated debt    |  |                                   |         |      |  |      |         |      |  |            |         |   |  |  |   |  |  |          |         | 
|Variable rate           |  |                                   | 2,166.2 |      |  |      | 2,059.8 |      |  |            | 4,082.9 |   |  |  |  |  |  |          |        | 
|Average interest rate   |  |                                   | 3.22    | %    |  |      | 3.19    | %    |  |            | 2.9     | % |  |  |  |  |  |          |        | 
|Fix rate                |  |                                   |        |      |  |      |        |      |  |            | 800.0   |   |  |  |  |  |  |          |        | 
|Interest rate           |  |                                   |        |      |  |      |        |      |  |            | 2.7     | % |  |  |  |  |  |          |        | 
|RMB$-denominated debt   |  |                                   |         |      |  |      |         |      |  |            |         |   |  |  |   |  |  |          |         | 
|Variable rate           |  |                                   |        |      |  |      |        |      |  |            | 62.9    |   |  |  |  |  |  |          |        | 
|Average Interest rate   |  |                                   |        |      |  |      |        |      |  |            | 5.35    | % |  |  |  |  |  |          |        | 
|Fair Value              |  |                                   | 2,166.2 |      |  |      | 2,059.8 |      |  |            | 4,882.9 |   |  |  |  |  |  |          | 6,647.8 | 

87



---



##### Table of Contents



Other Market Risk

In addition to our interests in our joint ventures, we have made
investments in equity securities issued by a significant number of private
companies related to test and assembly and other related technology industries.
As of December 31, 2002, the aggregate carrying value of these investments on
our balance sheet was NT$4,139.4 million (US$119.3million). The carrying value
of our investments in private companies are subject to fluctuation based on
many factors such as prevailing market conditions. Moreover, because these are
investments in unlisted securities, the fair market value may be significantly
different from our carrying value.




Item 12. Description of Securities Other than Equity Securities

Not applicable.

88



---



##### Table of Contents






PART II




Item 13. Defaults, Dividend Arrearages and Delinquencies



| |  | None of these events occurred in any of the years ended December 31,
2000, 2001 and 2002.
| |  | -----------------------------------------------------------------------------------------




Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds



| |  | Not applicable.
| |  | ---------------




Item 15. Controls and Procedures

Within 90 days prior to the date of this annual report, our management,
under the supervision and with the participation of Mr. Chi Wen Tsai, our
president and chief executive officer and Mr. Wen-Chung Lin, our chief
financial officer, performed an evaluation of the effectiveness of our
disclosure controls and procedures, as such term is defined under Rules
13a-14(c) and 15d-14(c) promulgated under the Securities Exchange Act of 1934,
as amended (the Exchange Act). Based on that evaluation, our chief executive
officer and chief financial officer have concluded that our disclosure controls
and procedures are effective in ensuring that material information required to
be disclosed in this annual report is recorded, processed, summarized and
reported to them for assessment, and required disclosure is made within the
time period specified in the rules and forms of the Securities and Exchange
Commission.

There have been no significant changes in our internal controls or in
other factors that could significantly affect the internal controls subsequent
to the date of their evaluation, including any corrective actions with regard
to significant deficiencies and material weaknesses.




Item 16A. Audit Committee Financial Expert.

Not applicable.




Item 16B. Code of Ethics

Not applicable.

89



---



##### Table of Contents






PART III




Item 17. Financial Statements

The Registrant has elected to provide the financial statements and related
information specified in Item 18 in lieu of Item 17.




Item 18. Financial Statements

The following is a list of the audited financial statements and reports of
independent accountants included in this annual report beginning on page F-1.

90



---



##### Table of Contents



INDEX TO THE FINANCIAL STATEMENTS

|                                           |                                                                                                                                                                                  |  |      |  | 
|------------------------------------------ | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- |  | 
|                                           |                                                                                                                                                                                  |  | Page
|                                           |                                                                                                                                                                                  |  |     
|SILICONWARE PRECISION INDUSTRIES CO., LTD.
|                                           | Report of Independent Accountants                                                                                                                                               
|                                           | Consolidated Balance Sheets as of December 31, 2001 and 2002                                                                                                                    
|                                           | Consolidated Statements of Income for the years ended December 31, 2000,
2001 and 2002                                                                                          
|                                           | Consolidated Statements of Changes in Stockholders Equity for the years
ended December 31, 2000, 2001 and 2002                                                                 
|                                           | Consolidated Statements of Cash Flows for the years December 31, 2000, 2001
and 2002                                                                                            
|                                           | Notes to Consolidated Financial Statements                                                                                                                                      
|CHIPMOS TECHNOLOGIES INC.                 
|                                           | Independent Auditors Report                                                                                                                                                    
|                                           | Balance Sheets as of December 31, 2001 and 2002                                                                                                                                 
|                                           | Statements of Operations for the years ended December 31, 2000, 2001 and 2002
Statements of Changes in Shareholders Equity for the years
ended December 31, 2000, 2001 and 2002
|                                           | Statements of Cash Flows for the years ended December 31, 2000, 2001 and 2002
Notes to Financial Statements                                                                     

91



---



##### Table of Contents






Item 19. Exhibit Index

|        |  |   |  |                                                                                                                                                                                                                                      
|------- |  | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |   |  |                                                                                                                                                                                                                                      
|Number  |  |   |  | Description of Exhibits                                                                                                                                                                                                              
|        |  |   |  |                                                                                                                                                                                                                                      
|3.1     |  |  |  | Articles of Incorporation of the Registrant (English translations) 1                                                                                                                                                                 
|        |  |   |  |                                                                                                                                                                                                                                      
|4.1     |  |  |  | Form of the Second Amended and Restated Deposit Agreement among the
Registrant, Citibank, N.A. and Holders and Beneficial owners of American
Depositary Shares issued thereunder, including the form of American Depositary
Receipts2
|        |  |   |  |                                                                                                                                                                                                                                      
|4.1     |  |  |  | Agreement for Providing Testing Services with Siliconware Corp. (effective
from November 1, 1998 to December 31, 2000) (in Chinese with English
translation)3                                                                        
|        |  |   |  |                                                                                                                                                                                                                                      
|4.2     |  |  |  | Immunity Agreement with Motorola, Inc. (effective from November 5, 1996 to
December 31, 2002)4                                                                                                                                       
|        |  |   |  |                                                                                                                                                                                                                                      
|4.3     |  |  |  | Technology Transfer and License Agreement with NEC Corporation (effective from
June 23, 1998 to June 22, 2003)5                                                                                                                      
|        |  |   |  |                                                                                                                                                                                                                                      
|4.4     |  |  |  | License Agreement with Tessera Inc. (effective from December 31, 1998 to April
19, 2016)6                                                                                                                                            
|        |  |   |  |                                                                                                                                                                                                                                      
|4.5     |  |  |  | License Agreement with Flip Chip Technologies, L.L.C. (effective from November
28, 1999 to November 27, 2009)7                                                                                                                       
|        |  |   |  |                                                                                                                                                                                                                                      
|4.6     |  |  |  | Joint Venture Agreement with Mosel Vitelic, Inc. (in Chinese with English
translation)8                                                                                                                                              
|        |  |   |  |                                                                                                                                                                                                                                      
|4.7     |  |  |  | Trust Deed with Citicorp Trustee Company Limited9                                                                                                                                                                                    
|        |  |   |  |                                                                                                                                                                                                                                      
|4.8     |  |  |  | Merger Agreement with Siliconware Corp. (in Chinese with English translation)10                                                                                                                                                      
|        |  |   |  |                                                                                                                                                                                                                                      
|13.1    |  |  |  | Certification by our President & Chief Executive Officer pursuant to 18 U.S.C.                                                                                                                                                       



---

|1  |  | Incorporated by reference to
Exhibit 3.1 to the Registrants Year 2001 Form
20-F filed with the Commission on June 25, 2002.                                      
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2  |  | Incorporated by reference to Exhibit 4.1 to the Registrants Registration
Statement on Form F-1 (File No. 333-11812) filed with the Commission on April
29, 2000. 
|  
|3  |  | Incorporated by reference to Exhibit 10.1 to the Registrants Registration
Statement on Form F-1 (File No. 333-11812) filed with the Commission on April
29, 2000.
|  
|4  |  | Incorporated by reference to Exhibit 10.2 to the Registrants Registration
Statement on Form F-1 (File No. 333-11812) filed with the Commission on April
29, 2000.
|  
|5  |  | Incorporated by reference to Exhibit 10.3 to the Registrants Registration
Statement on Form F-1 (File No. 333-11812) filed with the Commission on April
29, 2000.
|  
|6  |  | Incorporated by reference to Exhibit 10.4 to the Registrants Registration
Statement on Form F-1 (File No. 333-11812) filed with the Commission on April
29, 2000.
|  
|7  |  | Incorporated by reference to Exhibit 10.5 to the Registrants Registration
Statement on Form F-1 (File No. 333-11812) filed with the Commission on April
29, 2000.
|  
|8  |  | Incorporated by reference to Exhibit 10.6 to the Registrants Registration
Statement on Form F-1 (File No. 333-11812) filed with the Commission on April
29, 2000.
|  
|9  |  | Incorporated by reference to Exhibit 10.7 to the Registrants Registration
Statement on Form F-1 (File No. 333-11812) filed with the Commission on April
29, 2000.
|  
|10 |  | Incorporated by reference to Exhibit 10.8 to the Registrants Year 2000 Form
20-F filed with the Commission on June 29, 2001.                                     

92



---



##### Table of Contents



|     |  |   |  |                                                                                                                                                                
|---- |  | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |  |   |  | Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002                                                                              
|     |  |   |  |                                                                                                                                                                
|13.2 |  |  |  | Certification by our Director & Chief Financial Officer pursuant to 18 U.S.C.
Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002

93



---



##### Table of Contents






SIGNATURES

The registrant hereby certifies that it meets all of the requirements for
filing on Form 20-F and that it has duly caused and authorized the undersigned
to sign this annual report on its behalf.

|                    |  |                                             |  |                  
|------------------- |  | ------------------------------------------- |  | -----------------
|                    |  | SILICONWARE PRECISION INDUSTRIES CO., LTD. 
|                    |  |                                             |  |                  
|                    |  | By:                                         |  | /s/ Wen Chung Lin
|                    |  |                                             |  |                  
|                    |  | Name: Wen Chung Lin                        
|                    |  | Title: Director and Chief Financial Officer
|                    |  |                                             |  |                  
|Date: June 26, 2003 |  |                                             |  |                  

94



---



##### Table of Contents






CERTIFICATIONS

I, Chi Wen Tsai, certify that:

1.     I have reviewed this annual report on Form 20-F of Siliconware
Precision Industries Co., Ltd.;

2.     Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3.     Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4.     The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:



| | a. |  | designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including
its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which
this annual report is being prepared;
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b. |  | evaluated the effectiveness of the registrants disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this annual report (the Evaluation Date); and                                                                                                  
|
| | c. |  | presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;                                                                                                                        

5.     The registrants other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):



| | a. |  | all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrants
ability to record, process, summarize and report financial data
and have identified for the registrants auditors any material
weaknesses in internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b. |  | any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrants internal controls; and                                                                                                                                        

95



---



##### Table of Contents



6.     The registrants other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

|                    |  |                      |  |                                   
|------------------- |  | -------------------- |  | ----------------------------------
|Date: June 26, 2003 |  |                      |  |                                   
|                    |  |                      |  |                                   
|                    |  | By: /s/ Chi Wen Tsai
|                    |  |                     
|                    |  | Name:                |  | Chi Wen Tsai                      
|                    |  | Title:               |  | President; Chief Executive Officer

96



---



##### Table of Contents



I, Wen Chung Lin, certify that:

1.     I have reviewed this annual report on Form 20-F of Siliconware
Precision Industries Co., Ltd.;

2.     Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3.     Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4.     The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:



| | a. |  | designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including
its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which
this annual report is being prepared;
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b. |  | evaluated the effectiveness of the registrants disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this annual report (the Evaluation Date); and                                                                                                  
|
| | c. |  | presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;                                                                                                                        

5.     The registrants other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):



| | a. |  | all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrants
ability to record, process, summarize and report financial data
and have identified for the registrants auditors any material
weaknesses in internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b. |  | any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrants internal controls; and                                                                                                                                        

97



---



##### Table of Contents



6.     The registrants other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

|                    |  |                       |  |                                  
|------------------- |  | --------------------- |  | ---------------------------------
|Date: June 26, 2003 |  |                       |  |                                  
|                    |  |                       |  |                                  
|                    |  | By: /s/ Wen Chung Lin
|                    |  |                      
|                    |  | Name:                 |  | Wen Chung Lin                    
|                    |  | Title:                |  | Director; Chief Financial Officer

98



---



##### Table of Contents



INDEX TO FINANCIAL STATEMENTS

|                                           |                                                                                                                 |  |      |  |     
|------------------------------------------ | --------------------------------------------------------------------------------------------------------------- |  | ---- |  | ----
|                                           |                                                                                                                 |  | Page
|                                           |                                                                                                                 |  |     
|SILICONWARE PRECISION INDUSTRIES CO., LTD. |                                                                                                                 |  |      | 
|                                           | Report of Independent Accountants                                                                               |  |      |  | F-2 
|                                           | Consolidated Balance Sheets as of December 31, 2001 and 2002                                                    |  |      |  | F-4 
|                                           | Consolidated Statements of Income for the years ended December 31, 2000,
2001 and 2002                          |  |      |  | F-6 
|                                           | Consolidated Statements of Changes in Stockholders Equity for the years
ended December 31, 2000, 2001 and 2002 |  |      |  | F-7 
|                                           | Consolidated Statements of Cash Flows for the years December 31, 2000, 2001
and 2002                            |  |      |  | F-10
|                                           | Notes to Consolidated Financial Statements                                                                      |  |      |  | F-13
|CHIPMOS TECHNOLOGIES INC.                 
|                                           | Independent Auditors Report                                                                                    |  |      |  | F-61
|                                           | Balance Sheets as of December 31, 2001 and 2002                                                                 |  |      |  | F-62
|                                           | Statements of Operations for the years ended December 31, 2000, 2001 and 2002                                   |  |      |  | F-64
|                                           | Statements of Changes in Shareholders Equity for the years ended December
31, 2000, 2001 and 2002              |  |      |  | F-66
|                                           | Statements of Cash Flows for the years ended December 31, 2000, 2001 and 2002                                   |  |      |  | F-69
|                                           | Notes to Financial Statements                                                                                   |  |      |  |     

F-1



---



##### Table of Contents



REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders     of
Siliconware Precision Industries Co., Ltd.

We have audited the accompanying consolidated balance sheets of
Siliconware Precision Industries Co., Ltd. and its subsidiaries as of December
31, 2001 and 2002, and the related consolidated statements of income, of
changes in stockholders equity and of cash flows for each of the three years
in the period ended December 31, 2002, expressed in New Taiwan dollars. These
financial statements are the responsibility of the Companys management. Our
responsibility is to express an opinion on these financial statements based on
our audits. We did not audit the financial statements of ChipMOS Technologies
Inc., an investee accounted for under the equity method. Those statements were
audited by other auditors whose reports thereon have been furnished to us. Our
opinion expressed herein, insofar as it relates to the investments in ChipMOS
Technologies Inc. which amounted to NT$3,116,299,000 at December 31, 2001, and
related investment loss of NT$436,270,000 and investment income of
NT$251,212,000 for the years ended December 31, 2000 and 2001, respectively, is
based solely on the reports of the other auditors.

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

F-2



---



##### Table of Contents



In our opinion, based on our audits and the reports of other auditors, the
accompanying consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Siliconware
Precision Industries Co., Ltd. and its subsidiaries as of December 31, 2001 and
2002, and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 2002, expressed in New Taiwan
dollars, in conformity with the Rules Governing the Preparation of Financial
Statements of Securities Issuers and accounting principles generally accepted
in the Republic of China.

As discussed in Note 3, commencing from January 1, 2002, the Company
delayed the recognition of investment income (loss) for ChipMOS Technologies
Inc. under the equity method until the subsequent year.

Accounting principles generally accepted in the Republic of China vary in
certain significant respects from accounting principles generally accepted in
the United States. The application of accounting principles in the United
States would have affected the determination of consolidated net income
expressed in New Taiwan dollars, for each of the three years ended December 31,
2002 and the determination of consolidated shareholders equity and
consolidated financial position also expressed in New Taiwan dollars, as of
December 31, 2001 and 2002 to the extent summarized in note 26 to the
consolidated financial statements.

January 30, 2003 (except for the information in note 26 for which the date is
May 28, 2003)

F-3



---



##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(EXPRESSED IN THOUSANDS OF DOLLARS)

|                                                   |                                                        |                         |            |              |            |      |            |             |            |  |           |          |         | 
|-------------------------------------------------- | ------------------------------------------------------ | ----------------------- | ---------- | ------------ | ---------- | ---- | ---------- | ----------- | ---------- |  | --------- | -------- | ------- | 
|                                                   |                                                        |                         |            | December 31,
|                                                   |                                                        |                         |            |             
|                                                   |                                                        |                         |            | 2001         |            | 2002
|                                                   |                                                        |                         |            |              |            |     
|                                                   |                                                        |                         |            | NT$          |            | NT$  |            | US$        
|                                                   |                                                        |                         |            |              |            |      |            |             |            |  |           | (Note 2)
|ASSETS                                             |                                                        |                         |            |              |            |      |            |             |            |  |           |         
|Current Assets                                     |                                                        |                         |            |              |            |      |            |             |            |  |           |         
|                                                   | Cash and cash equivalents (Note 4)                     |                         |            | 6,309,963    |            |      |            | 5,969,646   |            |  |           | 172,036  |        
|                                                   | Short-term investments                                 |                         |            |             |            |      |            | 47,736      |            |  |           | 1,376    |        
|                                                   | Notes receivable, net                                  |                         |            | 180,762      |            |      |            | 127,237     |            |  |           | 3,667    |        
|                                                   | Accounts receivable, net (Note 5)                      |                         |            | 3,710,855    |            |      |            | 4,122,784   |            |  |           | 118,812  |        
|                                                   | Inventories (Note 6)                                   |                         |            | 1,403,722    |            |      |            | 1,372,607   |            |  |           | 39,556   |        
|                                                   | Other current assets (Notes 18 and 21)                 |                         |            | 412,791      |            |      |            | 1,087,065   |            |  |           | 31,327   |        
|                                                   |                                                        |                         |            |              |            |      |            |             |            |  |           |         
|                                                   |                                                        |                         | 12,018,093 |              |            |      | 12,727,075 |             |            |  | 366,774   |         
|                                                   |                                                        |                         |            |              |            |      |            |             |            |  |           |         
|Long-term investments (Note 7)                     |                                                        |                         |            |              |            |      |            |             |            |  |           |         
|                                                   | Long-term investments in stocks                        |                         |            | 5,984,270    |            |      |            | 6,361,171   |            |  |           | 183,319  |        
|                                                   | Long-term investments in bonds                         |                         |            | 300,000      |            |      |            | 629,450     |            |  |           | 18,140   |        
|                                                   | Prepaid long-term investments in stocks                |                         |            |             |            |      |            | 899,540     |            |  |           | 25,923   |        
|                                                   | Allowance for loss on long-term investments            |                         |            |             |            |      |            | (302,780    | )          |  |           | (8,725   | )      
|                                                   |                                                        |                         |            |              |            |      |            |             |            |  |           |         
|                                                   |                                                        |                         | 6,284,270  |              |            |      | 7,587,381  |             |            |  | 218,657   |         
|                                                   |                                                        |                         |            |              |            |      |            |             |            |  |           |         
|Property, plant and equipment (Notes 8, 20
and 21) |                                                        |                         |            |              |            |      |            |             |            |  |           |         
|                                                   | Cost:                                                  |                         |            |              |            |      |            |             |            |  |           |          |        
|                                                   |                                                        | Land                    |            |              | 1,712,140  |      |            |             | 2,094,494  |  |           |          | 60,360  | 
|                                                   |                                                        | Buildings               |            |              | 4,087,387  |      |            |             | 4,809,439  |  |           |          | 138,601 | 
|                                                   |                                                        | Machinery and equipment |            |              | 24,525,012 |      |            |             | 27,794,516 |  |           |          | 800,994 | 
|                                                   |                                                        | Utility equipment       |            |              | 420,814    |      |            |             | 431,316    |  |           |          | 12,430  | 
|                                                   |                                                        | Furniture and fixtures  |            |              | 405,007    |      |            |             | 355,599    |  |           |          | 10,248  | 
|                                                   |                                                        | Other equipment         |            |              | 1,060,258  |      |            |             | 1,111,815  |  |           |          | 32,041  | 
|                                                   |                                                        |                         |            |              |            |      |            |             |            |  |           |         
|                                                   |                                                        |                         | 32,210,618 |              |            |      | 36,597,179 |             |            |  | 1,054,674 |         
|                                                   | Accumulated depreciation                               |                         |            | (12,423,523  | )          |      |            | (13,817,625 | )          |  |           | (398,203 | )      
|                                                   | Construction in progress and prepayments for
equipment |                         |            | 2,886,231    |            |      |            | 1,114,832   |            |  |           | 32,128   |        
|                                                   |                                                        |                         |            |              |            |      |            |             |            |  |           |         
|                                                   |                                                        |                         | 22,673,326 |              |            |      | 23,894,386 |             |            |  | 688,599   |         
|                                                   |                                                        |                         |            |              |            |      |            |             |            |  |           |         
|Other Assets                                       |                                                        |                         |            |              |            |      |            |             |            |  |           |         
|                                                   | Deferred charges                                       |                         |            | 371,289      |            |      |            | 616,075     |            |  |           | 17,754   |        
|                                                   | Deferred income tax asset (Note 18)                    |                         |            | 1,004,076    |            |      |            | 1,170,140   |            |  |           | 33,722   |        
|                                                   | Other assets  others (Note 9)                         |                         |            | 214,457      |            |      |            | 240,807     |            |  |           | 6,940    |        
|                                                   |                                                        |                         |            |              |            |      |            |             |            |  |           |         
|                                                   |                                                        |                         | 1,589,822  |              |            |      | 2,027,022  |             |            |  | 58,416    |         
|                                                   |                                                        |                         |            |              |            |      |            |             |            |  |           |         
|Total assets                                       |                                                        |                         | 42,565,511 |              |            |      | 46,235,864 |             |            |  | 1,332,446 |         
|                                                   |                                                        |                         |            |              |            |      |            |             |            |  |           |         

The accompanying notes are an integral part of these consolidated financial statements.
See report of independent accountant dated January 30, 2003.

F-4



---



##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
(EXPRESSED IN THOUSANDS OF DOLLARS)

|                                           |                                              |                                               |            |              |            |      |            |            |           |  |           |          |         | 
|------------------------------------------ | -------------------------------------------- | --------------------------------------------- | ---------- | ------------ | ---------- | ---- | ---------- | ---------- | --------- |  | --------- | -------- | ------- | 
|                                           |                                              |                                               |            | December 31,
|                                           |                                              |                                               |            |             
|                                           |                                              |                                               |            | 2001         |            | 2002
|                                           |                                              |                                               |            |              |            |     
|                                           |                                              |                                               |            | NT$          |            | NT$  |            | US$       
|                                           |                                              |                                               |            |              |            |      |            |            |           |  |           | (Note 2)
|LIABILITIES AND STOCKHOLDERS EQUITY       |                                              |                                               |            |              |            |      |            |            |           |  |           |         
|Current Liabilities                        |                                              |                                               |            |              |            |      |            |            |           |  |           |         
|                                           | Short-term loans (Note 21)                   |                                               |            | 790,000      |            |      |            | 302,000    |           |  |           | 8,703    |        
|                                           | Commercial paper                             |                                               |            | 99,894       |            |      |            | 499,796    |           |  |           | 14,404   |        
|                                           | Notes payable                                |                                               |            | 418,007      |            |      |            | 1,289      |           |  |           | 37       |        
|                                           | Accounts payable (Note 20)                   |                                               |            | 961,577      |            |      |            | 1,358,787  |           |  |           | 39,158   |        
|                                           | Income tax payable (Note 18)                 |                                               |            | 702          |            |      |            | 49,581     |           |  |           | 1,429    |        
|                                           | Accrued expenses                             |                                               |            | 602,988      |            |      |            | 715,942    |           |  |           | 20,632   |        
|                                           | Other payables (Note 10)                     |                                               |            | 1,113,678    |            |      |            | 706,330    |           |  |           | 20,356   |        
|                                           | Current portion of long-term loans (Note 12) |                                               |            | 1,776,980    |            |      |            | 2,166,160  |           |  |           | 62,425   |        
|                                           | Other current liabilities                    |                                               |            | 78,633       |            |      |            | 70,958     |           |  |           | 2,045    |        
|                                           |                                              |                                               |            |              |            |      |            |            |           |  |           |         
|                                           |                                              |                                               | 5,842,459  |              |            |      | 5,870,843  |            |           |  | 169,189   |         
|                                           |                                              |                                               |            |              |            |      |            |            |           |  |           |         
|Long-term Liabilities                      |                                              |                                               |            |              |            |      |            |            |           |  |           |         
|Bonds payable (Notes 11 and 21)            |                                              |                                               | 4,470,894  |              |            |      | 7,947,857  |            |           |  | 229,045   |         
|Long-term loans (Notes 12 and 21)          |                                              |                                               | 6,168,606  |              |            |      | 6,195,101  |            |           |  | 178,533   |         
|                                           |                                              |                                               |            |              |            |      |            |            |           |  |           |         
|                                           |                                              |                                               | 10,639,500 |              |            |      | 14,142,958 |            |           |  | 407,578   |         
|                                           |                                              |                                               |            |              |            |      |            |            |           |  |           |         
|Other liabilities                          |                                              |                                               | 37,162     |              |            |      | 43,511     |            |           |  | 1,254     |         
|                                           |                                              |                                               |            |              |            |      |            |            |           |  |           |         
|Total Liabilities                          |                                              |                                               | 16,519,121 |              |            |      | 20,057,312 |            |           |  | 578,021   |         
|                                           |                                              |                                               |            |              |            |      |            |            |           |  |           |         
|Stockholders Equity                       |                                              |                                               |            |              |            |      |            |            |           |  |           |         
|                                           | Capital stock (Note 14)                      |                                               |            | 18,851,737   |            |      |            | 18,851,737 |           |  |           | 543,278  |        
|                                           | Capital reserve (Note 15)                    |                                               |            |              |            |      |            |            |           |  |           |          |        
|                                           |                                              | Additional paid-in capital                    |            |              | 6,126,478  |      |            |            | 6,126,478 |  |           |          | 176,556 | 
|                                           |                                              | Premium arising from merger                   |            |              | 1,951,563  |      |            |            | 1,951,563 |  |           |          | 56,241  | 
|                                           |                                              | Others                                        |            |              | 9,864      |      |            |            | 9,072     |  |           |          | 262     | 
|                                           | Retained earnings (Note 16)                  |                                               |            |              |            |      |            |            |           |  |           |          |        
|                                           |                                              | Legal reserve                                 |            |              | 1,321,835  |      |            |            | 424,495   |  |           |          | 12,233  | 
|                                           |                                              | Special reserve                               |            |              | 269,154    |      |            |            |          |  |           |          |        | 
|                                           |                                              | (Accumulated deficit) unappropriated earnings |            |              | (1,166,494 | )    |            |            | 425,195   |  |           |          | 12,253  | 
|                                           | Unrealized loss on long-term investments     |                                               |            |             |            |      |            | (302,780   | )         |  |           | (8,726   | )      
|                                           | Cumulative translation adjustment            |                                               |            | 45,388       |            |      |            | 35,683     |           |  |           | 1,028    |        
|                                           | Treasury stock (Note 17)                     |                                               |            | (1,363,135   | )          |      |            | (1,342,891 | )         |  |           | (38,700  | )      
|                                           |                                              |                                               |            |              |            |      |            |            |           |  |           |         
|Total Stockholders Equity                 |                                              |                                               | 26,046,390 |              |            |      | 26,178,552 |            |           |  | 754,425   |         
|                                           |                                              |                                               |            |              |            |      |            |            |           |  |           |         
|Commitments and Contingencies (Note 22)    |                                              |                                               |            |              |            |      |            |            |           |  |           |         
|Subsequent Event (Note 23)                 |                                              |                                               |            |              |            |      |            |            |           |  |           |         
|Total liabilities and stockholders equity |                                              |                                               | 42,565,511 |              |            |      | 46,235,864 |            |           |  | 1,332,446 |         
|                                           |                                              |                                               |            |              |            |      |            |            |           |  |           |         

The accompanying notes are an integral part of these consolidated financial statements.
See report of independent accountant dated January 30, 2003.

F-5



---



##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(EXPRESSED IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)

|                                                           |                                                       |  |                                  |           |      |  |             |            |     |  |             |          |   |  |          |         |  
|---------------------------------------------------------- | ----------------------------------------------------- |  | -------------------------------- | --------- | ---- |  | ----------- | ---------- | --- |  | ----------- | -------- | - |  | -------- | ------- | -
|                                                           |                                                       |  | For the years ended December 31,
|                                                           |                                                       |  |                                 
|                                                           |                                                       |  | 2000                             |           | 2001 |  | 2002       
|                                                           |                                                       |  |                                  |           |      |  |            
|                                                           |                                                       |  | NT$                              |           | NT$  |  | NT$         |            | US$
|                                                           |                                                       |  |                                  |           |      |  |             |            |     |  |             |          |   |  | (Note 2)
|Net Operating Revenues (Note 20)                           |                                                       |  | 18,845,766                       |           |      |  | 16,530,394  |            |     |  | 22,298,530  |          |   |  | 642,609  |        
|Cost of Goods Sold (Note 20)                               |                                                       |  | (14,906,554                      | )         |      |  | (15,109,501 | )          |     |  | (20,209,935 | )        |   |  | (582,419 | )      
|                                                           |                                                       |  |                                  |           |      |  |             |            |     |  |             |          |   |  |          |        
|Gross Profit                                               |                                                       |  | 3,939,212                        |           |      |  | 1,420,893   |            |     |  | 2,088,595   |          |   |  | 60,190   |        
|                                                           |                                                       |  |                                  |           |      |  |             |            |     |  |             |          |   |  |          |        
|Operating Expenses                                         |                                                       |  |                                  |           |      |  |             |            |     |  |             |          |   |  |          |        
|                                                           | Selling expenses                                      |  |                                  | (348,783  | )    |  |             | (245,098   | )   |  |             | (255,540 | ) |  |          | (7,364  | )
|                                                           | Administrative expenses                               |  |                                  | (381,176  | )    |  |             | (676,747   | )   |  |             | (779,398 | ) |  |          | (22,461 | )
|                                                           | Research and development
expenses                     |  |                                  | (268,863  | )    |  |             | (506,082   | )   |  |             | (506,981 | ) |  |          | (14,611 | )
|                                                           |                                                       |  |                                  |           |      |  |             |            |     |  |             |          |   |  |          |        
|                                                           |                                                       |  | (998,822                         | )         |      |  | (1,427,927  | )          |     |  | (1,541,919  | )        |   |  | 44,436   |        
|                                                           |                                                       |  |                                  |           |      |  |             |            |     |  |             |          |   |  |          |        
|Operating Income (Loss)                                    |                                                       |  | 2,940,390                        |           |      |  | (7,034      | )          |     |  | 546,676     |          |   |  | 15,754   |        
|                                                           |                                                       |  |                                  |           |      |  |             |            |     |  |             |          |   |  |          |        
|Non-operating Income                                       |                                                       |  |                                  |           |      |  |             |            |     |  |             |          |   |  |          |        
|                                                           | Interest income                                       |  |                                  | 223,929   |      |  |             | 300,432    |     |  |             | 191,550  |   |  |          | 5,520   |  
|                                                           | Investment income                                     |  |                                  | 191,868   |      |  |             |           |     |  |             | 61,060   |   |  |          | 1,760   |  
|                                                           | Gain on disposal of investments                       |  |                                  | 38,594    |      |  |             | 30,561     |     |  |             |         |   |  |          |        |  
|                                                           | Others                                                |  |                                  | 399,854   |      |  |             | 277,186    |     |  |             | 277,726  |   |  |          | 8,003   |  
|                                                           |                                                       |  |                                  |           |      |  |             |            |     |  |             |          |   |  |          |        
|                                                           |                                                       |  | 854,245                          |           |      |  | 608,179     |            |     |  | 530,336     |          |   |  | 15,283   |        
|                                                           |                                                       |  |                                  |           |      |  |             |            |     |  |             |          |   |  |          |        
|Non-operating Expenses                                     |                                                       |  |                                  |           |      |  |             |            |     |  |             |          |   |  |          |        
|                                                           | Interest expenses                                     |  |                                  | (453,819  | )    |  |             | (655,675   | )   |  |             | (521,117 | ) |  |          | (15,018 | )
|                                                           | Investment loss                                       |  |                                  |          |      |  |             | (1,198,756 | )   |  |             |         |   |  |          |        |  
|                                                           | Others                                                |  |                                  | (145,595  | )    |  |             | (228,351   | )   |  |             | (276,064 | ) |  |          | (7,955  | )
|                                                           |                                                       |  |                                  |           |      |  |             |            |     |  |             |          |   |  |          |        
|                                                           |                                                       |  | (599,414                         | )         |      |  | (2,082,782  | )          |     |  | (797,181    | )        |   |  | (22,973  | )      
|                                                           |                                                       |  |                                  |           |      |  |             |            |     |  |             |          |   |  |          |        
|                                                           | Income (loss) Before Income Tax
and Minority Interest |  |                                  | 3,195,221 |      |  |             | (1,481,637 | )   |  |             | 279,831  |   |  |          | 8,064   |  
|Income Tax Benefit (Note 18)                               |                                                       |  | 26,156                           |           |      |  | 282,610     |            |     |  | 145,364     |          |   |  | 4,189    |        
|Minority Interest in Net Loss of
Consolidated Subsidiaries |                                                       |  | 3                                |           |      |  | 15,816      |            |     |  |            |          |   |  |         |        
|                                                           |                                                       |  |                                  |           |      |  |             |            |     |  |             |          |   |  |          |        
|Net income (loss)                                          |                                                       |  | 3,221,380                        |           |      |  | (1,183,211  | )          |     |  | 425,195     |          |   |  | 12,253   |        
|                                                           |                                                       |  |                                  |           |      |  |             |            |     |  |             |          |   |  |          |        
|Earnings (loss) per share (Note 19)                        |                                                       |  |                                  |           |      |  |             |            |     |  |             |          |   |  |          |        
|Income (loss) before income tax
and minority interest      |                                                       |  | 1.99                             |           |      |  | (0.80       | )          |     |  | 0.15        |          |   |  |         |        
|                                                           |                                                       |  |                                  |           |      |  |             |            |     |  |             |          |   |  |          |        
|                                                           | Net income (loss)                                     |  |                                  | 2.01      |      |  |             | (0.64      | )   |  |             | 0.23     |   |  |          | 0.01    |  
|                                                           |                                                       |  |                                  |           |      |  |             |            |     |  |             |          |   |  |          |        

The accompanying notes are an integral part of these consolidated financial statements.
See report of independent accountant dated January 30, 2003.

F-6



---



##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY (CONTINUED)
(EXPRESSED IN THOUSANDS OF DOLLARS)



|                                                                                                                              |  |                      |           |              |  |        |            |            |  |                   |         |          |  |                |           |   |  |  |         |  |  |  |            |  
|----------------------------------------------------------------------------------------------------------------------------- |  | -------------------- | --------- | ------------ |  | ------ | ---------- | ---------- |  | ----------------- | ------- | -------- |  | -------------- | --------- | - |  |  | ------- |  |  |  | ---------- | -
|                                                                                                                              |  |                      |           |              |  |        |            |            |  |                   |         |          |  |                |           |   |  |  |         |  |  |  |            |  
|                                                                                                                              |  | Capital Stock Issued |           | Certificates |  |        |            |            |  | Retained Earnings
|                                                                                                                              |  |                      |           | Exchangeable |  |        |            |            | 
|                                                                                                                              |  | Shares               |           |              |  |        |            | for Common |  | Capital           |         | Legal    |  | Unappropriated
|                                                                                                                              |  | (Thousand)           |           | Amount       |  | Shares |            | Reserve    |  | Reserve           |         | Earnings
|                                                                                                                              |  |                      |           |              |  |        |            |            |  |                   |         |         
|2000                                                                                                                          |  |                      |           |              |  | NT$    |            | NT$        |  | NT$               |         | NT$      |  | NT$           
|Balance at January 1, 2000                                                                                                    |  |                      | 1,127,092 |              |  |        | 11,270,924 |            |  |                   | 43      |          |  |                | 427,737   |   |  |  | 848,689 |  |  |  | 1,602,373  |  
|Appropriation for legal reserve                                                                                               |  |                      |          |              |  |        |           |            |  |                   |        |          |  |                |          |   |  |  | 149,963 |  |  |  | (149,963   | )
|Directors and supervisors remuneration                                                                                      |  |                      |          |              |  |        |           |            |  |                   |        |          |  |                |          |   |  |  |        |  |  |  | (29,039    | )
|Capitalization of employees bonus                                                                                            |  |                      | 13,776    |              |  |        | 137,756    |            |  |                   |        |          |  |                |          |   |  |  |        |  |  |  | (137,756   | )
|Stock dividends                                                                                                               |  |                      | 123,981   |              |  |        | 1,239,806  |            |  |                   |        |          |  |                |          |   |  |  |        |  |  |  | (1,239,806 | )
|Capitalization of capital reserve                                                                                             |  |                      | 33,813    |              |  |        | 338,129    |            |  |                   |        |          |  |                | (338,129  | ) |  |  |        |  |  |  |           |  
|Bond converted to certificates exchangeable for
common share                                                                  |  |                      |          |              |  |        |           |            |  |                   | 12,171  |          |  |                | 77,943    |   |  |  |        |  |  |  |           |  
|Certificates exchangeable for common share
converted to common share                                                          |  |                      | 1,221     |              |  |        | 12,214     |            |  |                   | (12,214 | )        |  |                |          |   |  |  |        |  |  |  |           |  
|Issuance of American depositary shares                                                                                        |  |                      | 150,000   |              |  |        | 1,500,000  |            |  |                   |        |          |  |                | 5,993,682 |   |  |  |        |  |  |  |           |  
|Cumulative translation adjustment on long-term
investment                                                                     |  |                      |          |              |  |        |           |            |  |                   |        |          |  |                |          |   |  |  |        |  |  |  |           |  
|Long-term investment adjustment for investee
companys long-term investment adjustment for
change in investment holding ratio |  |                      |          |              |  |        |           |            |  |                   |        |          |  |                | 48,194    |   |  |  |        |  |  |  |           |  
|Long-term investment adjustment for investee
companys unrealized loss on long-term investment                                |  |                      |          |              |  |        |           |            |  |                   |        |          |  |                |          |   |  |  |        |  |  |  |           |  
|Issuance of new shares for merger                                                                                             |  |                      | 173,712   |              |  |        | 1,737,117  |            |  |                   |        |          |  |                | 1,951,563 |   |  |  |        |  |  |  |           |  
|Capital reserve adjustment under equity method                                                                                |  |                      |          |              |  |        |           |            |  |                   |        |          |  |                | (39,866   | ) |  |  |        |  |  |  | 10,446     |  
|Net income                                                                                                                    |  |                      |          |              |  |        |           |            |  |                   |        |          |  |                |          |   |  |  |        |  |  |  | 3,221,380  |  
|Treasury stocks                                                                                                               |  |                      |          |              |  |        |           |            |  |                   |        |          |  |                |          |   |  |  |        |  |  |  |           |  
|                                                                                                                              |  |                      |           |              |  |        |            |            |  |                   |         |          |  |                |           |   |  |  |         |  |  |  |            |  
|Balance at December 31, 2000                                                                                                  |  |                      | 1,623,595 |              |  |        | 16,235,946 |            |  |                   |        |          |  |                | 8,121,124 |   |  |  | 998,652 |  |  |  | 3,277,635  |  
|                                                                                                                              |  |                      |           |              |  |        |            |            |  |                   |         |          |  |                |           |   |  |  |         |  |  |  |            |  

[Additional columns below]

[Continued from above table, first column(s) repeated]

|                                                                                                                              |  |             |         |             |  |          |        |       |  |  |          |   |  |  |            |  
|----------------------------------------------------------------------------------------------------------------------------- |  | ----------- | ------- | ----------- |  | -------- | ------ | ----- |  |  | -------- | - |  |  | ---------- | -
|                                                                                                                              |  | Unrealized  |         |             |  |          |        |       |  |  |          |   |  | 
|                                                                                                                              |  | Loss on     |         | Cumulative  |  |          |        |       |  |  |          |  
|                                                                                                                              |  | Long-term   |         | Translation |  | Treasury |        |       |  | 
|                                                                                                                              |  | Investments |         | Adjustment  |  | Stock    |        | Total
|                                                                                                                              |  |             |         |             |  |          |        |      
|2000                                                                                                                          |  | NT$         |         | NT$         |  | NT$      |        | NT$  
|Balance at January 1, 2000                                                                                                    |  |             |        |             |  |          | 23,020 |       |  |  | (150,925 | ) |  |  | 14,021,861 |  
|Appropriation for legal reserve                                                                                               |  |             |        |             |  |          |       |       |  |  |         |   |  |  |           |  
|Directors and supervisors remuneration                                                                                      |  |             |        |             |  |          |       |       |  |  |         |   |  |  | (29,039    | )
|Capitalization of employees bonus                                                                                            |  |             |        |             |  |          |       |       |  |  |         |   |  |  |           |  
|Stock dividends                                                                                                               |  |             |        |             |  |          |       |       |  |  |         |   |  |  |           |  
|Capitalization of capital reserve                                                                                             |  |             |        |             |  |          |       |       |  |  |         |   |  |  |           |  
|Bond converted to certificates exchangeable for
common share                                                                  |  |             |        |             |  |          |       |       |  |  |         |   |  |  | 90,114     |  
|Certificates exchangeable for common share
converted to common share                                                          |  |             |        |             |  |          |       |       |  |  |         |   |  |  |           |  
|Issuance of American depositary shares                                                                                        |  |             |        |             |  |          |       |       |  |  |         |   |  |  | 7,493,682  |  
|Cumulative translation adjustment on long-term
investment                                                                     |  |             |        |             |  |          | 9,882  |       |  |  |         |   |  |  | 9,882      |  
|Long-term investment adjustment for investee
companys long-term investment adjustment for
change in investment holding ratio |  |             |        |             |  |          |       |       |  |  |         |   |  |  | 48,194     |  
|Long-term investment adjustment for investee
companys unrealized loss on long-term investment                                |  |             | (16,255 | )           |  |          |       |       |  |  |         |   |  |  | (16,255    | )
|Issuance of new shares for merger                                                                                             |  |             |        |             |  |          |       |       |  |  |         |   |  |  | 3,688,680  |  
|Capital reserve adjustment under equity method                                                                                |  |             |        |             |  |          |       |       |  |  |         |   |  |  | (29,420    | )
|Net income                                                                                                                    |  |             |        |             |  |          |       |       |  |  |         |   |  |  | 3,221,380  |  
|Treasury stocks                                                                                                               |  |             |        |             |  |          |       |       |  |  | (643,259 | ) |  |  | (643,259   | )
|                                                                                                                              |  |             |         |             |  |          |        |       |  |  |          |   |  |  |            |  
|Balance at December 31, 2000                                                                                                  |  |             | (16,255 | )           |  |          | 32,902 |       |  |  | (794,184 | ) |  |  | 27,855,820 |  
|                                                                                                                              |  |             |         |             |  |          |        |       |  |  |          |   |  |  |            |  

The accompanying notes are an integral part of these consolidated financial statements.
See report of independent accountant dated January 30, 2003.

F-7



---



##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY (CONTINUED)
(EXPRESSED IN THOUSANDS OF DOLLARS)



|                                                                                                                              |  |                      |           |        |  |         |            |                   |  |         |           |          |  |                |           |  |  |  |         |  |  |  |            |  
|----------------------------------------------------------------------------------------------------------------------------- |  | -------------------- | --------- | ------ |  | ------- | ---------- | ----------------- |  | ------- | --------- | -------- |  | -------------- | --------- |  |  |  | ------- |  |  |  | ---------- | -
|                                                                                                                              |  | Capital Stock Issued |           |        |  |         |            | Retained Earnings
|                                                                                                                              |  |                      |           |        |  |         |            |                  
|                                                                                                                              |  | Shares               |           |        |  |         |            | Capital           |  | Legal   |           | Special  |  | Unappropriated
|                                                                                                                              |  | (Thousand)           |           | Amount |  | Reserve |            | Reserve           |  | Reserve |           | Earnings
|                                                                                                                              |  |                      |           |        |  |         |            |                   |  |         |           |         
|2001                                                                                                                          |  |                      |           |        |  | NT$     |            | NT$               |  | NT$     |           | NT$      |  | NT$           
|Appropriation for legal reserve                                                                                               |  |                      |          |        |  |         |           |                   |  |         |          |          |  |                | 323,183   |  |  |  |        |  |  |  | (323,183   | )
|Appropriation for special reserve                                                                                             |  |                      |          |        |  |         |           |                   |  |         |          |          |  |                |          |  |  |  | 269,154 |  |  |  | (269,154   | )
|Directors and supervisors remuneration                                                                                      |  |                      |          |        |  |         |           |                   |  |         |          |          |  |                |          |  |  |  |        |  |  |  | (52,790    | )
|Capitalization of employees bonus                                                                                            |  |                      | 26,158    |        |  |         | 261,579    |                   |  |         |          |          |  |                |          |  |  |  |        |  |  |  | (261,579   | )
|Stock dividends                                                                                                               |  |                      | 235,421   |        |  |         | 2,354,212  |                   |  |         |          |          |  |                |          |  |  |  |        |  |  |  | (2,354,212 | )
|Reverse of investee companys unrealized
loss on long-term investments                                                        |  |                      |          |        |  |         |           |                   |  |         |          |          |  |                |          |  |  |  |        |  |  |  |           |  
|Adjustment for investee companies
cumulative translation adjustment on
long-term investment                                  |  |                      |          |        |  |         |           |                   |  |         |          |          |  |                |          |  |  |  |        |  |  |  |           |  
|Long-term investment adjustment for investee
companys long-term investment adjustment
for change in investment holding ratio |  |                      |          |        |  |         |           |                   |  |         | (33,219   | )        |  |                |          |  |  |  |        |  |  |  |           |  
|Net loss                                                                                                                      |  |                      |          |        |  |         |           |                   |  |         |          |          |  |                |          |  |  |  |        |  |  |  | (1,183,211 | )
|Treasury stock                                                                                                                |  |                      |          |        |  |         |           |                   |  |         |          |          |  |                |          |  |  |  |        |  |  |  |           |  
|                                                                                                                              |  |                      |           |        |  |         |            |                   |  |         |           |          |  |                |           |  |  |  |         |  |  |  |            |  
|Balance at December 31, 2001                                                                                                  |  |                      | 1,885,174 |        |  |         | 18,851,737 |                   |  |         | 8,087,905 |          |  |                | 1,321,835 |  |  |  | 269,154 |  |  |  | (1,166,494 | )
|                                                                                                                              |  |                      |           |        |  |         |            |                   |  |         |           |          |  |                |           |  |  |  |         |  |  |  |            |  

[Additional columns below]

[Continued from above table, first column(s) repeated]

|                                                                                                                              |  |             |        |             |  |          |        |       |  |  |            |   |  |  |            |  
|----------------------------------------------------------------------------------------------------------------------------- |  | ----------- | ------ | ----------- |  | -------- | ------ | ----- |  |  | ---------- | - |  |  | ---------- | -
|                                                                                                                              |  | Unrealized  |        |             |  |          |        |       |  |  |            |   |  | 
|                                                                                                                              |  | Loss on     |        | Cumulative  |  |          |        |       |  |  |            |  
|                                                                                                                              |  | Long-term   |        | Translation |  | Treasury |        |       |  | 
|                                                                                                                              |  | Investments |        | Adjustment  |  | Stock    |        | Total
|                                                                                                                              |  |             |        |             |  |          |        |      
|2001                                                                                                                          |  | NT$         |        | NT$         |  | NT$      |        | NT$  
|Appropriation for legal reserve                                                                                               |  |             |       |             |  |          |       |       |  |  |           |   |  |  |           |  
|Appropriation for special reserve                                                                                             |  |             |       |             |  |          |       |       |  |  |           |   |  |  |           |  
|Directors and supervisors remuneration                                                                                      |  |             |       |             |  |          |       |       |  |  |           |   |  |  | (52,790    | )
|Capitalization of employees bonus                                                                                            |  |             |       |             |  |          |       |       |  |  |           |   |  |  |           |  
|Stock dividends                                                                                                               |  |             |       |             |  |          |       |       |  |  |           |   |  |  |           |  
|Reverse of investee companys unrealized
loss on long-term investments                                                        |  |             | 16,255 |             |  |          |       |       |  |  |           |   |  |  | 16,255     |  
|Adjustment for investee companies
cumulative translation adjustment on
long-term investment                                  |  |             |       |             |  |          | 12,486 |       |  |  |           |   |  |  | 12,486     |  
|Long-term investment adjustment for investee
companys long-term investment adjustment
for change in investment holding ratio |  |             |       |             |  |          |       |       |  |  |           |   |  |  | (33,219    | )
|Net loss                                                                                                                      |  |             |       |             |  |          |       |       |  |  |           |   |  |  | (1,183,211 | )
|Treasury stock                                                                                                                |  |             |       |             |  |          |       |       |  |  | (568,951   | ) |  |  | (568,951   | )
|                                                                                                                              |  |             |        |             |  |          |        |       |  |  |            |   |  |  |            |  
|Balance at December 31, 2001                                                                                                  |  |             |       |             |  |          | 45,388 |       |  |  | (1,363,135 | ) |  |  | 26,046,390 |  
|                                                                                                                              |  |             |        |             |  |          |        |       |  |  |            |   |  |  |            |  

The accompanying notes are an integral part of these consolidated financial statements.
See report of independent accountant dated January 30, 2003.

F-8



---



##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY (CONTINUED)
(EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS)



|                                                                                              |  |                      |           |         |  |         |            |                   |  |         |           |                |  |     |          |   |  |  |          |   |  |  |         | 
|--------------------------------------------------------------------------------------------- |  | -------------------- | --------- | ------- |  | ------- | ---------- | ----------------- |  | ------- | --------- | -------------- |  | --- | -------- | - |  |  | -------- | - |  |  | ------- | 
|                                                                                              |  | Capital Stock Issued |           |         |  |         |            | Retained Earnings
|                                                                                              |  |                      |           |         |  |         |            |                  
|                                                                                              |  | Shares               |           | Capital |  | Capital |            | Legal             |  | Special |           | Unappropriated
|                                                                                              |  | (Thousand)           |           | Stock   |  | Reserve |            | Reserve           |  | Reserve |           | Earnings      
|                                                                                              |  |                      |           |         |  |         |            |                   |  |         |           |               
|2002                                                                                          |  |                      |           |         |  | NT$     |            | NT$               |  | NT$     |           | NT$            |  | NT$
|Legal reserve offset deficit                                                                  |  |                      |          |         |  |         |           |                   |  |         |          |                |  |     | (897,340 | ) |  |  |         |   |  |  | 897,340 | 
|Reverse of special reserve to unappropriated earnings                                         |  |                      |          |         |  |         |           |                   |  |         |          |                |  |     |         |   |  |  | (269,154 | ) |  |  | 269,154 | 
|Adjustment for investee companies cumulative
translation
adjustment on long-term investments |  |                      |          |         |  |         |           |                   |  |         |          |                |  |     |         |   |  |  |         |   |  |  |        | 
|Long-term investment adjustment for change in
investment holding ratio                        |  |                      |          |         |  |         |           |                   |  |         | (1,242    | )              |  |     |         |   |  |  |         |   |  |  |        | 
|Adjustment for unrealized loss on long-term investments                                       |  |                      |          |         |  |         |           |                   |  |         |          |                |  |     |         |   |  |  |         |   |  |  |        | 
|Net income                                                                                    |  |                      |          |         |  |         |           |                   |  |         |          |                |  |     |         |   |  |  |         |   |  |  | 425,195 | 
|Resale of treasury stock                                                                      |  |                      |          |         |  |         |           |                   |  |         | 450       |                |  |     |         |   |  |  |         |   |  |  |        | 
|                                                                                              |  |                      |           |         |  |         |            |                   |  |         |           |                |  |     |          |   |  |  |          |   |  |  |         | 
|Balance at December 31, 2002                                                                  |  |                      | 1,885,174 |         |  |         | 18,851,737 |                   |  |         | 8,087,113 |                |  |     | 424,495  |   |  |  |         |   |  |  | 425,195 | 
|                                                                                              |  |                      |           |         |  |         |            |                   |  |         |           |                |  |     |          |   |  |  |          |   |  |  |         | 

[Additional columns below]

[Continued from above table, first column(s) repeated]

|                                                                                              |  |                 |          |             |  |          |        |       |  |  |            |   |  |  |            |  
|--------------------------------------------------------------------------------------------- |  | --------------- | -------- | ----------- |  | -------- | ------ | ----- |  |  | ---------- | - |  |  | ---------- | -
|                                                                                              |  | Unrealized Loss |          | Cumulative  |  |          |        |       |  |  |            |  
|                                                                                              |  | on Long-term    |          | Translation |  | Treasury |        |       |  | 
|                                                                                              |  | Investments     |          | Adjustment  |  | Stock    |        | Total
|                                                                                              |  |                 |          |             |  |          |        |      
|2002                                                                                          |  | NT$             |          | NT$         |  | NT$      |        | NT$  
|Legal reserve offset deficit                                                                  |  |                 |         |             |  |          |       |       |  |  |           |   |  |  |           |  
|Reverse of special reserve to unappropriated earnings                                         |  |                 |         |             |  |          |       |       |  |  |           |   |  |  |           |  
|Adjustment for investee companies cumulative
translation
adjustment on long-term investments |  |                 |         |             |  |          | (9,705 | )     |  |  |           |   |  |  | (9,705     | )
|Long-term investment adjustment for change in
investment holding ratio                        |  |                 |         |             |  |          |       |       |  |  |           |   |  |  | (1,242     | )
|Adjustment for unrealized loss on long-term investments                                       |  |                 | (302,780 | )           |  |          |       |       |  |  |           |   |  |  | (302,780   | )
|Net income                                                                                    |  |                 |         |             |  |          |       |       |  |  |           |   |  |  | 425,195    |  
|Resale of treasury stock                                                                      |  |                 |         |             |  |          |       |       |  |  | 20,244     |   |  |  | 20,694     |  
|                                                                                              |  |                 |          |             |  |          |        |       |  |  |            |   |  |  |            |  
|Balance at December 31, 2002                                                                  |  |                 | (302,780 | )           |  |          | 35,683 |       |  |  | (1,342,891 | ) |  |  | 26,178,552 |  
|                                                                                              |  |                 |          |             |  |          |        |       |  |  |            |   |  |  |            |  

The accompanying notes are an integral part of these consolidated financial statements
See report of independent accountants dated January 30, 2003.

F-9



---



##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(EXPRESSED IN THOUSANDS OF DOLLARS)

|                                      |                                                                                                      |                                                                                           |  |                                  |           |      |  |            |           |     |  |           |           |  |  |          |         | 
|------------------------------------- | ---------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------- |  | -------------------------------- | --------- | ---- |  | ---------- | --------- | --- |  | --------- | --------- |  |  | -------- | ------- | 
|                                      |                                                                                                      |                                                                                           |  | For the years ended December 31,
|                                      |                                                                                                      |                                                                                           |  |                                 
|                                      |                                                                                                      |                                                                                           |  | 2000                             |           | 2001 |  | 2002      
|                                      |                                                                                                      |                                                                                           |  |                                  |           |      |  |           
|                                      |                                                                                                      |                                                                                           |  | NT$                              |           | NT$  |  | NT$        |           | US$
|                                      |                                                                                                      |                                                                                           |  |                                  |           |      |  |            |           |     |  |           |           |  |  | (Note 2)
|Cash flows from operating activities: |                                                                                                      |                                                                                           |  |                                  |           |      |  |            |           |     |  |           |           |  |  |         
|                                      | Net income (loss)                                                                                    |                                                                                           |  | 3,221,380                        |           |      |  | (1,183,211 | )         |     |  | 425,195   |           |  |  | 12,253   |        
|                                      | Adjustments to reconcile net income (loss) to net
cash provided by operating activities
Depreciation |                                                                                           |  | 2,105,325                        |           |      |  | 4,057,729  |           |     |  | 4,575,422 |           |  |  | 131,857  |        
|                                      |                                                                                                      | Amortization                                                                              |  | 151,705                          |           |      |  | 264,834    |           |     |  | 326,266   |           |  |  | 9,402    |        
|                                      |                                                                                                      | Bad debts expense                                                                         |  | 4,614                            |           |      |  | 5,634      |           |     |  |          |           |  |  |         |        
|                                      |                                                                                                      | Unrealized loss on short-term investments                                                 |  | 5,095                            |           |      |  |           |           |     |  | 6,360     |           |  |  | 183      |        
|                                      |                                                                                                      | Recovery of market value of short-term
investments                                        |  |                                 |           |      |  | (5,095     | )         |     |  |          |           |  |  |         |        
|                                      |                                                                                                      | Gain on disposal of investments                                                           |  | (38,594                          | )         |      |  | (30,561    | )         |     |  | (51,626   | )         |  |  | (1,488   | )      
|                                      |                                                                                                      | Provision for sales allowance                                                             |  |                                 |           |      |  | 35,000     |           |     |  | 29,262    |           |  |  | 843      |        
|                                      |                                                                                                      | Provision for (recovery of) loss on obsolescence
and decline in market value of inventory |  | 70,811                           |           |      |  | 105,144    |           |     |  | (10,312   | )         |  |  | (297     | )      
|                                      |                                                                                                      | Long-term investment (income) loss accounted for
under equity method                      |  | (282,950                         | )         |      |  | 1,153,495  |           |     |  | (41,399   | )         |  |  | (1,193   | )      
|                                      |                                                                                                      | Permanent loss on long-term investments                                                   |  | 61,419                           |           |      |  | 52,976     |           |     |  | 24,934    |           |  |  | 719      |        
|                                      |                                                                                                      | Loss recognized for transferring short-term
investments to long-term investments          |  | 24,640                           |           |      |  |           |           |     |  |          |           |  |  |         |        
|                                      |                                                                                                      | Loss (gain) on disposal of property, plant and
equipment                                  |  | 21,256                           |           |      |  | (280       | )         |     |  | (15,794   | )         |  |  | (455     | )      
|                                      |                                                                                                      | Provision for loss on idle assets                                                         |  | 1,494                            |           |      |  | 1,240      |           |     |  | 17,243    |           |  |  | 497      |        
|                                      |                                                                                                      | Amortization of discount on commercial paper                                              |  | 13,513                           |           |      |  | 1,095      |           |     |  | 2,986     |           |  |  | 86       |        
|                                      |                                                                                                      | Amortization of discount on long-term note payable                                        |  |                                 |           |      |  | 12,903     |           |     |  | 17,487    |           |  |  | 504      |        
|                                      |                                                                                                      | Amortization of discount on long-term receivable                                          |  |                                 |           |      |  | (6,039     | )         |     |  |          |           |  |  |         |        
|                                      |                                                                                                      | Compensation interest payable on bonds payable                                            |  | 341,456                          |           |      |  | 331,902    |           |     |  | 285,977   |           |  |  | 8,241    |        
|                                      |                                                                                                      | Foreign currency exchange loss (gain) on bonds
payable                                    |  | 323,008                          |           |      |  | 304,643    |           |     |  | (97,163   | )         |  |  | (2,800   | )      
|                                      |                                                                                                      | Gain on redemption of bonds payables                                                      |  |                                 |           |      |  | (20,556    | )         |     |  | (16,798   | )         |  |  | (484     | )      
|(Increase) decrease in assets:        |                                                                                                      |                                                                                           |  |                                  |           |      |  |            |           |     |  |           |           |  |  |         
|                                      | Notes receivable                                                                                     |                                                                                           |  | 231,344                          |           |      |  | 230,251    |           |     |  | 53,525    |           |  |  | 1,542    |        
|                                      | Accounts receivable                                                                                  |                                                                                           |  | (506,600                         | )         |      |  | (123,378   | )         |     |  | (441,191  | )         |  |  | (12,714  | )      
|                                      | Inventories                                                                                          |                                                                                           |  | (344,778                         | )         |      |  | 115,850    |           |     |  | 41,427    |           |  |  | 1,194    |        
|                                      | Other current assets                                                                                 |                                                                                           |  | (113,263                         | )         |      |  | 40,262     |           |     |  | (248,605  | )         |  |  | (7,164   | )      
|                                      | Deferred income tax assets                                                                           |                                                                                           |  | (428,368                         | )         |      |  | (270,956   | )         |     |  | (196,413  | )         |  |  | (5,660   | )      
|Increase (decrease) in liabilities:   |                                                                                                      |                                                                                           |  |                                  |           |      |  |            |           |     |  |           |           |  |  |         
|                                      | Notes payable                                                                                        |                                                                                           |  | 9,829                            |           |      |  | (4,455     | )         |     |  | (393,956  | )         |  |  | (11,353  | )      
|                                      | Accounts payable                                                                                     |                                                                                           |  | (296,394                         | )         |      |  | 302,952    |           |     |  | 397,210   |           |  |  | 11,447   |        
|                                      | Income tax payable                                                                                   |                                                                                           |  | 251,026                          |           |      |  | (376,457   | )         |     |  | 48,879    |           |  |  | 1,409    |        
|                                      | Accrued expenses                                                                                     |                                                                                           |  | 114,972                          |           |      |  | (109,146   | )         |     |  | 117,212   |           |  |  | 3,378    |        
|                                      | Other current liabilities                                                                            |                                                                                           |  | 13,814                           |           |      |  | 38,221     |           |     |  | 18,556    |           |  |  | 535      |        
|                                      | Other payables                                                                                       |                                                                                           |  | 65,424                           |           |      |  | (1,397     | )         |     |  | 144,367   |           |  |  | 4,160    |        
|                                      | Other liabilities                                                                                    |                                                                                           |  | (3                               | )         |      |  | 5,307      |           |     |  | 3,775     |           |  |  | 108      |        
|                                      | Accrued pension liabilities                                                                          |                                                                                           |  |                                 |           |      |  | 16,408     |           |     |  | (16,627   | )         |  |  | (479     | )      
|                                      |                                                                                                      |                                                                                           |  |                                  |           |      |  |            |           |     |  |           |           |  |  |         
|                                      |                                                                                                      | Net cash provided by operating activities                                                 |  |                                  | 5,021,175 |      |  |            | 4,944,315 |     |  |           | 5,006,199 |  |  |          | 144,271 | 
|                                      |                                                                                                      |                                                                                           |  |                                  |           |      |  |            |           |     |  |           |           |  |  |         

The accompanying notes are an integral part of these consolidated financial statements.
See report of independent accountant dated January 30, 2003.

F-10



---



##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(EXPRESSED IN THOUSANDS OF DOLLARS)

|                                                                                |                                                         |  |                                  |         |      |  |            |       |     |  |            |   |  |  |          |   | 
|------------------------------------------------------------------------------- | ------------------------------------------------------- |  | -------------------------------- | ------- | ---- |  | ---------- | ----- | --- |  | ---------- | - |  |  | -------- | - | 
|                                                                                |                                                         |  | For the years ended December 31,
|                                                                                |                                                         |  |                                 
|                                                                                |                                                         |  | 2000                             |         | 2001 |  | 2002      
|                                                                                |                                                         |  |                                  |         |      |  |           
|                                                                                |                                                         |  | NT$                              |         | NT$  |  | NT$        |       | US$
|                                                                                |                                                         |  |                                  |         |      |  |            |       |     |  |            |   |  |  | (Note 2)
|Cash flows from investing activities:                                           |                                                         |  |                                  |         |      |  |            |       |     |  |            |   |  |  |          |  
|                                                                                | Purchase of short-term investments                      |  | (108,778                         | )       |      |  |           |       |     |  | (6,872,467 | ) |  |  | (198,054 | )
|                                                                                | Proceeds from disposal of short-term
investments        |  | 88,450                           |         |      |  | 53,536     |       |     |  | 6,821,740  |   |  |  | 196,592  |  
|                                                                                | Payment for security deposits                           |  |                                 |         |      |  |           |       |     |  | (423,000   | ) |  |  | (12,190  | )
|                                                                                | Refund of security deposits                             |  | 77,000                           |         |      |  | 212,317    |       |     |  | 3,320      |   |  |  | 96       |  
|                                                                                | Purchase of long-term investments in stocks             |  | (2,485,229                       | )       |      |  | (1,592,112 | )     |     |  | (1,329,915 | ) |  |  | (38,326  | )
|                                                                                | Purchase of long-term investments in bonds              |  |                                 |         |      |  |           |       |     |  | (346,350   | ) |  |  | (9,981   | )
|                                                                                | Proceeds from disposal of long-term
investments         |  | 167,773                          |         |      |  | 337,012    |       |     |  | 129,877    |   |  |  | 3,743    |  
|                                                                                | Acquisition of property, plant and equipment            |  | (6,535,190                       | )       |      |  | (5,474,188 | )     |     |  | (6,444,535 | ) |  |  | (185,722 | )
|                                                                                | Proceeds from disposal of property, plant and
equipment |  | 7,095                            |         |      |  | 2,528      |       |     |  | 79,875     |   |  |  | 2,302    |  
|                                                                                | Payment for deferred charges                            |  | (253,121                         | )       |      |  | (244,009   | )     |     |  | (341,878   | ) |  |  | (9,852   | )
|                                                                                | Payment for refundable deposits                         |  | (5,436                           | )       |      |  | (162       | )     |     |  | (3,141     | ) |  |  | (91      | )
|                                                                                | Refund of refundable deposits                           |  | 1,432                            |         |      |  | 651        |       |     |  | 686        |   |  |  | 20       |  
|                                                                                | Acquisition of other assets                             |  | (46,554                          | )       |      |  | (161       | )     |     |  | (79,792    | ) |  |  | (2,300   | )
|                                                                                | Proceeds from disposal of other assets                  |  | 13                               |         |      |  | 19         |       |     |  |           |   |  |  |         |  
|                                                                                | Cash received from merger                               |  |                                  | 483,341 |      |  |            | 4,643 |     |  |            |  |  |  |          |  | 
|                                                                                |                                                         |  |                                  |         |      |  |            |       |     |  |            |   |  |  |          |   | 
|                                                                                | Net cash used in investing activities                   |  | (8,609,204                       | )       |      |  | (6,699,926 | )     |     |  | (8,805,580 | ) |  |  | (253,763 | )
|                                                                                |                                                         |  |                                  |         |      |  |            |       |     |  |            |   |  |  |          |  
|Cash flows from financing activities
Proceeds from issuance of short-term loans |                                                         |  | 9,623,682                        |         |      |  | 7,305,918  |       |     |  | 8,102,000  |   |  |  | 233,487  |  
|                                                                                | Repayment of short-term loans                           |  | (9,402,000                       | )       |      |  | (7,487,100 | )     |     |  | (8,590,000 | ) |  |  | (247,550 | )
|                                                                                | Proceeds from issuance of commercial paper              |  | 2,630,859                        |         |      |  | 298,800    |       |     |  | 1,796,917  |   |  |  | 51,784   |  
|                                                                                | Repayments of commercial paper                          |  | (2,854,000                       | )       |      |  | (200,000   | )     |     |  | (1,400,000 | ) |  |  | (40,346  | )
|                                                                                | Proceeds from long-term loans                           |  | 1,120,000                        |         |      |  | 4,421,082  |       |     |  | 2,245,947  |   |  |  | 64,725   |  
|                                                                                | Repayment of long-term loans                            |  |                                 |         |      |  | (301,000   | )     |     |  | (1,847,760 | ) |  |  | (53,250  | )
|                                                                                | Proceeds from issuance of bonds payable                 |  |                                 |         |      |  |           |       |     |  | 7,608,260  |   |  |  | 219,258  |  
|                                                                                | Redemption of bonds payable                             |  |                                 |         |      |  | (1,917,304 | )     |     |  | (4,469,051 | ) |  |  | (128,791 | )
|                                                                                | Proceeds from deposit-in                                |  |                                 |         |      |  | 480        |       |     |  | 250        |   |  |  | 7        |  
|                                                                                | Repayment of deposit in                                 |  |                                 |         |      |  |           |       |     |  | (90        | ) |  |  | (3       | )
|                                                                                | Payment of directors and supervisors
remuneration     |  | (29,039                          | )       |      |  | (52,790    | )     |     |  |           |   |  |  |         |  
|                                                                                | Proceeds from disposal of treasury stock                |  |                                 |         |      |  |           |       |     |  | 20,694     |   |  |  | 597      |  
|                                                                                | Purchase of treasury stock                              |  | (30,043                          | )       |      |  | (568,951   | )     |     |  |           |   |  |  |         |  
|                                                                                | Effect on foreign currency exchange                     |  |                                 |         |      |  |           |       |     |  | (8,103     | ) |  |  | (233     | )
|                                                                                | Issuance of American depositary shares                  |  | 7,493,682                        |         |      |  |           |       |     |  |           |   |  |  |         |  
|                                                                                |                                                         |  |                                  |         |      |  |            |       |     |  |            |   |  |  |          |  
|                                                                                | Net cash provided by financing activities               |  | 8,553,141                        |         |      |  | 1,499,135  |       |     |  | 3,459,064  |   |  |  | 99,685   |  
|                                                                                |                                                         |  |                                  |         |      |  |            |       |     |  |            |   |  |  |          |  
|Net increase (decrease) in cash and cash
equivalents                            |                                                         |  | 4,965,112                        |         |      |  | (256,476   | )     |     |  | (340,317   | ) |  |  | (9,807   | )
|Cash and cash equivalents at beginning of year                                  |                                                         |  | 1,601,327                        |         |      |  | 6,566,439  |       |     |  | 6,309,963  |   |  |  | 181,843  |  
|                                                                                |                                                         |  |                                  |         |      |  |            |       |     |  |            |   |  |  |          |  
|Cash and cash equivalents at end of year                                        |                                                         |  | 6,566,439                        |         |      |  | 6,309,963  |       |     |  | 5,969,646  |   |  |  | 172,036  |  
|                                                                                |                                                         |  |                                  |         |      |  |            |       |     |  |            |   |  |  |          |  

The accompanying notes are an integral part of these consolidated financial statements.
See report of independent accountant dated January 30, 2003.

F-11



---



##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(EXPRESSED IN THOUSANDS OF DOLLARS)

|                                                                        |                                                     |  |                                  |   |      |  |            |   |     |  |           |   |  |  |          |   | 
|----------------------------------------------------------------------- | --------------------------------------------------- |  | -------------------------------- | - | ---- |  | ---------- | - | --- |  | --------- | - |  |  | -------- | - | 
|                                                                        |                                                     |  | For the years ended December 31,
|                                                                        |                                                     |  |                                 
|                                                                        |                                                     |  | 2000                             |   | 2001 |  | 2002      
|                                                                        |                                                     |  |                                  |   |      |  |           
|                                                                        |                                                     |  | NT$                              |   | NT$  |  | NT$        |   | US$
|                                                                        |                                                     |  |                                  |   |      |  |            |   |     |  |           |   |  |  | (Note 2)
|Supplemental
disclosures of cash flow information                      
|Cash paid for interest (excluding capitalized interest)                 |                                                     |  | 102,462                          |   |      |  | 332,813    |   |     |  | 763,383   |   |  |  | 22,000   |  
|                                                                        |                                                     |  |                                  |   |      |  |            |   |     |  |           |   |  |  |          |  
|                                                                        | Cash paid for income tax                            |  | 150,618                          |   |      |  | 358,851    |   |     |  | 3,276     |   |  |  | 94       |  
|                                                                        |                                                     |  |                                  |   |      |  |            |   |     |  |           |   |  |  |          |  
|Supplemental disclosures of partial cash paid for
investing activities: |                                                     |  |                                  |   |      |  |            |   |     |  |           |   |  |  |          |  
|                                                                        | Acquisition of property, plant and equipment        |  | 5,947,952                        |   |      |  | 5,467,078  |   |     |  | 5,868,868 |   |  |  | 169,132  |  
|                                                                        | Add: Payable at beginning of the year               |  | 977,370                          |   |      |  | 1,014,006  |   |     |  | 1,035,695 |   |  |  | 29,847   |  
|                                                                        | Notes payable at beginning of the year              |  | 207,779                          |   |      |  | 51,561     |   |     |  | 22,762    |   |  |  | 656      |  
|                                                                        | Less: Payable at end of the year                    |  | (546,350                         | ) |      |  | (1,035,695 | ) |     |  | (482,790  | ) |  |  | (13,913  | )
|                                                                        | Notes payable at end of the year                    |  | (51,561                          | ) |      |  | (22,762    | ) |     |  |          |   |  |  |         |  
|                                                                        |                                                     |  |                                  |   |      |  |            |   |     |  |           |   |  |  |          |  
|                                                                        | Cash paid                                           |  | 6,535,190                        |   |      |  | 5,474,188  |   |     |  | 6,444,535 |   |  |  | 185,722  |  
|                                                                        |                                                     |  |                                  |   |      |  |            |   |     |  |           |   |  |  |          |  
|The fair value of assets and liabilities acquired from
merger:          |                                                     |  |                                  |   |      |  |            |   |     |  |           |   |  |  |          |  
|                                                                        | Issuance of new stocks                              |  | 1,737,117                        |   |      |  |           |   |     |  |          |   |  |  |         |  
|                                                                        | Payments for acquisition                            |  |                                 |   |      |  | 68,464     |   |     |  |          |   |  |  |         |  
|                                                                        | Deferred charge                                     |  | 1,951,563                        |   |      |  | (17,227    | ) |     |  |          |   |  |  |         |  
|                                                                        | Fixed assets acquired                               |  | (7,399,467                       | ) |      |  | (13,796    | ) |     |  |          |   |  |  |         |  
|                                                                        | Long-term loans transferred                         |  | 2,692,600                        |   |      |  |           |   |     |  |          |   |  |  |         |  
|                                                                        | Other net liabilities transferred (assets acquired) |  | 1,501,528                        |   |      |  | (32,798    | ) |     |  |          |   |  |  |         |  
|                                                                        |                                                     |  |                                  |   |      |  |            |   |     |  |           |   |  |  |          |  
|                                                                        | Cash received                                       |  | 483,341                          |   |      |  | 4,643      |   |     |  |          |   |  |  |         |  
|                                                                        |                                                     |  |                                  |   |      |  |            |   |     |  |           |   |  |  |          |  

The accompanying notes are an integral part of these consolidated financial statements.
See report of independent accountant dated January 30, 2003.

F-12



---



##### Table of Contents



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

1. History and Organization

Siliconware Precision Industries Co., Ltd. (SPIL) was incorporated as a
company limited by shares under the Company Law of the Republic of China (the
ROC) in May 1984 and was listed on the Taiwan Stock Exchange in April 1993.
The main activities of SPIL are the assembly, testing and turnkey services
of integrated circuits. Siliconware Corporation was merged with SPIL on
December 30, 2000.

2. Summary of Significant Accounting Policies

The accompanying financial statements have been prepared in conformity with
the Rules Governing the Preparation of Financial Statements of Securities
Issues and accounting principles generally accepted in the Republic of
China. Accounting principles generally accepted in the Republic of China
vary in certain significant respects from accounting principles generally
accepted in the United States. The application of accounting principles in
the United States would have affected the determination of consolidated net
income expressed in New Taiwan dollars, for each of the three years ended
December 31, 2002 and the determination of consolidated shareholders equity
and consolidated financial position also expressed in New Taiwan dollars, as
of December 31, 2001 and 2002 to the extent summarized in note 26 to the
consolidated financial statements.

The Companys significant accounting policies are summarized as follows:

Consolidation

Pursuant to ROC Securities and Futures Commissions (SFC) regulations, if the
total assets and the operating revenue of the subsidiary are less than 10% of
the total non-consolidated assets and operating revenue of SPIL, the
subsidiarys financial statements may, at the option of SPIL, not be included
in the consolidation. Irrespective of the above test, when the total
combined assets or operating revenue of all such non-consolidated
subsidiaries constitute more than 30% of SPILs non-consolidated assets or
operating revenue, then each individual subsidiary with total assets or
operating revenue greater than 3% of SPILs non-consolidated assets or
operating revenue is included in the consolidation. SPILs consolidation
policy is to consolidate all subsidiaries in which SPIL has majority voting
ownership.

The Companys consolidated financial statements include the following
subsidiaries:

Siliconware Investment Company Ltd. (SIC), a 100% owned subsidiary of SPIL,
was incorporated in September 1996 to engage in investment activities. As of
December 31, 2002, the issued capital of SIC was NT$1,770.0 million.

F-13



---



##### Table of Contents



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

SPIL (B.V.I.) Holding Limited (SPIL BVI), a 100% owned subsidiary of SPIL,
was incorporated in April 2001 to engage in investment activities. As of
December 31, 2002, the issued capital of SPIL BVI was US$34,300,000.

Siliconware USA, Inc. (SUI), a 100% owned subsidiary of SPIL BVI, was
incorporated in October 1997 to engage as sales agent. As of December 31,
2002, the issued capital of SUI was US$1,250,000.

SPIL (Cayman) Holding Limited (SPIL Cayman), a 100% owned subsidiary of SPIL
BVI, was incorporated in January 2002 to engage in investment activities. As
of December 31, 2002, the issued capital of SPIL Cayman was US$6,550,000.

Siliconware Technology (Suzhou) Limited (Siliconware Technology), a 100%
owned subsidiary of SPIL Cayman, was incorporated in February 2002 to engage
in the design and manufacture of transistor and electronic component. As of
December 31, 2002, the issued capital of Siliconware Technology was
US$6,500,000.

Use of Estimates

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the amounts reported of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements,
and reported amount of revenue, costs of revenue and expenses during the
reporting period. Actual results could differ from those estimates.

Translation of Foreign Currency Transactions on Subsidiaries Financial Statements

The financial statements of foreign subsidiaries and investee are translated
into New Taiwan dollars using the spot rate as of each financial statement
date for asset and liability accounts, average exchange rate for profit and
loss accounts, spot rate for dividend and historical exchange rates for
equity accounts. The cumulative translation effects for subsidiaries and
investees using functional currencies other than the New Taiwan dollar are
included in the cumulative translation adjustment in stockholders equity.

Foreign Currency Transactions

The accounts of the Company are maintained in New Taiwan dollars.
Transactions denominated in foreign currencies are translated into New Taiwan
dollars at the exchange rates prevailing on the transaction dates.
Receivables, other monetary assets and liabilities denominated in foreign
currencies are translated into New Taiwan dollars at the exchange rates
prevailing at the balance sheet date. Exchange gains or losses are included
in the current years results.

F-14



---



##### Table of Contents



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

Convenience Translation into US Dollars

The Company maintains its accounting records and prepares its financial
statements in New Taiwan (NT) dollars. The United States (US) dollar
amounts disclosed in the 2002 financial statements are presented solely for
the convenience of the reader and were translated at the rate of NT$34.7 to
US$1.00, the U.S. Federal Reserve Bank of New York noon buying exchange rate
on December 31, 2002. Such translation amounts are unaudited and should not
be construed that the NT dollar amounts represent, or have been, or could be,
converted into US dollars at that or any other rate.

Cash and Cash Equivalents

Cash includes cash deposits in banks, certificates of deposits and time
deposits. Cash equivalents are short-term, highly liquid investments which
are readily convertible to known amounts of cash and with maturity dates that
do not present significant risk of changes in value because of changes in
interest rates.

Short-term Investments

Marketable securities are recorded at cost when acquired and are stated at
the lower of aggregate cost or market value at the balance sheet date. The
market value of listed stocks is determined by the average closing price
during the last month of the accounting period. The excess of aggregate cost
over market value is reported as a loss in the current year. In subsequent
periods, recoveries of market value are recognized as gain to the extent that
the market value does not exceed the original cost of the investment.

Allowance for Doubtful Accounts

The allowance for doubtful accounts is provided based on the evaluation of
collectibility and aging analysis of notes receivable, accounts receivables
and other receivables.

Inventories

Inventories are recorded at cost when acquired and are stated at the lower of
aggregate cost, based on weighted average method, or market value at the
balance sheet date. The market values of raw materials and supplies are
determined on the basis of replacement cost. The market values of finished
goods and work in processes are determined on the basis of net realizable
value. The allowance for loss on obsolescence and decline in market value is
provided, when necessary.

F-15



---



##### Table of Contents



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

Long-term Investments in Stocks



|A. |  | Long-term equity investments in which the Company owns less than 20%
of the voting rights of the investee company 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 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s income. 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 company are accounted for under the
equity method, unless the Company cannot exercise significant influence
over the investee company, in which case, 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|  
|C. |  | The Company delays recognition of investment income (loss) on
long-term equity investments in which the Company owns less than 50% of
the voting rights of the investee company, if the financial statements
of the investee for the same period are not available in time. The
Company consistently recognizes the investment income (loss) in the
subsequent year based on prior years weighted average holding share on
the investee. However, if the investee meets certain criteria set by
the ROC Securities and Futures Commission (SFC), delay in recognition of
income (loss) is not permitted. The investment income (losses) for
ChipMOS for the years ended December 31, 2000 and 2001 were recognized
based on the audited ChipMOSs financial statements of the same periods.
As discussed in Note 3, commencing from January 1, 2002, with the
approval from ROC SFC, recognition of investment income (loss) has been
delayed until the subsequent year for ChipMOS. Because of the change in
accounting policy, the Company did not recognize any gain or loss for
the investment in ChipMOS for the year ended December 31, 2002.
|  
|D. |  | Unrealized intercompany gains and losses are eliminated under the
equity method. Profit or 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 or loss from other types of
intercompany transactions is recognized when realized.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|  
|E. |  | 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 amount is
insufficient, the effect is then charged to retained earnings.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

F-16



---



##### Table of Contents



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



|F. |  | 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 by the Company and is included in the stockholders equity as
Cumulative Translation Adjustment.
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Long-term Investments in Bonds

Long-term investments in bonds are recorded at amortized cost, which is the
par value after adjustment by the unamortized premium or discount.

Property, Plant and Equipment

Property, plant and equipment are stated at cost. Interest incurred relating
to the acquisition and construction of property, plant and equipment is
capitalized and depreciated accordingly.

Depreciation is provided on the straight-line method over the assets
estimated economic service lives, plus one additional year as salvage value.
Salvage value of fixed assets which are still in use after their estimated
economic service lives are depreciated over their new estimated remaining
service lives. The service lives of the fixed assets are 3 to 15 years,
except for machinery and equipment which are 5 years and for buildings which
are 35 to 55 years.

Maintenance and repairs are charged to expense as incurred. Significant
renewals and improvements are treated as capital expenditures and are
depreciated accordingly. When fixed assets are disposed of, their original
cost and accumulated depreciation are written-off. Gain or loss on disposal
of fixed assets is recorded as non-operating income or loss.

Idle assets are stated at the lower of book value or net realizable value and
are reclassified to other assets.

According to the regulation of People Republic of China, depreciation for 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

The costs of computer software system purchased externally and tooling cost
are recognized as deferred charges and amortized on the straight-line method
over the estimated useful lives of 2 to 5 years. Convertible bonds issuance
costs are amortized over the period of the bonds.

F-17



---



##### Table of Contents



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

Land Use Right

The rental cost for Siliconware Technology to lease the land from the local
government is recognized as land use right and amortized on the straight-line
method over the contract period of 50 years.

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.                                                                                                            
|  
|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 failed to exercise his/her
redemption right during the redemption period. The balance of the
compensation interest payable is amortized over the period from the date
following the redemption period to the maturity date using the effective
interest method.

Retirement Plan

SPIL has a funded defined benefit pension plan covering all regular employees
in accordance with the ROC Labor Standards Law. The net pension cost, which
is computed based on an actuarial valuation, includes service cost, interest
cost, expected return on plan assets and amortization of net asset/obligation
at transition. The unrecognized net asset or obligation at transition is
amortized equally over 15 years. The pension fund is managed by an
independently administered pension fund committee.

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 the SUIs Board of Directors.

F-18



---



##### Table of Contents



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

Income Tax



|A. |  | Provision for income tax includes deferred tax resulting from
temporary differences and investment tax credit. Deferred tax assets or
liabilities are further classified into current or noncurrent items and
are presented in the financial statements as net balance. A valuation
allowance on deferred tax assets is provided to the extent that it is
more likely than not that the tax benefit will not be realized.              
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|B. |  | The Company adopted 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, qualifying personnel
training 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 should be subject to an additional 10% corporate income tax
which is recognized as expense at the time the stockholders resolve that
the companys earnings are retained.                                                                                                                                                                                    

Revenue Recognition

Revenue is recognized when service is rendered and the payment is realized or
realizable.

Research and Development

Costs incurred by the Company in research and development activities are
expensed as incurred.

Merger

The Company adopted ROC FAS No. 25, Business Combinations Accounted under
the Purchase Method in determining the cost of an acquired company.
According to ROC FAS No. 25, costs of assets acquired by issuing shares of
stock is determined by the fair value of shares issued or the fair value of
assets acquired whichever is more clearly evident. The excess of fair value
of the net assets acquired over the par value of the shares issued is
recognized as the capital reserve.

Treasury Stock



|A. |  | Treasury stock, representing issued stock reacquired by the Company
for cash, is stated at cost, and is presented as a deduction under
stockholders equity.                                                                                                                                                                                                                              
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|B. |  | Upon subsequent disposal of the treasury stock, the excess of the proceeds
from disposal over the book value, using 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 and the remainder, if any, is charged against retained
earnings.

F-19



---



##### Table of Contents



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

Earnings (Loss) Per Share

Basic earnings (loss) per share are calculated by dividing net income (loss)
by the weighted average number of shares outstanding during the year 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 share equivalents had been issued. For
the years ended December 31, 2000, 2001 and 2002, there were no differences
between basic and diluted earnings (losses) per share as common share
equivalents had anti-dilutive effect.

3. Effects of Changes in Accounting Principle

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. Commencing
from January 1, 2002, with the approval from ROC SFC, recognition of
investment income (loss) has been delayed until the subsequent year for
ChipMOS. Because of the change in accounting policy, the Company did not
recognize any gain or loss for the investment in ChipMOS for the year ended
December 31, 2002. The delay of recognition of investment income (loss) does
not have a cumulative effect to retained earnings as of January 1, 2002.

4. Cash and Cash Equivalents

|                  |  |                    |           |         |  |  |           | 
|----------------- |  | ------------------ | --------- | ------- |  |  | --------- | 
|                  |  | As of December 31,
|                  |  |                   
|                  |  | 2001               |           | 2002   
|                  |  |                    |           |        
|                  |  | NT$'000            |           | NT$'000
|Cash on hand      |  |                    | 1,068     |         |  |  | 2,355     | 
|Saving accounts   |  |                    | 577,742   |         |  |  | 337,900   | 
|Checking accounts |  |                    | 888,372   |         |  |  | 75,388    | 
|Time deposits     |  |                    | 4,842,781 |         |  |  | 5,554,003 | 
|                  |  |                    |           |         |  |  |           | 
|                  |  |                    | 6,309,963 |         |  |  | 5,969,646 | 
|                  |  |                    |           |         |  |  |           | 

As of December 31, 2001 and 2002, the interest rates for time deposits ranged
from 2.8% to 5.15% and from 1.01% to 5%, respectively.

5. Accounts Receivable

|                                      |                               |  |                    |         |         |  |           |         |  
|------------------------------------- | ----------------------------- |  | ------------------ | ------- | ------- |  | --------- | ------- | -
|                                      |                               |  | As of December 31,
|                                      |                               |  |                   
|                                      |                               |  | 2001               |         | 2002   
|                                      |                               |  |                    |         |        
|                                      |                               |  | NT$'000            |         | NT$'000
|Accounts receivable                   |                               |  | 3,763,463          |         |         |  | 4,159,974 |        
|Less: Allowance for doubtful accounts |                               |  | (17,608            | )       |         |  | (7,928    | )      
|                                      | Allowance for sales discounts |  |                    | (35,000 | )       |  |           | (29,262 | )
|                                      |                               |  |                    |         |         |  |           |        
|                                      |                               |  | 3,710,855          |         |         |  | 4,122,784 |        
|                                      |                               |  |                    |         |         |  |           |        

F-20



---



##### Table of Contents



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

6. Inventories

|                                                                                  |  |                    |           |         |  |  |           |  
|--------------------------------------------------------------------------------- |  | ------------------ | --------- | ------- |  |  | --------- | -
|                                                                                  |  | As of December 31,
|                                                                                  |  |                   
|                                                                                  |  | 2001               |           | 2002   
|                                                                                  |  |                    |           |        
|                                                                                  |  | NT$'000            |           | NT$'000
|Raw materials and supplies                                                        |  |                    | 1,342,470 |         |  |  | 1,325,087 |  
|Work in process                                                                   |  |                    | 109,659   |         |  |  | 125,550   |  
|Finished goods                                                                    |  |                    | 130,010   |         |  |  | 90,075    |  
|                                                                                  |  |                    |           |         |  |  |           |  
|                                                                                  |  |                    | 1,582,139 |         |  |  | 1,540,712 |  
|Less: Allowance for loss on obsolescence
and decline in market value of inventory |  |                    | (178,417  | )       |  |  | (168,105  | )
|                                                                                  |  |                    |           |         |  |  |           |  
|                                                                                  |  |                    | 1,403,722 |         |  |  | 1,372,607 |  
|                                                                                  |  |                    |           |         |  |  |           |  

7. Long-term Investments



|A. |  | Details of long-term investments are summarized as follows:
|-- |  | -----------------------------------------------------------

|                                     |                                             |         |                    |           |      |        |            |           |   |  |           |           |            |  |  |       |  
|------------------------------------ | ------------------------------------------- | ------- | ------------------ | --------- | ---- | ------ | ---------- | --------- | - |  | --------- | --------- | ---------- |  |  | ----- | -
|                                     |                                             |         | As of December 31,
|                                     |                                             |         |                   
|                                     |                                             |         | 2001               |           | 2002
|                                     |                                             |         |                    |           |     
|                                     |                                             |         |                    |           |      |        | Percentage |           |   |  |           |           | Percentage
|                                     |                                             |         |                    |           |      |        | of         |           |   |  |           |           | of        
|Investee company                     |                                             | Amount  |                    | ownership |      | Amount |            | ownership
|                                     |                                             |         |                    |           |      |        |            |          
|                                     |                                             | NT$'000 |                    |           |      |        |            | NT$'000   |   |  |           |          
|Equity method:                       |                                             |         |                    |           |      |        |            |           |   |  |           |           |            |  |  |      
|                                     | Sigurd Microelectronics Corp.               |         |                    | 459,174   |      |        |            | 33.58     | % |  |           | 524,820   |            |  |  | 33.58 | %
|                                     | Double Win Enterprise Co., Ltd.             |         |                    | 145,255   |      |        |            | 24.14     | % |  |           | 122,400   |            |  |  | 24.14 | %
|                                     | ChipMOS Technologies Inc.                   |         |                    | 3,116,299 |      |        |            | 28.73     | % |  |           | 3,116,299 |            |  |  | 28.73 | %
|                                     | Universal Communication
Technology Inc.     |         |                    |          |      |        |            |          |   |  |           | 322,586   |            |  |  | 42.82 | %
|                                     | Artest Corporation                          |         |                    | 209,880   |      |        |            | 31.09     | % |  |           | 208,500   |            |  |  | 30.09 | %
|                                     | Taiwan Hi-tech Corporation                  |         |                    | 117,710   |      |        |            | 39.31     | % |  |           | 118,446   |            |  |  | 38.75 | %
|                                     |                                             |         |                    |           |      |        |            |           |   |  |           |           |            |  |  |      
|                                     |                                             |         | 4,048,318          |           |      |        |            |           |   |  | 4,413,051 |           |            |  |  |      
|                                     |                                             |         |                    |           |      |        |            |           |   |  |           |           |            |  |  |      
|Cost method:                         |                                             |         |                    |           |      |        |            |           |   |  |           |           |            |  |  |      
|                                     | Phoenix Precision Technology
Corporation    |         |                    | 1,126,631 |      |        |            | 18.03     | % |  |           | 1,087,794 |            |  |  | 17.48 | %
|                                     | ThaiLin Semiconductor Corp.                 |         |                    | 216,420   |      |        |            | 9.32      | % |  |           | 216,420   |            |  |  | 5.43  | %
|                                     | Unimicrom Technology Corp.                  |         |                    | 204,688   |      |        |            | 2.05      | % |  |           | 164,122   |            |  |  | 1.62  | %
|                                     | Others                                      |         |                    | 388,213   |      |        |            |          |   |  |           | 479,784   |            |  |  |      |  
|                                     |                                             |         |                    |           |      |        |            |           |   |  |           |           |            |  |  |      
|                                     |                                             |         | 1,935,952          |           |      |        |            |           |   |  | 1,948,120 |           |            |  |  |      
|                                     |                                             |         |                    |           |      |        |            |           |   |  |           |           |            |  |  |      
|Prepayment for long-term
investment: |                                             |         |                    |           |      |        |            |           |   |  |           |           |            |  |  |      
|                                     | King Yuan Electronics Co., Ltd.             |         |                    |          |      |        |            |           |   |  |           | 899,540   |            |  |  |       |  
|                                     |                                             |         |                    |           |      |        |            |           |   |  |           |           |            |  |  |      
|                                     |                                             |         | 5,984,270          |           |      |        |            |           |   |  | 7,260,711 |           |            |  |  |      
|                                     |                                             |         |                    |           |      |        |            |           |   |  |           |           |            |  |  |      
|                                     | Allowance for loss on long-term
investments |         |                    |          |      |        |            |           |   |  |           | (302,780  | )          |  |  |       |  
|                                     |                                             |         |                    |           |      |        |            |           |   |  |           |           |            |  |  |      
|                                     |                                             |         | 5,984,270          |           |      |        |            |           |   |  | 6,957,931 |           |            |  |  |      
|                                     |                                             |         |                    |           |      |        |            |           |   |  |           |           |            |  |  |      

F-21



---



##### Table of Contents



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



|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.
Commencing from January 1, 2002, with the approval from ROC SFC,
recognition of investment income (loss) has been delayed until the
subsequent year for ChipMOS. Therefore, no investment income (loss) was
recognized for ChipMOS for the year ended December 31, 2002.                                                  
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|C. |  | Dunning 2002, the Company made an investment in Universal
Communication Technology Inc. (Universal) accounted for under the
equity method. The recognition of investment income (loss) for
Universal has been delayed until the subsequent year because the Company
was unable to obtain the financial statements of Universal for the same
period in time. No investment income (loss) was recognized for
Universal for the year ended December 31, 2002.                                                                                   
|  
|D. |  | Recognition of investment income (loss) 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$0.9 million and NT$1.7 million and investment loss of NT$15.0 million
for investments in these two companies for the year ended December 31,
2000, 2001 and 2002, was based on the audited financial statements of
the investee companies for the years ended December 31, 1999, 2000 and
2001, respectively.             
|  
|E. |  | For the years ended December 31, 2000, 2001 and 2002, other than the
investment income (loss) from Taiwan Hi-tech Corporation and Double Win
Enterprise Co., Ltd., the Company recognized investment income of 322.5
million, investment loss of NT$433.5 million and investment income of
NT$69.2 million, respectively, which was based on the investee
companies audited financial statements for the years ended December 31,
2000, 2001 and 2002, respectively.                                                                          
|  
|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 on the right to the earning
distribution. Since the preferred stock is non-cumulative, investment
income (loss) is recognized upon dividend declaration. No dividend was
declared in 2000, 2001 and 2002. Therefore, no investment income (loss)
was recognized in 2000, 2001 and 2002.
|  
|G. |  | On December 25, 2001, the shareholders of Caesar Technology Inc.
resolved to liquidate the investee company. The Company expects that no
proceeds will be obtained after the liquidation. Therefore, the Company
wrote off the investment in the year ended December 31, 2001.                                                                                                                                                                                                                                                                 

F-22



---



##### Table of Contents



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

H. Details of long-term investments in bonds are summarized as follows:

|                                                                                                           |  |              |         |              |  |         |         |              |  |  |         |  |  |  |         | 
|---------------------------------------------------------------------------------------------------------- |  | ------------ | ------- | ------------ |  | ------- | ------- | ------------ |  |  | ------- |  |  |  | ------- | 
|                                                                                                           |  | December 31,
|                                                                                                           |  |             
|                                                                                                           |  | 2001         |         | 2002        
|                                                                                                           |  |              |         |             
|                                                                                                           |  | Amount       |         | Market value |  | Amount  |         | Market value
|                                                                                                           |  |              |         |              |  |         |         |             
|                                                                                                           |  | NT$'000      |         | NT$'000      |  | NT$'000 |         | NT$'000     
|                                                                                                           |  |              |         |              |  |         |         |             
|ThaiLin
Semiconductor Corp.
convertible bonds                                                              |  |              | 300,000 |              |  |         | 300,000 |              |  |  | 283,100 |  |  |  | 267,190 | 
|United
Microelectronics Corporation
exchangeable bonds
(exchangeable for AU Optronics
Corporations
stock) |  |              |        |              |  |         |        |              |  |  | 346,350 |  |  |  | 326,539 | 
|                                                                                                           |  |              |         |              |  |         |         |              |  |  |         |  |  |  |         | 
|                                                                                                           |  |              | 300,000 |              |  |         | 300,000 |              |  |  | 629,450 |  |  |  | 593,729 | 
|                                                                                                           |  |              |         |              |  |         |         |              |  |  |         |  |  |  |         | 

The main terms of the issue of ThaiLin Semiconductor Corp.
convertible bonds are as follows:

Maturity: July 4, 2006

Interest rate: 0%

Redemption period: The bondholders may redeem the bonds on July 4,
2003 at annual yield rate of 4.75% or on July 4, 2004 at annual yield
rate of 5.25%.

The main terms of the issue of United Microelectronics Corporation
exchangeable bonds are as follows:

Maturity: May 10, 2007

Interest rate: 0%

Redemption period: The bondholders may redeem the bonds on February
10, 2005 at 100% of the face value.

Exchangable period: The bondholders may exchange the bonds for the
common share of AU Optronics Corp. form June 19, 2002 to April 10, 2007.

Exchangable ratio: The bondholders may exchange the bonds for common shares of AU Optronics Corp. at 5,838.389 shares per bond, denominated at
US$10,000 per bond.

As of December 31, 2001 and 2002, the unamortized premium for
long-term investments in bonds is $0.

F-23



---



##### Table of Contents



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

8. Property, Plant and Equipment

|                                                       |  |                         |  |              |  |            |            |         |  |             |             |   |  |  |            | 
|------------------------------------------------------ |  | ----------------------- |  | ------------ |  | ---------- | ---------- | ------- |  | ----------- | ----------- | - |  |  | ---------- | 
|                                                       |  | As of December 31, 2001
|                                                       |  |                        
|                                                       |  |                         |  |              |  |            |            |         |  | Accumulated |             |   |  | 
|                                                       |  | Cost                    |  | depreciation |  | Book value
|                                                       |  |                         |  |              |  |           
|                                                       |  |                         |  |              |  | NT$'000    |            | NT$'000 |  | NT$'000    
|Land                                                   |  |                         |  |              |  |            | 1,712,140  |         |  |             |            |   |  |  | 1,712,140  | 
|Buildings                                              |  |                         |  |              |  |            | 4,087,387  |         |  |             | (680,100    | ) |  |  | 3,407,287  | 
|Machinery and equipment                                |  |                         |  |              |  |            | 24,525,012 |         |  |             | (10,953,050 | ) |  |  | 13,571,962 | 
|Utility equipment                                      |  |                         |  |              |  |            | 420,814    |         |  |             | (183,006    | ) |  |  | 237,808    | 
|Furniture and fixtures                                 |  |                         |  |              |  |            | 405,007    |         |  |             | (187,822    | ) |  |  | 217,185    | 
|Other equipment                                        |  |                         |  |              |  |            | 1,060,258  |         |  |             | (419,545    | ) |  |  | 640,713    | 
|Construction in progress
and prepayments for equipment |  |                         |  |              |  |            | 2,886,231  |         |  |             |            |   |  |  | 2,886,231  | 
|                                                       |  |                         |  |              |  |            |            |         |  |             |             |   |  |  |            | 
|                                                       |  |                         |  |              |  |            | 35,096,849 |         |  |             | (12,423,523 | ) |  |  | 22,673,326 | 
|                                                       |  |                         |  |              |  |            |            |         |  |             |             |   |  |  |            | 

|                                                       |  |                         |            |              |  |             |             |   |  |  |            | 
|------------------------------------------------------ |  | ----------------------- | ---------- | ------------ |  | ----------- | ----------- | - |  |  | ---------- | 
|                                                       |  | As of December 31, 2002
|                                                       |  |                        
|                                                       |  |                         |            |              |  | Accumulated |             |   |  | 
|                                                       |  | Cost                    |            | depreciation |  | Book value 
|                                                       |  |                         |            |              |  |            
|                                                       |  | NT$'000                 |            | NT$'000      |  | NT$'000    
|Land                                                   |  |                         | 2,094,494  |              |  |             |            |   |  |  | 2,094,494  | 
|Buildings                                              |  |                         | 4,809,439  |              |  |             | (879,679    | ) |  |  | 3,929,760  | 
|Machinery and equipment                                |  |                         | 27,794,516 |              |  |             | (12,166,179 | ) |  |  | 15,628,337 | 
|Utility equipment                                      |  |                         | 431,316    |              |  |             | (174,206    | ) |  |  | 257,110    | 
|Furniture and fixtures                                 |  |                         | 355,599    |              |  |             | (171,641    | ) |  |  | 183,958    | 
|Other equipment                                        |  |                         | 1,111,815  |              |  |             | (425,920    | ) |  |  | 685,895    | 
|Construction in progress
and prepayments for equipment |  |                         | 1,114,832  |              |  |             |            |   |  |  | 1,114,832  | 
|                                                       |  |                         |            |              |  |             |             |   |  |  |            | 
|                                                       |  |                         | 37,712,011 |              |  |             | (13,817,625 | ) |  |  | 23,894,386 | 
|                                                       |  |                         |            |              |  |             |             |   |  |  |            | 

For the years ended December 31, 2000, 2001 and 2002, total interest
expense amounted to NT$453.8 million, NT$663.9 million and NT$605.2
million, respectively, of which NT$0 million, NT$8.2 million and NT$84.1
million was capitalized to property, plant and equipment, respectively.
The interest rates used to calculate the capitalized interest was 3.84%
and ranged from 4.04% to 4.94% for the years ended December 31, 2001 and
2002, respectively.

9 Other Assets  Others

|               |  |                    |         |         |  |  |         | 
|-------------- |  | ------------------ | ------- | ------- |  |  | ------- | 
|               |  | As of December 31,
|               |  |                   
|               |  | 2001               |         | 2002   
|               |  |                    |         |        
|               |  | NT$'000            |         | NT$'000
|Land           |  |                    | 108,087 |         |  |  | 108,087 | 
|Land use right |  |                    |        |         |  |  | 40,957  | 
|Others         |  |                    | 106,370 |         |  |  | 91,763  | 
|               |  |                    |         |         |  |  |         | 
|               |  |                    | 214,457 |         |  |  | 240,807 | 
|               |  |                    |         |         |  |  |         | 

F-24



---



##### Table of Contents



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

As of December 31, 2002, SPIL 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. The land purchase has been completed and
SPIL had made payments for the purchase. SPIL entered into a trust contract
with the designated officer, which provides the land use right for nil
consideration to SPIL. The trust contract prohibits the title owner from
transferring the title of the land and land use right under any
circumstances.

10. Other Payables

|                                             |  |                    |           |         |  |  |         | 
|-------------------------------------------- |  | ------------------ | --------- | ------- |  |  | ------- | 
|                                             |  | As of December 31,
|                                             |  |                   
|                                             |  | 2001               |           | 2002   
|                                             |  |                    |           |        
|                                             |  | NT$'000            |           | NT$'000
|Other payables  property, plant & equipment |  |                    | 1,035,695 |         |  |  | 482,790 | 
|Other                                        |  |                    | 77,983    |         |  |  | 223,540 | 
|                                             |  |                    |           |         |  |  |         | 
|                                             |  |                    | 1,113,678 |         |  |  | 706,330 | 
|                                             |  |                    |           |         |  |  |         | 

11. Bonds Payable

|                                   |  |                    |           |         |  |  |           | 
|---------------------------------- |  | ------------------ | --------- | ------- |  |  | --------- | 
|                                   |  | As of December 31,
|                                   |  |                   
|                                   |  | 2001               |           | 2002   
|                                   |  |                    |           |        
|                                   |  | NT$'000            |           | NT$'000
|Euro convertible bonds payable     |  |                    | 3,292,119 |         |  |  | 6,961,000 | 
|Secured bond payable               |  |                    |          |         |  |  | 800,000   | 
|Add: Compensation interest payable |  |                    | 1,178,775 |         |  |  | 186,857   | 
|                                   |  |                    |           |         |  |  |           | 
|                                   |  |                    | 4,470,894 |         |  |  | 7,947,857 | 
|                                   |  |                    |           |         |  |  |           | 



| | A. |  | On July 21, 1997, SPIL issued seven-year (from July 21, 1997 to
July 21, 2004) Euro Convertible bonds amounting to US$138,000,000 on
the Luxembourg Stock Exchange. The interest rate on these bonds is
0.5% per annum, net of withholding tax. As of December 31, 2002, SPIL
redeemed and cancelled the bonds at the principal amount of US$135,525,000. SPIL recognized gain on redemption amounted to NT$16.8
million for the year ended December 31, 2002, which was shown as other
non-operating income. As of December 31, 2002, the remainder of the
bonds at the principal amount of US$2,475,000 has been converted into
1,225 thousand shares.
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | B. |  | On January 28, 2002, SPIL issued five-year (from January 28, 2002
to January 28, 2007) Euro Convertible bonds amounting to US$200,000,000
with zero interest rate at par on the Luxembourg Stock Exchange. The
main terms of the issue are as follows:
(1)                                                                                                                                                                                                                                                                                                                                                                                              

F-25



---



##### Table of Contents



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



| | (1) |  | SPIL 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 SPIL
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) |  | Repurchase at the option of the bondholders:                                                                                                                                                                                                                                                                                                                                                                      
|
| |     |  | SPIL will, at the option of the bondholders, repurchase such bonds on
July 28, 2004 at 105.9185% of the principal amount, or on January 28,
2007 at 111.837% of the 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 will be subject to
adjustment for bonus issues, right issues, distributions of cash and
stock dividends and other dilution.                                                                                                                                                                     



|C. |  | In January 2002, SPIL issued NT$800.0 million of three-year secured
bonds. The interest rate on these bonds is 2.7% per annum. Main terms
of the bonds payables are as follows:
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                                  |  |                                                    |  |                                                    |  |         |                         |              |  |                                                               
|----------------------------------------------------------------- |  | -------------------------------------------------- |  | -------------------------------------------------- |  | ------- | ----------------------- | ------------ |  | --------------------------------------------------------------
|                                                                  |  |                                                    |  |                                                    |  |         |                         |              |  | Interest                                                      
|Nature of bonds                                                   |  | Date issued                                        |  | Maturity date                                      |  | Amount  |                         | payment date
|                                                                  |  |                                                    |  |                                                    |  |         |                         |             
|                                                                  |  |                                                    |  |                                                    |  | NT$000 |                         |             
|Secured bonds
payable
Secured bonds
payable
Secured bonds
payable |  | January 16, 2002
January 17, 2002
January 18, 2002 |  | January 16, 2005
January 17, 2005
January 18, 2005 |  |         | 300,000
300,000
200,000 |              |  | January 16 each year
January 17 each year
January 18 each year

12. Long-term Loans

|                |  |                                                           |  |                    |         |         |  |        
|--------------- |  | --------------------------------------------------------- |  | ------------------ | ------- | ------- |  | -------
|                |  |                                                           |  | As of December 31,
|                |  |                                                           |  |                   
|Nature of loans |  | Repayment period                                          |  | 2001               |         | 2002   
|                |  |                                                           |  |                    |         |        
|                |  |                                                           |  | NT$000            |         | NT$000
|Secured loans   |  | Repayable in 8 quarterly
installments from
February 2001  |  |                    | 106,400 |         |  |       
|Secured loans   |  | Repayable in 13
quarterly
installments from
December 2000 |  |                    | 212,800 |         |  | 106,400

F-26



---



##### Table of Contents



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

|                                         |  |                                                           |  |                    |            |         |  |            |  
|---------------------------------------- |  | --------------------------------------------------------- |  | ------------------ | ---------- | ------- |  | ---------- | -
|                                         |  |                                                           |  | As of December 31,
|                                         |  |                                                           |  |                   
|Nature of loans                          |  | Repayment period                                          |  | 2001               |            | 2002   
|                                         |  |                                                           |  |                    |            |        
|                                         |  |                                                           |  | NT$000            |            | NT$000
|Secured loans                            |  | Repayable in 15
quarterly
installments from
December 2001 |  |                    | 372,400    |         |  | 266,000    |  
|Secured loans                            |  | Repayable in 15
quarterly
installments from
March 2002    |  |                    | 2,000,000  |         |  | 1,466,520  |  
|Secured loans                            |  | Repayable in 8 semi-annual installments
from April 2002   |  |                    | 1,000,000  |         |  | 750,000    |  
|Secured loans                            |  | Repayable in 7 semi-annual installments
from June 2002    |  |                    | 2,360,000  |         |  | 2,299,920  |  
|Secured loans                            |  | Repayable in January
2005                                 |  |                    |           |         |  | 1,170,000  |  
|Commercial paper                         |  | Repayable in January
2005                                 |  |                    | 1,500,000  |         |  | 1,500,000  |  
|Commercial paper                         |  | Repayable in 7
semi-annual
installments from
October 2002 |  |                    | 400,000    |         |  | 750,000    |  
|Credit loans                             |  | Repayable in October
and November 2005                    |  |                    |           |         |  | 62,885     |  
|                                         |  |                                                           |  |                    |            |         |  |           
|                                         |  |                                                           |  |                    | 7,951,600  |         |  | 8,371,725  |  
|Less: Current portion
of long-term loans |  |                                                           |  |                    | (1,776,980 | )       |  | (2,166,160 | )
|Discount on
long-term loans              |  |                                                           |  |                    | (6,014     | )       |  | (10,464    | )
|                                         |  |                                                           |  |                    |            |         |  |           
|                                         |  |                                                           |  |                    | 6,168,606  |         |  | 6,195,101  |  
|                                         |  |                                                           |  |                    |            |         |  |           
|Interest rates                           |  |                                                           |  |                    | 3.16%~5.35 | %       |  | 2.75%~4.94 | %
|                                         |  |                                                           |  |                    |            |         |  |           

The loan agreements require, among other things, the maintenance of specific
financial covenants and consent by the banks on important transactions, such
as merger, changing in operations and asset transfers.



|13. |  | Pension Plan and Net Pension Cost
|--- |  | ---------------------------------



| | A. |  | Substantially all of the regular employees of SPIL are covered by
SPILs pension plan. Under the funding policy of the plan, SPIL
contributes monthly an amount equal to 5% 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, with one unit for each additional year of service with a
maximum of 45 units). One unit represents the six-month average wages
or salaries before the retirement of the employee. Retirement benefits
are paid from the pension fund.
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | B. |  | The following tables set forth the actuarial assumptions, funded
status and amounts recognized for SPILs defined benefit pension plan:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

F-27



---



##### Table of Contents



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

Assumptions used in actuarial calculations as of December 31,

|                                        |  |      |      |      |  |      |      |   |  |  |      |  
|--------------------------------------- |  | ---- | ---- | ---- |  | ---- | ---- | - |  |  | ---- | -
|                                        |  | 2000 |      | 2001 |  | 2002
|                                        |  |      |      |      |  |     
|Discount rate                           |  |      | 6.50 | %    |  |      | 6.25 | % |  |  | 5.00 | %
|Long-term rate of compensation increase |  |      | 5.10 | %    |  |      | 5.00 | % |  |  | 3.50 | %
|Expected return on plan assets          |  |      | 6.50 | %    |  |      | 6.25 | % |  |  | 5.00 | %

|                               |  |         |          |         |  |  |          |  
|------------------------------ |  | ------- | -------- | ------- |  |  | -------- | -
|                               |  | 2001    |          | 2002   
|                               |  |         |          |        
|                               |  | NT$000 |          | NT$000
|Vested benefit                 |  |         | (2,811   | )       |  |  | (4,323   | )
|                               |  |         |          |         |  |  |          |  
|Vested benefit obligation      |  |         | (2,811   | )       |  |  | (4,241   | )
|                               |  |         |          |         |  |  |          |  
|Accumulated benefit obligation |  |         | (311,739 | )       |  |  | (506,998 | )
|                               |  |         |          |         |  |  |          |  

Changes in benefit obligation during the period to December 31:

|                                            |  |         |          |         |  |  |          |  
|------------------------------------------- |  | ------- | -------- | ------- |  |  | -------- | -
|                                            |  | 2001    |          | 2002   
|                                            |  |         |          |        
|                                            |  | NT$000 |          | NT$000
|Projected benefit obligation at January 1   |  |         | (536,831 | )       |  |  | (533,247 | )
|Service cost                                |  |         | (85,960  | )       |  |  | (79,402  | )
|Interest cost                               |  |         | (33,552  | )       |  |  | (26,662  | )
|Gain (loss) on projected benefit obligation |  |         | 65,526   |         |  |  | (48,905  | )
|Benefits paid                               |  |         | 57,570   |         |  |  | 724      |  
|                                            |  |         |          |         |  |  |          |  
|Projected benefit obligation at December 31 |  |         | (533,247 | )       |  |  | (687,492 | )
|                                            |  |         |          |         |  |  |          |  

Changes in plan assets during the period to December 31:

|                                         |  |  |         |   |         |  |         |   | 
|---------------------------------------- |  |  | ------- | - | ------- |  | ------- | - | 
|                                         |  |  | 2001    |   | 2002   
|                                         |  |  |         |   |        
|                                         |  |  | NT$000 |   | NT$000
|Fair value of plan assets at January 1   |  |  | 396,837 |   |         |  | 437,991 |  
|Actual return on plan assets             |  |  | 16,574  |   |         |  | 10,839  |  
|Employer contributions                   |  |  | 82,150  |   |         |  | 103,882 |  
|Benefits paid                            |  |  | (57,570 | ) |         |  | (724    | )
|                                         |  |  |         |   |         |  |         |  
|Fair value of plan assets at December 31 |  |  | 437,991 |   |         |  | 551,988 |  
|                                         |  |  |         |   |         |  |         |  
|Funded Status at December 31:            |  |  |         |   |         |  |         |   | 

|                                |  |         |          |         |  |  |          |  
|------------------------------- |  | ------- | -------- | ------- |  |  | -------- | -
|                                |  | 2001    |          | 2002   
|                                |  |         |          |        
|                                |  | NT$000 |          | NT$000 | 
|Fair value of plan assets       |  |         | 437,991  |         |  |  | 551,988  |  
|Projected benefit obligation    |  |         | (533,247 | )       |  |  | (687,492 | )
|                                |  |         |          |         |  |  |          |  
|Funded status                   |  |         | (95,256  | )       |  |  | (135,504 | )
|Unrecognized transition assets  |  |         | (8,215   | )       |  |  | (7,303   | )
|Unrecognized net actuarial loss |  |         | 86,844   |         |  |  | 145,134  |  
|                                |  |         |          |         |  |  |          |  
|Accrued pension cost            |  |         | (16,627  | )       |  |  | 2,327    |  
|                                |  |         |          |         |  |  |          |  

Amounts recognized in balance sheet at December 31:

|                                               |  |         |         |         |  |  |       | 
|---------------------------------------------- |  | ------- | ------- | ------- |  |  | ----- | 
|                                               |  | 2001    |         | 2002   
|                                               |  |         |         |        
|                                               |  | NT$000 |         | NT$000
|(Accrued pension cost) prepaid pension
expense |  |         | (16,627 | )       |  |  | 2,327 | 
|                                               |  |         |         |         |  |  |       | 

F-28



---



##### Table of Contents



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

Components of net periodic cost for the period ended December 31:

|                                 |  |         |         |         |  |         |         |   |  |  |         |  
|-------------------------------- |  | ------- | ------- | ------- |  | ------- | ------- | - |  |  | ------- | -
|                                 |  | 2000    |         | 2001    |  | 2002   
|                                 |  |         |         |         |  |        
|                                 |  | NT$000 |         | NT$000 |  | NT$000
|Service cost                     |  |         | 46,628  |         |  |         | 85,960  |   |  |  | 79,402  |  
|Interest cost                    |  |         | 19,879  |         |  |         | 33,552  |   |  |  | 26,662  |  
|Expected return on plan assets   |  |         | (16,847 | )       |  |         | (24,802 | ) |  |  | (21,899 | )
|Recognition of transition assets |  |         | (913    | )       |  |         | (913    | ) |  |  | (913    | )
|Recognition of actuarial loss    |  |         | 2,936   |         |  |         | 4,761   |   |  |  | 1,676   |  
|                                 |  |         |         |         |  |         |         |   |  |  |         |  
|Net periodic cost                |  |         | 51,683  |         |  |         | 98,558  |   |  |  | 84,928  |  
|                                 |  |         |         |         |  |         |         |   |  |  |         |  

14. Capital Stock



| | A. |  | As of December 31, 2002, the authorized capital of the Company was
NT$26,000 million represented by 2,600,000,000 common shares with par
value of NT$10 per share. As of December 31, 2002, issued common stock
was 1,885,173,700 shares. Of these shares, 80.2 million shares are
outstanding in the form of American Depositary Shares (ADSs),
totaling 16.0 million ADSs at December 31, 2002. Each ADS was issued
in respect of five shares of common stock of SPIL. The main terms and
conditions of the ADSs are summarized as follows:
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (1) |  | Voting Rights                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | --- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |     |  | ADS holders will have no voting rights with respect to the Deposited
Shares. The Depositary shall provide voting instruction to the
Chairman of SPIL 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 cause the shares underlying the
ADSs to be voted in the manner instructed.
|
| | (2) |  | Distribution of Dividends                                                                                                                                                                                                                                                                                                                                                                                                                                           
|
| |     |  | ADS holders are deemed to have the same rights as holders of common
shares with respect to the distribution of dividends.                                                                                                                                                                                                                                                                                                                                           

15. 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 the shares and amount to be capitalized is subject to certain
limitation.                                                                                                                                                   

F-29



---



##### Table of Contents



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

16. Retained Earnings (Accumulated Deficit)



|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) |  | Offset prior years operating losses, if any;                                                                                                                                                                    
| | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (2) |  | Pay all taxes and dues;                                                                                                                                                                                          
|
| | (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 deducting items (1), (2), (3), and (4) above from the
current years earnings, any portion of the remaining amount may be
allocated as follows: 10% as employees bonus; and 90% as
stockholders dividend.
|
| | (6) |  | The distribution of (5) above shall be made in accordance with
the resolution adopted by the Board of Directors and approved at the
stockholders meeting.                                                       



|   |  | As of January 30, 2003, the Board of Directors of SPIL has not resolved
the distribution of the year 2002 earnings. Therefore, any information in
relation to the year 2002 earnings will be posted to the website of the
Taiwan Stock Exchange after the Boards resolution and the stockholders
approval is obtained. SPIL did not distribute the earnings in 2002
because it incurred net loss in 2001.                                                                                                                                                                                                                                                                                                                                                                     
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | The appropriation for legal reserve can only be used to offset a deficit
or increase capital. The legal reserve can be used to increase capital
only when reserve balance exceeds 50% of the capital stock, and the amount
capitalized should be limited to 50% of the excess portion of the reserve.                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|  
|   |  | In accordance with the ROC SFC 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 subsequently year(s), if the year-end
balances of the cumulative foreign currency translation adjustment and
unrealized loss 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.
|  
|B. |  | 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 paid by the Company 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 SPILs corporate income tax as tax
credit against its individual income tax liability effective 1998. As
of December 31, 2002, the                                                                                                                  

F-30



---



##### Table of Contents



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



| |  | undistributed earnings of SPIL derived on or after January 1, 1998 was
NT$425.2 million.                                                                                                                                                                                                                                                        
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | As of December 31, 2002, the balance of stockholders imputation tax
credit account of SPIL was NT$37.7 million. The stockholders imputation
tax credit rates of SPIL for dividend distribution in 2001 were 11.86%.
As of December 31, 2002, the rate of stockholders imputation tax credit
to undistributed earnings is approximately 8.87%.

17. TREASURY STOCK

|                       |  |                                       |        |           |  |            |   |        |  |  |      |   |  |  |        | 
|---------------------- |  | ------------------------------------- | ------ | --------- |  | ---------- | - | ------ |  |  | ---- | - |  |  | ------ | 
|                       |  | For the year ended December 31, 2002  |        |           |  |           
|                       |  |                                       |        |           |  |           
|                       |  | Number of shares (shares in thousand)
|Reason for acquisition |  | Beginning                             |        | Additions |  | Reductions |   | Ending
|                       |  |                                       |        |           |  |            |   |       
|Transfer to employees  |  |                                       | 32,412 |           |  |            |  |        |  |  | (907 | ) |  |  | 31,505 | 
|                       |  |                                       |        |           |  |            |   |        |  |  |      |   |  |  |        | 



|A. |  | According to the ROC Securities Exchange Act, the number of
outstanding treasury shares shall not exceed 10% of the total shares of
common stocks issued by the company. The cost of the outstanding
treasury stock shall not exceed the total of retained earnings, paid-in
capital in excess of par value and capital reserve from donation. In
addition, treasury stock shall not be used as collateral and shall not
have the stockholders rights until transferred.
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|B. |  | As of December 31, 2002, SPILs treasury stock amounted to NT$553.0
million, representing by 31,505,000 shares, which should be sold to
SPILs employees within three years from the date of acquisition. Any
unsold treasury stock after three years shall be considered as unissued
shares, and shall be charged against contributed capital and capital
reserve.                                                                                                      
|  
|C. |  | As of December 31, 2001 and 2002, SIC, a consolidated subsidiary of
SPIL, held 27,016,000 shares of SPILs common stock, with acquisition
cost of NT$794.2 million, which was shown as treasury stock.                                                                                                                                                                                                                                                                   

18. Income Tax

SPIL and its subsidiaries file separate income tax returns. Reconciliation
between the income tax calculated on pre-tax financial statement income
based on the statutory tax rate and the income tax benefit is as follows:

|                                                                                 |  |         |          |         |  |         |          |   |  |  |          |  
|-------------------------------------------------------------------------------- |  | ------- | -------- | ------- |  | ------- | -------- | - |  |  | -------- | -
|                                                                                 |  | 2000    |          | 2001    |  | 2002   
|                                                                                 |  |         |          |         |  |        
|                                                                                 |  | NT$'000 |          | NT$'000 |  | NT$'000
|Income tax expense (benefit) per book
calculated at the statutory tax rate (25%) |  |         | 790,396  |         |  |         | (368,269 | ) |  |  | 70,373   |  
|Tax exempt income and other permanent
differences (A), (F)                       |  |         | (114,499 | )       |  |         | 218,035  |   |  |  | (149,813 | )
|Loss carryforward                                                                |  |         |         |         |  |         | (67,369  | ) |  |  |         |  
|Investment tax credits (E)                                                       |  |         | (523,265 | )       |  |         | (828,443 | ) |  |  | (281,438 | )
|Prior years under (over) provision                                              |  |         | 3,928    |         |  |         | (12,423  | ) |  |  | 47,074   |  
|Tax on interest income separately taxed                                          |  |         |         |         |  |         |         |   |  |  | 709      |  

F-31



---



##### Table of Contents



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

|                                                        |  |         |          |         |  |         |          |   |  |  |          |  
|------------------------------------------------------- |  | ------- | -------- | ------- |  | ------- | -------- | - |  |  | -------- | -
|                                                        |  | 2000    |          | 2001    |  | 2002   
|                                                        |  |         |          |         |  |        
|                                                        |  | NT$'000 |          | NT$'000 |  | NT$'000
|(Reversal of) allowance on deferred tax
assets (B), (C) |  |         | (244,037 | )       |  |         | 762,836  |   |  |  | 165,045  |  
|                                                        |  |         |          |         |  |         |          |   |  |  |          |  
|Income tax benefit for current year                     |  |         | (87,477  | )       |  |         | (295,633 | ) |  |  | (148,050 | )
|Additional 10% tax on undistributed
earnings            |  |         | 61,321   |         |  |         | 13,023   |   |  |  | 2,686    |  
|                                                        |  |         |          |         |  |         |          |   |  |  |          |  
|Income tax benefit                                      |  |         | (26,156  | )       |  |         | (282,610 | ) |  |  | (145,364 | )
|Net change of deferred tax assets                       |  |         | 455,177  |         |  |         | 270,956  |   |  |  | 196,413  |  
|Net change of deferred tax asset arising
from merger    |  |         | (26,809  | )       |  |         |         |   |  |  |         |  
|Adjustment of prior years (under) over
provision       |  |         | (6,816   | )       |  |         | 12,423   |   |  |  | (47,074  | )
|Tax on interest income separately taxed                 |  |         |         |         |  |         |         |   |  |  | (709     | )
|Prepaid income taxes                                    |  |         | (20,568  | )       |  |         | (26,932  | ) |  |  | (19,359  | )
|Subsidiarys tax refund (payable)                       |  |         | 2,331    |         |  |         | (702     | ) |  |  | (3,088   | )
|                                                        |  |         |          |         |  |         |          |   |  |  |          |  
|Income tax payable (refund)                             |  |         | 377,159  |         |  |         | (26,865  | ) |  |  | (19,181  | )
|                                                        |  |         |          |         |  |         |          |   |  |  |          |  



|A. |  | For the years ended December 31, 2000, 2001 and 2002, significant
portions of the permanent differences derived from compensation
interest on bond payable, gain on disposal of investments, long-term
investment income (loss) accounted for under equity method, expiration
of investment credits and the sale of certain integrated circuit
product which is exempted from income tax.
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|B. |  | As of December 31, 2001 and 2002, deferred tax assets and
liabilities were as follows:                                                                                                                                                                                                                                                                                                   

|                                        |  |              |            |         |  |  |           |  
|--------------------------------------- |  | ------------ | ---------- | ------- |  |  | --------- | -
|                                        |  | December 31,
|                                        |  |             
|                                        |  | 2001         |            | 2002   
|                                        |  |              |            |        
|                                        |  | NT$'000      |            | NT$'000
|Deferred tax assets  current           |  |              | 38,145     |         |  |  | 675,082   |  
|Deferred tax liability  current        |  |              | (24,889    | )       |  |  |          |  
|                                        |  |              |            |         |  |  |           |  
|                                        |  |              | 13,256     |         |  |  | 675,082   |  
|Less: Allowance for deferred tax assets |  |              |           |         |  |  | (631,476  | )
|                                        |  |              |            |         |  |  |           |  
|                                        |  |              | 13,256     |         |  |  | 43,606    |  
|                                        |  |              |            |         |  |  |           |  
|Deferred tax assets  noncurrent        |  |              | 2,475,089  |         |  |  | 2,203,289 |  
|Deferred tax liability  noncurrent     |  |              | (181,527   | )       |  |  | (210,093  | )
|                                        |  |              |            |         |  |  |           |  
|                                        |  |              | 2,293,562  |         |  |  | 1,993,196 |  
|Less: Allowance for deferred tax assets |  |              | (1,289,485 | )       |  |  | (823,056  | )
|                                        |  |              |            |         |  |  |           |  
|                                        |  |              | 1,004,077  |         |  |  | 1,170,140 |  
|                                        |  |              |            |         |  |  |           |  

F-32



---



##### 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, 2001 and 2002 are as follows:
|-- |  | ---------------------------------------------------------------------------------------------------

|                                         |                                   |                                                                             |  |        |  |            |  |                   |           |                   |           |            |          |         |  |           |            |   |           |           |          |  
|---------------------------------------- | --------------------------------- | --------------------------------------------------------------------------- |  | ------ |  | ---------- |  | ----------------- | --------- | ----------------- | --------- | ---------- | -------- | ------- |  | --------- | ---------- | - | --------- | --------- | -------- | -
|                                         |                                   |                                                                             |  |        |  |            |  | December 31, 2001 |           | December 31, 2002
|                                         |                                   |                                                                             |  |        |  |            |  |                   |           |                  
|                                         |                                   |                                                                             |  | Amount |  | Tax Effect |  | Amount            |           | Tax Effect       
|                                         |                                   |                                                                             |  |        |  |            |  |                   |           |                  
|                                         |                                   |                                                                             |  |        |  |            |  | NT$'000           |           | NT$'000           |           | NT$'000    |          | NT$'000
|Current (shown in other current
assets): |                                   |                                                                             |  |        |  |            |  |                   |           |                   |           |            |          |         |  |           |            |   |           |          
|                                         | Temporary differences             |                                                                             |  |        |  |            |  |                   |           |                   |           |            |          |         |  |           |            |   |           |           |         
|                                         |                                   | Unrealized (gain) loss on foreign
currency exchange                         |  |        |  |            |  |                   | (116,411  | )                 |           |            | (24,889  | )       |  |           | 31,191     |   |           |           | 6,825    |  
|                                         |                                   | Unrealized loss on obsolescence and
decline in market value of inventory    |  |        |  |            |  |                   | 178,416   |                   |           |            | 38,145   |         |  |           | 168,105    |   |           |           | 36,781   |  
|                                         | Investment tax credits            |                                                                             |  |        |  |            |  |                   |           |                   |           |           |          |         |  |           |            |   |           | 631,476   |         
|                                         |                                   |                                                                             |  |        |  |            |  |                   |           |                   |           |            |          |         |  |           |            |   |           |          
|                                         |                                   |                                                                             |  |        |  |            |  |                   |           |                   | 13,256    |            |          |         |  |           |            |   | 675,082   |          
|                                         | Allowance for deferred tax assets |                                                                             |  |        |  |            |  |                   |           |                   |           |           |          |         |  |           |            |   |           | (631,476  | )       
|                                         |                                   |                                                                             |  |        |  |            |  |                   |           |                   |           |            |          |         |  |           |            |   |           |          
|                                         |                                   |                                                                             |  |        |  |            |  |                   |           |                   | 13,256    |            |          |         |  |           |            |   | 43,606    |          
|                                         |                                   |                                                                             |  |        |  |            |  |                   |           |                   |           |            |          |         |  |           |            |   |           |          
|Noncurrent:                              |                                   |                                                                             |  |        |  |            |  |                   |           |                   |           |            |          |         |  |           |            |   |           |          
|                                         | Temporary differences             |                                                                             |  |        |  |            |  |                   |           |                   |           |            |          |         |  |           |            |   |           |           |         
|                                         |                                   | Unrealized loss on long-term
investments                                    |  |        |  |            |  |                   | 1,409,640 |                   |           |            | 303,191  |         |  |           | 1,341,245  |   |           |           | 295,804  |  
|                                         |                                   | Depreciation expense                                                        |  |        |  |            |  |                   | (907,633  | )                 |           |            | (181,527 | )       |  |           | (1,024,466 | ) |           |           | (204,893 | )
|                                         |                                   | Unrealized foreign currency
exchange loss (gain) arising from
bonds payable |  |        |  |            |  |                   | 911,919   |                   |           |            | 194,968  |         |  |           | (23,768    | ) |           |           | (5,200   | )
|                                         |                                   | Other                                                                       |  |        |  |            |  |                   | 9,582     |                   |           |            | 2,049    |         |  |           | 21,505     |   |           |           | 4,705    |  
|                                         | Loss carryforward                 |                                                                             |  |        |  |            |  | 269,474           |           |                   |           | 67,369     |          |         |  | 1,450,557 |            |   |           | 362,639   |         
|                                         | Investment tax credit             |                                                                             |  |        |  |            |  |                   |           |                   |           | 1,907,512  |          |         |  |           |            |   |           | 1,540,141 |         
|                                         |                                   |                                                                             |  |        |  |            |  |                   |           |                   |           |            |          |         |  |           |            |   |           |          
|                                         |                                   |                                                                             |  |        |  |            |  |                   |           |                   | 2,293,562 |            |          |         |  |           |            |   | 1,993,196 |          
|                                         | Allowance for deferred tax assets |                                                                             |  |        |  |            |  |                   |           |                   |           | (1,289,485 | )        |         |  |           |            |   |           | (823,056  | )       
|                                         |                                   |                                                                             |  |        |  |            |  |                   |           |                   |           |            |          |         |  |           |            |   |           |          
|                                         |                                   |                                                                             |  |        |  |            |  |                   |           |                   | 1,004,077 |            |          |         |  |           |            |   | 1,170,140 |          
|                                         |                                   |                                                                             |  |        |  |            |  |                   |           |                   |           |            |          |         |  |           |            |   |           |          



| |    |  | Valuation allowance for deferred tax assets relates primarily to unrealized foreign
currency exchange loss arising from bonds payable and investment tax credits received in
connection with SPILs investment in qualifying investments in significant technology
companies and acquisition of qualifying machinery and equipment.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | D. |  | The income tax returns of SPIL and SIC through 1999 have been assessed and
approved by the Tax Authority.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|
| | E. |  | According to the income tax regulation of the People Republic of China applied to
qualifying foreign investment production enterprise, 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 of an application filed by the investor, be
refunded forty percent of the income tax already paid in relation to the reinvested amount.

F-33



---



##### Table of Contents



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



|F. |  | As of December 31, 2002, the Companys unused portion of investment tax
credits under the Statue for Up-Grading of Industries, were as follows:
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------

|                                                           |  |            |           |         |  |            |           |  |  |               |  | 
|---------------------------------------------------------- |  | ---------- | --------- | ------- |  | ---------- | --------- |  |  | ------------- |  | 
|Nature of Investment Tax                                   |  | Deductible |           | Unused  |  |            |           | 
|Credits                                                    |  | Amount     |           | Amount  |  | Valid Year
|                                                           |  |            |           |         |  |           
|                                                           |  | NT$'000    |           | NT$'000 |  |            |           | 
|Acquisition costs of
qualifying machinery and
equipment    |  |            | 1,487,764 |         |  |            | 1,487,744 |  |  | 2003 TNR 2006
|Qualifying research and
development                        |  |            | 234,247   |         |  |            | 234,247   |  |  | 2003 TNR 2006
|Qualifying investments in
significant technology
companies |  |            | 449,606   |         |  |            | 449,606   |  |  | 2003 TNR 2005
|                                                           |  |            |           |         |  |            |           |  |  |               |  | 
|                                                           |  |            | 2,171,617 |         |  |            | 2,171,597 |  |  |               |  | 
|                                                           |  |            |           |         |  |            |           |  |  |               |  | 



|G. |  | The Company is exempted from income tax, with respect to the
assembling of certain integrated circuit products under the Statute for
Up-Grading of Industries, for five years through December 2002.
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|H. |  | As of December 31, 2002, the details of loss carryforwards are as
follows:                                                                                                                            

|     |  |                    |           |                  |  |                    |  |  |      |  |  | 
|---- |  | ------------------ | --------- | ---------------- |  | ------------------ |  |  | ---- |  |  | 
|Year |  | Loss carryforwards |           | Status of filing |  | Year of expiration
|     |  |                    |           |                  |  |                   
|     |  | NT$'000            |           |                  |  |                    |  |  |      | 
|2001 |  |                    | 152,957   |                  |  | Filling amount     |  |  | 2006 | 
|2002 |  |                    | 1,297,600 |                  |  | Estimated filing   |  |  | 2007 | 
|     |  |                    |           |                  |  | amount             |  |  |      | 
|     |  |                    |           |                  |  |                    |  |  |      |  |  | 
|     |  |                    | 1,450,557 |                  |  |                    |  |  |      |  |  | 
|     |  |                    |           |                  |  |                    |  |  |      |  |  | 

19. Earnings (Loss) Per Share

|                                                                            |                         |              |                                  |                |           |            |           |  |  |  |           |  | 
|--------------------------------------------------------------------------- | ----------------------- | ------------ | -------------------------------- | -------------- | --------- | ---------- | --------- |  |  |  | --------- |  | 
|                                                                            |                         |              | For the years ended December 31,
|                                                                            |                         |              |                                 
|                                                                            |                         |              | 2000                             |                | 2001      |            | 2002     
|                                                                            |                         |              |                                  |                |           |            |          
|                                                                            |                         |              | '000                             |                | '000      |            | '000     
|Income (loss) before income tax
and minority interest (A)                   |                         | NT$3,195,221 |                                  | (NT$1,481,637) |           | NT$279,831
|                                                                            |                         |              |                                  |                |           |            |           |  |  |  |           | 
|Net income (loss) (B)                                                       |                         | NT$3,221,380 |                                  | (NT$1,183,211) |           | NT$425,195
|                                                                            |                         |              |                                  |                |           |            |           |  |  |  |           | 
|Weighted average outstanding
common stock (C)                               |                         |              | 1,603,263                        |                |           |            | 1,846,975 |  |  |  | 1,825,935 | 
|                                                                            |                         |              |                                  |                |           |            |           |  |  |  |           | 
|Basic earnings (loss) per share
(in dollars)
Income (loss) before tax (A/C) |                         | NT$1.99      |                                  | (NT$0.80)      |           | NT$0.15   
|                                                                            |                         |              |                                  |                |           |            |           |  |  |  |           | 
|                                                                            | Net income (loss) (B/C) |              | NT$2.01                          |                | (NT$0.64) |            | NT$0.23  
|                                                                            |                         |              |                                  |                |           |            |           |  |  |  |           | 

Stock dividends which were allocated from the 2000 unappropriated earnings
and employee stock bonus have been considered in the calculation of 2002
weighted average outstanding shares of common stock. The weighted average
treasury stock for 2000, 2001 and 2002 has been deducted in the calculation
of weighted average outstanding common stock.

F-34



---



##### Table of Contents



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

20. Related Party Transactions



|A. |  | Name and Relationship with Related Parties
|-- |  | ------------------------------------------

|                                         |  |                                                                                              
|---------------------------------------- |  | ---------------------------------------------------------------------------------------------
|Name of Related Parties                  |  | Relationship with the Company                                                                
|                                         |  |                                                                                              
|Sigurd Microelectronics Corp.            |  | Investee company accounted for under the
equity method                                       
|ChipMOS Technologies Inc.                |  | Investee company accounted for under the
equity method                                       
|Siliconware Corporation                  |  | Investee company accounted for under the
equity method (merged with SPIL on December 30,2000)
|Double Win Enterprise Co.,
Ltd.          |  | Investee company accounted for under the
equity method                                       
|Caesar Technology Inc.
(Note 1)          |  | Investee company accounted for under the
equity method                                       
|Phoenix Precision Technology
Corporation |  | Same Chairman of the Board                                                                   

| |  |        |  |                                                                                                                                           
| |  | ------ |  | ------------------------------------------------------------------------------------------------------------------------------------------
| |  | Note1: |  | The shareholders of the investee resolved to liquidate the
investee on December 25, 2001. Therefore, the Company wrote off the
investment.



|B. |  | Significant Transactions with Related Parties
|-- |  | ---------------------------------------------

(1) Sales to related parties

|                          |  |                                  |         |       |  |            |   |       |  |         |       |            |  |  |   |  |  |            |   |  |  |  |   | 
|------------------------- |  | -------------------------------- | ------- | ----- |  | ---------- | - | ----- |  | ------- | ----- | ---------- |  |  | - |  |  | ---------- | - |  |  |  | - | 
|                          |  | For the years ended December 31,
|                          |  |                                 
|                          |  | 2000                             |         | 2001  |  | 2002      
|                          |  |                                  |         |       |  |           
|                          |  |                                  |         |       |  | Percentage |   |       |  |         |       | Percentage |  |  |   |  |  | Percentage
|                          |  |                                  |         |       |  | of net     |   |       |  |         |       | of net     |  |  |   |  |  | of net    
|                          |  | Amount                           |         | sales |  | Amount     |   | sales |  | Amount  |       | sales     
|                          |  |                                  |         |       |  |            |   |       |  |         |       |           
|                          |  | NT$'000                          |         | %     |  | NT$'000    |   | %     |  | NT$'000 |       | %         
|ChipMOS
Technologies Inc. |  |                                  | 130,236 |       |  |            | 1 |       |  |         | 3,886 |            |  |  |  |  |  |            |  |  |  |  |  | 
|Others                    |  |                                  | 8       |       |  |            |  |       |  |         | 5,644 |            |  |  |  |  |  |            |  |  |  |  |  | 
|                          |  |                                  |         |       |  |            |   |       |  |         |       |            |  |  |   |  |  |            |   |  |  |  |   | 
|                          |  |                                  | 130,244 |       |  |            | 1 |       |  |         | 9,530 |            |  |  |  |  |  |            |  |  |  |  |  | 
|                          |  |                                  |         |       |  |            |   |       |  |         |       |            |  |  |   |  |  |            |   |  |  |  |   | 

The collection period is approximately three months from the date of
sale. Selling prices and collection terms offered to related parties
were generally comparable to those offered to non-related parties.

(2) Purchases of inventory from related parties

|                                         |  |                                  |           |           |  |            |    |           |  |         |           |            |  |  |    |  |  |            |           |  |  |  |    | 
|---------------------------------------- |  | -------------------------------- | --------- | --------- |  | ---------- | -- | --------- |  | ------- | --------- | ---------- |  |  | -- |  |  | ---------- | --------- |  |  |  | -- | 
|                                         |  | For the years ended December 31,
|                                         |  |                                 
|                                         |  | 2000                             |           | 2001      |  | 2002      
|                                         |  |                                  |           |           |  |           
|                                         |  |                                  |           |           |  | Percentage |    |           |  |         |           | Percentage |  |  |    |  |  | Percentage
|                                         |  |                                  |           |           |  | of net     |    |           |  |         |           | of net     |  |  |    |  |  | of net    
|                                         |  | Amount                           |           | purchases |  | Amount     |    | purchases |  | Amount  |           | purchases 
|                                         |  |                                  |           |           |  |            |    |           |  |         |           |           
|                                         |  | NT$'000                          |           | %         |  | NT$'000    |    | %         |  | NT$'000 |           | %         
|Siliconware
Corporation                  |  |                                  | 1,321,786 |           |  |            | 14 |           |  |         |          |            |  |  |   |  |  |            |          |  |  |  |   | 
|Phoenix Precision
Technology
Corporation |  |                                  | 1,051,015 |           |  |            | 13 |           |  |         | 1,353,917 |            |  |  | 19 |  |  |            | 1,716,348 |  |  |  | 16 | 
|Others                                   |  |                                  | 12,141    |           |  |            |   |           |  |         | 7,497     |            |  |  |   |  |  |            | 428       |  |  |  |   | 
|                                         |  |                                  |           |           |  |            |    |           |  |         |           |            |  |  |    |  |  |            |           |  |  |  |    | 
|                                         |  |                                  | 2,384,942 |           |  |            | 27 |           |  |         | 1,361,414 |            |  |  | 19 |  |  |            | 1,716,776 |  |  |  | 16 | 
|                                         |  |                                  |           |           |  |            |    |           |  |         |           |            |  |  |    |  |  |            |           |  |  |  |    | 

F-35



---



##### Table of Contents



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

The purchase price and payment term provided by related parties were
generally comparable to those provided by non-related parties. The
average payment period is approximately three months from the date of
purchase.

(3) Accounts payable to related parties

|                                         |  |                   |         |                   |  |             |    |         |  |  |         |             |  |  |    | 
|---------------------------------------- |  | ----------------- | ------- | ----------------- |  | ----------- | -- | ------- |  |  | ------- | ----------- |  |  | -- | 
|                                         |  | December 31, 2001 |         | December 31, 2002
|                                         |  |                   |         |                  
|                                         |  |                   |         |                   |  | Percentage  |    |         |  |  |         | Percentage 
|                                         |  |                   |         |                   |  | of accounts |    |         |  |  |         | of accounts
|                                         |  | Amount            |         | payable           |  | Amount      |    | payable
|                                         |  |                   |         |                   |  |             |    |        
|                                         |  | NT$'000           |         | %                 |  | NT$'000     |    | %      
|Phoenix Precision
Technology Corporation |  |                   | 162,800 |                   |  |             | 17 |         |  |  | 194,994 |             |  |  | 14 | 
|                                         |  |                   |         |                   |  |             |    |         |  |  |         |             |  |  |    | 

(4) Property Transactions

For the year ended December 31, 2001 and 2002, SPIL purchased machinery
and equipment from Caesar Technology Inc. amounting to $70.6 million and
59.5 million (tax excluded), respectively.

(5) Endorsements and Guarantees

As of December 31, 2001 and 2002, the Company provided the following
endorsements and guarantees to related parties:

|                              |  |                   |        |                   |  |             |         |              |  |  |   |  |  |  |   | 
|----------------------------- |  | ----------------- | ------ | ----------------- |  | ----------- | ------- | ------------ |  |  | - |  |  |  | - | 
|                              |  | December 31, 2001 |        | December 31, 2002
|                              |  |                   |        |                  
|                              |  | Credit used       |        | Credit limit      |  | Credit used |         | Credit limit
|                              |  |                   |        |                   |  |             |         |             
|                              |  | NT$'000           |        | NT$'000           |  | NT$'000     |         | NT$'000     
|Sigurd Microelectronics
Corp. |  |                   | 84,440 |                   |  |             | 300,000 |              |  |  |  |  |  |  |  | 
|                              |  |                   |        |                   |  |             |         |              |  |  |   |  |  |  |   | 

21. Assets Pledged as Collaterals

As of December 31, 2001 and 2002 the following assets have been pledged as
collateral against certain obligations of the Company:

|                                              |  |            |            |         |  |                       |  |                                                  
|--------------------------------------------- |  | ---------- | ---------- | ------- |  | --------------------- |  | -------------------------------------------------
|                                              |  | Book Value |            |        
|                                              |  |            |            |        
|Assets                                        |  | 2001       |            | 2002    |  | Subject of collateral
|                                              |  |            |            |         |  |                      
|                                              |  | NT$'000    |            | NT$'000 |  |                      
|Treasury stock                                |  |            | 440,956    |         |  | -                     |  | Short-term loans                                 
|Buildings                                     |  |            | 2,211,850  |         |  | 1,420,094             |  | Long-term loans and
bonds payable                
|Machinery and utility
equipment               |  |            | 9,390,684  |         |  | 7,671,251             |  | Long-term loans                                  
|Prepayment for equipment                      |  |            | 258,746    |         |  | -                     |  | Long-term loans                                  
|Time deposits (shown in
other current assets) |  |            | 11,620     |         |  | 431,600               |  | Guarantees for custom
duties and commercial
paper
|                                              |  |            |            |         |  |                       |  |                                                  
|                                              |  |            | 12,313,856 |         |  | 9,522,945             |  |                                                  
|                                              |  |            |            |         |  |                       |  |                                                  

F-36



---



##### Table of Contents



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

22. Commitments and Contingencies

In addition to the endorsements and guarantees stated in Note 20, the Company
had the following commitments and contingencies as of December 31, 2002.



|A. |  | As of December 31, 2002, the Companys unused letters of credit for
imported machinery and equipment were NT$351.8 million.                                                                                                                                                                                                                                                                                                                                                                                                                                
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|B. |  | SPIL and its subsidiaries entered into agreements with third parties
to construct the plant for expansion of operations amounting to
approximately NT$571.3 million. As of December 31, 2002, the Company
has outstanding obligations of approximately NT$159.8 million related to
these contracts.                                                                                                                                                                                                                                                        
|  
|C. |  | SPIL entered into contracts with seven foreign companies for the use
of certain technologies and patents related to packaging system of
integrated circuit products. SPIL agreed to pay royalty fees based on
the total number of certain products sold. Five contracts are valid
through June 2003, 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.
|  
|D. |  | As of December 31, 2002, the required future minimum payments in
relation to SUIs lease contracts are as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                         

|                         |  |         |         | 
|------------------------ |  | ------- | ------- | 
|Years ended December 31, |  | Amount 
|                         |  |        
|                         |  | NT$'000
|2003                     |  |         | 36,380  | 
|2004                     |  |         | 39,004  | 
|2005                     |  |         | 40,342  | 
|2006                     |  |         | 566     | 
|                         |  |         |         | 
|                         |  |         | 116,292 | 
|                         |  |         |         | 

23. Subsequent Event

None.

24. Other

A.     Disclosure on Financial Instruments

|                                         |                         |         |                         |            |            |  |            |            | 
|---------------------------------------- | ----------------------- | ------- | ----------------------- | ---------- | ---------- |  | ---------- | ---------- | 
|                                         |                         |         | As of December 31, 2001
|                                         |                         |         |                        
|                                         |                         |         | Book Value              |            | Fair Value
|                                         |                         |         |                         |            |           
|                                         |                         | NT$'000 |                         | NT$'000   
|Non-derivative financial instruments     |                         |         |                         |            |            |  |            |           
|Financial Assets                         |                         |         |                         |            |            |  |            |           
|Financial assets with book value         |                         |         |                         |            |            |  |            |           
|                                         | equal to fair value (1) |         |                         | 10,380,061 |            |  |            | 10,380,061 | 
|Long-term investments in stocks (2)      |                         |         | 5,984,270               |            |            |  | 6,812,349  |           
|Long-term bonds investments in bonds (2) |                         |         | 300,000                 |            |            |  | 300,000    |           
|                                         |                         |         |                         |            |            |  |            |           
|                                         |                         |         | 16,664,331              |            |            |  | 17,492,410 |           
|                                         |                         |         |                         |            |            |  |            |           

|                                                              |  |                         |            |            |  |  |            | 
|------------------------------------------------------------- |  | ----------------------- | ---------- | ---------- |  |  | ---------- | 
|                                                              |  | As of December 31, 2001
|                                                              |  |                        
|                                                              |  | Book Value              |            | Fair Value
|                                                              |  |                         |            |           
|                                                              |  | NT$'000                 |            | NT$'000   
|Financial Liabilities                                         |  |                         |            |            |  |  |            | 
|Financial liabilities with book value
equal to fair value (1) |  |                         | 4,065,547  |            |  |  | 4,065,547  | 
|Bonds payable (3)                                             |  |                         | 4,470,894  |            |  |  | 4,455,225  | 
|Long-term loans (4)                                           |  |                         | 7,945,586  |            |  |  | 7,945,586  | 
|Accrued pension cost (5)                                      |  |                         | 16,627     |            |  |  | 95,256     | 
|                                                              |  |                         |            |            |  |  |            | 
|                                                              |  |                         | 16,498,654 |            |  |  | 16,561,614 | 
|                                                              |  |                         |            |            |  |  |            | 

F-37



---



##### Table of Contents



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

|                                         |                         |         |                         |            |            |  |            |            | 
|---------------------------------------- | ----------------------- | ------- | ----------------------- | ---------- | ---------- |  | ---------- | ---------- | 
|                                         |                         |         | As of December 31, 2002
|                                         |                         |         |                        
|                                         |                         |         | Book Value              |            | Fair Value
|                                         |                         |         |                         |            |           
|                                         |                         | NT$'000 |                         | NT$'000   
|Non-derivative financial instruments     |                         |         |                         |            |            |  |            |           
|Financial Assets                         |                         |         |                         |            |            |  |            |           
|Financial assets with book value         |                         |         |                         |            |            |  |            |           
|                                         | equal to fair value (1) |         |                         | 10,947,904 |            |  |            | 10,947,904 | 
|Short-term investment                    |                         |         | 47,736                  |            |            |  | 42,200     |           
|Long-term investments in stocks (2)      |                         |         | 6,957,931               |            |            |  | 7,098,212  |           
|Long-term bonds investments in bonds (2) |                         |         | 629,450                 |            |            |  | 593,729    |           
|                                         |                         |         |                         |            |            |  |            |           
|                                         |                         |         | 18,583,021              |            |            |  | 18,682,045 |           
|                                         |                         |         |                         |            |            |  |            |           

|                                                              |  |                         |            |            |  |  |             | 
|------------------------------------------------------------- |  | ----------------------- | ---------- | ---------- |  |  | ----------- | 
|                                                              |  | As of December 31, 2002
|                                                              |  |                        
|                                                              |  | Book Value              |            | Fair Value
|                                                              |  |                         |            |           
|                                                              |  | NT$'000                 |            | NT$'000   
|Financial Liabilities                                         |  |                         |            |            |  |  |             | 
|Financial liabilities with book value
equal to fair value (1) |  |                         | 5,867,569  |            |  |  | 5,867,569   | 
|Bonds payable (3)                                             |  |                         | 7,947,857  |            |  |  | 7,447,755   | 
|Long-term loans (4)                                           |  |                         | 6,195,101  |            |  |  | 6,195,101   | 
|(Prepaid pension expense)/Accrued
pension cost (5)            |  |                         | (2,327     | )          |  |  | 135,504     | 
|                                                              |  |                         |            |            |  |  |             | 
|                                                              |  |                         | 20,008,200 |            |  |  | 19,,645,929 | 
|                                                              |  |                         |            |            |  |  |             | 



---

|(1) |  | Financial assets and liabilities with book value equal to fair
values.
The carrying amounts of cash and cash equivalents, notes receivable,
accounts receivable, other current assets, refundable deposits,
short-term loans, commercial paper, notes payable, accounts payable,
income tax payable, accrued expenses, other payables and other current
liabilities approximate fair value as reported in the balance sheet
because of their short maturates.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | The fair value of short-term investment, long-term investments in
stocks and long-term investment in bonds is generally based on the
market value of short-term and long-term equity investments. If the
market value of short-term and long-term equity investments is
unavailable, the net equities of the investee companies or 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.                                                                                                                                                                                                                                                                                                                                                       
|   
|(5) |  | The fair value of accrued pension cost and prepaid pension expense
is equal to the funded status as shown in the actuarial report measured
at December 31, 2001 and 2002, respectively.                                                                                                                                                                                                                                                                      

F-38



---



##### Table of Contents



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

B.     Eliminated transactions between parent company and subsidiaries

|                                                              |  |                                      |            |              |  |                 |           |             |  |  |           |  |  |  |         |  
|------------------------------------------------------------- |  | ------------------------------------ | ---------- | ------------ |  | --------------- | --------- | ----------- |  |  | --------- |  |  |  | ------- | -
|                                                              |  | Name of the counter party and amount
|                                                              |  |                                     
|                                                              |  | Siliconware                          |            | Siliconware  |  |                 |           |             |  |  |           | 
|                                                              |  | Precision                            |            | Investment   |  | SPIL (B.V.I.)   |           | Siliconware
|Transaction                                                   |  | Industries Co., Ltd.                 |            | Company Ltd. |  | Holding Limited |           | USA Inc.   
|                                                              |  |                                      |            |              |  |                 |           |            
|                                                              |  | NT$'000                              |            | NT$'000      |  | NT$'000         |           | NT$'000    
|For the year ended December 31, 2001:                         |  |                                      |            |              |  |                 |           |             |  |  |           |  |  |  |         |  
|Eliminate long-term investment and stockholders equity       |  |                                      | (1,785,892 | )            |  |                 | 1,727,578 |             |  |  | 58,314    |  |  |  |        |  
|Eliminate subsidiarys long-term investment on parent company |  |                                      | 794,184    |              |  |                 | (794,184  | )           |  |  |          |  |  |  |        |  
|Eliminate accrued expense and accounts receivable             |  |                                      | 23,005     |              |  |                 |          |             |  |  |          |  |  |  | (23,005 | )
|Eliminate commission expense and revenue                      |  |                                      | (248,103   | )            |  |                 |          |             |  |  |          |  |  |  | 248,103 |  
|Eliminate other payable and accounts receivable               |  |                                      | 180        |              |  |                 |          |             |  |  |          |  |  |  | (180    | )
|For the year ended December 31, 2002:                         |  |                                      |            |              |  |                 |           |             |  |  |           |  |  |  |         |  
|Eliminate long-term investment and stockholders equity       |  |                                      | (2,113,283 | )            |  |                 | 951,947   |             |  |  | 1,161,336 |  |  |  |        |  
|Eliminate subsidiarys long-term investment on parent company |  |                                      | 794,184    |              |  |                 | (794,184  | )           |  |  |          |  |  |  |        |  
|Eliminate accrued expense and accounts receivable             |  |                                      | 22,686     |              |  |                 |          |             |  |  |          |  |  |  | (22,686 | )
|Eliminate commission expense and revenue                      |  |                                      | (269,946   | )            |  |                 |          |             |  |  |          |  |  |  | 269,946 |  

F-39



---



##### Table of Contents



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

25. Segment Information



|A. |  | Operation in Different Industries. The Company principally operates
in one industry. The Companys operation involves assembly, testing and
turnkey services of integrated circuits.
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|B. |  | Operations in Different Geographic Areas. The Company has no
significant foreign operations. Therefore, ROC FAS No. 20 Segmental
Information Disclosure is not applicable.        
|  
|C. |  | Export Sales.                                                                                                                                                                       

|                |  |                                  |           |         |  |         |           |  |  |  |            | 
|--------------- |  | -------------------------------- | --------- | ------- |  | ------- | --------- |  |  |  | ---------- | 
|                |  | For the years ended December 31,
|                |  |                                 
|                |  | 2000                             |           | 2001    |  | 2002   
|                |  |                                  |           |         |  |        
|Geographic      |  | NT$'000                          |           | NT$'000 |  | NT$'000
|U.S. and Canada |  |                                  | 9,114,393 |         |  |         | 8,005,894 |  |  |  | 11,525,085 | 
|Other           |  |                                  | 182,557   |         |  |         | 297,248   |  |  |  | 650,365    | 
|                |  |                                  |           |         |  |         |           |  |  |  |            | 
|                |  |                                  | 9,296,950 |         |  |         | 8,303,142 |  |  |  | 12,175,450 | 
|                |  |                                  |           |         |  |         |           |  |  |  |            | 

Sales by geographic region are identified by the location where the
revenue is generated.



|D. |  | Major Customers.
|-- |  | ----------------

|           |       |        |                                  |             |      |        |            |             |   |        |           |             |            |  |    |    |  |  |            |           |  |  |    |    | 
|---------- | ----- | ------ | -------------------------------- | ----------- | ---- | ------ | ---------- | ----------- | - | ------ | --------- | ----------- | ---------- |  | -- | -- |  |  | ---------- | --------- |  |  | -- | -- | 
|           |       |        | For the years ended December 31,
|           |       |        |                                 
|           |       |        | 2000                             |             | 2001 |        | 2002      
|           |       |        |                                  |             |      |        |           
|           |       |        |                                  |             |      |        | Percentage |             |   |        |           |             | Percentage |  |    |    |  |  | Percentage
|Customers  |       | Amount |                                  | of net sale |      | Amount |            | of net sale |   | Amount |           | of net sale
|           |       |        |                                  |             |      |        |            |             |   |        |           |            
|           |       |        | NT$'000                          |             | %    |        | NT$'000    |             | % |        | NT$'000   |             | %         
|Customer A |       |        | 1,277,904                        |             |      |        | 7          |             |   |        | 2,088,955 |             |            |  | 12 |    |  |  | 3,680,731  |           |  |  | 16 |   
|Customer B |       |        | 99,621                           |             |      |        | 1          |             |   |        | 1,451,400 |             |            |  | 9  |    |  |  | 2,895,828  |           |  |  | 13 |   
|Customer C |       |        | 2,095,062                        |             |      |        | 11         |             |   |        | 2,299,951 |             |            |  | 14 |    |  |  | 1,779,457  |           |  |  | 8  |   
|           |       |        |                                  |             |      |        |            |             |   |        |           |             |            |  |    |    |  |  |            |           |  |  |    |   
|           | Total |        |                                  | 3,472,587   |      |        |            | 19          |   |        |           | 5,840,306   |            |  |    | 35 |  |  |            | 8,356,016 |  |  |    | 37 | 
|           |       |        |                                  |             |      |        |            |             |   |        |           |             |            |  |    |    |  |  |            |           |  |  |    |   

A major customer is identified as the party that accounts for more than
10% of the Companys net sales in any given year.

26. US GAAP Reconciliation

The accompanying consolidated financial statements have been prepared in
conformity with Rules Governing the Preparation of Financial Statements of
Securities Issuers and accounting principles generally accepted in the
Republic of China (ROC GAAP), which differ in certain material respects
from generally accepted accounting principles in the United States (US
GAAP). Such differences involve methods for measuring the amounts shown in
the financial statements, as well as additional disclosures required by US
GAAP.

The following is a summary of the material adjustments to net income and
shareholders equity, which would be required in reconciling the significant
differences between ROC GAAP and US GAAP:

F-40



---



##### 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,
|                                                                               |                                     |                                                                 |       |    |      |          |            |                                 
|                                                                               |                                     |                                                                 |       |    |      |          |            | 2000                             |         | 2001     |            | 2002    
|                                                                               |                                     |                                                                 |       |    |      |          |            |                                  |         |          |            |         
|                                                                               |                                     |                                                                 |       |    |      |          |            | NT$'000                          |         | NT$'000  |            | NT$'000  |         | US$'000
|Net income(loss) as reported under ROC GAAP                                    |                                     |                                                                 |       |    |      |          | 3,221,380  |                                  |         |          | (1,183,211 | )        |         |         | 425,195   |          |          |        | 12,254    |       
|US GAAP adjustments:                                                           |                                     |                                                                 |       |    |      |          |            |                                  |         |          |            |          |         |         |           |          |          |        |           |       
|                                                                               | Compensated absences                |                                                                 |       | (i | )    |          |            | (2,300                           | )       |          |            | (3,500   | )       |         |           | (7,000   | )        |        |           | (202   | )      
|                                                                               | Compensation                        |                                                                 | (ii)  |    |      | (997,427 | )          |                                  |         | (256,578 | )          |          |         |        |           |          |          |       |          
|                                                                               | Earthquake losses                   |                                                                 | (iii) |    |      | 52,749   |            |                                  |         |         |            |          |         |        |           |          |          |       |          
|                                                                               | Goodwill amortization               |                                                                 |       |    |      |          |            |                                 |         |          |            | (541,939 | )       |         |           |         |          |        |           |       |        
|                                                                               | Impairment on long-term investments |                                                                 |       | (x | )    |          |            |                                 |         |          |            |         |         |         |           | (212,569 | )        |        |           | (6,126 | )      
|                                                                               | Embedded derivative                 |                                                                 | (xi)  |    |      |         |            |                                  |         |         |            |          |         | (52,891 | )         |          |          | (1,524 | )        
|                                                                               | Marketable securities               |                                                                 | (vii) |    |      |         |            |                                  |         |         |            |          |         | (5,536  | )         |          |          | (159   | )        
|                                                                               | Equity investments:                 |                                                                 | (iv)  |    |      |          |            |                                  |         |          |            |          |         |         |           |          |          |        |          
|                                                                               |                                     | Timing differences                                              |       |    |      |          |            |                                  | 5,485   |          |            |          | (15,497 | )       |           |          | (362,521 | )      |           |        | (10,447 | )
|                                                                               |                                     | Net income/(loss) variance between US
GAAP and ROC GAAP         |       |    |      |          |            |                                  | (42,740 | )        |            |          | 53,704  |         |           |          | 21,855   |        |           |        | 630     |  
|                                                                               |                                     | Accounting for income in preferred stock                        |       |    |      |          |            |                                  | (2,530  | )        |            |          | (33,534 | )       |           |          | (45,270  | )      |           |        | (1,305  | )
|                                                                               |                                     | Technology and know-how contributed
to a joint venture investee |       |    |      |          |            |                                  | (31,000 | )        |            |          | (31,000 | )       |           |          | (6,000   | )      |           |        | (173    | )
|                                                                               |                                     |                                                                 |       |    |      |          |            |                                  |         |          |            |          |         |         |           |          |          |        |           |       
|                                                                               |                                     |                                                                 |       |    |      |          | (1,017,763 | )                                |         |          | (828,344   | )        |         |         | (669,932  | )        |          |        | (19,306   | )     
|                                                                               | Taxation effect                     |                                                                 |       | (v | )    |          |            | (221,238                         | )       |          |            | 221,083  |         |         |           | 21,774   |          |        |           | 627    |        
|                                                                               |                                     |                                                                 |       |    |      |          |            |                                  |         |          |            |          |         |         |           |          |          |        |           |       
|Net income (loss) under US GAAP                                                |                                     |                                                                 |       |    |      |          | 1,982,379  |                                  |         |          | (1,790,472 | )        |         |         | (222,963  | )        |          |        | (6,425    | )     
|                                                                               |                                     |                                                                 |       |    |      |          |            |                                  |         |          |            |          |         |         |           |          |          |        |           |       
|Basic and diluted earnings (loss) per share
(EPS) under US GAAP (in dollars) |                                     | (vi)                                                            |       |    | 1.26 |          |            |                                  | (0.98   | )        |            |          | (0.12   | )       |           |          |         |       
|                                                                               |                                     |                                                                 |       |    |      |          |            |                                  |         |          |            |          |         |         |           |          |          |        |           |       
|Weighted average number of common stock
outstanding (in thousands)             |                                     |                                                                 |       |    |      |          | 1,571,813  |                                  |         |          | 1,831,716  |          |         |         | 1,825,935 |          |          |        | 1,825,935 |       
|                                                                               |                                     |                                                                 |       |    |      |          |            |                                  |         |          |            |          |         |         |           |          |          |        |           |       

Reconciliation of consolidated shareholders equity:

|                                                      |                                     |                                                                 |        |    |   |           |            |                    |          |           |            |         |          |           |            |          |          |         |         |        |         |  
|----------------------------------------------------- | ----------------------------------- | --------------------------------------------------------------- | ------ | -- | - | --------- | ---------- | ------------------ | -------- | --------- | ---------- | ------- | -------- | --------- | ---------- | -------- | -------- | ------- | ------- | ------ | ------- | -
|                                                      |                                     |                                                                 |        |    |   |           |            | As of December 31,
|                                                      |                                     |                                                                 |        |    |   |           |            |                   
|                                                      |                                     |                                                                 |        |    |   |           |            | 2000               |          | 2001      |            | 2002   
|                                                      |                                     |                                                                 |        |    |   |           |            |                    |          |           |            |        
|                                                      |                                     |                                                                 |        |    |   |           |            | NT$'000            |          | NT$'000   |            | NT$'000 |          | US$'000  
|Total shareholders equity as reported
Under ROC GAAP |                                     |                                                                 |        |    |   |           | 27,855,820 |                    |          |           | 26,046,390 |         |          |           | 26,178,552 |          |          |         | 754,425 |       
|US GAAP adjustments:                                  |                                     |                                                                 |        |    |   |           |            |                    |          |           |            |         |          |           |            |          |          |         |         |       
|                                                      | Compensated absences                |                                                                 |        | (i | ) |           |            | (9,200             | )        |           |            | (12,700 | )        |           |            | (19,700  | )        |         |         | (568   | )      
|                                                      | Compensation                        |                                                                 | (ii)   |    |   | (314,369  | )          |                    |          |          |            |         |          |          |            |          |          |        |        
|                                                      | Impairment of long-term investments |                                                                 |        | (x | ) |           |            |                   |          |           |            |        |          |           |            | (212,569 | )        |         |         | (6,126 | )      
|                                                      | Embedded derivative                 |                                                                 | (xi)   |    |   |          |            |                    |          |          |            |         |          | (52,891   | )          |          |          | (1,524  | )      
|                                                      | Earthquake losses                   |                                                                 | (iii)  |    |   |          |            |                    |          |          |            |         |          |          |            |          |          |        |        
|                                                      | Equity investments:                 |                                                                 | (iv)   |    |   |           |            |                    |          |           |            |         |          |           |            |          |          |         |        
|                                                      |                                     | Timing differences                                              |        |    |   |           |            |                    | 6,487    |           |            |         | (9,009   | )         |            |          | (371,530 | )       |         |        | (10,707 | )
|                                                      |                                     | Net income variance between US
GAAP and ROC GAAP                |        |    |   |           |            |                    | 50,688   |           |            |         | 104,392  |           |            |          | 126,247  |         |         |        | 3,638   |  
|                                                      |                                     | Accounting for income in preferred stock                        |        |    |   |           |            |                    | 38,816   |           |            |         | (14,335  | )         |            |          | (65,943  | )       |         |        | (1,900  | )
|                                                      |                                     | Technology and know-how contributed
to a joint venture investee |        |    |   |           |            |                    | (167,417 | )         |            |         | (198,417 | )         |            |          | (204,417 | )       |         |        | (5,891  | )
|                                                      | Marketable securities               |                                                                 | (vii)  |    |   | 45,935    |            |                    |          | 541,885   |            |         |          | (14,201   | )          |          |          | (409    | )      
|                                                      | Acquisition of Siliconware Corp.    |                                                                 | (viii) |    |   | 5,415,439 |            |                    |          | 4,873,500 |            |         |          | 4,873,500 |            |          |          | 140,447 |        
|                                                      | Taxation effect                     |                                                                 |        | (v | ) |           |            | (217,428           | )        |           |            | 3,654   |          |           |            | 25,428   |          |         |         | 733    |        
|                                                      |                                     |                                                                 |        |    |   |           |            |                    |          |           |            |         |          |           |            |          |          |         |         |       
|Shareholders equity under US GAAP                    |                                     |                                                                 |        |    |   |           | 32,704,771 |                    |          |           | 31,335,360 |         |          |           | 30,262,476 |          |          |         | 872,118 |       
|                                                      |                                     |                                                                 |        |    |   |           |            |                    |          |           |            |         |          |           |            |          |          |         |         |       

F-41



---



##### Table of Contents



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

Movements in shareholders equity in accordance with US GAAP:

|                                                          |  |       |  |  |         |         |            |         |          |         |            |   |         |   |         |  
|--------------------------------------------------------- |  | ----- |  |  | ------- | ------- | ---------- | ------- | -------- | ------- | ---------- | - | ------- | - | ------- | -
|                                                          |  |       |  |  |         | 2001    |            | 2002   
|                                                          |  |       |  |  |         |         |            |        
|                                                          |  |       |  |  |         | NT$'000 |            | NT$'000 |          | US$'000
|Balance at January 1,                                     |  |       |  |  |         |         | 32,704,771 |         |          |         | 31,335,360 |   |         |   | 903,036 |  
|Net income (loss) under US GAAP                           |  |       |  |  |         |         | (1,790,472 | )       |          |         | (222,963   | ) |         |   | (6,425  | )
|Compensation                                              |  | (ii)  |  |  | 518,157 |         |            |         |         |         |            |   |        |  
|Cumulative translation adjustment
on long-term investment |  |       |  |  |         |         | (7,131     | )       |          |         | (16,042    | ) |         |   | (462    | )
|Change in fair value of
marketable
securities             |  | (vii) |  |  | 495,950 |         |            |         | (550,551 | )       |            |   | (15,866 | )
|Adjustment for change in equity
investment holding ratio  |  |       |  |  |         |         | (33,219    | )       |          |         | (1,242     | ) |         |   | (36     | )
|Unrealized loss on long-term
investment                   |  |       |  |  |         |         | 16,255     |         |          |         | (302,780   | ) |         |   | (8,726  | )
|Treasury stock                                            |  |       |  |  |         |         | (568,951   | )       |          |         | 20,694     |   |         |   | 597     |  
|                                                          |  |       |  |  |         |         |            |         |          |         |            |   |         |   |         |  
|Balance at December 31,                                   |  |       |  |  |         |         | 31,335,360 |         |          |         | 30,262,476 |   |         |   | 872,118 |  
|                                                          |  |       |  |  |         |         |            |         |          |         |            |   |         |   |         |  

The balance sheet accounts under US GAAP is as follows:

|                              |  |                    |            |         |  |  |            | 
|----------------------------- |  | ------------------ | ---------- | ------- |  |  | ---------- | 
|                              |  | As of December 31,
|                              |  |                   
|                              |  | 2001               |            | 2002   
|                              |  |                    |            |        
|                              |  | NT$'000            |            | NT$'000
|Current Assets                |  |                    |            |         |  |  |            | 
|Cash and cash equivalents     |  |                    | 1,467,182  |         |  |  | 2,793,055  | 
|Short-term investments        |  |                    | 4,842,781  |         |  |  | 3,218,791  | 
|Notes receivable, net         |  |                    | 180,762    |         |  |  | 127,237    | 
|Accounts receivable, net      |  |                    | 3,710,855  |         |  |  | 4,122,784  | 
|Inventories                   |  |                    | 1,403,722  |         |  |  | 1,372,607  | 
|Other current assets          |  |                    | 413,940    |         |  |  | 1,100,503  | 
|                              |  |                    |            |         |  |  |            | 
|                              |  |                    | 12,019,242 |         |  |  | 12,734,977 | 
|                              |  |                    |            |         |  |  |            | 
|Long-term investments         |  |                    | 6,696,785  |         |  |  | 6,791,612  | 
|Property, plant and equipment |  |                    | 22,673,326 |         |  |  | 23,894,386 | 
|Intangible assets             |  |                    | 4,873,500  |         |  |  | 4,873,500  | 
|Other assets                  |  |                    | 1,589,262  |         |  |  | 2,039,013  | 
|                              |  |                    |            |         |  |  |            | 
|Total Assets                  |  |                    | 47,852,115 |         |  |  | 50,333,488 | 
|                              |  |                    |            |         |  |  |            | 

|                                           |  |                    |            |         |  |  |            | 
|------------------------------------------ |  | ------------------ | ---------- | ------- |  |  | ---------- | 
|                                           |  | As of December 31,
|                                           |  |                   
|                                           |  | 2001               |            | 2002   
|                                           |  |                    |            |        
|                                           |  | NT$'000            |            | NT$'000
|Current liabilities                        |  |                    | 5,855,159  |         |  |  | 5,890,543  | 
|Long-term liabilities                      |  |                    | 10,639,500 |         |  |  | 14,142,958 | 
|Other liabilities                          |  |                    | 22,096     |         |  |  | 37,511     | 
|                                           |  |                    |            |         |  |  |            | 
|Total Liabilities                          |  |                    | 16,516,755 |         |  |  | 20,071,012 | 
|                                           |  |                    |            |         |  |  |            | 
|Total Stockholders Equity                 |  |                    | 31,335,360 |         |  |  | 30,262,476 | 
|                                           |  |                    |            |         |  |  |            | 
|Total Liabilities and Stockholders Equity |  |                    | 47,852,115 |         |  |  | 50,333,488 | 
|                                           |  |                    |            |         |  |  |            | 

(i)  Compensated Absences



| |  | Under ROC GAAP, the Company is not required to accrue for unused vacation
at the end of each year. However, under US GAAP, unused vacation that
can be carried over to the next year has to be accrued for at each
balance sheet date to properly match the expense with the period in
which the employee provided the services.
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-42



---



##### Table of Contents



(ii) Compensation

|                                              |                                                      |      |                                  |         |         |      |         |         |  |  |   |   | 
|--------------------------------------------- | ---------------------------------------------------- | ---- | -------------------------------- | ------- | ------- | ---- | ------- | ------- |  |  | - | - | 
|                                              |                                                      |      | For the years ended December 31,
|                                              |                                                      |      |                                 
|Net Income Impact of Compensation Adjustments |                                                      | 2000 |                                  | 2001    |         | 2002
|                                              |                                                      |      |                                  |         |         |     
|                                              |                                                      |      | NT$'000                          |         | NT$'000 |      | NT$'000
|US GAAP Adjustments:                          |                                                      |      |                                  |         |         |      |         |         |  |  |   |  
|Remuneration to directors                     |                                                      |      | 52,790                           |         |         |      |        |         |  |  |  |  
|                                              |                                                      |      |                                  |         |         |      |         |         |  |  |   |  
|Employee bonuses
Accrual                      |                                                      |      | 261,579                          |         |         |      |        |         |  |  |  |  
|                                              | Adjustment to fair market value                      |      |                                  | 683,058 |         |      |         | 256,578 |  |  |   |  | 
|                                              |                                                      |      |                                  |         |         |      |         |         |  |  |   |  
|                                              | Total employee bonuses                               |      |                                  | 944,637 |         |      |         | 256,578 |  |  |   |  | 
|                                              |                                                      |      |                                  |         |         |      |         |         |  |  |   |  
|                                              | Total net income adjustment relating to
compensation |      |                                  | 997,427 |         |      |         | 256,578 |  |  |   |  | 
|                                              |                                                      |      |                                  |         |         |      |         |         |  |  |   |  

|                                                               |  |                    |         |         |  |         |   |  |  |  |   | 
|-------------------------------------------------------------- |  | ------------------ | ------- | ------- |  | ------- | - |  |  |  | - | 
|                                                               |  | As of December 31,
|Shareholder's Equity Impact of Compensation                    |  |                   
|                                                               |  | 2000               |         | 2001    |  | 2002   
|Adjustments                                                    |  |                    |         |         |  |        
|                                                               |  | NT$'000            |         | NT$'000 |  | NT$'000
|US GAAP Adjustments:                                           |  |                    |         |         |  |         |   |  |  |  |   | 
|Remuneration to directors                                      |  |                    | 52,790  |         |  |         |  |  |  |  |  | 
|Employee bonuses                                               |  |                    | 261,579 |         |  |         |  |  |  |  |  | 
|                                                               |  |                    |         |         |  |         |   |  |  |  |   | 
|Total shareholders equity adjustment relating to
compensation |  |                    | 314,369 |         |  |         |  |  |  |  |  | 
|                                                               |  |                    |         |         |  |         |   |  |  |  |   | 

Remuneration to Directors The Companys Articles of Incorporation
require a cash remuneration payment to its directors. Under ROC GAAP,
such payments are charged directly to retained earnings in the period
shareholders approve such payment. Under US GAAP, such cash payments
should be recorded as compensation expense in the period when services are
rendered.

Employee Bonuses Certain employees of the Company are entitled to
bonuses in accordance with applicable provisions of the Companys Articles
of Incorporation. Employee bonuses are determined at 10% of distributable
retained earnings. Distributable retained earnings are calculated as
retained earnings after various reserves 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. 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. 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 net income and shareholders equity as
shown in the above schedules. As the Company incurred loss in 2001, no
employee bonus was paid in 2002. On March 24, 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. In
addition to the adjustments to net income
and shareholders equity as shown in the above schedules, application of US
GAAP on employee bonuses would also result in a reclassification from retained
earnings to additional paid in capital of NT$4,074.2 million and NT$4,074.2
million for the years ended December 31, 2001 and 2002, respectively.

F-43



---



##### Table of Contents



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

(iii) Earthquake Losses

The Company had suffered damages to its certain inventory, property and
equipment during the earthquake in September 1999. Under ROC GAAP, such
losses were recognized and were offset by both insurance proceeds received
and expected probable insurance recovery. Under US GAAP, such losses were
recognized and offset but only to the extent insurance recovery has been
received by the Company. Pending insurance claims on the loss of NT$52.7
million are not recognized as a deduction from the losses under US GAAP.
This amount of insurance proceeds was collected in 2000, which is recorded
as a gain under US GAAP.

(iv) Equity Investments

Under 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.

Timing difference

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, under ROC GAAP, if financial statements of an investee
are not sufficiently timely for the Company to apply the equity method
currently and such equity interests are below certain materiality threshold,
the Company is permitted to delay the recognition of income (loss) until the
subsequent year. 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 deducts the delayed income from subsequent
years net income and adds it back to prior year to arrive at net income
under US GAAP.

Net income/(loss) variance between US GAAP and ROC 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 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,
deferred tax and compensated absences.

Accounting for income in preferred stock

Under ROC GAAP, when an investment is made in non-accumulative, convertible
preferred shares, investment income is recognized for the amount of actual
dividends when 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. An equity investor recognizes its proportionate share of both the
investees income and losses.

F-44



---



##### Table of Contents



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

Technology and know-how contributed to a joint venture investee

In 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 had not been
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 as 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 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
noncash 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 know-how contributed. Therefore, under US GAAP, the
Company initially recorded its joint venture investment at NT$1.4 billion,
the amount of cash contributed, and did not recognize the deemed value for
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.

(v) Taxation Effect

Under ROC GAAP, a 10% tax on undistributed earnings is recognized as a tax
expense in the period when the amounts 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
the equity investment adjustments in preferred stock of Artest, accruals for
earthquake losses, and accruals for compensated absences.

(vi) 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. 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 2000, 2001 and 2002 were 13,775,600 shares,
26,157,900 shares and 0 shares, respectively.

F-45



---



##### Table of Contents



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

(vii) Marketable Securities

Under 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 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. The fair value of listed stock
under US GAAP is generally determined by the closing price at the balance
sheet date.

(viii) Goodwill Acquired from Merger

The fair value of the net assets received is used by the Company as the
value of the consideration for the acquisition of the remaining interests
in Siliconware Corporation and is reflected in the common stock and capital
reserve in the balance sheet. As the consideration is equal to the fair
value of the net assets received, no goodwill is recorded under ROC GAAP.
The fair value of the net assets acquired is determined based on an
independent appraisal process. Under US GAAP, the acquisition is accounted
for using the purchase method of accounting, and the purchase price is
determined using the fair value of the shares exchanged. The fair value of
the shares exchanged was determined based on the average closing market
price of the Companys stock on the five trading days beginning two days
prior to August 22, 2000, the date of the announcement of the acquisition.
No identifiable intangible assets were acquired in the merger. The
difference between the fair value of the shares exchanged and the fair
value of the net assets acquired results in goodwill. The purchase price
was allocated to all identifiable tangible assets and liabilities acquired
based on their estimated fair values at December 30, 2000, as follows (in
NT$ millions):

|               |  |   |                |  
|-------------- |  | - | -------------- | -
|Current assets |  | $ | 1,371          |  
|Other assets   |  |   | 5,692          |  
|Liabilities    |  |   | (        3,403 | )
|Goodwill       |  |   | 5,415          |  
|               |  |   |                |  
|Purchase price |  | $ | 9,075          |  
|               |  |   |                |  

F-46



---



##### Table of Contents



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

Before the adoption of SFAS No. 142, goodwill is amortized on a
straight-line basis over ten years. Amortization of goodwill during 2001
was NT$541.9 million. Effective January 1, 2002, SFAS No. 142 requires that
we cease amortization of goodwill and perform an impairment review upon
adoption and at least annually thereafter. Since the Company operates on an
integrated basis, the Company itself is the sole reporting unit. Based on
the comparison of the fair value and carrying value of the Company,
management concluded that goodwill was not impaired as of adoption and as of
December 31, 2002.

(ix) Stock Dividends

Under 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 will result in, under US GAAP, a reclassification from retained
earnings to additional paid-in capital of NT$19,268.6 million and
NT$19,268.6 million at December 31, 2001 and 2002, respectively. This
adjustments have no effect on shareholders equity.

(x) Impairment of long-lived assets

There is no specific standards under ROC GAAP addressing impairment of
long-lived assets. US GAAP requires that long-lived assets 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 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, have incurred significant losses since our investments
and there is no indication of recovery in the near future, we concluded that
the impairment loss was other than temporary. Accordingly, we recorded
impairment charges totaling NT$212.6 million (US$6.1 million) on these
long-term equity investments to write off the carrying value of the
investments to their fair value.

(xi) Embedded derivative

Under ROC GAAP, investment in convertible/exchangeable bond is carried at
amortized cost, which is the par value after adjustment by the unamortized
premium or discount. Under US GAAP, the convertible or exchangeable option
is considered an embedded derivative instrument and must be separated from
the host contract and accounted for separately as a derivative instrument if
(1) the economic characteristics and risks of the embedded derivative
instrument are not clearly and closely related to the economic
characteristics and risks of the host contract; (2) the contract that
embodies both the embedded derivative instrument and the host contract is
not remeasured at fair value with changes in fair value reported in earnings
as they occur; and (3) a separate instrument with the same terms as the
embedded derivative instrument would be a derivative instrument. The
bifurcated

F-47



---



##### Table of Contents



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

derivative would be measured at fair value with changes in fair value
reported in earnings as they occur. If an entity were unable to reliably
identify and measure the embedded derivative instrument for separation from
the host contract, the entire contract would have to be measured at fair
value, with gains and losses recognized in earnings.

ADDITIONAL US GAAP DISCLOSURES

Risks and Uncertainties

The 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 45% and North America of 52%. The
Companys largest customer accounted for 14% and 16% for 2001 and 2002,
respectively, and its five largest customers accounted for 45% and 48% of the
Companys total sales in 2001 and 2002, respectively.

In 2001 and 2002, significant portion of the Companys net operating revenue
were denominated in U.S. dollars. On the other hand, in 2001 and 2002,
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.

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 amount to NT$1,667.6 million
and NT$2,165.0 million as of December 31, 2001 and 2002, 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.

F-48



---



##### Table of Contents



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

Impairment of Long-lived Assets

Property, 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, 2001 and 2002, the carrying amounts of property, plant and
equipment held for disposal were NT$1.2 million and NT$17.2 million,
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, 2000, 2001 and 2002
were NT$1.5 million, NT$1.2 million and NT$17.2 million, respectively.

Maturity of Long-term Liabilities

Aggregate maturities for the Companys bonds payable and long-term loans as
of December 31, 2002 are as follows:

|                         |  |            |            | 
|------------------------ |  | ---------- | ---------- | 
|Year ending December 31, |  | Maturities
|                         |  |           
|                         |  | NT$'000   
|2003                     |  |            | 2,166,160  | 
|2004                     |  |            | 9,207,617  | 
|2005                     |  |            | 4,945,805  | 
|                         |  |            |            | 
|                         |  |            | 16,319,582 | 
|                         |  |            |            | 

Cash and Cash Flow Statement

Under ROC GAAP, all certificates of deposit are classified as cash and cash
equivalents. Under US GAAP, cash equivalents are short-term, highly liquid
investments that are readily convertible to known amounts of cash and have
original maturities of three months or less. Summarized cash flow
information under US GAAP would be presented as follows:

|                                                              |  |                     |            |         |  |  |            |  
|------------------------------------------------------------- |  | ------------------- | ---------- | ------- |  |  | ---------- | -
|                                                              |  | For the years ended
|                                                              |  | December 31,       
|                                                              |  |                    
|                                                              |  | 2001                |            | 2002   
|                                                              |  |                     |            |        
|                                                              |  | NT$'000             |            | NT$'000
|Net cash provided by operating activities, US GAAP            |  |                     | 4,944,315  |         |  |  | 5,006,199  |  
|Net cash used in investing activities, US GAAP                |  |                     | (7,679,399 | )       |  |  | (7,139,390 | )
|Net cash provided by financing activities, US GAAP            |  |                     | 1,499,135  |         |  |  | 3,459,064  |  
|                                                              |  |                     |            |         |  |  |            |  
|Net (decrease) increase in cash and cash
equivalents, US GAAP |  |                     | (1,235,949 | )       |  |  | 1,325,873  |  
|Cash and cash equivalents at beginning of year
under US GAAP  |  |                     | 2,703,131  |         |  |  | 1,467,182  |  
|                                                              |  |                     |            |         |  |  |            |  
|Cash and cash equivalents end of year under US GAAP           |  |                     | 1,467,182  |         |  |  | 2,793,055  |  
|                                                              |  |                     |            |         |  |  |            |  

F-49



---



##### Table of Contents



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

Comprehensive Income

Comprehensive income under ROC GAAP for the years ended December 31, 2001 and
2002 and accumulated other comprehensive income balances as of December 31,
2001 and 2002 are summarized as follows:

|                                                        |                                                          |  |            |            |         |  |            |            |  
|------------------------------------------------------- | -------------------------------------------------------- |  | ---------- | ---------- | ------- |  | ---------- | ---------- | -
|                                                        |                                                          |  | 2001       |            | 2002   
|                                                        |                                                          |  |            |            |        
|                                                        |                                                          |  | NT$'000    |            | NT$'000
|Net (loss) income                                       |                                                          |  | (1,183,211 | )          |         |  | 425,195    |           
|Other comprehensive income (loss), net of taxes:        |                                                          |  |            |            |         |  |            |           
|                                                        | Cumulative translation adjustment on equity investment   |  |            | 12,486     |         |  |            | (    9,705 | )
|                                                        | Adjustment for change in equity investment holding ratio |  |            | (   33,219 | )       |  |            | (    1,242 | )
|                                                        | Adjustment for unrealized loss on long-term investment   |  |            | 16,255     |         |  |            | (  302,780 | )
|                                                        | Resale of treasury stock                                 |  |            |           |         |  |            | 20,694     |  
|                                                        |                                                          |  |            |            |         |  |            |           
|Comprehensive (loss) income                             |                                                          |  | (1,187,689 | )          |         |  | 132,162    |           
|                                                        |                                                          |  |            |            |         |  |            |           
|Accumulated other comprehensive income (loss) balances: |                                                          |  |            |            |         |  |            |           
|                                                        | Cumulative translation adjustment on equity investment   |  |            | 45,388     |         |  |            | 35,683     |  
|                                                        | Adjustment for change in equity investment holding ratio |  |            | 16,305     |         |  |            | 15,063     |  
|                                                        | Adjustment for unrealized loss on long-term investment   |  |            |           |         |  |            | (  302,780 | )
|                                                        | Resale of treasury stock                                 |  |            |           |         |  |            | 20,694     |  
|                                                        |                                                          |  |            |            |         |  |            |           
|Accumulated other comprehensive income (loss)           |                                                          |  | 61,693     |            |         |  | (  231,340 | )         
|                                                        |                                                          |  |            |            |         |  |            |           

Recent Accounting Pronouncements

In June 2002, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No.146 (SFAS No.146), Accounting
for Costs Associated with Exit or Disposal Activities. SFAS No. 146 addresses
financial accounting and reporting for costs associated with exit or disposal
activities and nullifies Emerging Issues Task Force Issue No.94-3, Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit
an Activity (including Certain Costs Incurred in a Restructuring). SFAS No.146
requires that a liability for costs associated with an exit or disposal
activity be recognized and measured initially at fair value only when the
liability is incurred, rather than at the date of commitment to an exit or
disposal plan. SFAS No. 146 is effective for exit or disposal activities that
are initiated after December 31, 2002. The Company does not expect that the
adoption of SFAS No. 146 will have a material impact on the Companys financial
position or results of operations.

In December 2002, the FASB issued Statement of Financial Accounting Standards
No.148 (SFAS No.148), Accounting for Stock-Based CompensationTransition and
DisclosureAn Amendment of FASB Statement No.123. SFAS No.148 amends Statement
of Financial Accounting Standards No.123 (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. SFAS No.148 amends the disclosure requirements of SFAS
No.123 to require prominent disclosures both in annual and interim financial
statements about the method of accounting for stock-based employee

F-50



---



##### Table of Contents



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

compensation
and the effect of the method used on reported results. The Company does not
expect that the adoption of SFAS No. 148 will have a material impact on the
Companys financial position or results of operations, although SFAS No. 148
may impact the disclosure of future stock-based compensation.

In November 2002, the FASB issued Interpretation No. 45 (FIN No. 45)
Guarantors Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others. FIN No. 45 elaborates on the
existing disclosure requirements for most guarantees, including loan
guarantees. It also clarifies that at the time a company issues a guarantee,
the company must recognize an initial liability for the fair value, or market
value, of the obligations it assumes under that guarantee. However, the
provisions related to recognizing a liability at inception of the guarantee for
the fair value of the guarantors obligations does not apply to product
warranties or to guarantees accounted for as derivatives. The initial
recognition and initial measurement provisions apply on a prospective basis to
guarantees issued or modified after December 31, 2002. The disclosure
requirements of FIN No. 45 are effective for financial statements of interim or
annual periods ending after December 15, 2002. The Company does not believe the
adoption of FIN No. 45 will have a material impact on its financial position or
results of operations.

In November 2002, the Emerging Issues Task Force reached a consensus on Issue
No. 00-21 (EITF 00-21), Revenue Arrangements with Multiple Deliverables.
EITF 00-21 provides guidance on how to account for arrangements that involve
the delivery or performance of multiple products, services and/or rights to use
assets. The provisions of EITF 00-21 will apply to revenue arrangements entered
into in fiscal periods beginning after June 15, 2003. The Company does not
believe the adoption of EITF 00-21 will have a material impact on its financial
position or results of operations.

In January 2003, the FASB issued Interpretation No. 46 (FIN No. 46)
Consolidation of Variable Interest Entities. Until this interpretation, a
company generally included another entity in its consolidated financial
statements only if it controlled the entity through voting interests. FIN No.46
requires a variable interest entity, as defined, to be consolidated by a
company if that company is subject to a majority of the risk of loss from the
variable interest entitys activities or entitled to receive a majority of the
entitys residual returns. Management is currently evaluating the effect of
adopting FIN No. 46 on its results of operations and financial position.

F-51



---



##### Table of Contents



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

On May 15, 2003, the Financial Accounting Standards Board issued Statement
No. 150, Accounting for Certain Financial Instruments with Characteristics
of both Liabilities and Equity (SFAS 150). SFAS 150 establishes standards
for how an issuer classifies and measures certain financial instruments with
characteristics of both liabilities and equity. It requires that certain
financial instruments be presented as liabilities that were previously
presented as equity or as temporary equity. Such instruments include
mandatory redeemable preferred and common stocks and certain options and
warrants. SFAS 150 is effective for financial instruments entered into or
modified after May 31, 2003 and is generally effective at the beginning of
the first interim period beginning after June 15, 2003. The Company is
currently evaluating the impact that SFAS 150 will have on its consolidated
financial position and results of operations when adopted.

SummarizedFinancial Information of Equity Investees

Summary Financial Information of the Companys equity investees, except
ChipMOS, has been prepared on an aggregate basis under ROC GAAP.

Balance Sheet Information

|                        |  |         |           |         |  |  |           | 
|----------------------- |  | ------- | --------- | ------- |  |  | --------- | 
|                        |  | 2001    |           | 2002   
|                        |  |         |           |        
|                        |  | NT$'000 |           | NT$'000
|Current Assets          |  |         | 1,125,028 |         |  |  | 1,387,540 | 
|Non-Current Assets      |  |         | 2,599,935 |         |  |  | 4,036,858 | 
|                        |  |         |           |         |  |  |           | 
|Total Assets            |  |         | 3,724,963 |         |  |  | 5,424,398 | 
|                        |  |         |           |         |  |  |           | 
|Current Liabilities     |  |         | 585,260   |         |  |  | 1,156,519 | 
|Non-Current Liabilities |  |         | 479,863   |         |  |  | 1,082,017 | 
|                        |  |         |           |         |  |  |           | 
|Total Liabilities       |  |         | 1,065,123 |         |  |  | 2,238,536 | 
|                        |  |         |           |         |  |  |           | 

Income Statement Information

|                    |  |         |           |         |  |  |           |  
|------------------- |  | ------- | --------- | ------- |  |  | --------- | -
|                    |  | 2001    |           | 2002   
|                    |  |         |           |        
|                    |  | NT$'000 |           | NT$'000
|Net Sales           |  |         | 1,898,800 |         |  |  | 2,113,099 |  
|Gross (Loss) Profit |  |         | 202,602   |         |  |  | 320,567   |  
|Loss Before Tax     |  |         | (172,711  | )       |  |  | (30,329   | )
|Net Loss            |  |         | (91,398   | )       |  |  | (14,933   | )

F-52



---



##### Table of Contents



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

27. SPECIAL DISCLOSURE ITEMS

A.     Significant Transactions Information



| | (1) |  | Loans to third parties attributed to financial activities:                                                            
| | --- |  | ----------------------------------------------------------------------------------------------------------------------
|
| |     |  | As of December 31, 2002: None.                                                                                        
|
| | (2) |  | The Company provided the following endorsement and guarantee to third
parties:
 
For the year ended December 31, 2002:

|         |  |                                            |  |                               |  |                                                    |  |                   |  |                   
|-------- |  | ------------------------------------------ |  | ----------------------------- |  | -------------------------------------------------- |  | ----------------- |  | ------------------
|Endorser |  | Endorsee                                   |  |                               |  | The highest                                       
|         |  |                                            |  |                               |  | outstanding                                       
|         |  |                                            |  |                               |  | Relationship with                                  |  | Endorsement limit |  | endorsement amount
|Number   |  | Name of endorser                           |  | Name of endorsee              |  | the Company                                        |  | to single company |  | for the period    
|         |  |                                            |  |                               |  |                                                    |  |                   |  |                   
|         |  |                                            |  |                               |  |                                                    |  | NT$000           |  | NT$000           
|0        |  | Siliconware
Precision
Industries Co., Ltd. |  | Sigurd
Microelectronics
Corp. |  | Investee company
accounted for under
equity method |  | 13,082,935        |  | 84,440            

|         |  |                                            |  |                    |  |                          |  |                          |  |                        
|-------- |  | ------------------------------------------ |  | ------------------ |  | ------------------------ |  | ------------------------ |  | -----------------------
|Endorser |  |                                            |  |                    |  |                          |  |                         
|         |  | The outstanding                            |  | The amount of      |  | The ratio of accumulated |  | The ceiling of the      
|         |  |                                            |  | endorsement amount |  | endorsement with         |  | endorsement amount to    |  | outstanding endorsement
|Number   |  | Name of endorser                           |  | at 12/31/2002      |  | collateral placed        |  | net value of the Company |  | for the Company        
|         |  |                                            |  |                    |  |                          |  |                          |  |                        
|         |  |                                            |  | NT$000            |  | NT$000                  |  |                          |  | NT$000                
|0        |  | Siliconware
Precision
Industries Co., Ltd. |  | -                  |  | -                        |  | -                        |  | 26,165,870(1)          



|(1) |  | The ceiling of the outstanding endorsement for SPIL is the most recent
periods net equity.
|--- |  | -------------------------------------------------------------------------------------------

F-53



---



##### Table of Contents



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



| | (3) |  | The ending balance of securities
is summarized as follows:
 
As of December 31, 2002:
| | --- |  | -------------------------------------------------------------------------------------

|                                           |  |            |  |                                          |  |                                            |  |                             
|------------------------------------------ |  | ---------- |  | ---------------------------------------- |  | ------------------------------------------ |  | ----------------------------
|                                           |  |            |  |                                          |  | The relationship of the                    |  |                             
|                                           |  | Type of    |  |                                          |  | issuers with                               |  |                             
|Investor                                   |  | securities |  | Name of securities                       |  | the Company                                |  | General ledger accounts     
|                                           |  |            |  |                                          |  |                                            |  |                             
|Siliconware Precision
Industries Co., Ltd. |  | Stock      |  | Siliconware Investment Company Ltd.      |  | Investee accounted for under
equity method |  | Long-term investments       
|Siliconware Precision
Industries Co., Ltd. |  | Stock      |  | Sigurd Microelectronics Corp.            |  | Investee accounted for under
equity method |  | Long-term investments       
|Siliconware Precision
Industries Co., Ltd. |  | Stock      |  | Double Win Enterprise Co., Ltd.          |  | Investee accounted for under
equity method |  | Long-term investments       
|Siliconware Precision
Industries Co., Ltd. |  | Stock      |  | ChipMOS Technologies Inc.                |  | Investee accounted for under
equity method |  | Long-term investments       
|Siliconware Precision
Industries Co., Ltd. |  | Stock      |  | SPIL (B.V.I.) Holding Limited            |  | Investee accounted for under
equity method |  | Long-term investments       
|Siliconware Precision
Industries Co., Ltd. |  | Stock      |  | Universal Communication Technology Inc.  |  | Investee accounted for under
equity method |  | Long-term investments       
|Siliconware Precision
Industries Co., Ltd. |  | Stock      |  | Phoenix Precision Technology Corporation |  | Same chairman of the Board                 |  | Long-term investments       
|Siliconware Precision
Industries Co., Ltd. |  | Stock      |  | ThaiLin Semiconductor Corp.              |  | -                                          |  | Long-term investments       
|Siliconware Precision
Industries Co., Ltd. |  | Bonds      |  | ThaiLin Semiconductor Corp.              |  | -                                          |  | Long-term investments       
|Siliconware Precision
Industries Co., Ltd. |  | Bonds      |  | United Microelectronic Corporation       |  | -                                          |  | Long-term investments       
|Siliconware Precision
Industries Co., Ltd. |  | Stock      |  | King Yuan Electronics Co., Ltd.          |  | -                                          |  | Prepaid long-term investment
|Siliconware Precision
Industries Co., Ltd. |  | Stock      |  | Others                                   |  | -                                          |  | Long-term investments       

|                                           |  |                  |  |               |  |                   |  |                   
|------------------------------------------ |  | ---------------- |  | ------------- |  | ----------------- |  | ------------------
|                                           |  |                  |  |               |  | December 31, 2002
|                                           |  |                  |  |               |  |                  
|                                           |  | Number of shares |  |               |  | Percentage        |  | Market value per  
|Investor                                   |  | (in thousands)   |  | Book value(3) |  | of ownership      |  | share (in dollars)
|                                           |  |                  |  |               |  |                   |  |                   
|                                           |  |                  |  | NT$000       |  |                   |  | NT$               
|Siliconware Precision
Industries Co., Ltd. |  | 177,000          |  | 951,947       |  | 100.00%           |  | 8.21(1)           
|Siliconware Precision
Industries Co., Ltd. |  | 30,594           |  | 524,820       |  | 33.58%            |  | 17.73(1)          
|Siliconware Precision
Industries Co., Ltd. |  | 8,450            |  | 122,400       |  | 24.14%            |  | 15.27(2)          
|Siliconware Precision
Industries Co., Ltd. |  | 254,863          |  | 3,116,299     |  | 28.73%            |  | 12.41(2)          
|Siliconware Precision
Industries Co., Ltd. |  | 34,300           |  | 1,161,336     |  | 100.00%           |  | 33.86(1)          
|Siliconware Precision
Industries Co., Ltd. |  | 32,975           |  | 322,586       |  | 42.82%            |  | 6.90(1)           
|Siliconware Precision
Industries Co., Ltd. |  | 67,610           |  | 1,087,794     |  | 17.48%            |  | 13.37             
|Siliconware Precision
Industries Co., Ltd. |  | 10,859           |  | 216,420       |  | 5.43%             |  | 6.74              
|Siliconware Precision
Industries Co., Ltd. |  | 2,831            |  | 283,100       |  | -                 |  | 267,190(3)        
|Siliconware Precision
Industries Co., Ltd. |  | 1,000            |  | 346,350       |  | -                 |  | 326,539           
|Siliconware Precision
Industries Co., Ltd. |  | 64,350           |  | 899,540       |  | -                 |  | 899,540           
|Siliconware Precision
Industries Co., Ltd. |  | 13,707           |  | 185,226       |  | -                 |  | (4)              



|(1) |  | The market value is not available, therefore, the net equity per
share based on the audited financial statements as of December 31,
2002 was used.                                       
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | The market value is not available and recognition of investment
income (loss) is delayed until the subsequent year, therefore, the net
equity per share as of December 31, 2001 was used.
|   
|(3) |  | The market value is not available, therefore, the issuance price
was used.                                                                                                               
|   
|(4) |  | Combined amount for individual security less than NT$100 million.                                                                                                                        

F-54



---



##### Table of Contents



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



| | (4) |  | Securities for which total buying or selling amount exceeding
the lower of NT$100 million and 20 percent of the capital stock:

For the year ended December 31, 2002 :
| | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                           |  |                                                       |  |                                                        |  |                                        
|------------------------------------------ |  | ----------------------------------------------------- |  | ------------------------------------------------------ |  | ---------------------------------------
|                                           |  |                                                       |  |                                                        |  | Name of the                            
|Investor                                   |  | Name of the security                                  |  | Accounts                                               |  | counter party                          
|                                           |  |                                                       |  |                                                        |  |                                        
|Siliconware Precision Industries
Co., Ltd. |  | SPIL (B.V.I.) Holding
Limited stock                   |  | Long-term
investments                                  |  | Note                                   
|Siliconware Precision Industries
Co., Ltd. |  | United Microelectronics
Corporation convertible
bonds |  | Long-term
investments                                  |  | United Microelectronics
Corporation    
|Siliconware Precision Industries
Co., Ltd. |  | Citimoney USD Fund                                    |  | Short-term
investments                                 |  |                                       
|Siliconware Precision Industries
Co., Ltd. |  | Universal Communication
Technology Inc.               |  | Long-term
investments                                  |  | Universal Communication
Technology Inc.
|Siliconware Precision Industries
Co., Ltd. |  | King Yuan Electronics Co.,
Ltd.                       |  | Long-term
investment and
prepaid
long-term
investments |  | King Yuan Electronics
Co., Ltd.        

|                                           |  |                  |  |                   |  |          |  |            |  |          
|------------------------------------------ |  | ---------------- |  | ----------------- |  | -------- |  | ---------- |  | ---------
|                                           |  |                  |  | Beginning balance |  | Addition
|                                           |  |                  |  |                   |  |         
|                                           |  | The relationship |  | Number of         |  |          |  | Number of  |  |          
|                                           |  | of the issuers   |  | shares (in        |  |          |  | shares (in |  |          
|Investor                                   |  | with the Company |  | thousands)        |  | Amount   |  | thousands) |  | Amount   
|                                           |  |                  |  |                   |  |          |  |            |  |          
|                                           |  |                  |  |                   |  | NT$000  |  |            |  | NT$000  
|Siliconware Precision Industries
Co., Ltd. |  | -                |  | 2,050             |  | 58,314   |  | 32,250     |  | 1,127,012
|Siliconware Precision Industries
Co., Ltd. |  | -                |  | -                 |  | -        |  | 1,000      |  | 346,350  
|Siliconware Precision Industries
Co., Ltd. |  | -                |  | -                 |  | -        |  | 82         |  | 6,818,370
|Siliconware Precision Industries
Co., Ltd. |  | -                |  | 7,600             |  | 76,000   |  | 25,375     |  | 253,750  
|Siliconware Precision Industries
Co., Ltd. |  | -                |  | -                 |  | -        |  | 64,350     |  | 901,041  

|                                           |  |            |  |                |  |           |  |                  |  |            |  |          
|------------------------------------------ |  | ---------- |  | -------------- |  | --------- |  | ---------------- |  | ---------- |  | ---------
|                                           |  | Disposal   |  | Ending balance
|                                           |  |            |  |               
|                                           |  | Number of  |  |                |  |           |  |                  |  | Number of  |  |          
|                                           |  | shares (in |  | Sale           |  | Book      |  | Gain (loss) from |  | shares (in |  |          
|Investor                                   |  | thousands) |  | price          |  | value     |  | disposal         |  | thousands) |  | Amount   
|                                           |  |            |  |                |  |           |  |                  |  |            |  |          
|                                           |  |            |  | NT$000        |  | NT$000   |  | NT$000          |  |            |  | NT$000  
|Siliconware Precision Industries
Co., Ltd. |  | -          |  | -              |  | -         |  | -                |  | 34,300     |  | 1,161,336
|Siliconware Precision Industries
Co., Ltd. |  | -          |  | -              |  | -         |  | -                |  | 1,000      |  | 346,350  
|Siliconware Precision Industries
Co., Ltd. |  | 82         |  | 6,821,740      |  | 6,818,370 |  | 3,370            |  | -          |  |         
|Siliconware Precision Industries
Co., Ltd. |  | -          |  | -              |  | -         |  | -                |  | 32,975     |  | 322,586  
|Siliconware Precision Industries
Co., Ltd. |  | -          |  | -              |  | -         |  | -                |  | 64,350     |  | 901,041  



| |     |  | Note: The cash investment of US$ 32,250,000.                                                                                                                 
| | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (5) |  | Acquisition of real estate with an amount exceeding the lower
of NT$100 million and 20 percent of the capital stock:
 
For the year ended December 31, 2002 :

|                                           |  |             |  |             |  |             |  |              |  |                                                                       |  |                  
|------------------------------------------ |  | ----------- |  | ----------- |  | ----------- |  | ------------ |  | --------------------------------------------------------------------- |  | -----------------
|                                           |  | Name of the |  | Date of     |  | Transaction |  | Status of    |  |                                                                       |  | Relationship with
|Investor                                   |  | properties  |  | transaction |  | amount      |  | payment      |  | Counter party                                                         |  | the Company      
|                                           |  |             |  |             |  |             |  |              |  |                                                                       |  |                  
|                                           |  |             |  |             |  | NT$000     |  |              |  |                                                                       |  |                  
|Siliconware
Precision
Industries
Co., Ltd. |  | Land        |  | June 2002   |  | 257,557     |  | 256,057
paid |  | Tou Tien Metal Co.,
Ltd. Yi-Cheng Lee,
Ting-Tsai Lee and
Yu-Lee Chang |  |                 

|                                           |  |                                |  |                     |  |             |  |       
|------------------------------------------ |  | ------------------------------ |  | ------------------- |  | ----------- |  | ------
|                                           |  | Related party as counter party
|                                           |  |                               
|                                           |  | Original owner who             |  | The relationship of |  | Date of the |  |       
|                                           |  | sold the property to           |  | the original owner  |  | original    |  |       
|Investor                                   |  | the counter party              |  | with the Company    |  | transaction |  | Amount
|                                           |  |                                |  |                     |  |             |  |       
|Siliconware
Precision
Industries
Co., Ltd. |  | -                              |  | -                   |  | -           |  |      

|                                           |  |                            |  |                           |  |                 
|------------------------------------------ |  | -------------------------- |  | ------------------------- |  | ----------------
|                                           |  |                            |  | Purpose and               |  |                 
|                                           |  | The bases or reference     |  | status of the             |  |                 
|Investor                                   |  | used in deciding the price |  | acquisition               |  | Other commitment
|                                           |  |                            |  |                           |  |                 
|Siliconware
Precision
Industries
Co., Ltd. |  | Contract price             |  | Future
operating
activity |  |                

F-55



---



##### Table of Contents



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



| | (6) |  | Disposal of real estate with an amount exceeding the lower of
NT$100 million and 20 percent of the capital stock:                    
| | --- |  | -------------------------------------------------------------------------------------------------------------------------------------
|
| |     |  | For the year ended December 31, 2002 : None.                                                                                         
|
| | (7) |  | Related party transactions for purchases and sales amounts
exceeding the lower of NT$100 million and 20 percent of the capital
stock:
|
| |     |  | For the year ended December 31, 2002 :                                                                                               

|                                           |  |                                          |  |                            |  |                               
|------------------------------------------ |  | ---------------------------------------- |  | -------------------------- |  | ------------------------------
|                                           |  |                                          |  |                            |  | Description of the transaction
|                                           |  |                                          |  |                            |  |                               
|                                           |  | Name of the                              |  | Relationship with          |  | Purchases/                    
|Purchase / sales company                   |  | counter parties                          |  | the counter parties        |  | sales                         
|                                           |  |                                          |  |                            |  |                               
|Siliconware Precision
Industries
Co., Ltd. |  | Phoenix Precision
Technology Corporation |  | Same Chairman of the Board |  | Purchase                      

|                                           |  |                                |  |                            |  |                                        |  |                               |  |              |  |                          |  |                              
|------------------------------------------ |  | ------------------------------ |  | -------------------------- |  | -------------------------------------- |  | ----------------------------- |  | ------------ |  | ------------------------ |  | -----------------------------
|                                           |  |                                |  |                            |  |                                        |  | Description of and reasons    |  |              |  |                         
|                                           |  |                                |  |                            |  |                                        |  | for difference in transaction |  |              |  |                         
|                                           |  |                                |  |                            |  |                                        |  | terms compared to non-        |  |              |  |                         
|                                           |  | Description of the transaction |  | related party transactions |  | Notes or accounts receivable / payable
|                                           |  |                                |  |                            |  |                                       
|                                           |  |                                |  | Percentage of net          |  |                                        |  |                               |  |              |  |                          |  | Percentage of notes or       
|Purchase / sales company                   |  | Amount                         |  | purchases / sales          |  | Credit terms                           |  | Unit price                    |  | Credit terms |  | Amount                   |  | accounts receivable / payable
|                                           |  |                                |  |                            |  |                                        |  |                               |  |              |  |                          |  |                              
|                                           |  | NT$000                        |  |                            |  |                                        |  |                               |  |              |  | NT$000                  |  |                              
|Siliconware Precision
Industries
Co., Ltd. |  | 1,716,348                      |  | 16%                        |  | Three months                           |  | -                             |  | -            |  | Accounts payable
194,994 |  | 14%                          



| | (8) |  | Receivables from related parties exceeding the lower of NT$100
million and 20 percent of the capital stock:
| | --- |  | -----------------------------------------------------------------------------------------------------------
|
| |     |  | As of December 31, 2002 : None.                                                                            
|
| | (9) |  | Transaction of derivative financial instruments:                                                           
|
| |     |  | For the year ended December 31, 2002 : None.                                                               

F-56



---



##### Table of Contents



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

B.     Related information on investee companies



| | (1) |  | Basic information on investee
companies:
For the year ended December 31, 2002 :
| | --- |  | -------------------------------------------------------------------------------

|                                           |  |                                         |  |                                         |  |                                                              
|------------------------------------------ |  | --------------------------------------- |  | --------------------------------------- |  | -------------------------------------------------------------
|Investor                                   |  | Name of Investee                        |  | Location                                |  | Main activities                                              
|                                           |  |                                         |  |                                         |  |                                                              
|Siliconware Precision
Industries Co., Ltd. |  | Siliconware Investment
Company Ltd.     |  | Taipei                                  |  | Investment activities                                        
|Siliconware Precision
Industries Co., Ltd. |  | Sigurd Microelectronics Corp.           |  | Chu-tung, Hsin-Chu                      |  | Testing and assembly of
integrated circuits                  
|Siliconware Precision
Industries Co., Ltd. |  | Double Win Enterprise Co., Ltd.         |  | Ping-chen City, Taoyuan                 |  | PCB, SMT process and hand
insert                             
|Siliconware Precision
Industries Co., Ltd. |  | ChipMOS Technologies Inc.               |  | Science-based Industrial Park,
Hsin-Chu |  | Testing and assembly of
integrated circuits                  
|Siliconware Precision
Industries Co., Ltd. |  | Taiwan Hi-tech Corporation              |  | Science-based Industrial Park,
Hsin-Chu |  | Plating of IC lead frame                                     
|Siliconware Precision
Industries Co., Ltd. |  | SPIL (B.V.I.) Holding Limited           |  | British Virgin Islands                  |  | Investment activities                                        
|Siliconware Precision
Industries Co., Ltd. |  | Universal Communication Technology
Inc. |  | Hsin-Chu                                |  | RF IC test                                                   
|Siliconware Investment Company
Ltd.        |  | Artest Corporation                      |  | Sunnyvale, CA USA                       |  | Testing and development of
integrated circuits               
|Siliconware Investment Company
Ltd.        |  | Taiwan Hi-tech Corporation              |  | Science-based Industrial Park,
Hsin-Chu |  | Plating of IC lead frame                                     
|SPIL (B.V.I.) Holding Limited              |  | Siliconware USA, Inc.                   |  | San Jose, CA USA                        |  | Sales agent                                                  
|SPIL (B.V.I.) Holding Limited              |  | SPIL (Cayman) Holding Limited           |  | Cayman Islands, British West
India      |  | Investment activities                                        
|SPIL (Cayman) Holding Limited              |  | Siliconware Technology (Suzhou)
Limited |  | Suzhou Jiangsu, China                   |  | Design and manufacture of
transistor and electronic
component

|                                           |  |                      |                                              |                |  |                |            |               |  |            |  |                |   |  |               |   |  |             
|------------------------------------------ |  | -------------------- | -------------------------------------------- | -------------- |  | -------------- | ---------- | ------------- |  | ---------- |  | -------------- | - |  | ------------- | - |  | ------------
|                                           |  |                      |                                              |                |  |                |            |               |  |            |  | Current period |   | 
|                                           |  |                      |                                              |                |  |                |            |               |  |            |  |                |   | 
|                                           |  |                      |                                              |                |  |                |            |               |  |            |  |                |   |  | Income (loss) |   | 
|                                           |  | Original investments | The Company / majority owned subsidiary owns |                |  |                | recognized |               | 
|                                           |  |                      |                                              |                |  |                |            |               |  |           
|                                           |  |                      |                                              | Prior period   |  |                |            |               |  |            |  | Net income     |   |  | by the        |   |  |             
|                                           |  | Current period       |                                              | ending balance |  | Shares         |            | Percentage of |  |            |  | (loss) of      |   |  | Company       |   |  |             
|Investor                                   |  | ending balance       |                                              | (Note 6)       |  | (in thousands) |            | ownership     |  | Book value |  | investee       |   |  | (Note 5)      |   |  | Note        
|                                           |  |                      |                                              |                |  |                |            |               |  |            |  |                |   |  |               |   |  |             
|                                           |  | NT$000              |                                              | NT$000        |  |                |            |               |  | NT$000    |  | NT$000        |   |  | NT$000       |   |  |             
|Siliconware Precision
Industries Co., Ltd. |  | 1,770,000            |                                              | 1,770,000      |  | 177,000        |            | 100.00%       |  | 951,947    |  | 19,930         |   |  | 19,930        |   |  | (Note 2)    
|Siliconware Precision
Industries Co., Ltd. |  | 320,519              |                                              | 320,519        |  | 30,594         |            | 33.58%        |  | 524,820    |  | 237,232        |   |  | 69,166        |   |  | (Note 1)    
|Siliconware Precision
Industries Co., Ltd. |  | 169,000              |                                              | 169,000        |  | 8,450          |            | 24.14%        |  | 122,400    |  | (85,520        | ) |  | (20,645       | ) |  | (Notes 1, 3)
|Siliconware Precision
Industries Co., Ltd. |  | 2,332,768            |                                              | 2,332,768      |  | 254,863        |            | 28.73%        |  | 3,116,299  |  | -              |   |  | -             |   |  | (Notes 1, 3)
|Siliconware Precision
Industries Co., Ltd. |  | 186,728              |                                              | 186,728        |  | 5,506          |            | 22.55%        |  | 72,761     |  | 17,682         |   |  | 3,434         |   |  | (Notes 1, 3)
|Siliconware Precision
Industries Co., Ltd. |  | 1,197,109            |                                              | 70,097         |  | 34,300         |            | 100.00%       |  | 1,161,336  |  | (15,887        | ) |  | (15,887       | ) |  | (Note 2)    
|Siliconware Precision
Industries Co., Ltd. |  | 329,750              |                                              | 76,000         |  | 32,975         |            | 42.82%        |  | 322,586    |  | -              |   |  | -             |   |  | (Notes 1, 3)
|Siliconware Investment Company
Ltd.        |  | 165,048              |                                              | 165,048        |  | 6,000          |            | 30.09%        |  | 208,500    |  | -              |   |  | -             |   |  | (Note 4)    
|Siliconware Investment Company
Ltd.        |  | 46,392               |                                              | 47,584         |  | 3,995          |            | 16.20%        |  | 45,685     |  | 17,682         |   |  | -             |   |  | (Notes 3, 4)
|SPIL (B.V.I.) Holding Limited              |  | 68,464               |                                              | 68,464         |  | 1,250          |            | 100.00%       |  | 50,419     |  | (5,551         | ) |  | -             |   |  | (Note 7)    
|SPIL (B.V.I.) Holding Limited              |  | 219,294              |                                              | -              |  | 6,550          |            | 100.00%       |  | 218,956    |  | (8,292         | ) |  | -             |   |  | (Note 7)    
|SPIL (Cayman) Holding Limited              |  | 217,620              |                                              | -              |  | 6,500          |            | 100.00%       |  | 216,350    |  | (7,980         | ) |  | -             |   |  | (Note 8)    

|        |  |                                                                                                                                       
|------- |  | --------------------------------------------------------------------------------------------------------------------------------------
|Note 1: |  | The Companys investee accounted for under the equity method.                                                                         
|Note 2: |  | The Companys majority owned subsidiary.                                                                                              
|Note 3: |  | Recognition of investment income (loss) is delayed until the
subsequent year.                                                         
|Note 4: |  | The investee accounted for under the equity method of Siliconware
Investment Company Ltd., a majority owned subsidiary of the Company.
|Note 5: |  | Amortization of premium or discount is not included.                                                                                  
|Note 6: |  | Original investments as of December 31, 2001.                                                                                         
|Note 7: |  | The investee accounted for under the equity method of SPIL (B.V.I.)
Holding Limited, a majority owned subsidiary of the Company.      
|Note 8: |  | The investee accounted for under the equity method of SPIL (Cayman)
Holding Limited.                                                  

F-57



---



##### Table of Contents



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



| | (2) |  | The ending balance of securities held by investee companies:
| | --- |  | ------------------------------------------------------------
|
| |     |  | As of December 31, 2002 :                                   

|                                    |  |            |  |                                            |  |                                                                        
|----------------------------------- |  | ---------- |  | ------------------------------------------ |  | -----------------------------------------------------------------------
|                                    |  |            |  |                                            |  | Relationship of                                                        
|                                    |  | Type of    |  |                                            |  | the issuers with                                                       
|Investor                            |  | securities |  | Name of securities                         |  | the Company                                                            
|                                    |  |            |  |                                            |  |                                                                        
|Siliconware Investment Company
Ltd. |  | Stock      |  | Artest Corporation                         |  | Investee accounted for under
equity method by subsidiary
of the Company
|Siliconware Investment Company
Ltd. |  | Stock      |  | Siliconware Precision Industries Co., Ltd. |  | The Company                                                            
|Siliconware Investment Company
Ltd. |  | Stock      |  | Unimicrom Technology Corp.                 |  |                                                                       
|Siliconware Investment Company
Ltd. |  | Stock      |  | Others                                     |  |                                                                       
|SPIL (B.V.I.) Holding Limited       |  | Stock      |  | Siliconware USA, Inc.                      |  | Investee accounted for under
equity method by subsidiary
of the Company
|SPIL (B.V.I.) Holding Limited       |  | Stock      |  | SPIL (Cayman) Holding Limited              |  | Investee accounted for under
equity method by subsidiary
of the Company
|SPIL (Cayman) Holding Limited       |  | Stock      |  | Siliconware Technology (Suzhou) Limited    |  | Investee accounted for under
equity method by subsidiary of
the Company

|                                    |  |                        |  |                   |  |            |  |               |  |                  
|----------------------------------- |  | ---------------------- |  | ----------------- |  | ---------- |  | ------------- |  | -----------------
|                                    |  |                        |  | December 31, 2002
|                                    |  |                        |  |                  
|                                    |  |                        |  | Number of shares  |  | Book value |  | Percentage of |  | Market value per 
|Investor                            |  | General ledger account |  | (in thousands)    |  | (Note 2)   |  | ownership     |  | share (in dollar)
|                                    |  |                        |  |                   |  |            |  |               |  |                  
|                                    |  |                        |  |                   |  | NT$000    |  |               |  | NT$000          
|Siliconware Investment Company
Ltd. |  | Long-term investments  |  | 6,000             |  | 208,500    |  | 30.09%        |  | 34.92(1)         
|Siliconware Investment Company
Ltd. |  | Long-term investments  |  | 27,016            |  | 794,184    |  | 1.43%         |  | 18.55            
|Siliconware Investment Company
Ltd. |  | Long-term investments  |  | 11,457            |  | 164,123    |  | 1.62%         |  | 21.39            
|Siliconware Investment Company
Ltd. |  | Long-term investments  |  | 27,010            |  | 467,099    |  |              |  | (2)             
|SPIL (B.V.I.) Holding Limited       |  | Long-term investments  |  | 1,250             |  | 50,419     |  | 100.00%       |  | 40.33(3)         
|SPIL (B.V.I.) Holding Limited       |  | Long-term investments  |  | 6,550             |  | 218,956    |  | 100.00%       |  | 33.43(3)         
|SPIL (Cayman) Holding Limited       |  | Long-term investments  |  | 6,500             |  | 216,350    |  | 100.00%       |  | 33.29(3)         



| | (1) |  | Redemption price per share.                                                                             
| | --- |  | --------------------------------------------------------------------------------------------------------
|
| | (2) |  | Combined amount for individual security less than $100 million.                                         
|
| | (3) |  | The market value is not available, therefore, the net equity per
share as of December 31, 2002 was used.

F-58



---



##### Table of Contents



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



| | (3) |  | Securities for which total buying or selling amount exceeded
the lower of NT$100,000 and 20 percent of the capital stock:
| | --- |  | -------------------------------------------------------------------------------------------------------------------------
|
| |     |  | For the year ended December 31, 2002:                                                                                    

|                              |  |                                         |  |                       |  |                                |  |                 
|----------------------------- |  | --------------------------------------- |  | --------------------- |  | ------------------------------ |  | ----------------
|                              |  |                                         |  |                       |  |                                |  | The relationship
|                              |  |                                         |  |                       |  | Name of the                    |  | of the issuers  
|Investor                      |  | Name of the security                    |  | Accounts              |  | counter party                  |  | with the Company
|                              |  |                                         |  |                       |  |                                |  |                 
|SPIL (B.V.I.) Holding Limited |  | SPIL (Cayman)
Holding Limited           |  | Long-term investments |  | Note                           |  |                
|SPIL (B.V.I.) Holding Limited |  | King Yuan
Electronic Co., Ltd.
(Bonds)  |  | Long-term investments |  | King Yuan Electronic
Co., Ltd. |  |                
|SPIL (Cayman) Holding Limited |  | Siliconware
Technology
(Suzhou) Limited |  | Long-term investments |  | Note                           |  |                

|                              |  |                   |  |          |  |            |  |                |  |            |  |         |  |         |  |             |  |            |  |        
|----------------------------- |  | ----------------- |  | -------- |  | ---------- |  | -------------- |  | ---------- |  | ------- |  | ------- |  | ----------- |  | ---------- |  | -------
|                              |  | Beginning balance |  | Addition |  | Disposal   |  | Ending balance
|                              |  |                   |  |          |  |            |  |               
|                              |  | Number of         |  |          |  | Number of  |  |                |  | Number of  |  |         |  |         |  | Gain (loss) |  | Number of  |  |        
|                              |  | shares (in        |  |          |  | shares (in |  |                |  | shares (in |  | Sale    |  | Book    |  | from        |  | shares (in |  |        
|Investor                      |  | thousands)        |  | Amount   |  | thousands) |  | Amount         |  | thousands) |  | price   |  | value   |  | disposal    |  | thousands) |  | Amount 
|                              |  |                   |  |          |  |            |  |                |  |            |  |         |  |         |  |             |  |            |  |        
|                              |  |                   |  | NT$000  |  |            |  | NT$000        |  |            |  | NT$000 |  | NT$000 |  | NT$000     |  |            |  | NT$000
|SPIL (B.V.I.) Holding Limited |  |                  |  |         |  | 6,550      |  | 219,294        |  |           |  |        |  |        |  |            |  | 6,550      |  | 218,956
|SPIL (B.V.I.) Holding Limited |  |                  |  |         |  | 2,570      |  | 860,436        |  | 2,570      |  | 860,436 |  | 860,436 |  |            |  |           |  |       
|SPIL (Cayman) Holding Limited |  |                  |  |         |  | 6,500      |  | 217,620        |  |           |  |        |  |        |  |            |  | 6,500      |  | 216,350

Note: The original investment when established.

C.     Investment in Mainland China information:

For the year ended December 31, 2002:



| | (1) |  | Information of investment in Mainland China:
| | --- |  | --------------------------------------------
|
| |     |  | As of December 31, 2002 :                   

|                                        |  |                                                               |  |                  |  |            |  |                  |  |                 
|--------------------------------------- |  | ------------------------------------------------------------- |  | ---------------- |  | ---------- |  | ---------------- |  | ----------------
|                                        |  |                                                               |  |                  |  |            |  | Accumulated      |  |                 
|                                        |  |                                                               |  |                  |  |            |  | remittance as of |  | Remitted        
|Name of investee in                     |  |                                                               |  |                  |  | Investment |  | December         |  | or (collected)  
|Mainland China                          |  | Main activities of investee                                   |  | Capital          |  | method     |  | 31, 2001         |  | this period     
|                                        |  |                                                               |  |                  |  |            |  |                  |  |                 
|                                        |  |                                                               |  | NT$000          |  |            |  | NT$000          |  | NT$000         
|Siliconware Technology
(Suzhou) Limited |  | Design and manufacture of transistor
and electronic component |  | 225,550
(Note 2) |  | (Note 1)   |  |                 |  | 225,550
(Note 2)

|                                        |  |                           |  |                       |  |                          |  |                  |  |                             
|--------------------------------------- |  | ------------------------- |  | --------------------- |  | ------------------------ |  | ---------------- |  | ----------------------------
|                                        |  |                           |  |                       |  | Investment income (loss) |  |                  |  |                             
|                                        |  |                           |  | Ownership held by     |  | recognized               |  |                  |  | The investment income (loss)
|Name of investee in                     |  | Accumulated remittance as |  | the Company           |  | by the Company           |  | Ending balance   |  | remitted back as            
|Mainland China                          |  | of December 31, 2002      |  | (Direct and indirect) |  | during the period        |  | of investment    |  | of December 31,2002         
|                                        |  |                           |  |                       |  |                          |  |                  |  |                             
|                                        |  |                           |  |                       |  | NT$000                  |  | NT$000          |  | NT$000                     
|Siliconware Technology
(Suzhou) Limited |  | $225,550
(Note 2)         |  | 100.00%               |  | (7,980)                  |  | 216,350
(Note 2) |  |                            

F-59



---



##### Table of Contents



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

|                            |         |                              |                                 |                              |                             |  |                              |           | 
|--------------------------- | ------- | ---------------------------- | ------------------------------- | ---------------------------- | --------------------------- |  | ---------------------------- | --------- | 
|                            |         |                              |                                 |                              |                             |  | The ceiling of investment in
|                            |         |                              | The investment balance approved |                              | Mainland China according to
|Accumulated remittance from |         | by Investment Commissions,   |                                 | Investment Commissions,     
|Taiwan to Mainland China    |         | Ministry of Economic Affairs |                                 | Ministry of Economic Affairs
|                            |         |                              |                                 |                             
|NT$000                     |         | NT$'000                      |                                 | NT$'000                     
|                            | 225,550 |                              |                                 | 694,000                      |                             |  |                              | 6,735,710 | 



| |     |  | Note 1: The Company set up a subsidiary in the Cayman Islands to
reinvest in Mainland China.                                                                                                                                                           
| | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |     |  | Note 2: Transactions denominated in foreign currencies are translated
into New Taiwan dollars at the exchange rate prevailing on the balance
sheet date.                                                                                               
|
| | (2) |  | Material transactions occurred directly between the Company and
its Mainland China investee companies and material transactions
occurred indirectly between the Company and its Mainland China
investee companies via enterprises in other areas: None.

F-60



---



##### Table of Contents



The Board of Directors and Shareholders
ChipMOS TECHNOLOGIES INC.

We have audited the accompanying balance sheets of ChipMOS TECHNOLOGIES INC. as
of December 31, 2002, and the related statements of operations, changes in
shareholders equity, and cash flows for the year then ended, all expressed in
New Taiwan dollars. These financial statements are the responsibility of the
Companys management. Our responsibility is to express an opinion on these
financial statements based on our audits. The financial statements of ChipMOS
TECHNOLOGIES INC. as of December 31, 2000 and 2001, were audited by other
auditors whose reports dated February 2, 2001 and April 24, 2002 respectively,
expressed unqualified opinions on those statements.

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

In our opinion, the 2002 financial statements referred above present fairly, in
all material respects, the financial position of ChipMOS TECHNOLOGIES INC. as
of December 31, 2002, and the results of its operations and its cash flows for
the year then ended in conformity with accounting principles generally accepted
in the Republic of China.

Accounting principles generally accepted in the Republic of China vary in
certain significant respects from accounting principles generally accepted in
the United States of America. The application of the latter would have affected
the determination of net income (loss) for the year ended December 31, 2002,
and the determination of shareholders equity and financial position at
December 31, 2002, to the extent summarized in Note 22.

Moore Stephens
April 18, 2003
Taipei, Taiwan
Republic of China

F-61



---



##### Table of Contents



ChipMOS TECHNOLOGIES INC.

BALANCE SHEETS
December 31, 2001 and 2002
(In Thousands of New Taiwan and U.S. Dollars, Except Par Value)

|                                                                                                                         |                                                                                   |      |             |            |     |  |            |            |  |  |          |         | 
|------------------------------------------------------------------------------------------------------------------------ | --------------------------------------------------------------------------------- | ---- | ----------- | ---------- | --- |  | ---------- | ---------- |  |  | -------- | ------- | 
|                                                                                                                         |                                                                                   |      | December 31
|                                                                                                                         |                                                                                   |      |            
|ASSETS                                                                                                                   |                                                                                   | 2001 |             | 2002      
|                                                                                                                         |                                                                                   |      |             |           
|                                                                                                                         |                                                                                   |      | NT$         |            | NT$ |  | US$       
|                                                                                                                         |                                                                                   |      |             |            |     |  |            |            |  |  | (Note 3) |        
|CURRENT ASSETS                                                                                                           |                                                                                   |      |             |            |     |  |            |            |  |  |          |        
|Cash                                                                                                                     |                                                                                   |      | 1,174,253   |            |     |  | 1,963,381  |            |  |  | 56,257   |        
|Restricted cash and cash equivalents (Note 18)                                                                           |                                                                                   |      | 234,001     |            |     |  | 76,868     |            |  |  | 2,203    |        
|Short-term
investmentsnet (Notes 2 and 4)                                                                               |                                                                                   |      | 969,945     |            |     |  | 874,932    |            |  |  | 25,070   |        
|Notes receivable                                                                                                         |                                                                                   |      | 29,542      |            |     |  | 30,474     |            |  |  | 873      |        
|Accounts
receivablenet of allowance for doubtful receivables of
NT$17,490 in 2001 and NT$17,397 in 2002 (Notes 2 and 5) |                                                                                   |      | 250,709     |            |     |  | 562,424    |            |  |  | 16,115   |        
|Receivables from related parties (Notes 2,5,7 and 17):                                                                   |                                                                                   |      |             |            |     |  |            |            |  |  |          |        
|                                                                                                                         | Notes
and accountsnet of allowance for doubtful receivables of
NT$14,949 in 2002 |      |             | 1,201,281  |     |  |            | 1,104,475  |  |  |          | 31,647  | 
|                                                                                                                         | Others                                                                            |      |             | 106,474    |     |  |            | 169,859    |  |  |          | 4,867   | 
|Other
receivablenet of allowance for doubtful receivables of
NT$12,510 in 2001 and 2002 (Notes 2 and 5)                 |                                                                                   |      | 10,581      |            |     |  | 82,614     |            |  |  | 2,367    |        
|Inventoriesnet (Notes 2 and 6)                                                                                          |                                                                                   |      | 172,254     |            |     |  | 165,378    |            |  |  | 4,739    |        
|Deferred income tax-net (Notes 2 and 16)                                                                                 |                                                                                   |      | 40,748      |            |     |  | 38,467     |            |  |  | 1,102    |        
|Prepaid expenses and other current assets                                                                                |                                                                                   |      | 17,881      |            |     |  | 232,288    |            |  |  | 6,656    |        
|                                                                                                                         |                                                                                   |      |             |            |     |  |            |            |  |  |          |        
|Total Current Assets                                                                                                     |                                                                                   |      | 4,207,669   |            |     |  | 5,301,160  |            |  |  | 151,896  |        
|                                                                                                                         |                                                                                   |      |             |            |     |  |            |            |  |  |          |        
|LONG-TERM INVESTMENTS (Notes 2 and 7)                                                                                    |                                                                                   |      | 271,375     |            |     |  | 1,441,866  |            |  |  | 41,313   |        
|                                                                                                                         |                                                                                   |      |             |            |     |  |            |            |  |  |          |        
|PROPERTY, PLANT AND EQUIPMENT (Notes 2, 8,12 and 13)                                                                     |                                                                                   |      |             |            |     |  |            |            |  |  |          |        
|Cost                                                                                                                     |                                                                                   |      |             |            |     |  |            |            |  |  |          |        
|                                                                                                                         | Buildings and auxiliary equipment                                                 |      |             | 2,533,231  |     |  |            | 2,655,633  |  |  |          | 76,093  | 
|                                                                                                                         | Machinery and equipment                                                           |      |             | 13,392,623 |     |  |            | 13,934,925 |  |  |          | 399,282 | 
|                                                                                                                         | Furniture and fixtures                                                            |      |             | 211,582    |     |  |            | 233,059    |  |  |          | 6,678   | 
|                                                                                                                         | Transportation equipment                                                          |      |             | 9,809      |     |  |            | 10,613     |  |  |          | 304     | 
|                                                                                                                         | Tools                                                                             |      |             | 783,852    |     |  |            | 833,075    |  |  |          | 23,870  | 
|                                                                                                                         | Leasehold improvements                                                            |      |             | 6,702      |     |  |            | 1,238      |  |  |          | 35      | 
|                                                                                                                         |                                                                                   |      |             |            |     |  |            |            |  |  |          |        
|                                                                                                                         | Total cost                                                                        |      |             | 16,937,799 |     |  |            | 17,668,543 |  |  |          | 506,262 | 
|Accumulated depreciation                                                                                                 |                                                                                   |      | (6,527,606  | )          |     |  | (8,911,261 | )          |  |  | (255,337 | )      
|Construction in progress and advance payment                                                                             |                                                                                   |      | 377,259     |            |     |  | 933,011    |            |  |  | 26,734   |        
|                                                                                                                         |                                                                                   |      |             |            |     |  |            |            |  |  |          |        
|Net Property, Plant and Equipment                                                                                        |                                                                                   |      | 10,787,452  |            |     |  | 9,690,293  |            |  |  | 277,659  |        
|                                                                                                                         |                                                                                   |      |             |            |     |  |            |            |  |  |          |        
|INTANGIBLE
ASSETSNET (Notes 2 and 9)                                                                                    |                                                                                   |      | 153,862     |            |     |  | 50,348     |            |  |  | 1,443    |        
|                                                                                                                         |                                                                                   |      |             |            |     |  |            |            |  |  |          |        
|OTHER ASSETS                                                                                                             |                                                                                   |      |             |            |     |  |            |            |  |  |          |        
|Restricted cash and cash equivalents (note 18)                                                                           |                                                                                   |      | 601,624     |            |     |  | 601,744    |            |  |  | 17,242   |        
|Employee dormitory building  net of accumulated depreciation
of NT$23,271 in 2001 and NT$32,367 in 2002 (Note 2)        |                                                                                   |      | 138,765     |            |     |  | 129,978    |            |  |  | 3,724    |        
|Refundable deposits                                                                                                      |                                                                                   |      | 13,796      |            |     |  | 13,839     |            |  |  | 397      |        
|                                                                                                                         |                                                                                   |      |             |            |     |  |            |            |  |  |          |        
|Total Other Assets                                                                                                       |                                                                                   |      | 754,185     |            |     |  | 745,561    |            |  |  | 21,363   |        
|                                                                                                                         |                                                                                   |      |             |            |     |  |            |            |  |  |          |        
|TOTAL ASSETS                                                                                                             |                                                                                   |      | 16,174,543  |            |     |  | 17,229,228 |            |  |  | 493,674  |        
|                                                                                                                         |                                                                                   |      |             |            |     |  |            |            |  |  |          |        

(Forward)

F-62



---



##### Table of Contents



ChipMOS TECHNOLOGIES INC.

BALANCE SHEETS
December 31, 2001 and 2002
(In Thousands of New Taiwan and U.S. Dollars, Except Par Value)

|                                                                                                                |                                                |      |             |          |     |  |            |            |   |  |          |         |  
|--------------------------------------------------------------------------------------------------------------- | ---------------------------------------------- | ---- | ----------- | -------- | --- |  | ---------- | ---------- | - |  | -------- | ------- | -
|                                                                                                                |                                                |      | December 31
|                                                                                                                |                                                |      |            
|LIABILITIES AND SHAREHOLDERS' EQUITY                                                                            |                                                | 2001 |             | 2002     |     |  |            |           
|                                                                                                                |                                                |      |             |          |     |  |            |           
|                                                                                                                |                                                |      | NT$         |          | NT$ |  | US$       
|                                                                                                                |                                                |      |             |          |     |  |            |            |   |  | (Note 3)
|CURRENT LIABILITIES                                                                                             |                                                |      |             |          |     |  |            |            |   |  |          |        
|Bank loans (Note 10)                                                                                            |                                                |      | 1,066,762   |          |     |  | 2,032,631  |            |   |  | 58,241   |        
|Commercial papers (Note 11)                                                                                     |                                                |      |            |          |     |  | 159,427    |            |   |  | 4,568    |        
|Accounts payable                                                                                                |                                                |      | 120,085     |          |     |  | 145,352    |            |   |  | 4,165    |        
|Payables to related parties (Note 17):                                                                          |                                                |      |             |          |     |  |            |            |   |  |          |        
|                                                                                                                | Others                                         |      |             | 2,561    |     |  |            | 3,659      |   |  |          | 105     |  
|Income tax payable (Notes 2 and 16)                                                                             |                                                |      | 35,731      |          |     |  |           |            |   |  |         |        
|Payables to contractors and equipment suppliers                                                                 |                                                |      | 358,757     |          |     |  | 158,750    |            |   |  | 4,549    |        
|Accrued expenses and other current liabilities                                                                  |                                                |      | 254,042     |          |     |  | 373,480    |            |   |  | 10,701   |        
|Current portion of long-term loans (Note 13)                                                                    |                                                |      | 1,180,000   |          |     |  | 352,160    |            |   |  | 10,091   |        
|                                                                                                                |                                                |      |             |          |     |  |            |            |   |  |          |        
|Total Current Liabilities                                                                                       |                                                |      | 3,017,938   |          |     |  | 3,225,459  |            |   |  | 92,420   |        
|                                                                                                                |                                                |      |             |          |     |  |            |            |   |  |          |        
|LONG-TERM LIABILITIES                                                                                           |                                                |      |             |          |     |  |            |            |   |  |          |        
|Long-term bonds payable (Note 12)                                                                               |                                                |      | 1,200,000   |          |     |  | 1,200,000  |            |   |  | 34,384   |        
|Long-term loans (Note 13)                                                                                       |                                                |      | 769,411     |          |     |  | 2,811,435  |            |   |  | 80,557   |        
|                                                                                                                |                                                |      |             |          |     |  |            |            |   |  |          |        
|Total Long-Term Liabilities                                                                                     |                                                |      | 1,969,411   |          |     |  | 4,011,435  |            |   |  | 114,941  |        
|                                                                                                                |                                                |      |             |          |     |  |            |            |   |  |          |        
|OTHER LIABILITIES                                                                                               |                                                |      |             |          |     |  |            |            |   |  |          |        
|Deferred income tax-net (Notes 2 and 16)                                                                        |                                                |      | 155,378     |          |     |  | 231,779    |            |   |  | 6,641    |        
|Accrued pension cost (Notes 2 and 14)                                                                           |                                                |      | 19,206      |          |     |  | 26,194     |            |   |  | 751      |        
|Guarantee deposits                                                                                              |                                                |      | 329         |          |     |  | 461        |            |   |  | 13       |        
|                                                                                                                |                                                |      |             |          |     |  |            |            |   |  |          |        
|Total Other Liabilities                                                                                         |                                                |      | 174,913     |          |     |  | 258,434    |            |   |  | 7,405    |        
|                                                                                                                |                                                |      |             |          |     |  |            |            |   |  |          |        
|Total Liabilities                                                                                               |                                                |      | 5,162,262   |          |     |  | 7,495,328  |            |   |  | 214,766  |        
|                                                                                                                |                                                |      |             |          |     |  |            |            |   |  |          |        
|COMMITMENTS AND CONTINGENCIES (Note 19)                                                                         |                                                |      |             |          |     |  |            |            |   |  |          |        
|SHAREHOLDERS EQUITY (Notes 2 and 15)                                                                           |                                                |      |             |          |     |  |            |            |   |  |          |        
|Capital
stockNT$10 par valueAuthorized970,000 thousand shares
Issued887,227 thousand shares in 2001 and 2002 |                                                |      | 8,872,272   |          |     |  | 8,872,272  |            |   |  | 254,220  |        
|Capital surplus                                                                                                 |                                                |      | 2,090,889   |          |     |  | 2,085,814  |            |   |  | 59,765   |        
|Retained earnings:                                                                                              |                                                |      |             |          |     |  |            |            |   |  |          |        
|                                                                                                                | Appropriated as legal reserve                  |      |             | 424,007  |     |  |            | 424,007    |   |  |          | 12,149  |  
|                                                                                                                | Unappropriated earnings (accumulated deficits) |      |             | (374,200 | )   |  |            | (1,648,057 | ) |  |          | (47,222 | )
|Cumulative translation adjustments                                                                              |                                                |      | (687        | )        |     |  | (734       | )          |   |  | (21      | )      
|Treasury
stock (Note 7)                                                                                         |                                                |      |            |          |     |  | 598        |            |   |  | 17       |        
|                                                                                                                |                                                |      |             |          |     |  |            |            |   |  |          |        
|Total Shareholders Equity                                                                                      |                                                |      | 11,012,281  |          |     |  | 9,733,900  |            |   |  | 278,908  |        
|                                                                                                                |                                                |      |             |          |     |  |            |            |   |  |          |        
|TOTAL LIABILITIES AND SHAREHOLDERS EQUITY                                                                      |                                                |      | 16,174,543  |          |     |  | 17,229,228 |            |   |  | 493,674  |        
|                                                                                                                |                                                |      |             |          |     |  |            |            |   |  |          |        

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

F-63



---



##### Table of Contents



ChipMOS TECHNOLOGIES INC.

STATEMENTS OF OPERATIONS
For the Years Ended December 31, 2000, 2001 and 2002
(In Thousands of New Taiwan and U.S. Dollars, Except Earnings (loss) Per Share)

|                                                                  |  |                        |           |      |  |      |            |     |  |  |           |   |  |          |         |  
|----------------------------------------------------------------- |  | ---------------------- | --------- | ---- |  | ---- | ---------- | --- |  |  | --------- | - |  | -------- | ------- | -
|                                                                  |  | Year Ended December 31
|                                                                  |  |                       
|                                                                  |  | 2000                   |           | 2001 |  | 2002
|                                                                  |  |                        |           |      |  |     
|                                                                  |  | NT$                    |           | NT$  |  | NT$  |            | US$
|                                                                  |  |                        |           |      |  |      |            |     |  |  |           |   |  | (Note 3)
|NET REVENUES (Notes 2 and 17)                                     |  |                        |           |      |  |      |            |     |  |  |           |   |  |          |         |  
|Related parties                                                   |  |                        | 5,311,125 |      |  |      | 3,719,006  |     |  |  | 3,665,384 |   |  |          | 105,025 |  
|Third parties                                                     |  |                        | 2,913,066 |      |  |      | 1,526,089  |     |  |  | 2,860,481 |   |  |          | 81,962  |  
|                                                                  |  |                        |           |      |  |      |            |     |  |  |           |   |  |          |         |  
|Total Net Revenue                                                 |  |                        | 8,224,191 |      |  |      | 5,245,095  |     |  |  | 6,525,865 |   |  |          | 186,987 |  
|                                                                  |  |                        |           |      |  |      |            |     |  |  |           |   |  |          |         |  
|COST OF REVENUES (Note 17)                                        |  |                        |           |      |  |      |            |     |  |  |           |   |  |          |         |  
|Related parties                                                   |  |                        | 3,686,784 |      |  |      | 3,760,067  |     |  |  | 3,004,306 |   |  |          | 86,083  |  
|Third parties                                                     |  |                        | 1,824,208 |      |  |      | 2,269,242  |     |  |  | 3,707,400 |   |  |          | 106,229 |  
|                                                                  |  |                        |           |      |  |      |            |     |  |  |           |   |  |          |         |  
|Total Cost of Revenues                                            |  |                        | 5,510,992 |      |  |      | 6,029,309  |     |  |  | 6,711,706 |   |  |          | 192,312 |  
|                                                                  |  |                        |           |      |  |      |            |     |  |  |           |   |  |          |         |  
|GROSS PROFIT (LOSS)                                               |  |                        | 2,713,199 |      |  |      | (784,214   | )   |  |  | (185,841  | ) |  |          | (5,325  | )
|                                                                  |  |                        |           |      |  |      |            |     |  |  |           |   |  |          |         |  
|OPERATING EXPENSES (Note 17)                                      |  |                        |           |      |  |      |            |     |  |  |           |   |  |          |         |  
|Research and development (Note 2)                                 |  |                        | 357,429   |      |  |      | 408,905    |     |  |  | 326,753   |   |  |          | 9,362   |  
|General and administrative                                        |  |                        | 226,498   |      |  |      | 186,211    |     |  |  | 180,396   |   |  |          | 5,169   |  
|Marketing                                                         |  |                        | 138,007   |      |  |      | 68,018     |     |  |  | 66,898    |   |  |          | 1,917   |  
|                                                                  |  |                        |           |      |  |      |            |     |  |  |           |   |  |          |         |  
|Total Operating Expenses                                          |  |                        | 721,934   |      |  |      | 663,134    |     |  |  | 574,047   |   |  |          | 16,448  |  
|                                                                  |  |                        |           |      |  |      |            |     |  |  |           |   |  |          |         |  
|INCOME (LOSS) FROM OPERATIONS                                     |  |                        | 1,991,265 |      |  |      | (1,447,348 | )   |  |  | (759,888  | ) |  |          | (21,773 | )
|NON-OPERATING INCOME                                              |  |                        |           |      |  |      |            |     |  |  |           |   |  |          |         |  
|Gain on sales of investments (Note 2)                             |  |                        | 99,390    |      |  |      | 232,701    |     |  |  | 50,370    |   |  |          | 1,443   |  
|Rental (Note 17)                                                  |  |                        | 88,828    |      |  |      | 93,491     |     |  |  | 35,473    |   |  |          | 1,017   |  
|Interest                                                          |  |                        | 34,093    |      |  |      | 65,276     |     |  |  | 36,864    |   |  |          | 1,056   |  
|Foreign
exchange gainnet (Note 2)                                |  |                        | 75,146    |      |  |      | 55,626     |     |  |  |          |   |  |          |        |  
|Reversal of allowance for doubtful receivables
(Note 5)           |  |                        |          |      |  |      | 38,835     |     |  |  |          |   |  |          |        |  
|Subsidy income                                                    |  |                        | 9,250     |      |  |      | 26,161     |     |  |  | 8,982     |   |  |          | 257     |  
|Gain on disposal of property, plant and equipment
(Note 2)        |  |                        | 4,108     |      |  |      | 240        |     |  |  | 37,698    |   |  |          | 1,080   |  
|Insurance compensation                                            |  |                        | 101,936   |      |  |      |           |     |  |  |          |   |  |          |        |  
|Reversal of allowance for loss on short-term
investments (Note 2) |  |                        | 658       |      |  |      |           |     |  |  |          |   |  |          |         |  
|Other                                                             |  |                        | 9,047     |      |  |      | 13,387     |     |  |  | 9,964     |   |  |          | 286     |  
|                                                                  |  |                        |           |      |  |      |            |     |  |  |           |   |  |          |         |  
|Total Non-Operating Income                                        |  |                        | 422,456   |      |  |      | 525,717    |     |  |  | 179,351   |   |  |          | 5,139   |  
|                                                                  |  |                        |           |      |  |      |            |     |  |  |           |   |  |          |         |  
|NON-OPERATING EXPENSES                                            |  |                        |           |      |  |      |            |     |  |  |           |   |  |          |         |  
|Interest (Note 8)                                                 |  |                        | 308,405   |      |  |      | 299,136    |     |  |  | 241,096   |   |  |          | 6,908   |  
|Allowance for loss on short-term investments (Note 4)             |  |                        |          |      |  |      |           |     |  |  | 168,604   |   |  |          | 4,831   |  
|Loss
on lease rescissionnet (Note 18)                            |  |                        | 13,533    |      |  |      | 116,622    |     |  |  |          |   |  |          |        |  

(Forward)

F-64



---



##### Table of Contents



|                                                                                                                                       |  |  |           |  |  |  |            |   |  |  |            |   |  |  |         |  
|-------------------------------------------------------------------------------------------------------------------------------------- |  |  | --------- |  |  |  | ---------- | - |  |  | ---------- | - |  |  | ------- | -
|Investments loss recognized by equity
methodnet (Note 2 and 7)                                                                        |  |  | 183,890   |  |  |  | 73,341     |   |  |  | 93,199     |   |  |  | 2,671   |  
|Financing cost                                                                                                                         |  |  | 14,517    |  |  |  | 14,768     |   |  |  | 17,108     |   |  |  | 490     |  
|Loss on disposal of property, plant and equipment
(Note 2)                                                                             |  |  | 2,928     |  |  |  | 1,079      |   |  |  | 640        |   |  |  | 18      |  
|Foreign
exchange lossnet (Note 2)                                                                                                     |  |  |          |  |  |  |           |   |  |  | 60,846     |   |  |  | 1,744   |  
|Other                                                                                                                                  |  |  | 18,041    |  |  |  | 50,147     |   |  |  | 12,887     |   |  |  | 369     |  
|                                                                                                                                       |  |  |           |  |  |  |            |   |  |  |            |   |  |  |         |  
|Total Non-Operating Expenses                                                                                                           |  |  | 541,314   |  |  |  | 555,093    |   |  |  | 594,380    |   |  |  | 17,031  |  
|                                                                                                                                       |  |  |           |  |  |  |            |   |  |  |            |   |  |  |         |  
|INCOME (LOSS) BEFORE INCOME TAX                                                                                                        |  |  | 1,872,407 |  |  |  | (1,476,724 | ) |  |  | (1,174,917 | ) |  |  | (33,665 | )
|INCOME TAX EXPENSE (Notes 2 and 16)                                                                                                    |  |  | 333,386   |  |  |  | 32,340     |   |  |  | 97,862     |   |  |  | 2,804   |  
|                                                                                                                                       |  |  |           |  |  |  |            |   |  |  |            |   |  |  |         |  
|NET INCOME (LOSS)                                                                                                                      |  |  | 1,539,021 |  |  |  | (1,509,064 | ) |  |  | (1,272,779 | ) |  |  | (36,469 | )
|                                                                                                                                       |  |  |           |  |  |  |            |   |  |  |            |   |  |  |         |  
|EARNINGS (LOSS) PER SHARE                                                                                                              |  |  |           |  |  |  |            |   |  |  |            |   |  |  |         |  
|Based on weighted-average number of shares
outstanding of 769,664 thousand shares in 2000
and 887,227 thousand shares in 2001 and 2002 |  |  | 2.00      |  |  |  | (1.70      | ) |  |  | (1.43      | ) |  |  | (0.04   | )
|                                                                                                                                       |  |  |           |  |  |  |            |   |  |  |            |   |  |  |         |  
|Based on weighted-average number of shares
outstandingretroactively adjusted                                                          |  |  | 1.87      |  |  |  | (1.70      | ) |  |  |            |   |  |  |         |  
|                                                                                                                                       |  |  |           |  |  |  |            |   |  |  |            |   |  |  |         |  

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

F-65



---



##### Table of Contents



ChipMOS TECHNOLOGIES INC.

STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
For the Years Ended December 31, 2000, 2001 and 2002
(In Thousands of New Taiwan Dollars, Except Number of Shares)



|                                                              |                                             |                                    |         |        |                      |  |                                  |         |         |  |            |   |             |   |           |   |     |  |       |   |   |  |           |   |          |   | 
|------------------------------------------------------------- | ------------------------------------------- | ---------------------------------- | ------- | ------ | -------------------- |  | -------------------------------- | ------- | ------- |  | ---------- | - | ----------- | - | --------- | - | --- |  | ----- | - | - |  | --------- | - | -------- | - | 
|                                                              |                                             |                                    |         |        | CAPITAL STOCK ISSUED |  | CAPITAL SURPLUS (Notes 2 and 15)
|                                                              |                                             |                                    |         |        |                      |  |                                 
|                                                              |                                             |                                    |         |        |                      |  |                                  |         |         |  |            |   | Additional  |   | Gain on   |   |     |  |      
|                                                              |                                             |                                    |         |        | Shares               |  |                                  |         |         |  | Paid-in    |   | Disposal of |   | Long-term |   |     |  |      
|                                                              |                                             |                                    |         |        | (Thousand)           |  | Amount                           |         | Capital |  | Properties |   | investments |   | Total    
|                                                              |                                             |                                    |         |        |                      |  |                                  |         |         |  |            |   |             |   |          
|                                                              |                                             |                                    |         |        |                      |  |                                  |         | NT$     |  | NT$        |   | NT$         |   | NT$       |   | NT$
|BALANCE, JANUARY 1, 2000                                      |                                             |                                    | 646,929 |        |                      |  | 6,469,289                        |         |         |  |           |   |             |   | 3,051     |   |     |  |      |   |   |  | 3,051     |  
|Appropriation of 1999 earnings:                               |                                             |                                    |         |        |                      |  |                                  |         |         |  |            |   |             |   |           |   |     |  |       |   |   |  |           |  
|                                                              | Legal reserve                               |                                    |         |       |                      |  |                                  |        |         |  |            |  |             |   |           |  |     |  |       |  |   |  |           |  |         
|                                                              | Remuneration to directors and supervisors   |                                    |         |       |                      |  |                                  |        |         |  |            |  |             |   |           |  |     |  |       |  |   |  |           |  |         
|                                                              | Bonus
to employeesstock                    |                                    |         | 8,513  |                      |  |                                  | 85,137  |         |  |            |  |             |   |           |  |     |  |       |  |   |  |           |  |         
|                                                              | Stock
dividends11.6%                       |                                    |         | 75,044 |                      |  |                                  | 750,437 |         |  |            |  |             |   |           |  |     |  |       |  |   |  |           |  |         
|Issuance of capital stock, August 10, 2000                    |                                             |                                    | 100,000 |        |                      |  | 1,000,000                        |         |         |  | 2,500,000  |   |             |   |          |   |     |  |      |   |   |  | 2,500,000 |  
|Net income in 2000                                            |                                             |                                    |        |        |                      |  |                                 |         |         |  |           |   |             |   |          |   |     |  |      |   |   |  |          |  
|Translation adjustments                                       |                                             |                                    |        |        |                      |  |                                 |         |         |  |           |   |             |   |          |   |     |  |      |   |   |  |          |  
|Gain on disposal of property, plant and equipment             |                                             |                                    |        |        |                      |  |                                 |         |         |  |           |   |             |   | 3,081     |   |     |  |      |   |   |  | 3,081     |  
|Unrealized loss on long-term investments                      |                                             |                                    |        |        |                      |  |                                 |         |         |  |           |   |             |   |          |   |     |  |      |   |   |  |          |  
|                                                              |                                             |                                    |         |        |                      |  |                                  |         |         |  |            |   |             |   |           |   |     |  |       |   |   |  |           |  
|BALANCE, DECEMBER 31, 2000                                    |                                             |                                    | 830,486 |        |                      |  | 8,304,863                        |         |         |  | 2,500,000  |   |             |   | 6,132     |   |     |  |      |   |   |  | 2,506,132 |  
|Appropriation of 2000 earnings:                               |                                             |                                    |         |        |                      |  |                                  |         |         |  |            |   |             |   |           |   |     |  |       |   |   |  |           |  
|                                                              | Legal reserve                               |                                    |         |       |                      |  |                                  |        |         |  |            |  |             |   |           |  |     |  |       |  |   |  |           |  |         
|                                                              | Remuneration to directors and supervisors   |                                    |         |       |                      |  |                                  |        |         |  |            |  |             |   |           |  |     |  |       |  |   |  |           |  |         
|                                                              | Bonus to employees                          |                                   
|                                                              |                                             | Cash                               |         |        |                     |  |                                  |         |        |  |            |   |            |   |           |   |    |  |       |   |  |  |           |   |         |  
|                                                              |                                             | Stock                              |         |        | 6,912                |  |                                  |         | 69,117  |  |            |   |            |   |           |   |    |  |       |   |  |  |           |   |         |  
|                                                              | Stock
dividends1% appropriated by earnings |                                    |         | 8,305  |                      |  |                                  | 83,049  |         |  |            |  |             |   |           |  |     |  |       |  |   |  |           |  |         
|                                                              |                                             | 5% appropriated by capital surplus |         |        | 41,524               |  |                                  |         | 415,243 |  |            |   | (415,243    | ) |           |   |    |  |       |   |  |  |           |   | (415,243 | )
|Net loss in 2001                                              |                                             |                                    |        |        |                      |  |                                 |         |         |  |           |   |             |   |          |   |     |  |      |   |   |  |          |  
|Translation adjustments                                       |                                             |                                    |        |        |                      |  |                                 |         |         |  |           |   |             |   |          |   |     |  |      |   |   |  |          |  
|Reversal
of the unrealized loss on long-term investments      |                                             |                                    |        |        |                      |  |                                 |         |         |  |           |   |             |   |          |   |     |  |      |   |   |  |          |  
|                                                              |                                             |                                    |         |        |                      |  |                                  |         |         |  |            |   |             |   |           |   |     |  |       |   |   |  |           |  
|BALANCE, DECEMBER 31, 2001                                    |                                             |                                    | 887,227 |        |                      |  | 8,872,272                        |         |         |  | 2,084,757  |   |             |   | 6,132     |   |     |  |      |   |   |  | 2,090,889 |  
|Net loss in 2002                                              |                                             |                                    |        |        |                      |  |                                 |         |         |  |           |   |             |   |          |   |     |  |      |   |   |  |          |  
|Adjustment
of equity method for long-term investments         |                                             |                                    |        |        |                      |  |                                 |         |         |  |           |   |             |   |          |   |     |  | 1057  |   |   |  | 1,057     |  
|Reversal of gain on disposal of property, plant and
equipment |                                             |                                    |        |        |                      |  |                                 |         |         |  |           |   |             |   | (6,132    | ) |     |  |      |   |   |  | (6,132    | )
|Translation adjustments                                       |                                             |                                    |        |        |                      |  |                                 |         |         |  |           |   |             |   |          |   |     |  |      |   |   |  |          |  
|                                                              |                                             |                                    |         |        |                      |  |                                  |         |         |  |            |   |             |   |           |   |     |  |       |   |   |  |           |  
|BALANCE, DECEMBER 31, 2002                                    |                                             |                                    | 887,227 |        |                      |  | 8,872,272                        |         |         |  | 2,084,757  |   |             |   |          |   |     |  | 1,057 |   |   |  | 2,085,814 |  
|                                                              |                                             |                                    |         |        |                      |  |                                  |         |         |  |            |   |             |   |           |   |     |  |       |   |   |  |           |  

[Additional columns below]

[Continued from above table, first column(s) repeated]

|                                                              |                                             |       |                                    |         |                                    |   |              |          |                |   |            |          |         |   | 
|------------------------------------------------------------- | ------------------------------------------- | ----- | ---------------------------------- | ------- | ---------------------------------- | - | ------------ | -------- | -------------- | - | ---------- | -------- | ------- | - | 
|                                                              |                                             |       |                                    |         | RETAINED EARNINGS (Notes 2 and 15)
|                                                              |                                             |       |                                    |         |                                   
|                                                              |                                             |       |                                    |         |                                    |   |              |          | Unappropriated |   |            |          |        
|                                                              |                                             |       |                                    |         |                                    |   |              |          | Earnings       |   |            |          |        
|                                                              |                                             |       |                                    |         | Legal                              |   | (Accumulated |          |                |   |           
|                                                              |                                             |       |                                    |         | Reserve                            |   | Deficits)    |          | Total         
|                                                              |                                             |       |                                    |         |                                    |   |              |          |               
|                                                              |                                             |       |                                    |         | NT$                                |   | NT$          |          | NT$           
|BALANCE, JANUARY 1, 2000                                      |                                             |       | 175,816                            |         |                                    |   | 948,646      |          |                |   | 1,124,462  |         
|Appropriation of 1999 earnings:                               |                                             |       |                                    |         |                                    |   |              |          |                |   |            |         
|                                                              | Legal reserve                               |       |                                    | 94,597  |                                    |   |              | (94,597  | )              |   |            |         |        
|                                                              | Remuneration to directors and supervisors   |       |                                    |        |                                    |   |              | (17,027  | )              |   |            | (17,027  | )      
|                                                              | Bonus
to employeesstock                    |       |                                    |        |                                    |   |              | (85,137  | )              |   |            | (85,137  | )      
|                                                              | Stock
dividends11.6%                       |       |                                    |        |                                    |   |              | (750,437 | )              |   |            | (750,437 | )      
|Issuance of capital stock, August 10, 2000                    |                                             |       |                                   |         |                                    |   |             |          |                |   |           |         
|Net income in 2000                                            |                                             |       |                                   |         |                                    |   | 1,539,021    |          |                |   | 1,539,021  |         
|Translation adjustments                                       |                                             |       |                                   |         |                                    |   |             |          |                |   |           |         
|Gain on disposal of property, plant and equipment             |                                             |       |                                   |         |                                    |   | (3,081       | )        |                |   | (3,081     | )       
|Unrealized loss on long-term investments                      |                                             |       |                                   |         |                                    |   |             |          |                |   |           |         
|                                                              |                                             |       |                                    |         |                                    |   |              |          |                |   |            |         
|BALANCE, DECEMBER 31, 2000                                    |                                             |       | 270,413                            |         |                                    |   | 1,537,388    |          |                |   | 1,807,801  |         
|Appropriation of 2000 earnings:                               |                                             |       |                                    |         |                                    |   |              |          |                |   |            |         
|                                                              | Legal reserve                               |       |                                    | 153,594 |                                    |   |              | (153,594 | )              |   |            |         |        
|                                                              | Remuneration to directors and supervisors   |       |                                    |        |                                    |   |              | (27,647  | )              |   |            | (27,647  | )      
|                                                              | Bonus to employees                          |      
|                                                              |                                             | Cash  |                                    |         |                                   |   |              |          | (69,117        | ) |            |          | (69,117 | )
|                                                              |                                             | Stock |                                    |         |                                   |   |              |          | (69,117        | ) |            |          | (69,117 | )
|                                                              | Stock
dividends1% appropriated by earnings |       |                                    |        |                                    |   |              | (83,049  | )              |   |            | (83,049  | )      
|                                                              |                                             |       | 5% appropriated by capital surplus |         |                                    |  |              |          |                |  |            |          |         |  | 
|Net loss in 2001                                              |                                             |       |                                   |         |                                    |   | (1,509,064   | )        |                |   | (1,509,064 | )       
|Translation adjustments                                       |                                             |       |                                   |         |                                    |   |             |          |                |   |           |         
|Reversal
of the unrealized loss on long-term investments      |                                             |       |                                   |         |                                    |   |             |          |                |   |           |         
|                                                              |                                             |       |                                    |         |                                    |   |              |          |                |   |            |         
|BALANCE, DECEMBER 31, 2001                                    |                                             |       | 424,007                            |         |                                    |   | (374,200     | )        |                |   | 49,807     |         
|Net loss in 2002                                              |                                             |       |                                   |         |                                    |   | (1,272,779   | )        |                |   | (1,272,779 | )       
|Adjustment
of equity method for long-term investments         |                                             |       |                                   |         |                                    |   | (7,210       | )        |                |   | (7,210     | )       
|Reversal of gain on disposal of property, plant and
equipment |                                             |       |                                   |         |                                    |   | 6,132        |          |                |   | 6,132      |         
|Translation adjustments                                       |                                             |       |                                   |         |                                    |   |             |          |                |   |           |         
|                                                              |                                             |       |                                    |         |                                    |   |              |          |                |   |            |         
|BALANCE, DECEMBER 31, 2002                                    |                                             |       | 424,007                            |         |                                    |   | (1,648,057   | )        |                |   | (1,224,050 | )       
|                                                              |                                             |       |                                    |         |                                    |   |              |          |                |   |            |         

[Additional columns below]

[Continued from above table, first column(s) repeated]

|                                                              |                                             |  |                                    |   |            |   |             |   |          |   |               |   |       |   |            |         |         |   | 
|------------------------------------------------------------- | ------------------------------------------- |  | ---------------------------------- | - | ---------- | - | ----------- | - | -------- | - | ------------- | - | ----- | - | ---------- | ------- | ------- | - | 
|                                                              |                                             |  |                                    |   | UNREALIZED |   |             |   |          |   |               |   |       |   |            |         |        
|                                                              |                                             |  |                                    |   | LOSS ON    |   | CUMULATIVE  |   |          |   |               |   |       |   |           
|                                                              |                                             |  |                                    |   | LONG-TERM  |   | TRANSLATION |   |          |   |               |   | TOTAL
|                                                              |                                             |  |                                    |   | INVESTMENT |   | ADJUSTMENT  |   | TREASURY |   | SHAREHOLDERS'
|                                                              |                                             |  |                                    |   | (Note2)    |   | (Note 2)    |   | STOCK    |   | EQUITY       
|                                                              |                                             |  |                                    |   |            |   |             |   |          |   |              
|                                                              |                                             |  |                                    |   | NT$        |   | NT$         |   | NT$      |   | NT$          
|BALANCE, JANUARY 1, 2000                                      |                                             |  |                                   |   |            |   | 47          |   |          |   |              |   |       |   | 7,596,849  |        
|Appropriation of 1999 earnings:                               |                                             |  |                                    |   |            |   |             |   |          |   |               |   |       |   |            |        
|                                                              | Legal reserve                               |  |                                    |  |            |   |             |  |          |   |               |  |       |   |            |        |        
|                                                              | Remuneration to directors and supervisors   |  |                                    |  |            |   |             |  |          |   |               |  |       |   |            | (17,027 | )      
|                                                              | Bonus
to employeesstock                    |  |                                    |  |            |   |             |  |          |   |               |  |       |   |            |        |        
|                                                              | Stock
dividends11.6%                       |  |                                    |  |            |   |             |  |          |   |               |  |       |   |            |        |        
|Issuance of capital stock, August 10, 2000                    |                                             |  |                                   |   |            |   |            |   |          |   |              |   |       |   | 3,500,000  |        
|Net income in 2000                                            |                                             |  |                                   |   |            |   |            |   |          |   |              |   |       |   | 1,539,021  |        
|Translation adjustments                                       |                                             |  |                                   |   |            |   | (343        | ) |          |   |              |   |       |   | (343       | )      
|Gain on disposal of property, plant and equipment             |                                             |  |                                   |   |            |   |            |   |          |   |              |   |       |   |           |        
|Unrealized loss on long-term investments                      |                                             |  | (55,382                            | ) |            |   |            |   |          |   |              |   |       |   | (55,382    | )      
|                                                              |                                             |  |                                    |   |            |   |             |   |          |   |               |   |       |   |            |        
|BALANCE, DECEMBER 31, 2000                                    |                                             |  | (55,382                            | ) |            |   | (296        | ) |          |   |              |   |       |   | 12,563,118 |        
|Appropriation of 2000 earnings:                               |                                             |  |                                    |   |            |   |             |   |          |   |               |   |       |   |            |        
|                                                              | Legal reserve                               |  |                                    |  |            |   |             |  |          |   |               |  |       |   |            |        |        
|                                                              | Remuneration to directors and supervisors   |  |                                    |  |            |   |             |  |          |   |               |  |       |   |            | (27,647 | )      
|                                                              | Bonus to employees                          |  |                                   
|                                                              | Cash                                        |  |                                    |   |           |   |             |   |         |   |               |   |      |   |            |         | (69,117 | )
|                                                              | Stock                                       |  |                                    |   |           |   |             |   |         |   |               |   |      |   |            |         |        |  
|                                                              | Stock
dividends1% appropriated by earnings |  |                                    |  |            |   |             |  |          |   |               |  |       |   |            |        |        
|                                                              |                                             |  | 5% appropriated by capital surplus |   |            |  |             |   |          |  |               |   |       |  |            |         |         |  | 
|Net loss in 2001                                              |                                             |  |                                   |   |            |   |            |   |          |   |              |   |       |   | (1,509,064 | )      
|Translation adjustments                                       |                                             |  |                                   |   |            |   | (391        | ) |          |   |              |   |       |   | (391       | )      
|Reversal
of the unrealized loss on long-term investments      |                                             |  | 55,382                             |   |            |   |            |   |          |   |              |   |       |   | 55,382     |        
|                                                              |                                             |  |                                    |   |            |   |             |   |          |   |               |   |       |   |            |        
|BALANCE, DECEMBER 31, 2001                                    |                                             |  |                                   |   |            |   | (687        | ) |          |   |              |   |       |   | 11,012,281 |        
|Net loss in 2002                                              |                                             |  |                                   |   |            |   |            |   |          |   |              |   |       |   | (1,272,779 | )      
|Adjustment
of equity method for long-term investments         |                                             |  |                                   |   |            |   |            |   |          |   | 598           |   |       |   | (5,555     | )      
|Reversal of gain on disposal of property, plant and
equipment |                                             |  |                                   |   |            |   |            |   |          |   |              |   |       |   |           |        
|Translation adjustments                                       |                                             |  |                                   |   |            |   | (47         | ) |          |   |              |   |       |   | (47        | )      
|                                                              |                                             |  |                                    |   |            |   |             |   |          |   |               |   |       |   |            |        
|BALANCE, DECEMBER 31, 2002                                    |                                             |  |                                   |   |            |   | (734        | ) |          |   | 598           |   |       |   | 9,733,900  |        
|                                                              |                                             |  |                                    |   |            |   |             |   |          |   |               |   |       |   |            |        

F-66



---



##### Table of Contents



ChipMOS TECHNOLOGIES INC.
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2000, 2001 and 2002
(In Thousands of New Taiwan and U.S. Dollars)

|                                                                                        |  |                                                                |            |                                  |            |                        |            |      |            |      |            |          |            |   |          |   |         |   |        |  
|--------------------------------------------------------------------------------------- |  | -------------------------------------------------------------- | ---------- | -------------------------------- | ---------- | ---------------------- | ---------- | ---- | ---------- | ---- | ---------- | -------- | ---------- | - | -------- | - | ------- | - | ------ | -
|                                                                                        |  |                                                                |            |                                  |            | Year Ended December 31
|                                                                                        |  |                                                                |            |                                  |            |                       
|                                                                                        |  |                                                                |            |                                  |            | 2000                   |            | 2001 |            | 2002
|                                                                                        |  |                                                                |            |                                  |            |                        |            |      |            |     
|                                                                                        |  |                                                                |            |                                  |            | NT$                    |            | NT$  |            | NT$  |            | US$     
|                                                                                        |  |                                                                |            |                                  |            |                        |            |      |            |      |            | (Note 3)
|CASH FLOWS FROM OPERATING ACTIVITIES                                                    |  |                                                                |            |                                  |            |                        |            |      |            |      |            |          |            |   |          |  
|Net income (loss)                                                                       |  |                                                                | 1,539,021  |                                  |            |                        | (1,509,064 | )    |            |      | (1,272,779 | )        |            |   | (36,469  | )
|Adjustment to reconcile net income (loss) to net cash
provided by operating activities: |  |                                                                |            |                                  |            |                        |            |      |            |      |            |          |            |   |          |  
|                                                                                        |  | Depreciation                                                   |            |                                  | 1,824,888  |                        |            |      | 2,624,043  |      |            |          | 2,688,374  |   |          |   | 77,031  |  
|                                                                                        |  | Amortization                                                   |            |                                  | 187,817    |                        |            |      | 189,792    |      |            |          | 129,901    |   |          |   | 3,722   |  
|                                                                                        |  | Investment
loss recognized by equity method  net              |            |                                  | 183,890    |                        |            |      | 73,341     |      |            |          | 93,199     |   |          |   | 2,671   |  
|                                                                                        |  | Allowance for loss on short-term investments                   |            |                                  |           |                        |            |      |           |      |            |          | 168,604    |   |          |   | 4,831   |  
|                                                                                        |  | Loss (gain) on disposal of property, plant
and equipment  net |            |                                  | (1,180     | )                      |            |      | 839        |      |            |          | (37,058    | ) |          |   | (1,062  | )
|                                                                                        |  | Deferred income tax  net                                      |            |                                  | 270,608    |                        |            |      | (5,240     | )    |            |          | 78,682     |   |          |   | 2,255   |  
|                                                                                        |  | Accrued pension cost                                           |            |                                  | 7,910      |                        |            |      | 2,550      |      |            |          | 6,988      |   |          |   | 200     |  
|                                                                                        |  | Changes in operating assets and liabilities:                   |            |                                  |            |                        |            |      |            |      |            |          |            |   |          |   |         |  
|                                                                                        |  |                                                                |            | Notes receivable                 |            |                        | 211,317    |      |            |      | (14,344    | )        |            |   | (932     | ) |         |   | (27    | )
|                                                                                        |  |                                                                |            | Accounts receivable              |            |                        | (399,987   | )    |            |      | 851,102    |          |            |   | (311,715 | ) |         |   | (8,932 | )
|                                                                                        |  |                                                                |            | Receivables
from related parties
|                                                                                        |  |                                                                |            | Notes and accounts               |            |                        | 362,121    |      |            |      | (330,059   | )        |            |   | 96,806   |   |         |   | 2,774  |  
|                                                                                        |  |                                                                |            | Other                            |            |                        | (63,313    | )    |            |      | (42,130    | )        |            |   | (61,630  | ) |         |   | (1,766 | )
|                                                                                        |  | Other receivables                                              |            |                                  | 17,473     |                        |            |      | 7,524      |      |            |          | (72,033    | ) |          |   | (2,064  | )
|                                                                                        |  | Inventories                                                    |            |                                  | (111,221   | )                      |            |      | 152,944    |      |            |          | 6,876      |   |          |   | 197     |  
|                                                                                        |  | Prepaid expenses and other current assets                      |            |                                  | 1,154      |                        |            |      | 38,443     |      |            |          | (214,406   | ) |          |   | (6,143  | )
|                                                                                        |  | Accounts payable                                               |            |                                  | 45,960     |                        |            |      | (96,503    | )    |            |          | 25,267     |   |          |   | 724     |  
|                                                                                        |  | Payables to related parties                                    |            |                                  |            |                        |            |      |            |      |            |          |            |   |          |   |         |  
|                                                                                        |  |                                                                |            | Trade                            |            |                        | (72,805    | )    |            |      | (11,526    | )        |            |   |         |   |         |   |       |  
|                                                                                        |  |                                                                |            | Other                            |            |                        | (357       | )    |            |      | (449       | )        |            |   | 1,098    |   |         |   | 31     |  
|                                                                                        |  | Income tax payable                                             |            |                                  | 55,219     |                        |            |      | (25,831    | )    |            |          | (35,731    | ) |          |   | (1,024  | )
|                                                                                        |  | Accrued expenses and other current liabilities                 |            |                                  | 244,343    |                        |            |      | (199,601   | )    |            |          | 119,438    |   |          |   | 3,422   |  
|                                                                                        |  |                                                                |            |                                  |            |                        |            |      |            |      |            |          |            |   |          |  
|Net Cash Provided by Operating Activities                                               |  |                                                                | 4,302,858  |                                  |            |                        | 1,705,831  |      |            |      | 1,408,949  |          |            |   | 40,371   |  
|                                                                                        |  |                                                                |            |                                  |            |                        |            |      |            |      |            |          |            |   |          |  
|CASH FLOWS FROM INVESTING ACTIVITIES                                                    |  |                                                                |            |                                  |            |                        |            |      |            |      |            |          |            |   |          |  
|Decrease (increase) in restricted cash and cash equivalents                             |  |                                                                | (28,997    | )                                |            |                        | (801,587   | )    |            |      | 157,013    |          |            |   | 4,499    |  
|Decrease (increase) in short-term investments                                           |  |                                                                | (1,260,198 | )                                |            |                        | 1,078,262  |      |            |      | (73,600    | )        |            |   | (2,109   | )
|Proceeds from sales of:                                                                 |  |                                                                |            |                                  |            |                        |            |      |            |      |            |          |            |   |          |  
|                                                                                        |  | Long-term investments                                          |            |                                  | 100        |                        |            |      |           |      |            |          |           |   |          |   |        |  
|                                                                                        |  | Property, plant and equipment                                  |            |                                  | 719,626    |                        |            |      | 2,981      |      |            |          | 218,757    |   |          |   | 6,268   |  
|Acquisitions of:                                                                        |  |                                                                |            |                                  |            |                        |            |      |            |      |            |          |            |   |          |  
|                                                                                        |  | Long-term investments                                          |            |                                  | (360,496   | )                      |            |      | (10,698    | )    |            |          | (1,271,038 | ) |          |   | (36,420 | )
|                                                                                        |  | Property, plant and equipment                                  |            |                                  | (6,562,164 | )                      |            |      | (1,662,568 | )    |            |          | (1,963,825 | ) |          |   | (56,270 | )
|                                                                                        |  | Intangible assets                                              |            |                                  | (36,400    | )                      |            |      | (22,282    | )    |            |          | (26,387    | ) |          |   | (756    | )
|                                                                                        |  | Employee dormitory building                                    |            |                                  | (2,361     | )                      |            |      | (14,870    | )    |            |          | (310       | ) |          |   | (9      | )
|Decrease (increase) in refundable deposits                                              |  |                                                                | (14,642    | )                                |            |                        | 30,813     |      |            |      | (43        | )        |            |   | (1       | )
|                                                                                        |  |                                                                |            |                                  |            |                        |            |      |            |      |            |          |            |   |          |  
|Net Cash Used in Investing Activities                                                   |  |                                                                | (7,545,532 | )                                |            |                        | (1,399,949 | )    |            |      | (2,959,433 | )        |            |   | (84,798  | )
|                                                                                        |  |                                                                |            |                                  |            |                        |            |      |            |      |            |          |            |   |          |  
|(Forward)                                                                               |  |                                                                |            |                                  |            |                        |            |      |            |      |            |          |            |   |          |  

F-67



---



##### Table of Contents



|                                                    |                                                                                                      |  |                                                                        |           |   |                        |           |            |   |         |           |           |  |           |        |        |  |        |  | 
|--------------------------------------------------- | ---------------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------- | --------- | - | ---------------------- | --------- | ---------- | - | ------- | --------- | --------- |  | --------- | ------ | ------ |  | ------ |  | 
|                                                    |                                                                                                      |  |                                                                        |           |   | Year Ended December 31
|                                                    |                                                                                                      |  |                                                                        |           |   |                       
|                                                    |                                                                                                      |  |                                                                        |           |   | 2000                   |           | 2001       |   | 2002   
|                                                    |                                                                                                      |  |                                                                        |           |   |                        |           |            |   |        
|                                                    |                                                                                                      |  |                                                                        |           |   | NT$                    |           | NT$        |   | NT$     |           | US$      
|                                                    |                                                                                                      |  |                                                                        |           |   |                        |           |            |   |         |           | (Note 3) 
|CASH FLOWS FROM FINANCING ACTIVITIES                |                                                                                                      |  |                                                                        |           |   |                        |           |            |   |         |           |           |  |           |        |       
|Payments of:                                        |                                                                                                      |  |                                                                        |           |   |                        |           |            |   |         |           |           |  |           |        |       
|                                                    | Bank loans                                                                                           |  |                                                                        | (768,440  | ) |                        |           |           |   |         |           |          |  |           |        |       | 
|                                                    | Long-term loans                                                                                      |  |                                                                        |          |   |                        |           | (1,052,339 | ) |         |           |          |  |           |        |       | 
|Proceeds from:                                      |                                                                                                      |  |                                                                        |           |   |                        |           |            |   |         |           |           |  |           |        |       
|                                                    | Bank loans                                                                                           |  |                                                                        |          |   |                        |           | 833,144    |   |         |           | 965,869   |  |           |        | 27,675 | 
|                                                    | Commercial papers                                                                                    |  |                                                                        |          |   |                        |           |           |   |         |           | 159,427   |  |           |        | 4,568  | 
|                                                    | Long-term loans                                                                                      |  |                                                                        | 367,750   |   |                        |           |           |   |         |           | 1,214,184 |  |           |        | 34,791 | 
|                                                    | Long-term bonds payable                                                                              |  |                                                                        | 1,200,000 |   |                        |           |           |   |         |           |          |  |           |        |       | 
|                                                    | Issuance of capital stock                                                                            |  |                                                                        | 3,500,000 |   |                        |           |           |   |         |           |          |  |           |        |       | 
|Increase (decrease) in guarantee deposits           |                                                                                                      |  | 67                                                                     |           |   |                        | (655      | )          |   |         | 132       |           |  |           | 4      |       
|Remuneration paid to directors and supervisors      |                                                                                                      |  | (17,027                                                                | )         |   |                        | (27,647   | )          |   |         |          |           |  |           |       |       
|Bonus paid to employees                             |                                                                                                      |  |                                                                       |           |   |                        | (69,117   | )          |   |         |          |           |  |           |       |       
|                                                    |                                                                                                      |  |                                                                        |           |   |                        |           |            |   |         |           |           |  |           |        |       
|Net Cash Provided by (Used in) Financing Activities |                                                                                                      |  | 4,282,350                                                              |           |   |                        | (316,614  | )          |   |         | 2,339,612 |           |  |           | 67,038 |       
|                                                    |                                                                                                      |  |                                                                        |           |   |                        |           |            |   |         |           |           |  |           |        |       
|NET INCREASE (DECREASE) IN CASH                     |                                                                                                      |  | 1,039,676                                                              |           |   |                        | (10,732   | )          |   |         | 789,128   |           |  |           | 22,611 |       
|CASH, BEGINNING OF THE YEAR                         |                                                                                                      |  | 145,309                                                                |           |   |                        | 1,184,985 |            |   |         | 1,174,253 |           |  |           | 33,646 |       
|                                                    |                                                                                                      |  |                                                                        |           |   |                        |           |            |   |         |           |           |  |           |        |       
|CASH, END OF THE YEAR                               |                                                                                                      |  | 1,184,985                                                              |           |   |                        | 1,174,253 |            |   |         | 1,963,381 |           |  |           | 56,257 |       
|                                                    |                                                                                                      |  |                                                                        |           |   |                        |           |            |   |         |           |           |  |           |        |       
|SUPPLEMENTAL INFORMATION                            |                                                                                                      |  |                                                                        |           |   |                        |           |            |   |         |           |           |  |           |        |       
|                                                    | Income tax paid                                                                                      |  |                                                                        | 7,782     |   |                        |           | 63,411     |   |         |           | 56,766    |  |           |        | 1,627  | 
|                                                    |                                                                                                      |  |                                                                        |           |   |                        |           |            |   |         |           |           |  |           |        |       
|                                                    | Interest paid (excluding the amounts of NT$82,548
capitalized in 2000)                               |  |                                                                        | 261,388   |   |                        |           | 367,495    |   |         |           | 243,652   |  |           |        | 6,981  | 
|                                                    |                                                                                                      |  |                                                                        |           |   |                        |           |            |   |         |           |           |  |           |        |       
|NONCASH INVESTING AND FINANCING ACTIVITIES          |                                                                                                      |  |                                                                        |           |   |                        |           |            |   |         |           |           |  |           |        |       
|                                                    | Current portion of long-term loans                                                                   |  |                                                                        | 1,076,250 |   |                        |           | 1,180,000  |   |         |           | 352,160   |  |           |        | 10,091 | 
|                                                    |                                                                                                      |  |                                                                        |           |   |                        |           |            |   |         |           |           |  |           |        |       
|                                                    | Credit balances of long-term investments presented as
part of other receivables from related parties |  |                                                                        | 12,807    |   |                        |           | 11,504     |   |         |           | 9,749     |  |           |        | 279    | 
|                                                    |                                                                                                      |  |                                                                        |           |   |                        |           |            |   |         |           |           |  |           |        |       
|PARTIAL CASH PAID FOR INVESTING ACTIVITIES          |                                                                                                      |  |                                                                        |           |   |                        |           |            |   |         |           |           |  |           |        |       
|                                                    | Cash paid for acquisition of property, plant and equipment:                                          |  |                                                                        |           |   |                        |           |            |   |         |           |           |  |           |        |        | 
|                                                    |                                                                                                      |  | Total acquisitions                                                     |           |   | 7,016,998              |           |            |   | 982,932 |           |           |  | 1,763,818 |        |        |  | 50,539 | 
|                                                    |                                                                                                      |  | Decrease (increase) in payables to contractors and
equipment suppliers |           |   | (454,834               | )         |            |   | 679,636 |           |           |  | 200,007   |        |        |  | 5,731  | 
|                                                    |                                                                                                      |  |                                                                        |           |   |                        |           |            |   |         |           |           |  |           |        |       
|                                                    |                                                                                                      |  | 6,562,164                                                              |           |   |                        | 1,662,568 |            |   |         | 1,963,825 |           |  |           | 56,270 |       
|                                                    |                                                                                                      |  |                                                                        |           |   |                        |           |            |   |         |           |           |  |           |        |       

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

F-68



---



##### Table of Contents



ChipMOS TECHNOLOGIES INC.

NOTES TO FINANCIAL STATEMENTS



|1. |  | GENERAL                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | The Company 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.
The Company also provides semiconductor testing and assembly services on a
turnkey basis, in which the Company 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 the Company 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
the Company, thus, became the holders of the entire outstanding common shares
of ChipMOS Bermuda. As of December 31, 2002, ChipMOS Bermuda owned 70.34% of
the outstanding common shares of the Company.
|  
|2. |  | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|  
|   |  | The accompanying financial statements have been prepared in conformity with
regulations governing the preparation of financial statements of public
companies, and accounting principles generally accepted in Republic of China
(ROC). The Companys significant accounting policies are summarized as
follows:                                                                                                                                                                                                                                                                                                                                
|  
|   |  | Cash equivalents                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|  
|   |  | Commercial paper acquired under agreements that provide for their repurchase
within less than three months from date of their acquisition are classified
as cash equivalents.                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|  
|   |  | Short-term investments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|  
|   |  | Short-term investments are carried at the lower of cost or market value. An
allowance for 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 investment sold are determined using the weighted-average method.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

F-69



---



##### Table of Contents



Allowance for doubtful receivables

Allowance for doubtful receivables are provided based on a review of the
collectibility of individual receivables primarily taking into account the age
of the receivables and the financial condition of the debtors.

Inventories

Inventories are stated at the lower of cost or market value. Inventories are
recorded at standard costs and adjusted to approximate weighted-average cost at
end of the period. Market value represents net realizable value for finished
goods and work in process and replacement value for raw materials.

Long-term investments

Investments in shares of stock of companies where the Company exercises
significant influence over the investees operating and financial policies are
accounted for using the equity method. The Companys proportionate share in
the net income or net loss of investee companies is recognized as part of the
investment gain or loss recognized by equity method-net account in the
statements of operations. The share in the net loss of investees recognized in
the accompanying financial statements is not limited to the carrying value of
the investment and any advances made if: (a) the Company guarantees the
obligations of, or is committed to provide further financial support to
investees, or (b) investees losses are temporary and evidence sufficiently
shows imminent return to profitable operations. The resulting credit balances
of the long-term investment are presented as part of other receivable from
related parties or as other current liability on the balance sheet.
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.

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
decline in market value, which is considered temporary, 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 value 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.

F-70



---



##### Table of Contents



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 are deferred until
such
gains or losses are realized through the subsequent sale of the related
products to third parties.

Property, plant and equipment and employee dormitory building

Property, plant and equipment and employee dormitory building (presented as
part of Other Assets) are stated at cost less accumulated depreciation. Major
additions, renewals and betterment are capitalized while maintenance and minor
repairs are expensed currently.

Depreciation is provided using the straight-line method over the estimated
service lives: Buildings and auxiliary equipment, 3 to 54 years; machinery and
equipment, 2 to 5 years; furniture and fixtures, 2 to 5 years; transportation
equipment, 5 years; tools, 2 years; leasehold improvements, 2 years; employee
dormitory building, 5 to 50 years. Salvage value is considered when determining
the basis of depreciated assets. If items of property, plant and equipment and
employee dormitory building is still in good condition and useful at the end of
its original service life, the salvage value is depreciated over any extended
useful life and property, plant and equipment and employee dormitory building
are not depreciated beyond their original costs.

Upon sale or disposal of property, plant and equipment and employee dormitory
building, the related cost and accumulated depreciation are removed from the
accounts. Any resulting gain or loss is credited or charged to income. Any
such gain generated before 2000, less applicable income tax, was transferred to
capital surplus.

Intangible assets

Intangible assets are amortized using the straight-line method over the
following periods: Technology know-how, 5 years; technology license fee, 5
years; software, 2 to 4 years; bond issuance cost, 5 years.

Revenue recognition

The four criteria for recognizing revenue are the existence of evidence of an
arrangement exists, receipt of products by customers, fixed or determinable
selling price and reasonable assurance of collectibility. Revenue from testing
and assembly service is recognized upon completion of assembly and testing
services and receipt of products by customers. Revenue from product sales is
recognized when title of products and risks of ownership are transferred to
customers based upon receipt.

F-71



---



##### Table of Contents





| |  | Research and development costs                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Research and development costs consist of expenditures incurred during the
course of planned research and investigation aimed at discovery of new
knowledge which will be useful in developing new products or processes, or
significantly enhancing existing products or production processes, and the
implementation of such through design, testing of product alternatives or
construction of prototypes. All expenses incurred in connection with the
Companys research and development activities are charged to current income.                                                                                                                                                                                                                                                             
|
| |  | Shipping and handling expense                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|
| |  | The Company expenses, primarily as marketing expenses, all shipping and
handling expenses incurred in delivering the products to the customers
designated locations. Shipping and handling expenses incurred in the years
ended December 31, 2000, 2001 and 2002 were NT$5,170 thousand, NT$4,325
thousand and NT$5,130 thousand (US$147 thousand), respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                  
|
| |  | Pension cost                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|
| |  | Net periodic pension cost is recorded on the basis of actuarial calculations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|
| |  | Unrecognized net transition obligations are amortized over 24 years while
unrecognized net losses are amortized over the average remaining service
period.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|
| |  | Income tax                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|
| |  | The Company applies inter-period income tax allocation method for income tax.
Deferred income taxes are recognized for the tax effects of temporary
differences, unused tax credits and operating loss carryforwards. A valuation
allowance is recognized if, based on the weight of available evidence, it is
more likely than not that some portion or all of the deferred tax asset will
not be realized. A deferred tax asset or liability is, according to the
classification of its related asset or liability, classified as current or
non-current. However, if a deferred tax 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
differences.
|
| |  | Adjustments of prior years tax liabilities are added to or deducted from the
current years tax provision.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|
| |  | Income taxes (10%) on unappropriated earnings of Company are recorded as
expense in the year when the shareholders have resolved that earnings shall be
retained.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

F-72



---



##### Table of Contents





|   |  | Derivative financial instruments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | Foreign 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.
|  
|   |  | 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.                                                                                                                                                                                             
|  
|   |  | Other foreign-currency transactions                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|  
|   |  | Other foreign-currency transactions are recorded in New Taiwan dollars at
the rates of exchange in effect when the transactions occur. Gains or
losses caused by the application of different foreign exchange rates when
cash in foreign currency is converted into New Taiwan dollars, or when
foreign-currency assets and liabilities are settled, credited or charged to
income in the year of conversion or settlement. At year-end, the balances
of foreign-currency assets and liabilities are restated based on prevailing
exchange rates and resulting gains or losses are credited or charged to
income.                                                                                                                                       
|  
|   |  | Reclassifications                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|  
|   |  | Certain accounts in 2000 and 2001 have been reclassified to conform to 2002
classifications.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|  
|3. |  | TRANSLATION INTO U.S. DOLLAR AMOUNTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|  
|   |  | The Company maintains its accounts and expresses its financial statements in
New Taiwan dollars. For convenience purposes, U.S. dollar amounts presented
in the accompanying financial statements have been translated from New
Taiwan dollars at the midprice of the USD as quoted by HSBC as of December
31, 2002, which was NT$34.90 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.                                                                                                                                                                                  

F-73



---



##### Table of Contents





|4. |  | SHORT-TERM INVESTMENTS
|-- |  | ----------------------

|                                             |  |                |         |      |  |     |          |   |  |  |        |  
|-------------------------------------------- |  | -------------- | ------- | ---- |  | --- | -------- | - |  |  | ------ | -
|                                             |  | December 31   
|                                             |  |               
|                                             |  | 2001           |         | 2002
|                                             |  | NT$            |         | NT$  |  | US$
|                                             |  | (In Thousands)
|Stocks                                       |  |                |         |      |  |     | 242,416  |   |  |  | 6,946  |  
|Open-ended funds                             |  |                | 697,693 |      |  |     | 801,120  |   |  |  | 22,955 |  
|Corporate bonds                              |  |                | 272,252 |      |  |     |         |   |  |  |       |  
|Allowance for loss on short-term
investments |  |                |        |      |  |     | (168,604 | ) |  |  | (4,831 | )
|                                             |  |                |         |      |  |     |          |   |  |  |        |  
|                                             |  |                | 969,945 |      |  |     | 874,932  |   |  |  | 25,070 |  
|                                             |  |                |         |      |  |     |          |   |  |  |        |  
|Market value                                 |  |                | 969,945 |      |  |     | 874,932  |   |  |  | 25,070 |  
|                                             |  |                |         |      |  |     |          |   |  |  |        |  



|   |  | The market value of open-ended funds is based on the market price at
year-Corporate bonds are Samurai bonds that were issued in Japan by MVI with
a par of JPY1,480,000 thousand (NT$272,252 thousand). Those bonds are due
on June 2002 and bear interest at 2.8%. However, the Company sold the bonds
on February 2002 and an associated gain of JPY103, 000 thousand was realized
consequently.
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | On March 21, 2002, the Company purchased 13,396,000 shares of common stock
of at the amount of NT$242,416 thousand. The provision of allowance for
market decline on the common stock at the year-end was NT$168,604 thousand.                                                                                                                                                                    
|  
|5. |  | ALLOWANCE FOR DOUBTFUL RECEIVABLES                                                                                                                                                                                                                                                                                                                                                                
|  
|   |  | The changes in the allowances are summarized as follows:                                                                                                                                                                                                                                                                                                                                          

|                           |                      |  |                        |        |      |  |        |         |     |  |        |         |   |  |     |       |  
|-------------------------- | -------------------- |  | ---------------------- | ------ | ---- |  | ------ | ------- | --- |  | ------ | ------- | - |  | --- | ----- | -
|                           |                      |  | Year Ended December 31
|                           |                      |  |                       
|                           |                      |  | 2000                   |        | 2001 |  | 2002  
|                           |                      |  |                        |        |      |  |       
|                           |                      |  | NT$                    |        | NT$  |  | NT$    |         | US$
|                           |                      |  | (In Thousands)        
|Balance, beginning of year |                      |  | 11,000                 |        |      |  | 71,000 |         |     |  | 30,000 |         |   |  | 859 |      
|                           | Additions            |  |                        | 60,000 |      |  |        |        |     |  |        | 25,821  |   |  |     | 740   |  
|                           | Reversal             |  |                        |       |      |  |        | (38,835 | )   |  |        |        |   |  |     |      |  
|                           | Write offs           |  |                        |       |      |  |        | (2,165  | )   |  |        | (10,965 | ) |  |     | (314  | )
|                           |                      |  |                        |        |      |  |        |         |     |  |        |         |   |  |     |      
|                           | Balance, end of year |  |                        | 71,000 |      |  |        | 30,000  |     |  |        | 44,856  |   |  |     | 1,285 |  
|                           |                      |  |                        |        |      |  |        |         |     |  |        |         |   |  |     |      

F-74



---



##### Table of Contents





|6. |  | INVENTORIES-NET
|-- |  | ---------------

|                            |  |                |          |      |  |     |         |   |  |  |        |  
|--------------------------- |  | -------------- | -------- | ---- |  | --- | ------- | - |  |  | ------ | -
|                            |  | December 31   
|                            |  |               
|                            |  | 2001           |          | 2002
|                            |  |                |          |     
|                            |  | NT$            |          | NT$  |  | US$
|                            |  | (In Thousands) |          |      |  |    
|Finished goods              |  |                | 46,900   |      |  |     | 45,452  |   |  |  | 1,302  |  
|Work in process             |  |                | 116,082  |      |  |     | 73,076  |   |  |  | 2,094  |  
|Raw materials               |  |                | 110,205  |      |  |     | 133,458 |   |  |  | 3,824  |  
|                            |  |                |          |      |  |     |         |   |  |  |        |  
|                            |  |                | 273,187  |      |  |     | 251,986 |   |  |  | 7,220  |  
|Less  allowance for losses |  |                | (100,933 | )    |  |     | (86,608 | ) |  |  | (2,482 | )
|                            |  |                |          |      |  |     |         |   |  |  |        |  
|                            |  |                | 172,254  |      |  |     | 165,378 |   |  |  | 4,738  |  
|                            |  |                |          |      |  |     |         |   |  |  |        |  



| |  | The changes in the inventory valuation allowance are summarized as follows:
| |  | ---------------------------------------------------------------------------

|                           |  |                              |         |     |  |  |       |  
|-------------------------- |  | ---------------------------- | ------- | --- |  |  | ----- | -
|                           |  | Year Ended December 31, 2002
|                           |  |                             
|                           |  | NT$                          |         | US$
|                           |  | (In Thousands)              
|Balance, beginning of year |  |                              | 100,933 |     |  |  | 2,892 |  
|Write offs                 |  |                              | (14,325 | )   |  |  | (410  | )
|                           |  |                              |         |     |  |  |       |  
|Balance, end of year       |  |                              | 86,608  |     |  |  | 2,482 |  
|                           |  |                              |         |     |  |  |       |  



|7. |  | LONG-TERM INVESTMENTS
|-- |  | ---------------------

|                                                                                                                                 |                          |  |                |   |           |  |          |  |           |  |           |         |  |  |        |       |  |  |     |    | 
|-------------------------------------------------------------------------------------------------------------------------------- | ------------------------ |  | -------------- | - | --------- |  | -------- |  | --------- |  | --------- | ------- |  |  | ------ | ----- |  |  | --- | -- | 
|                                                                                                                                 |                          |  | December 31   
|                                                                                                                                 |                          |  |               
|                                                                                                                                 |                          |  | 2001           |   | 2002     
|                                                                                                                                 |                          |  |                |   |          
|                                                                                                                                 |                          |  | Carrying       |   | % of      |  | Carrying |  | % of     
|                                                                                                                                 |                          |  | Value          |   | Ownership |  | Value    |  | Ownership
|                                                                                                                                 |                          |  |                |   |           |  |          |  |          
|                                                                                                                                 |                          |  | NT$            |   |           |  |          |  | NT$       |  | US$       |         |  |  |       
|                                                                                                                                 |                          |  | (In Thousands)
|Equity method:                                                                                                                   |                          |  |                |   |           |  |          |  |           |  |           |         |  |  |        |       |  |  |     |   
|ChipMOS Japan Inc.                                                                                                               |                          |  | (1,594         | ) |           |  | 100      |  |           |  | (914      | )       |  |  | (26    | )     |  |  | 100 |   
|ChipMOS USA Inc.                                                                                                                 |                          |  | (9,910         | ) |           |  | 100      |  |           |  | (8,835    | )       |  |  | (253   | )     |  |  | 100 |   
|PlusMOS Inc.                                                                                                                     |                          |  | 53,276         |   |           |  | 25       |  |           |  | 51,564    |         |  |  | 1,478  |       |  |  | 25  |   
|Chantek Electronic Co., Ltd.                                                                                                     |                          |  |               |   |           |  |         |  |           |  | 117,314   |         |  |  | 3,361  |       |  |  | 34  |   
|ThaiLin Semiconductor Corp.                                                                                                      |                          |  |               |   |           |  |         |  |           |  | 666,039   |         |  |  | 19,084 |       |  |  | 42  |   
|Cost method:                                                                                                                     |                          |  |                |   |           |  |          |  |           |  |           |         |  |  |        |       |  |  |     |   
|Ultima Electronics Corp. (Ultima),
listed stock with market value of
NT$283,436 thousand in 2001 and
NT$331,016 thousand in 2002 |                          |  | 218,099        |   |           |  | 8        |  |           |  | 218,099   |         |  |  | 6,249  |       |  |  | 8   |   
|                                                                                                                                 | Best-Home Corp.          |  |                |  |           |  |          |  |           |  |           | 89,850  |  |  |        | 2,575 |  |  |     | 19 | 
|                                                                                                                                 | Sun Fund Securities Ltd. |  |                |  |           |  |          |  |           |  |           | 299,000 |  |  |        | 8,567 |  |  |     | 17 | 
|                                                                                                                                 |                          |  |                |   |           |  |          |  |           |  |           |         |  |  |        |       |  |  |     |   
|                                                                                                                                 |                          |  | 259,871        |   |           |  |          |  |           |  | 1,432,117 |         |  |  | 41,035 |       |  |  |     |   
|Credit balances of long-term
investments (presented as part of
other receivables from related
parties) (Note 17)                 |                          |  | 11,504         |   |           |  |          |  |           |  | 9,749     |         |  |  | 279    |       |  |  |     |   
|                                                                                                                                 |                          |  |                |   |           |  |          |  |           |  |           |         |  |  |        |       |  |  |     |   
|                                                                                                                                 |                          |  | 271,375        |   |           |  |          |  |           |  | 1,441,866 |         |  |  | 41,314 |       |  |  |     |   
|                                                                                                                                 |                          |  |                |   |           |  |          |  |           |  |           |         |  |  |        |       |  |  |     |   

F-75



---



##### Table of Contents





| |  | The equity in net income or loss of investee companies for the years ended
December 31, 2000, 2001 and 2002 were as follows:
| |  | ----------------------------------------------------------------------------------------------------------------------------

|                             |  |                        |          |      |  |      |         |     |  |  |         |   |  |  |        |  
|---------------------------- |  | ---------------------- | -------- | ---- |  | ---- | ------- | --- |  |  | ------- | - |  |  | ------ | -
|                             |  | Year Ended December 31
|                             |  |                       
|                             |  | 2000                   |          | 2001 |  | 2002
|                             |  |                        |          |      |  |     
|                             |  | NT$                    |          | NT$  |  | NT$  |         | US$
|                             |  | (In Thousands)        
|ChipMOS Japan Inc.           |  |                        | 685      |      |  |      | 711     |     |  |  | 791     |   |  |  | 23     |  
|ChipMOS USA Inc.             |  |                        | (12,886  | )    |  |      | 983     |     |  |  | 1,011   |   |  |  | 29     |  
|PlusMOS Inc.                 |  |                        | (171,689 | )    |  |      | (75,035 | )   |  |  | (1,712  | ) |  |  | (49    | )
|Chantek Electronic Co., Ltd. |  |                        |         |      |  |      |        |     |  |  | (90,921 | ) |  |  | (2,605 | )
|ThaiLin Semiconductor Corp.  |  |                        |         |      |  |      |        |     |  |  | (2,368  | ) |  |  | (68    | )
|                             |  |                        |          |      |  |      |         |     |  |  |         |   |  |  |        |  
|                             |  |                        | (183,890 | )    |  |      | (73,341 | )   |  |  | (93,199 | ) |  |  | (2,670 | )
|                             |  |                        |          |      |  |      |         |     |  |  |         |   |  |  |        |  



| |  | The foregoing equity in net income or loss is based on audited financial
statements.                       
| |  | -----------------------------------------------------------------------------------------------------------
|
| |  | The Company acquired an additional 1,118,000 shares of Ultima in 2001 for the
amount of NT$10,698 thousand.
|
| |  | The summarized financial information for PlusMOS, Chantek and ThaiLin is as follows:                       

|          |                         |  |             |                |     |      |     |           |  |  |  |        | 
|--------- | ----------------------- |  | ----------- | -------------- | --- | ---- | --- | --------- |  |  |  | ------ | 
|          |                         |  | December 31
|          |                         |  |            
|          |                         |  | 2001        |                |     | 2002 |     |          
|          |                         |  |             |                |     |      |     |          
|          |                         |  | NT$         |                | NT$ |      | US$
|          |                         |  |             | (In Thousands) |    
|Plus MOS: |                         |  |             |                |     |      |     |           |  |  |  |       
|          | Current assets          |  |             | 507,017        |     |      |     | 526,106   |  |  |  | 15,075 | 
|          |                         |  |             |                |     |      |     |           |  |  |  |        | 
|          | Non-current assets      |  |             | 173,073        |     |      |     | 176,403   |  |  |  | 5,055  | 
|          |                         |  |             |                |     |      |     |           |  |  |  |        | 
|          | Current liabilities     |  |             | 465,217        |     |      |     | 492,681   |  |  |  | 14,117 | 
|          |                         |  |             |                |     |      |     |           |  |  |  |        | 
|          | Non-current liabilities |  |             | 1,764          |     |      |     | 3,408     |  |  |  | 98     | 
|          |                         |  |             |                |     |      |     |           |  |  |  |        | 
|Chantek:  |                         |  |             |                |     |      |     |           |  |  |  |       
|          | Current assets          |  |             | 260,935        |     |      |     | 393,123   |  |  |  | 11,264 | 
|          |                         |  |             |                |     |      |     |           |  |  |  |        | 
|          | Non-current assets      |  |             | 2,135,686      |     |      |     | 1,115,699 |  |  |  | 31,968 | 
|          |                         |  |             |                |     |      |     |           |  |  |  |        | 
|          | Current liabilities     |  |             | 732,931        |     |      |     | 113,776   |  |  |  | 3,260  | 
|          |                         |  |             |                |     |      |     |           |  |  |  |        | 
|          | Non-current liabilities |  |             | 346,437        |     |      |     | 909,183   |  |  |  | 26,051 | 
|          |                         |  |             |                |     |      |     |           |  |  |  |        | 
|ThaiLin:  |                         |  |             |                |     |      |     |           |  |  |  |       
|          | Current assets          |  |             | 917,814        |     |      |     | 1,265,308 |  |  |  | 36,255 | 
|          |                         |  |             |                |     |      |     |           |  |  |  |        | 
|          | Non-current assets      |  |             | 2,232,134      |     |      |     | 1,852,366 |  |  |  | 53,076 | 
|          |                         |  |             |                |     |      |     |           |  |  |  |        | 
|          | Current liabilities     |  |             | 334,795        |     |      |     | 229,448   |  |  |  | 6,574  | 
|          |                         |  |             |                |     |      |     |           |  |  |  |        | 
|          | Non-current liabilities |  |             | 1,305,467      |     |      |     | 1,209,508 |  |  |  | 34,656 | 
|          |                         |  |             |                |     |      |     |           |  |  |  |        | 

F-76



---



##### Table of Contents



|         |                     |                     |  |                        |           |      |  |            |           |   |  |         |        |  
|-------- | ------------------- | ------------------- |  | ---------------------- | --------- | ---- |  | ---------- | --------- | - |  | ------- | ------ | -
|         |                     |                     |  | Year Ended December 31
|         |                     |                     |  |                       
|         |                     |                     |  | 2001                   |           | 2002
|         |                     |                     |  |                        |           |      | 
|         |                     |                     |  | NT$                    |           | NT$  |  | US$       
|         |                     |                     |  | (In Thousands)        
|PlusMOS: |                     |                     |  |                        |           |      |  |            |           |   |  |        
|         |                     | Net revenue         |  |                        | 1,096,494 |      |  |            | 1,900,315 |   |  |         | 54,450 |  
|         |                     |                     |  |                        |           |      |  |            |           |   |  |         |        |  
|         |                     | Cost of revenues    |  |                        | 1,304,221 |      |  |            | 1,801,160 |   |  |         | 51,609 |  
|         |                     |                     |  |                        |           |      |  |            |           |   |  |         |        |  
|         |                     | Gross profit (loss) |  |                        | (207,727  | )    |  |            | 99,155    |   |  |         | 2,841  |  
|         |                     |                     |  |                        |           |      |  |            |           |   |  |         |        |  
|         |                     | Net loss            |  |                        | (300,136  | )    |  |            | (6,852    | ) |  |         | (196   | )
|         |                     |                     |  |                        |           |      |  |            |           |   |  |         |        |  
|Chantek: |                     |                     |  |                        |           |      |  |            |           |   |  |        
|         | Net revenue         |                     |  | 607,856                |           |      |  | 594,338    |           |   |  | 17,030  |       
|         |                     |                     |  |                        |           |      |  |            |           |   |  |         |        |  
|         | Cost of revenues    |                     |  | 876,999                |           |      |  | 765,679    |           |   |  | 21,939  |       
|         |                     |                     |  |                        |           |      |  |            |           |   |  |         |        |  
|         | Gross profit (loss) |                     |  | (269,143               | )         |      |  | (171,341   | )         |   |  | (4,909  | )     
|         |                     |                     |  |                        |           |      |  |            |           |   |  |         |        |  
|         | Net loss            |                     |  | (774,887               | )         |      |  | (1,159,989 | )         |   |  | (33,238 | )     
|         |                     |                     |  |                        |           |      |  |            |           |   |  |         |        |  
|ThaiLin: |                     |                     |  |                        |           |      |  |            |           |   |  |        
|         | Net revenue         |                     |  | 718,321                |           |      |  | 721,205    |           |   |  | 20,665  |       
|         |                     |                     |  |                        |           |      |  |            |           |   |  |         |        |  
|         | Cost of revenues    |                     |  | 659,640                |           |      |  | 891,069    |           |   |  | 25,532  |       
|         |                     |                     |  |                        |           |      |  |            |           |   |  |         |        |  
|         | Gross profit (loss) |                     |  | 58,681                 |           |      |  | (169,864   | )         |   |  | (4,867  | )     
|         |                     |                     |  |                        |           |      |  |            |           |   |  |         |        |  
|         | Net loss            |                     |  | (110,338               | )         |      |  | (499,368   | )         |   |  | (14,309 | )     
|         |                     |                     |  |                        |           |      |  |            |           |   |  |         |        |  



|   |  | The total assets and/or revenues of Chip MOS Japan, Inc. and Chip MOS USA,
Inc. are less than 10% of the total assets and/or total revenues of the
Company. Therefore, the Company is not required to, nor did not prepare
consolidated financial statements.                                                                                                                    
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | Certain changes on the shareholders equity of Chantek Electronic Co., Ltd.
were made due to its long-term investments. The Company made the
adjustments on the equity according to its ownership to the respective
accounts, which increased capital reserve and treasury stock by NT$1,057
thousand and NT$598 thousand; decreased unappropriated earning by NT$7,210
thousand.
|  
|8. |  | PROPERTY, PLANT AND EQUIPMENT  NET                                                                                                                                                                                                                                                                                                                                              
|  
|   |  | Accumulated depreciation consists of the following:                                                                                                                                                                                                                                                                                                                              

|                                  |  |                |           |      |  |     |           |  |  |  |         | 
|--------------------------------- |  | -------------- | --------- | ---- |  | --- | --------- |  |  |  | ------- | 
|                                  |  | December 31   
|                                  |  |               
|                                  |  | 2001           |           | 2002
|                                  |  |                |           |     
|                                  |  | NT$            |           | NT$  |  | US$
|                                  |  | (In Thousands)
|Buildings and auxiliary equipment |  |                | 550,883   |      |  |     | 751,904   |  |  |  | 21,545  | 
|Machinery and equipment           |  |                | 5,375,698 |      |  |     | 7,370,938 |  |  |  | 211,202 | 
|Furniture and fixtures            |  |                | 116,215   |      |  |     | 157,245   |  |  |  | 4,506   | 
|Transportation equipment          |  |                | 4,175     |      |  |     | 5,911     |  |  |  | 169     | 
|Tools                             |  |                | 473,933   |      |  |     | 624,025   |  |  |  | 17,880  | 
|Leasehold improvements            |  |                | 6,702     |      |  |     | 1,238     |  |  |  | 35      | 
|                                  |  |                |           |      |  |     |           |  |  |  |         | 
|                                  |  |                | 6,527,606 |      |  |     | 8,911,261 |  |  |  | 255,337 | 
|                                  |  |                |           |      |  |     |           |  |  |  |         | 

F-77



---



##### Table of Contents





|   |  | As of December 31, 2002, certain of the above buildings and machinery were
mortgaged as collateral for the bonds and the long-term loans (Notes 12 and
13).
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|9. |  | INTANGIBLE ASSETS-NET                                                                                                                                      

|                         |                     |                                   |                                   |         |                |        |          |         |          |        |         |        |         |     | 
|------------------------ | ------------------- | --------------------------------- | --------------------------------- | ------- | -------------- | ------ | -------- | ------- | -------- | ------ | ------- | ------ | ------- | --- | 
|                         |                     |                                   |                                   |         | December 31   
|                         |                     |                                   |                                   |         |               
|                         |                     |                                   |                                   |         | 2001           |        | 2002    
|                         |                     |                                   |                                   |         |                |        |         
|                         |                     |                                   |                                   |         | NT$            |        | NT$      |         | US$     
|                         |                     |                                   |                                   |         | (In Thousands)
|Cost                     |                     |                                   |                                   |         |                |        |          |         |          |        |         |       
|                         | Technology know-how |                                   |                                   | 750,000 |                |        |          | 750,000 |          |        |         | 21,490 |        
|                         |                     |                                   | Technology license fee (Note 19b) |         |                | 15,888 |          |         |          | 15,888 |         |        |         | 455 | 
|                         | Software            |                                   |                                   | 92,817  |                |        |          | 98,921  |          |        |         | 2,834  |        
|                         | Bond issuance costs |                                   |                                   | 26,115  |                |        |          | 46,398  |          |        |         | 1,330  |        
|                         |                     |                                   |                                   |         |                |        |          |         |          |        |         |        |        
|                         |                     |                                   | 884,820                           |         |                |        | 911,207  |         |          |        | 26,109  |       
|                         |                     |                                   |                                   |         |                |        |          |         |          |        |         |        |        
|Accumulated amortization |                     |                                   |                                   |         |                |        |          |         |          |        |         |       
|                         |                     | Technology know-how               |                                   |         | (635,833       | )      |          |         | (731,666 | )      |         |        | (20,964 | )  
|                         |                     | Technology license fee (Note 19b) |                                   |         | (7,944         | )      |          |         | (11,349  | )      |         |        | (325    | )  
|                         |                     | Software                          |                                   |         | (68,492        | )      |          |         | (83,582  | )      |         |        | (2,395  | )  
|                         |                     | Bond issuance costs               |                                   |         | (18,689        | )      |          |         | (34,262  | )      |         |        | (982    | )  
|                         |                     |                                   |                                   |         |                |        |          |         |          |        |         |        |        
|                         |                     |                                   | (730,958                          | )       |                |        | (860,859 | )       |          |        | (24,666 | )     
|                         |                     |                                   |                                   |         |                |        |          |         |          |        |         |        |        
|Carrying value           |                     |                                   | 153,862                           |         |                |        | 50,348   |         |          |        | 1,443   |       
|                         |                     |                                   |                                   |         |                |        |          |         |          |        |         |        |        



|    |  | 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 the Company, technologies related to testing and
packaging integrated circuits at an agreed valuation of NT$750,000 thousand.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|10. |  | BANK LOANS                                                                                                                                                                                                                                                                                               

|                |                                                                                                    |  |           |           |                |  |           |           |     |  |        |        |  |  | 
|--------------- | -------------------------------------------------------------------------------------------------- |  | --------- | --------- | -------------- |  | --------- | --------- | --- |  | ------ | ------ |  |  | 
|                |                                                                                                    |  |           |           | December 31   
|                |                                                                                                    |  |           |           |               
|                |                                                                                                    |  |           |           | 2001           |  | 2002     
|                |                                                                                                    |  |           |           |                |  |          
|                |                                                                                                    |  |           |           | NT$            |  | NT$       |           | US$
|                |                                                                                                    |  |           |           | (In Thousands)
|Unsecured loan: |                                                                                                    |  |           |           |                |  |           |           |     |  |        |       
|                | Working
capital loans
NT$1,019,000 thousand,
repayable by May 2002, annual
interest at 3.72%~7.98% |  |           | 1,019,000 |                |  |           |          |     |  |        |       | 
|                | NT$1,390,000 thousand,
repayable by March 2003, annual
interest at 2.5%~3%                         |  |           |          |                |  |           | 1,390,000 |     |  |        | 39,828 | 
|                | Loan
for imports of machineryNT$47,762 thousand,
repayable by August 2002                          |  |           | 47,762    |                |  |           |          |     |  |        |       | 
|                | JPY2,193,280 thousand,
repayable by June 2003, annual
interest at 0.61%~1.75%                      |  |           |          |                |  |           | 642,631   |     |  |        | 18,414 | 
|                |                                                                                                    |  |           |           |                |  |           |           |     |  |        |        | 
|                |                                                                                                    |  | 1,066,762 |           |                |  | 2,032,631 |           |     |  | 58,242 |       
|                |                                                                                                    |  |           |           |                |  |           |           |     |  |        |        | 

F-78



---



##### Table of Contents





|    |  | Unused credit lines as of December 31, 2002 aggregated approximately
NT$1,804,369 thousand, which will expire from January 2002 to November 2003
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------
|   
|11. |  | COMMERCIAL PAPERS                                                                                                                               

|                      |  |                |   |      |  |     |         |   |  |  |       |  
|--------------------- |  | -------------- | - | ---- |  | --- | ------- | - |  |  | ----- | -
|                      |  | December 31   
|                      |  |               
|                      |  | 2001           |   | 2002
|                      |  |                |   |     
|                      |  | NT$            |   | NT$  |  | US$
|                      |  | (In Thousands) |   |      |  |    
|Commercial papers     |  |                |  |      |  |     | 160,000 |   |  |  | 4,584 |  
|Discount on par value |  |                |  |      |  |     | (573    | ) |  |  | (16   | )
|                      |  |                |   |      |  |     |         |   |  |  |       |  
|                      |  |                |  |      |  |     | 159,427 |   |  |  | 4,568 |  
|                      |  |                |   |      |  |     |         |   |  |  |       |  



|    |  | The actual interest rate was 1.8%~2.22% in 2002, and the expiration date would
be within 180 days from the issuing date.                                                                           
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|12. |  | LONG-TERM BONDS PAYABLE                                                                                                                                                                            
|   
|    |  | The Company on January 26, 2000 issued secured bonds with face value of
NT$1,200,000 thousand. Those bonds are due on January 26, 2005 and bear
annual interest at 5.95% that are payable annually.
|   
|    |  | Under the guaranteed facility agreement for the long-term bonds, the
Company is required to:                                                                                                       



| | (1) |  | Ensure that MVI and SPIL maintain a percentage
of direct ownership in the Company of at least 28.8% and 18%, respectively.
In addition, the Company must notify the banks in writing and get approval in
advance in cases where additional shares are issued in connection with an
initial public offering of its shares.
| | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (2) |  | Maintain certain financial ratios.                                                                                                                                                                                                                                                                                       



|    |  | As a result of the share exchange between the Company and ChipMOS Bermuda,
MVI no longer met the required direct ownership in the Company (Note 1). On
October 16, 2000, the Company obtained the necessary waivers and consents
from its lenders. These waivers and consents eliminated the MVI direct
ownership percentage requirement permanently. The Company was in compliance
with the financial ratio requirements as of December 31, 2002.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | As of December 31, 2002, certain buildings with an aggregate net book value
of NT$558,859 thousand was mortgaged as collateral for the long-term bonds.                                                                                                                                                                                                                                                                                           
|   
|13. |  | LONG-TERM LOANS                                                                                                                                                                                                                                                                                                                                                                                                                                   

F-79



---



##### Table of Contents



|                                                                                                                                                                                                              |  |             |                |      |  |     |           |   |  |  |         |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------- | -------------- | ---- |  | --- | --------- | - |  |  | ------- | -
|                                                                                                                                                                                                              |  | December 31
|                                                                                                                                                                                                              |  |            
|                                                                                                                                                                                                              |  | 2001        |                | 2002
|                                                                                                                                                                                                              |  |             |                |     
|                                                                                                                                                                                                              |  | NT$         |                | NT$  |  | US$
|                                                                                                                                                                                                              |  |             | (In Thousands) |     
|Bank loans collateralized by equipment
and building, repayable semi-annually
from November 2000 to December 2004,
interest at floating rate (6.93% and
5.425% as of December 31, 2001 and
2002, respectively) |  |             | 968,500        |      |  |     | 622,500   |   |  |  | 17,837  |  
|Syndicated bank loans collateralized by
equipment, repayable semi-annually
from November 2000 to may 2003,
interest at floating rate (8.3% as of
December 31, 2001)                                           |  |             | 949,000        |      |  |     |          |   |  |  |        |  
|Syndicated bank loans collateralized by
equipment, repayable semi-annually
from July 2004 to September 2007,
interest at floating rate (4.75% as of
December 31, 2002)                                        |  |             |               |      |  |     | 2,000,000 |   |  |  | 57,306  |  
|Syndicated bank loans repayable
semi-annually from July 2002 to
September 2007, interest at floating rate
(4.875% as of December 31, 2002)                                                                    |  |             |               |      |  |     | 500,000   |   |  |  | 14,327  |  
|Research and development subsidy loan,
collateralized by time deposits in
amounts of NT42,450 thousand,
repayable quarterly from January 2003
to December 2005, with zero interest
rate                       |  |             | 31,911         |      |  |     | 41,095    |   |  |  | 1,177   |  
|                                                                                                                                                                                                              |  |             |                |      |  |     |           |   |  |  |         |  
|                                                                                                                                                                                                              |  |             | 1,949,411      |      |  |     | 3,163,595 |   |  |  | 90,647  |  
|Less: Current portion                                                                                                                                                                                         |  |             | (1,180,000     | )    |  |     | (352,160  | ) |  |  | (10,090 | )
|                                                                                                                                                                                                              |  |             |                |      |  |     |           |   |  |  |         |  
|                                                                                                                                                                                                              |  |             | 769,411        |      |  |     | 2,811,435 |   |  |  | 80,557  |  
|                                                                                                                                                                                                              |  |             |                |      |  |     |           |   |  |  |         |  



| |  | As of December 31, 2002, the unused credit line for research and development
subsidy loan was approximately NT$26 thousand. The line expires upon
completion of the
research project. Also, according to the agreement signed by the Company with
Industrial Development Bureau (IDB) in respect to the research and development
subsidy loan, the Company 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, the Company is required to:                                                                                                                                                                                                                                                                                                                                                                                                              



| | (1) |  | Ensure that ChipMOS Bermuda and SPIL maintain a percentage of direct
ownership in the Company of at least 50% of outstanding shares and have control
over its operation.
| | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (2) |  | Maintain certain financial ratios.                                                                                                                                      

F-80



---



##### Table of Contents





| |  |  | The Company was in compliance with the financial ratio requirements as of
December 31, 2002.
| |  |  | --------------------------------------------------------------------------------------------



| |  | As of December 31, 2002, certain buildings and machinery with an aggregate
net book value of NT$655,260 thousand and NT$3,967,004 thousand and time
deposits in an aggregate amount of NT$42,450 thousand were mortgaged as
collateral for the long-term loans.
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Future minimum principal payments under the Companys long-term loans as of
December 31, 2002 are as follows:                                                                                                                                                  

|                          |  |                |           |     |  |  |        | 
|------------------------- |  | -------------- | --------- | --- |  |  | ------ | 
|                          |  | Amount        
|                          |  |               
|                          |  | NT$            |           | US$
|                          |  | (In Thousands)
|Within the following year |  |                | 352,160   |     |  |  | 10,091 | 
|During the second year    |  |                | 650,090   |     |  |  | 18,627 | 
|During the third year     |  |                | 726,641   |     |  |  | 20,821 | 
|During the fourth year    |  |                | 720,481   |     |  |  | 20,644 | 
|                          |  |                |           |     |  |  |        | 
|                          |  |                | 2,449,372 |     |  |  | 70,183 | 
|                          |  |                |           |     |  |  |        | 



|14. |  | PENSION PLAN                                                                                                                                                                                                                                                                                                                                            
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | The Company has an obligation to provide pension benefits to employees
starting from the inception of its operation. The Company has established a
defined benefit pension plan for all of its regular employees, which
provides benefits based on length of service and average monthly salary for
the six months period immediately before retirement.
|   
|    |  | The Company makes 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.                                                                                                                                      
|   
|    |  | Certain pension information is as follows:                                                                                                                                                                                                                                                                                                              



| | a. |  | Net pension cost
| | -- |  | ----------------

|                                |  |                        |        |      |  |      |        |     |  |  |        |   |  |  |     |  
|------------------------------- |  | ---------------------- | ------ | ---- |  | ---- | ------ | --- |  |  | ------ | - |  |  | --- | -
|                                |  | Year ended December 31
|                                |  |                       
|                                |  | 2000                   |        | 2001 |  | 2002
|                                |  |                        |        |      |  |     
|                                |  | NT$                    |        | NT$  |  | NT$  |        | US$
|                                |  | (In Thousands)        
|Service cost                    |  |                        | 22,375 |      |  |      | 23,363 |     |  |  | 21,323 |   |  |  | 611 |  
|Interest cost                   |  |                        | 2,030  |      |  |      | 3,384  |     |  |  | 3,529  |   |  |  | 101 |  
|Projected return on plan assets |  |                        | (1,699 | )    |  |      | (2,496 | )   |  |  | (2,802 | ) |  |  | (80 | )
|Amortization                    |  |                        | 106    |      |  |      | 98     |     |  |  | 27     |   |  |  | 1   |  
|Curtailment gain                |  |                        |       |      |  |      | (6,902 | )   |  |  |       |   |  |  |    |  
|                                |  |                        |        |      |  |      |        |     |  |  |        |   |  |  |     |  
|                                |  |                        | 22,812 |      |  |      | 17,447 |     |  |  | 22,077 |   |  |  | 633 |  
|                                |  |                        |        |      |  |      |        |     |  |  |        |   |  |  |     |  

F-81



---



##### Table of Contents





| | b. |  | Reconciliation of the fund status of the plan and accrued pension cost
| | -- |  | ----------------------------------------------------------------------

|                                                      |  |                        |         |      |  |                |         |     |  |  |          |   |  |  |        |  
|----------------------------------------------------- |  | ---------------------- | ------- | ---- |  | -------------- | ------- | --- |  |  | -------- | - |  |  | ------ | -
|                                                      |  | Year Ended December 31
|                                                      |  |                       
|                                                      |  | 2000                   |         | 2001 |  | 2002          
|                                                      |  |                        |         |      |  |               
|                                                      |  | NT$                    |         | NT$  |  | NT$            |         | US$
|                                                      |  |                        |         |      |  | (In Thousands) |         |     |  | 
|Actuarial present value of benefit
obligations        |  |                        |         |      |  |                |         |     |  |  |          |   |  |  |        |  
|Vested benefit obligation                             |  |                        |        |      |  |                |        |     |  |  |         |   |  |  |       |  
|Nonvested accumulated benefit
obligation              |  |                        | (17,475 | )    |  |                | (25,932 | )   |  |  | (55,647  | ) |  |  | (1,594 | )
|Additional benefits based on future
salaries          |  |                        | (40,534 | )    |  |                | (44,640 | )   |  |  | (66,501  | ) |  |  | (1,906 | )
|                                                      |  |                        |         |      |  |                |         |     |  |  |          |   |  |  |        |  
|Projected benefit obligation                          |  |                        | (58,009 | )    |  |                | (70,572 | )   |  |  | (122,148 | ) |  |  | (3,500 | )
|Plan assets at fair value                             |  |                        | 33,101  |      |  |                | 49,642  |     |  |  | 66,005   |   |  |  | 1,891  |  
|                                                      |  |                        |         |      |  |                |         |     |  |  |          |   |  |  |        |  
|Projected benefit obligation
in excess of plan assets |  |                        | (24,908 | )    |  |                | (20,930 | )   |  |  | (56,143  | ) |  |  | (1,609 | )
|Unrecognized net transition obligation                |  |                        | 628     |      |  |                | 538     |     |  |  | 511      |   |  |  | 15     |  
|Unrecognized net loss                                 |  |                        | 7,624   |      |  |                | 1,186   |     |  |  | 29,438   |   |  |  | 843    |  
|                                                      |  |                        |         |      |  |                |         |     |  |  |          |   |  |  |        |  
|Accrued pension cost                                  |  |                        | (16,656 | )    |  |                | (19,206 | )   |  |  | (26,194  | ) |  |  | (751   | )
|                                                      |  |                        |         |      |  |                |         |     |  |  |          |   |  |  |        |  



| | c. |  | Actuarial assumptions
| | -- |  | ---------------------

|                                       |  |  |     |   |  |  |     |   |  |  |     |   |  |  |     |  
|-------------------------------------- |  |  | --- | - |  |  | --- | - |  |  | --- | - |  |  | --- | -
|Discount rate                          |  |  | 6.0 | % |  |  | 5.0 | % |  |  | 3.5 | % |  |  | 3.5 | %
|Future salary increase rate            |  |  | 5.5 | % |  |  | 4.5 | % |  |  | 3.5 | % |  |  | 3.5 | %
|Expected rate of return on plan assets |  |  | 6.0 | % |  |  | 5.0 | % |  |  | 3.5 | % |  |  | 3.5 | %



| | d. |  | Changes in pension fund
| | -- |  | -----------------------

|                    |  |                        |        |      |  |                |        |     |  |  |        |  |  |  |     | 
|------------------- |  | ---------------------- | ------ | ---- |  | -------------- | ------ | --- |  |  | ------ |  |  |  | --- | 
|                    |  | Year Ended December 31
|                    |  |                       
|                    |  | 2000                   |        | 2001 |  | 2002           |        |     |  | 
|                    |  |                        |        |      |  |                |        |     |  | 
|                    |  | NT$                    |        | NT$  |  | NT$            |        | US$
|                    |  |                        |        |      |  | (In Thousands) |        |     |  | 
|Contributions       |  |                        | 14,902 |      |  |                | 14,886 |     |  |  | 15,332 |  |  |  | 439 | 
|                    |  |                        |        |      |  |                |        |     |  |  |        |  |  |  |     | 
|Payment of benefits |  |                        |       |      |  |                |       |     |  |  |       |  |  |  |    | 
|                    |  |                        |        |      |  |                |        |     |  |  |        |  |  |  |     | 



|15. |  | SHAREHOLDERS EQUITY                                                                                                                                                                                                                                                                                                                                                                                                 
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | Under the ROC Company Law, all of the capital surplus can only be used to offset a deficit except those
generated from donations (donated capital) and the excess of the issue price over the par value of
capital stock (including the stocks issued for new capital and mergers, and the purchase of treasury
stock). Capital surplus can be transferred to capital as stock dividends distributed to shareholders.

F-82



---



##### Table of Contents





|    |  | The Company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 the Company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 the
Company, 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 the Company on earnings
generated from the effective date. An Imputation Credit Account (ICA) is maintained by the Company 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.                                                                            
|   
|16. |  | 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 31
|                                                                   |                      |  |                       
|                                                                   |                      |  | 2000                   |          | 2001 |  | 2002          
|                                                                   |                      |  |                        |          |      |  |               
|                                                                   |                      |  | NT$                    |          | NT$  |  | NT$            |          | US$
|                                                                   |                      |  |                        |          |      |  | (In Thousands) |          |     |  |         
|Income tax expense on income before
income tax at statutory rate |                      |  | 374,483                |          |      |  | (369,181       | )        |     |  | (293,729 | )       |   |  | (8,416 | )     
|Tax effects of adjustments:                                        |                      |  |                        |          |      |  |                |          |     |  |          |         |   |  |        |       
|                                                                   | Tax-exempt income    |  |                        | (162,578 | )    |  |                |         |     |  |          |        |   |  |        |        |  
|                                                                   | Permanent difference |  |                        | 14,507   |      |  |                | (39,829  | )   |  |          | 58,879  |   |  |        | 1,687  |  
|                                                                   | Temporary difference |  |                        | (98,102  | )    |  |                | (102,958 | )   |  |          | (72,383 | ) |  |        | (2,074 | )
|                                                                   |                      |  |                        |          |      |  |                |          |     |  |          |         |   |  |        |       
|Income tax expense (benefit)  current
before tax credits          |                      |  | 128,310                |          |      |  | (511,968       | )        |     |  | (307,233 | )       |   |  | (8,803 | )     
|                                                                   |                      |  |                        |          |      |  |                |          |     |  |          |         |   |  |        |       

F-83



---



##### Table of Contents





| | b. |  | Income tax expense (benefit) consists of:
| | -- |  | -----------------------------------------

|                                                                    |                      |  |                        |         |      |  |                |          |     |  |          |         |  |  |        |       | 
|------------------------------------------------------------------- | -------------------- |  | ---------------------- | ------- | ---- |  | -------------- | -------- | --- |  | -------- | ------- |  |  | ------ | ----- | 
|                                                                    |                      |  | Year Ended December 31
|                                                                    |                      |  |                       
|                                                                    |                      |  | 2000                   |         | 2001 |  | 2002          
|                                                                    |                      |  |                        |         |      |  |               
|                                                                    |                      |  | NT$                    |         | NT$  |  | NT$            |          | US$
|                                                                    |                      |  |                        |         |      |  | (In Thousands) |          |     |  |         
|Income tax expense (benefit)-current
before tax credits             |                      |  | 128,310                |         |      |  | (511,968       | )        |     |  | (307,233 | )       |  |  | (8,803 | )    
|Additional 10% on the unappropriated
earnings                       |                      |  |                       |         |      |  | 114,459        |          |     |  |         |         |  |  |       |      
|Separate and foreign income tax                                     |                      |  |                       |         |      |  |               |          |     |  | 4,217    |         |  |  | 121    |      
|Income tax credits                                                  |                      |  | (64,155                | )       |      |  | (57,230        | )        |     |  |         |         |  |  |       |      
|                                                                    |                      |  |                        |         |      |  |                |          |     |  |          |         |  |  |        |      
|Income tax for the current year                                     |                      |  | 64,155                 |         |      |  | (454,739       | )        |     |  | (303,016 | )       |  |  | (8,682 | )    
|Net change of deferred income tax
assets (liabilities) for the year |                     
|                                                                    | Tax credits          |  |                        | (78,414 | )    |  |                | (434,872 | )   |  |          | 119,312 |  |  |        | 3,419 | 
|                                                                    | Temporary difference |  |                        | 98,102  |      |  |                | 172,600  |     |  |          | 77,295  |  |  |        | 2,214 | 
|Valuation allowance                                                 |                      |  | 250,920                |         |      |  | 769,000        |          |     |  | 181,633  |         |  |  | 5,204  |      
|Loss carry forward                                                  |                      |  |                       |         |      |  |               |          |     |  | 7,675    |         |  |  | 220    |      
|Adjustment of prior years taxes                                    |                      |  | (1,377                 | )       |      |  | (19,649        | )        |     |  | 14,963   |         |  |  | 429    |      
|                                                                    |                      |  |                        |         |      |  |                |          |     |  |          |         |  |  |        |      
|Income tax expense                                                  |                      |  | 333,386                |         |      |  | 32,340         |          |     |  | 97,862   |         |  |  | 2,804  |      
|                                                                    |                      |  |                        |         |      |  |                |          |     |  |          |         |  |  |        |      



| |    |  | The Company under Science-Based Industrial Park Regulations, is entitled to an exemption from 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, 2005.
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | c. |  | Deferred income tax assets and liabilities are summarized as follows:                                                                                                                                                                                                                                                           

|                                        |                                                                       |  |             |        |      |  |                |        |  |  |       |     | 
|--------------------------------------- | --------------------------------------------------------------------- |  | ----------- | ------ | ---- |  | -------------- | ------ |  |  | ----- | --- | 
|                                        |                                                                       |  | December 31
|                                        |                                                                       |  |            
|                                        |                                                                       |  | 2001        |        | 2002
|                                        |                                                                       |  |             |        |     
|                                        |                                                                       |  | NT$         |        | NT$  |  | US$           
|                                        |                                                                       |  |             |        |      |  | (In Thousands) |        |  |  |      
|Net current deferred income tax assets: |                                                                       |  |             |        |      |  |                |        |  |  |       |    
|                                        | Unrealized foreign exchange loss                                      |  |             | 10,556 |      |  |                | 5,439  |  |  |       | 156 | 
|                                        | Unrealized loss provision on sales
allowance                          |  |             |       |      |  |                | 5,721  |  |  |       | 164 | 
|                                        | Loss of market price decline and
obsolete and slow-moving
inventories |  |             | 22,733 |      |  |                | 21,652 |  |  |       | 620 | 
|                                        | Others                                                                |  |             | 7,459  |      |  |                | 5,655  |  |  |       | 162 | 
|                                        |                                                                       |  |             |        |      |  |                |        |  |  |       |    
|                                        |                                                                       |  | 40,748      |        |      |  | 38,467         |        |  |  | 1,102 |    
|                                        |                                                                       |  |             |        |      |  |                |        |  |  |       |    



| |  |  | (Forward)
| |  |  | ---------

| |  |  |  |  |  |  |  |  |  |  |  |  | 
| |  |  |  |  |  |  |  |  |  |  |  |  | 

F-84



---



##### Table of Contents



|                                                          |                                                                            |  |          |            |   |  |           |            |   |  |        |         |  
|--------------------------------------------------------- | -------------------------------------------------------------------------- |  | -------- | ---------- | - |  | --------- | ---------- | - |  | ------ | ------- | -
|Net non-current deferred income tax
assets (liabilities): |                                                                            |  |          |            |   |  |           |            |   |  |        |        
|                                                          | Tax credits for investment in machinery
and equipment and R&D
expenditures |  |          | 958,838    |   |  |           | 839,526    |   |  |        | 24,055  |  
|                                                          | Loss carry forwards                                                        |  |          | 511,968    |   |  |           | 811,526    |   |  |        | 23,253  |  
|                                                          | Depreciation differences                                                   |  |          | (501,184   | ) |  |           | (575,339   | ) |  |        | (16,485 | )
|                                                          | Other                                                                      |  |          |           |   |  |           | (859       | ) |  |        | (25     | )
|                                                          |                                                                            |  |          |            |   |  |           |            |   |  |        |         |  
|                                                          |                                                                            |  | 969,622  |            |   |  | 1,074,854 |            |   |  | 30,798 |        
|                                                          | Less: Valuation allowance                                                  |  |          | (1,125,000 | ) |  |           | (1,306,633 | ) |  |        | (37,439 | )
|                                                          |                                                                            |  |          |            |   |  |           |            |   |  |        |         |  
|                                                          |                                                                            |  | (155,378 | )          |   |  | (231,779  | )          |   |  | (6,641 | )      
|                                                          |                                                                            |  |          |            |   |  |           |            |   |  |        |         |  



| |    |  | The rate at which deferred income tax components are measured was 25% as of December 31, 2001 and 2002.                                                                                                         
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | d. |  | Integrated income tax information                                                                                                                                                                               
|
| |    |  | The balances of the ICA (See Note 15) were NT$35,918 thousand and NT$89,694 thousand as of December 31,
2001 and 2002, respectively.                                                                            
|
| |    |  | The imputation credit allocated to each shareholder shall be based on the balance in the ICA on the date
of distribution of dividends. There were no tax creditable ratios for 2001 and 2002 because of deficit.
|
| | e. |  | The balance and year of expiry of unused investment tax credits and loss carry forwards as of December 31,
2002 are as follows:                                                                                 

|               |  |             |         |             |  |                |         |  |  |  |           | 
|-------------- |  | ----------- | ------- | ----------- |  | -------------- | ------- |  |  |  | --------- | 
|               |  | Machinery & |         | R&D         |  | Loss Carry    
|Year of Expiry |  | Equipment   |         | Expenditure |  | Forwards      
|               |  |             |         |             |  |               
|               |  | NT$         |         | NT$         |  | NT$           
|               |  |             |         |             |  | (In Thousands) |         |  |  | 
|2003           |  |             | 208,474 |             |  |                | 41,904  |  |  |  |          | 
|2004           |  |             | 49,801  |             |  |                | 83,441  |  |  |  |          | 
|2005           |  |             | 264,493 |             |  |                | 84,762  |  |  |  |          | 
|2006           |  |             | 51,740  |             |  |                | 54,911  |  |  |  | 2,017,177 | 
|2007           |  |             |        |             |  |                |        |  |  |  | 1,228,930 | 
|               |  |             |         |             |  |                |         |  |  |  |           | 
|               |  |             | 574,508 |             |  |                | 265,018 |  |  |  | 3,246,107 | 
|               |  |             |         |             |  |                |         |  |  |  |           | 



| |  |  | The deferred tax assets related to the investment tax credits on R&D expenditures and purchases of
machinery and equipment will expire from 2003 to 2006. 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. However, tax credits
generated in the current year have to be utilized before prior year tax credit can be utilized to reduce
current year income tax obligations. The foregoing limitation on the utilization of tax credits, the
expiry dates of the tax credits, the
| |  |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-85



---



##### Table of Contents





| |  |  | 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 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, 2001 and 2002.
| |  |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | The income tax returns of the Company through 1998 have been assessed by the tax authorities.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  



|17. |  | RELATED PARTY TRANSACTIONS                                                      
|--- |  | --------------------------------------------------------------------------------
|   
|    |  | The Company engages in business transactions with the following related parties:



| | a. |  | ChipMOS Bermuda: A major shareholder.                                                                                
| | -- |  | ---------------------------------------------------------------------------------------------------------------------
|
| | b. |  | SPIL: A major shareholder.                                                                                           
|
| | c. |  | MVI: An indirect major shareholder.                                                                                  
|
| | d. |  | ChipMOS Japan Inc.: A 100% owned subsidiary.                                                                         
|
| | e. |  | ChipMOS USA Inc.: A 100% owned subsidiary.                                                                           
|
| | f. |  | PlusMOS: A 25% owned investee.                                                                                       
|
| | g. |  | ThaiLin: A 42% owned investee.                                                                                       
|
| | h. |  | Chantek: A 34% owned investee.                                                                                       
|
| | i. |  | Billion-Create Technology Co. (Billion-Create): A subsidiary of PIusMOS and that
was liquidated in November 2001     
|
| | j. |  | Ultima: An 8% owned investee; the chief executive officer of the Company is a
member of board of directors of Ultima.
|
| | k. |  | ProMOS Technologies Inc. (ProMOS): An investee of MVI                                                                
|
| | l. |  | DenMOS: A investee of MVI                                                                                            
|
| | m. |  | BestHome: A 19% owned investee; the Company is a major shareholder.                                                  



| |  | The significant transactions with the aforementioned parties, other than those disclosed in other notes,
are summarized as follows:
| |  | -----------------------------------------------------------------------------------------------------------------------------------

|                |                |  |                        |           |      |  |                |           |     |  |           |           |  |  |         |        | 
|--------------- | -------------- |  | ---------------------- | --------- | ---- |  | -------------- | --------- | --- |  | --------- | --------- |  |  | ------- | ------ | 
|                |                |  | Year Ended December 31
|                |                |  |                       
|                |                |  | 2000                   |           | 2001 |  | 2002          
|                |                |  |                        |           |      |  |               
|                |                |  | NT$                    |           | NT$  |  | NT$            |           | US$
|                |                |  |                        |           |      |  | (In Thousands) |           |     |  |          
|During the year |                |  |                        |           |      |  |                |           |     |  |           |           |  |  |         |       
|Sales           |               
|                | MVI            |  |                        | 4,054,724 |      |  |                | 2,495,046 |     |  |           | 2,285,348 |  |  |         | 65,483 | 
|                | Ultima         |  |                        | 893,835   |      |  |                | 1,163,383 |     |  |           | 1,218,265 |  |  |         | 34,907 | 
|                | PlusMOS        |  |                        | 71,869    |      |  |                | 55,548    |     |  |           | 9,010     |  |  |         | 258    | 
|                | ProMOS         |  |                        |          |      |  |                | 5,002     |     |  |           |          |  |  |         |       | 
|                | Billion-Create |  |                        | 278,917   |      |  |                |          |     |  |           |          |  |  |         |       | 
|                | SPIL           |  |                        | 11,780    |      |  |                |          |     |  |           |          |  |  |         |       | 
|                | DenMOS         |  |                        |          |      |  |                | 27        |     |  |           | 152,761   |  |  |         | 4,377  | 
|                |                |  |                        |           |      |  |                |           |     |  |           |           |  |  |         |       
|                |                |  | 5,311,125              |           |      |  | 3,719,006      |           |     |  | 3,665,384 |           |  |  | 105,025 |       
|                |                |  |                        |           |      |  |                |           |     |  |           |           |  |  |         |       



| |  | (Forward)
| |  | ---------
|
| |  |          

F-86



---



##### Table of Contents



|                        |         |                               |                    |         |       |         |        |        |       |        |        |       |       |        |     |     |     |     | 
|----------------------- | ------- | ----------------------------- | ------------------ | ------- | ----- | ------- | ------ | ------ | ----- | ------ | ------ | ----- | ----- | ------ | --- | --- | --- | --- | 
|Rental revenue          |         |                               |                    |         |       |         |        |        |       |        |        |       |       |        |     |    
|                        | MVI     |                               |                    | 15,550  |       |         |        | 29,717 |       |        |        | 8,800 |       |        |     | 252 |    
|                        | DenMOS  |                               |                    |        |       |         |        |       |       |        |        | 693   |       |        |     | 20  |    
|                        | Thailin |                               |                    |        |       |         |        |       |       |        |        | 2,212 |       |        |     | 63  |    
|                        |         |                               |                    |         |       |         |        |        |       |        |        |       |       |        |     |    
|                        |         |                               | 15,550             |         |       |         | 29,717 |        |       |        | 11,705 |       |       |        | 335 |    
|                        |         |                               |                    |         |       |         |        |        |       |        |        |       |       |        |     |    
|Purchases of materials  |         |                               |                    |         |       |         |        |        |       |        |        |       |       |        |     |    
|                        | MVI     |                               |                    | 192,708 |       |         |        |       |       |        |        |      |       |        |     |    |    
|                        | SPIL    |                               |                    | 348     |       |         |        |       |       |        |        |      |       |        |     |    |    
|                        |         |                               |                    |         |       |         |        |        |       |        |        |       |       |        |     |    
|                        |         |                               | 193,056            |         |       |         |       |        |       |        |       |       |       |        |    |    
|                        |         |                               |                    |         |       |         |        |        |       |        |        |       |       |        |     |    
|Manufacturing expenses: |         |                               |                    |         |       |         |        |        |       |        |        |       |       |        |     |    
|                        |         | Subcontract expenses          |                    |         |       |         |        |        |       |        |        |       |       |        |     |     |     |    
|                        |         |                               | SPIL               |         |       | 130,184 |        |        |       | 3,886  |        |       |       |       |     |     |     |    | 
|                        |         |                               | Chantek            |         |       |        |        |        |       | 2,950  |        |       |       | 2,719  |     |     |     | 80  | 
|                        |         |                               |                    |         |       |         |        |        |       |        |        |       |       |        |     |    
|                        |         |                               | 130,184            |         |       |         | 6,836  |        |       |        | 2,719  |       |       |        | 80  |    
|                        |         |                               |                    |         |       |         |        |        |       |        |        |       |       |        |     |    
|Operating expenses:     |         |                               |                    |         |       |         |        |        |       |        |        |       |       |        |     |    
|                        |         | Administrative expenses  MVI |                    |         | 5,363 |         |        |        | 4,550 |        |        |       | 4,550 |        |     |     | 130 |    
|                        |         |                               |                    |         |       |         |        |        |       |        |        |       |       |        |     |    
|                        |         | Service fee                   |                    |         |       |         |        |        |       |        |        |       |       |        |     |     |     |    
|                        |         |                               | ChipMOS USA Inc.   |         |       |        |        |        |       | 22,229 |        |       |       | 20,046 |     |     |     | 575 | 
|                        |         |                               | ChipMOS Japan Inc. |         |       | 10,679  |        |        |       | 11,135 |        |       |       | 9,498  |     |     |     | 272 | 
|                        |         |                               |                    |         |       |         |        |        |       |        |        |       |       |        |     |    
|                        |         |                               | 10,679             |         |       |         | 33,364 |        |       |        | 29,544 |       |       |        | 847 |    
|                        |         |                               |                    |         |       |         |        |        |       |        |        |       |       |        |     |    
|                        |         | R&D materials                 |                    |         |       |         |        |        |       |        |        |       |       |        |     |     |     |    
|                        |         |                               | PlusMOS            |         |       |        |        |        |       | 29,888 |        |       |       |       |     |     |     |    | 
|                        |         |                               | MVI                |         |       |        |        |        |       | 86     |        |       |       |       |     |     |     |    | 
|                        |         |                               | SPIL               |         |       | 4       |        |        |       |       |        |       |       |       |     |     |     |    | 
|                        |         |                               |                    |         |       |         |        |        |       |        |        |       |       |        |     |    
|                        |         |                               | 4                  |         |       |         | 29,974 |        |       |        |       |       |       |        |    |    
|                        |         |                               |                    |         |       |         |        |        |       |        |        |       |       |        |     |    
|                        |         | Rental expense-MVI            |                    |         | 2,140 |         |        |        | 2,490 |        |        |       | 2,811 |        |     |     | 81  |    
|                        |         |                               |                    |         |       |         |        |        |       |        |        |       |       |        |     |    
|                        |         | Consulting fees-MVI           |                    |         | 1,212 |         |        |        |      |        |        |       |      |        |     |     |    |    
|                        |         |                               |                    |         |       |         |        |        |       |        |        |       |       |        |     |    
|                        |         | Other expense                 |                    |         |       |         |        |        |       |        |        |       |       |        |     |     |     |    
|                        |         |                               | PlusMOS            |         |       | 1,060   |        |        |       |       |        |       |       |       |     |     |     |    | 
|                        |         |                               | MVI                |         |       | 742     |        |        |       |       |        |       |       |       |     |     |     |    | 
|                        |         |                               | Billion-Create     |         |       | 268     |        |        |       |       |        |       |       |       |     |     |     |    | 
|                        |         |                               |                    |         |       |         |        |        |       |        |        |       |       |        |     |    
|                        |         |                               | 2,070              |         |       |         |       |        |       |        |       |       |       |        |    |    
|                        |         |                               |                    |         |       |         |        |        |       |        |        |       |       |        |     |    

F-87



---



##### Table of Contents



|                                  |                                                  |  |             |         |                |  |           |         |     |  |        |        |  
|--------------------------------- | ------------------------------------------------ |  | ----------- | ------- | -------------- |  | --------- | ------- | --- |  | ------ | ------ | -
|                                  |                                                  |  | December 31
|                                  |                                                  |  |            
|                                  |                                                  |  | 2001        |         | 2002          
|                                  |                                                  |  |             |         |               
|                                  |                                                  |  |             |         |                |  | NT$       |         | US$
|                                  |                                                  |  |             |         | (In Thousands) |  |           |        
|At the end of year                |                                                  |  |             |         |                |  |           |         |     |  |        |       
|Notes and accounts receivable     |                                                  |  |             |         |                |  |           |         |     |  |        |       
|                                  | MVI                                              |  |             | 824,393 |                |  |           | 759,484 |     |  |        | 21,762 |  
|                                  | Ultima                                           |  |             | 375,150 |                |  |           | 331,940 |     |  |        | 9,511  |  
|                                  | PlusMOS                                          |  |             | 1,738   |                |  |           | 4,943   |     |  |        | 141    |  
|                                  | DenMOS                                           |  |             |        |                |  |           | 23,057  |     |  |        | 661    |  
|                                  |                                                  |  |             |         |                |  |           |         |     |  |        |       
|                                  |                                                  |  | 1,201,281   |         |                |  | 1,119,424 |         |     |  | 32,075 |       
|                                  |                                                  |  |             |         |                |  |           |         |     |  |        |       
|Other receivable                  |                                                  |  |             |         |                |  |           |         |     |  |        |       
|                                  | ChipMOS Bermuda                                  |  |             | 75,311  |                |  |           | 138,158 |     |  |        | 3,959  |  
|                                  | ChipMOS USA Inc.                                 |  |             | 24,873  |                |  |           | 23,348  |     |  |        | 669    |  
|                                  | MVI                                              |  |             | 11,600  |                |  |           | 4,347   |     |  |        | 124    |  
|                                  | ChipMOS Japan Inc.                               |  |             | 6,194   |                |  |           | 6,555   |     |  |        | 188    |  
|                                  | Ultima                                           |  |             |        |                |  |           | 268     |     |  |        | 8      |  
|                                  | ThaiLin                                          |  |             |        |                |  |           | 6,301   |     |  |        | 180    |  
|                                  | Chantek                                          |  |             |        |                |  |           | 356     |     |  |        | 10     |  
|                                  | DenMOS                                           |  |             |        |                |  |           | 275     |     |  |        | 8      |  
|                                  |                                                  |  |             |         |                |  |           |         |     |  |        |       
|                                  |                                                  |  | 117,978     |         |                |  | 179,608   |         |     |  | 5,146  |       
|                                  | Credit balances of long-term
investments (Note7) |  |             | (11,504 | )              |  |           | (9,749  | )   |  |        | (279   | )
|                                  |                                                  |  |             |         |                |  |           |         |     |  |        |       
|                                  |                                                  |  | 106,474     |         |                |  | 169,859   |         |     |  | 4,867  |       
|                                  |                                                  |  |             |         |                |  |           |         |     |  |        |       
|Prepaid meal expenses  Best Home |                                                  |  |            |         |                |  | 216,000   |         |     |  | 6,189  |       
|                                  |                                                  |  |             |         |                |  |           |         |     |  |        |       
|Other payable                     |                                                  |  |             |         |                |  |           |         |     |  |        |       
|                                  | ChipMOS USA Inc.                                 |  |             | 1,071   |                |  |           | 1,264   |     |  |        | 36     |  
|                                  | MVI                                              |  |             | 782     |                |  |           | 1,158   |     |  |        | 33     |  
|                                  | ChipMOS Japan Inc.                               |  |             | 542     |                |  |           | 1,139   |     |  |        | 33     |  
|                                  | PlusMOS                                          |  |             | 166     |                |  |           | 98      |     |  |        | 3      |  
|                                  |                                                  |  |             |         |                |  |           |         |     |  |        |       
|                                  |                                                  |  | 2,561       |         |                |  | 3,659     |         |     |  | 105    |       
|                                  |                                                  |  |             |         |                |  |           |         |     |  |        |       



| |  | As of December 31, 2002, the Company provided commercial paper acquired under repurchase agreements as
collateral for a loan amounting NT$600,000 thousand (excluding the interest) obtained by Ultima (See Note
18). The guarantee period is from November 2002 to November 2003.
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | The amount charged to Billion-Create
and PlusMOS for products and services is based on the market price.                                                                                                                                                                          

F-88



---



##### Table of Contents





|    |  | In 2000, 2001 and 2002, 49%, 48% and 35%, respectively, of the sales were to MVL Selling price were
determined based on hourly rate and machine hours incurred during the process of testing and packaging
the semiconductors. The hourly rate was determined based on negotiations, which considered anticipated
capacity requirements and commitments. Generally, the collection term for sales is 60 days after
shipment. In 2002, in view of the market conditions, the collection term was extended to 90 days from
the date of shipment.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | The payment terms for purchases from related parties are the same as those from other suppliers.
The collection term for Ultima is 90 days after shipment, while other related parties have the normal
collection terms.                                                                                                                                                                                                                                                                                                                      
|   
|    |  | In 2002, the Company acquired the ownership of Sun Fund Securities Ltd. from BestHome Corp. (See Note 7)                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   
|18. |  | RESTRICTED CASH AND CASH EQUIVALENTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

|             |                                                                                                                                   |  |             |         |      |  |                |         |  |  |        |        | 
|------------ | --------------------------------------------------------------------------------------------------------------------------------- |  | ----------- | ------- | ---- |  | -------------- | ------- |  |  | ------ | ------ | 
|             |                                                                                                                                   |  | December 31
|             |                                                                                                                                   |  |            
|             |                                                                                                                                   |  | 2001        |         | 2002
|             |                                                                                                                                   |  |             |         |     
|             |                                                                                                                                   |  | NT$         |         | NT$  |  | US$           
|             |                                                                                                                                   |  |             |         |      |  | (In Thousands) |         |  |  |       
|Current:     |                                                                                                                                   |  |             |         |      |  |                |         |  |  |        |       
|             | Time deposits (matures from January to
November 2002)                                                                             |  |             | 234,001 |      |  |                | 76,868  |  |  |        | 2,202  | 
|Non-current: |                                                                                                                                   |  |             |         |      |  |                |         |  |  |        |       
|             | Commercial paper acquired under repurchase
agreements (matured in January 2002, and
has been extended to April 2003
subsequently) |  |             | 601,624 |      |  |                | 601,744 |  |  |        | 17,242 | 
|             |                                                                                                                                   |  |             |         |      |  |                |         |  |  |        |       
|             |                                                                                                                                   |  | 835,625     |         |      |  | 678,612        |         |  |  | 19,444 |       
|             |                                                                                                                                   |  |             |         |      |  |                |         |  |  |        |       



|    |  | Time deposits are pledged as collateral for the Companys customs duties payable, letter of credit,
research and development subsidy loan and the commercial paper acquired under repurchase agreements are
pledged as collateral for the guarantee provided to Ultima (See Note 17).
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|19. |  | SIGNIFICANT COMMITMENTS AND CONTINGENCIES AS OF DECEMBER 31, 2002                                                                                                                                                                                                                    



| | a. |  | As of December 31, 2002, the Company leases parcels of land from the Hsinchu and Taiwan Science -
Based Industrial Park (SBIP) under several agreements expiring on various dates from 2002 to 2017, with
renewal options.
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-89



---



##### Table of Contents





| |  |  | The future minimum lease payments under the above-mentioned leases as of
December 31, 2002 are as follows:
| |  |  | ----------------------------------------------------------------------------------------------------------

|                            |  |                |         | 
|--------------------------- |  | -------------- | ------- | 
|Year                        |  | Amount        
|                            |  |               
|                            |  | NT$           
|                            |  | (In Thousands)
|2003                        |  |                | 16,738  | 
|2004                        |  |                | 16,203  | 
|2005                        |  |                | 15,668  | 
|2006                        |  |                | 15,668  | 
|2007                        |  |                | 15,668  | 
|Thereafter                  |  |                | 156,676 | 
|                            |  |                |         | 
|Total minimum lease payment |  |                | 236,621 | 
|                            |  |                |         | 



| | b. |  | On April 20, 1999, the Company entered into a semiconductor packaging technology license agreement
with TESSERA INC. Under the agreement, the Company agreed to pay a license fee of US$500 thousand and a
royalty fee at certain percentage of net sales of certain products. The Company paid the total license
fee of US$500 thousand (NT$15,888 thousand) in 1999 and amortized the amount over 5 years using the
straight-line method. The Company also shall pay certain additional license fees within five years if
cumulative production and sales quantity of products bearing Tessera Compliant Chip packages do not meet
the commitment schedule at a respective deadline as set in the agreement.
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | c. |  | The Company has unused
letters of credit aggregating approximately US$ 118 and JPY 853,306 at December 31, 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              



|20. |  | DERIVATIVE FINANCIAL INSTRUMENTS                                                                                                                                                                                                                                                                          
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | The Company had entered into forward exchange contracts or foreign currency options for the year ended
December 31, 2000, 2001 and 2002, 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 contracts                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | -- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |    |  | As of December 31, 2001 and 2002, the Company had no outstanding forward contracts. Net exchange
gains on forward exchange contracts were NT$9,455 thousand and NT$13,869 thousand for the year ended
December 31, 2000 and 2001, respectively.                                                                                                                                                                                                                                                  
|
| | b. |  | European options                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| |    |  | The Company 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, 2002, the Company had no outstanding foreign currency option contracts. For
the year ended December 31, 2000 2001 and 2002, the Company realized premium income of NT$0¡BNT$156
thousand and NT$90 thousand respectively.

F-90



---



##### Table of Contents





| | c. |  | Transaction risks
| | -- |  | -----------------



| | 1) |  | Credit risk: The banks with which the Company has entered into the above contracts are reputable
and, therefore, the Company is 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
sometimes enters into forward contracts and option contracts.                                  
|
| | 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.



| | d. |  | The estimated fair values of the Companys financial instruments are as follows:
| | -- |  | --------------------------------------------------------------------------------

|                                                |                    |  |                   |           |                   |  |                |           |            |  |           |           |  |  |           |           | 
|----------------------------------------------- | ------------------ |  | ----------------- | --------- | ----------------- |  | -------------- | --------- | ---------- |  | --------- | --------- |  |  | --------- | --------- | 
|                                                |                    |  | December 31, 2001 |           | December 31, 2002
|                                                |                    |  |                   |           |                  
|                                                |                    |  | Carrying          |           |                   |  |                |           | Carrying   |  |           |           | 
|                                                |                    |  | Value             |           | Fair Value        |  | Value          |           | Fair Value
|                                                |                    |  |                   |           |                   |  |                |           |           
|                                                |                    |  | NT$               |           | NT$               |  | NT$            |           | NT$       
|                                                |                    |  |                   |           |                   |  | (In Thousands) |           |            |  |          
|Non-derivative financial instruments            |                    |  |                   |           |                   |  |                |           |            |  |           |           |  |  |           |          
|Assets                                          |                    |  |                   |           |                   |  |                |           |            |  |           |           |  |  |           |          
|Cash                                            |                    |  | 1,174,253         |           |                   |  | 1,174,253      |           |            |  | 1,963,381 |           |  |  | 1,963,381 |          
|Restricted cash and cash
equivalents            |                    |  | 835,625           |           |                   |  | 835,625        |           |            |  | 678,612   |           |  |  | 678,612   |          
|Short-term investments                          |                    |  | 969,945           |           |                   |  | 969,945        |           |            |  | 874,932   |           |  |  | 874,932   |          
|Notes receivable                                |                    |  | 29,542            |           |                   |  | 29,542         |           |            |  | 30,474    |           |  |  | 30,474    |          
|Accounts receivable                             |                    |  | 250,709           |           |                   |  | 250,709        |           |            |  | 562,424   |           |  |  | 562,424   |          
|Receivables
from related parties                |                   
|                                                | Notes and accounts |  |                   | 1,201,281 |                   |  |                | 1,201,281 |            |  |           | 1,104,475 |  |  |           | 1,104,475 | 
|                                                | Others             |  |                   | 106,474   |                   |  |                | 106,474   |            |  |           | 169,859   |  |  |           | 169,859   | 
|Other receivable                                |                    |  | 10,581            |           |                   |  | 10,581         |           |            |  | 82,614    |           |  |  | 82,614    |          
|Long-term investments                           |                    |  | 271,375           |           |                   |  | 325,208        |           |            |  | 1,441,866 |           |  |  | 1,549,582 |          
|Refundable deposits                             |                    |  | 13,796            |           |                   |  | 13,796         |           |            |  | 13,839    |           |  |  | 13,839    |          
|Liabilities                                     |                    |  |                   |           |                   |  |                |           |            |  |           |           |  |  |           |          
|Bank loans                                      |                    |  | 1,066,762         |           |                   |  | 1,066,762      |           |            |  | 2,032,631 |           |  |  | 2,032,631 |          
|Short-term notes payable                        |                    |  |                  |           |                   |  |               |           |            |  | 159,427   |           |  |  | 159,427   |          
|Accounts payable                                |                    |  | 120,085           |           |                   |  | 120,085        |           |            |  | 145,352   |           |  |  | 145,352   |          
|Payable
to related parties                      |                   
|                                                | Trade              |  |                   |          |                   |  |                |          |            |  |           |          |  |  |           |          | 
|                                                | Others             |  |                   | 2,561     |                   |  |                | 2,561     |            |  |           | 3,659     |  |  |           | 3,659     | 
|Payables to contractors and
equipment suppliers |                    |  | 358,757           |           |                   |  | 358,757        |           |            |  | 158,750   |           |  |  | 158,750   |          
|Long-term loans (including
current portion)     |                    |  | 1,949,411         |           |                   |  | 1,949,411      |           |            |  | 3,163,595 |           |  |  | 3,163,595 |          
|Long-term bonds payable                         |                    |  | 1,200,000         |           |                   |  | 1,004,935      |           |            |  | 1,200,000 |           |  |  | 1,064,729 |          
|Guarantee deposits                              |                    |  | 329               |           |                   |  | 329            |           |            |  | 461       |           |  |  | 461       |          

F-91



---



##### Table of Contents





| |  |  | Fair values of financial instruments were determined as follows:
| |  |  | ----------------------------------------------------------------



| | 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.                                                                                                                                                                                                                                                    
|
| | 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.                                                                                                                                                                                                                                                                                                                                                                                         
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|21. |  | SEGMENT AND GEOGRAPHIC INFORMATION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   
|    |  | The Company engages mainly in research, development, manufacturing, assembly, testing and turnkey of
integrated circuits. In accordance with Statements 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 and Turnkey when making decisions about allocating resources and assessing performance
of the Company. All financial segment information required by SFAS No. 131 are as following:



| | a. |  | The Company provides semiconductor testing, assembly and turnkey services.
| | -- |  | --------------------------------------------------------------------------

|                               |  |         |           |          |  |         |           |     |  |        |           |                |  |        |           |   |  |         |            |             |  |              |           |  |  |  |            | 
|------------------------------ |  | ------- | --------- | -------- |  | ------- | --------- | --- |  | ------ | --------- | -------------- |  | ------ | --------- | - |  | ------- | ---------- | ----------- |  | ------------ | --------- |  |  |  | ---------- | 
|                               |  | 2000   
|                               |  |        
|                               |  |         |           |          |  |         |           |     |  |        |           |                |  |        |           |   |  | Segment |            | Corporate & |  | Consolidated
|                               |  | Testing |           | Assembly |  | Turnkey |           | TCP |  | Totals |           | Other assets   |  | Totals
|                               |  |         |           |          |  |         |           |     |  |        |           |                |  |       
|                               |  | NT$     |           | NT$      |  | NT$     |           | NT$ |  | NT$    |           | NT$            |  | NT$   
|                               |  |         |           |          |  |         |           |     |  |        |           | (In Thousands) |  |        |           |   |  |         |            |             |  |             
|Revenues from
customers        |  |         | 4,773,124 |          |  |         | 2,257,039 |     |  |        | 1,104,116 |                |  |        | 89,912    |   |  |         | 8,224,191  |             |  |              |          |  |  |  | 8,224,191  | 
|Cost of revenues               |  |         | 2,653,355 |          |  |         | 1,662,474 |     |  |        | 1,094,709 |                |  |        | 100,454   |   |  |         | 5,510,992  |             |  |              |          |  |  |  | 5,510,992  | 
|Segment gross
profit           |  |         | 2,119,769 |          |  |         | 594,565   |     |  |        | 9,407     |                |  |        | (10,542   | ) |  |         | 2,713,199  |             |  |              |          |  |  |  | 2,713,199  | 
|Depreciation and
amortization  |  |         | 1,586,624 |          |  |         | 377,004   |     |  |        |          |                |  |        | 27,001    |   |  |         | 1,990,629  |             |  |              | 22,076    |  |  |  | 2,012,705  | 
|Segment assets                 |  |         | 8,695,398 |          |  |         | 2,838,938 |     |  |        |          |                |  |        | 1,158,669 |   |  |         | 12,693,005 |             |  |              | 6,270,567 |  |  |  | 18,963,572 | 
|Expenditure for
segment assets |  |         | 4,834,602 |          |  |         | 996,725   |     |  |        |          |                |  |        | 1,185,671 |   |  |         | 7,016,998  |             |  |              |          |  |  |  | 7,016,998  | 

F-92



---



##### Table of Contents



|                               |  |         |           |          |  |         |           |     |  |        |           |                |  |        |           |   |  |         |            |             |  |              |           |  |  |  |            |  
|------------------------------ |  | ------- | --------- | -------- |  | ------- | --------- | --- |  | ------ | --------- | -------------- |  | ------ | --------- | - |  | ------- | ---------- | ----------- |  | ------------ | --------- |  |  |  | ---------- | -
|                               |  | 2000   
|                               |  |        
|                               |  |         |           |          |  |         |           |     |  |        |           |                |  |        |           |   |  | Segment |            | Corporate & |  | Consolidated
|                               |  | Testing |           | Assembly |  | Turnkey |           | TCP |  | Totals |           | Other assets   |  | Totals
|                               |  |         |           |          |  |         |           |     |  |        |           |                |  |       
|                               |  | NT$     |           | NT$      |  | NT$     |           | NT$ |  | NT$    |           | NT$            |  | NT$   
|                               |  |         |           |          |  |         |           |     |  |        |           | (In Thousands) |  |        |           |   |  |         |            |             |  |             
|Revenues from
customers        |  |         | 2,242,676 |          |  |         | 1,610,880 |     |  |        | 1,260,034 |                |  |        | 131,505   |   |  |         | 5,245,095  |             |  |              |          |  |  |  | 5,245,095  |  
|Cost of revenues               |  |         | 2,965,268 |          |  |         | 1,413,396 |     |  |        | 1,246,657 |                |  |        | 403,988   |   |  |         | 6,029,309  |             |  |              |          |  |  |  | 6,029,309  |  
|Segment gross
profit           |  |         | (722,592  | )        |  |         | 197,484   |     |  |        | 13,377    |                |  |        | (272,483  | ) |  |         | (784,214   | )           |  |              |          |  |  |  | (784,214   | )
|Depreciation and
amortization  |  |         | 2,107,395 |          |  |         | 506,901   |     |  |        |          |                |  |        | 191,359   |   |  |         | 2,805,655  |             |  |              | 8,180     |  |  |  | 2813,835   |  
|Segment assets                 |  |         | 7,262,355 |          |  |         | 2,380,771 |     |  |        |          |                |  |        | 1,290,762 |   |  |         | 10,933,888 |             |  |              | 5,198,883 |  |  |  | 16,132,771 |  
|Expenditure for
segment assets |  |         | 641,304   |          |  |         | 18,177    |     |  |        |          |                |  |        | 323,451   |   |  |         | 982,932    |             |  |              |          |  |  |  | 982,932    |  

|                               |  |         |           |          |  |         |           |     |  |        |           |                |  |        |           |  |  |         |           |             |  |              |           |  |  |  |            |  
|------------------------------ |  | ------- | --------- | -------- |  | ------- | --------- | --- |  | ------ | --------- | -------------- |  | ------ | --------- |  |  | ------- | --------- | ----------- |  | ------------ | --------- |  |  |  | ---------- | -
|                               |  | 2000   
|                               |  |        
|                               |  |         |           |          |  |         |           |     |  |        |           |                |  |        |           |  |  | Segment |           | Corporate & |  | Consolidated
|                               |  | Testing |           | Assembly |  | Turnkey |           | TCP |  | Totals |           | Other assets   |  | Totals
|                               |  |         |           |          |  |         |           |     |  |        |           |                |  |       
|                               |  | NT$     |           | NT$      |  | NT$     |           | NT$ |  | NT$    |           | NT$            |  | NT$   
|                               |  |         |           |          |  |         |           |     |  |        |           | (In Thousands) |  |        |           |  |  |         |           |             |  |             
|Revenues from
customers        |  |         | 2,331,057 |          |  |         | 1,415,196 |     |  |        | 1,787,838 |                |  |        | 991,774   |  |  |         | 6,525,865 |             |  |              |          |  |  |  | 6,525,865  |  
|Cost of revenues               |  |         | 2,684,654 |          |  |         | 1,394,291 |     |  |        | 1,766,985 |                |  |        | 865,776   |  |  |         | 6,711,706 |             |  |              |          |  |  |  | 6,711,706  |  
|Segment gross
profit           |  |         | (353,597  | )        |  |         | 20,905    |     |  |        | 20,853    |                |  |        | 125,998   |  |  |         | (185,841  | )           |  |              |          |  |  |  | (185,841   | )
|Depreciation and
amortization  |  |         | 2,055,221 |          |  |         | 443,718   |     |  |        |          |                |  |        | 310,239   |  |  |         | 2,809,178 |             |  |              | 9,097     |  |  |  | 2,818,275  |  
|Segment assets                 |  |         | 5,724,785 |          |  |         | 2,035,886 |     |  |        |          |                |  |        | 2,209,521 |  |  |         | 9,970,192 |             |  |              | 6,433,868 |  |  |  | 16,404,060 |  
|Expenditure for
segment assets |  |         | 531,434   |          |  |         | 68,421    |     |  |        |          |                |  |        | 1,164,630 |  |  |         | 1,764,485 |             |  |              |          |  |  |  | 1,764,485  |  



| |    |  | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                

F-93



---



##### Table of Contents





| | c. |  | Net revenues:
| | -- |  | -------------

|         |  |                        |           |      |  |      |           |  |  |  |           | 
|-------- |  | ---------------------- | --------- | ---- |  | ---- | --------- |  |  |  | --------- | 
|         |  | Year ended December 31
|         |  |                       
|         |  | 2000                   |           | 2001 |  | 2002
|         |  |                        |           |      |  |     
|         |  | NT$                    |           | NT$  |  | NT$ 
|         |  | (In Thousands)        
|Area     |  |                        |           |      |  |      |           |  |  |  |           | 
|Domestic |  |                        | 6,486,459 |      |  |      | 4,693,604 |  |  |  | 5,755,406 | 
|Export   |  |                        | 1,737,732 |      |  |      | 551,491   |  |  |  | 770,459   | 
|         |  |                        |           |      |  |      |           |  |  |  |           | 
|         |  |                        | 8,224,191 |      |  |      | 5,245,095 |  |  |  | 6,525,865 | 
|         |  |                        |           |      |  |      |           |  |  |  |           | 



| | d. |  | Net sales to customers representing at least 10% of net total sales:
| | -- |  | --------------------------------------------------------------------

|         |  |                        |           |      |  |        |    |     |  |        |           |   |  |     |    |  |  |  |           |  |  |  |    | 
|-------- |  | ---------------------- | --------- | ---- |  | ------ | -- | --- |  | ------ | --------- | - |  | --- | -- |  |  |  | --------- |  |  |  | -- | 
|         |  | Year Ended December 31
|         |  |                       
|         |  | 2000                   |           | 2001 |  | 2002  
|         |  |                        |           |      |  |       
|Customer |  | Amount                 |           | %    |  | Amount |    | %   |  | Amount |           | %
|         |  |                        |           |      |  |        |    |     |  |        |           |  
|         |  | NT$                    |           |      |  |        |    | NT$ |  |        |           |   |  | NT$ |    |  |  | 
|         |  | (In Thousands)        
|MVI      |  |                        | 4,054,724 |      |  |        | 49 |     |  |        | 2,495,046 |   |  |     | 48 |  |  |  | 2,285,348 |  |  |  | 35 | 
|Ultima   |  |                        | 893,835   |      |  |        | 11 |     |  |        | 1,163,383 |   |  |     | 22 |  |  |  | 1,218,265 |  |  |  | 19 | 



|22. |  | SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN ACCOUNTING
PRINCIPLES FOLLOWED BY THE COMPANY AND ACCOUNTING PRINCIPLES GENERALLY
ACCEPTED IN THE UNITED STATES                                                                                                                          
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | The 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 (U.S. GAAP):



| | a. |  | Bonuses to employees, directors and supervisors                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | -- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |    |  | According to ROC regulations and the Articles of Incorporation of the
Company, a portion of distributable earnings should be appropriated as
bonuses to employees and remuneration to directors and supervisors. The
remuneration to directors and supervisors are always 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.

F-94



---



##### Table of Contents





| |    |  | Under U.S. GAAP, such bonuses and remuneration are charged to income
currently and included in operating expenses as compensation expense. 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 the Company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
differences 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 securities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|
| |    |  | Under ROC GAAP, marketable equity securities are carried at the lower of
aggregate cost or market, 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 investments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|
| |    |  | Under 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 that under investee is nominal, thus they do
not appear in the reconciliation below.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

F-95



---



##### Table of Contents





| | d. |  | Technologies transferred in payment of capital stock                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | -- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |    |  | As discussed in Note 9, MVI and SPIL contributed, as payment to their
subscription in the shares of stock, technologies related to the testing and
packaging of integrated circuits at an agreed valuation 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, the
Company uses a 5 years amortization period. Under U.S. GAAP, the technology
contribution can not 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 costs                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|
| |    |  | ROC GAAP requires the deferral of start-up costs and the amortization of
such costs into income in a systematic manner over the periods estimated to be
benefited. Start-up costs include all costs incurred prior to production
readiness. On the other hand, US GAAP primarily requires that start-up costs
are expensed as incurred.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|
| | f. |  | Depreciation of fixed assets and employee
dormitory building                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|
| |    |  | Under ROC GAAP, the estimated life of a building can be as long as 55 years
based on the ROC Internal Revenue Code. For US GAAP purpose, building lives
have been estimated to be 25 years.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|
| | g. |  | Transfer of building and facilities from MVI                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|
| |    |  | The Company purchased building and facilities from MVI in 1997. The actual
costs 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. Such additional
payment of NT$173,174 thousand was capitalized by the Company as allowed
under ROC GAAP. Under U.S. GAAP, assets acquired are recorded at an amount
that does not exceed their fair values. Also, generally under U.S. GAAP,
transfers of assets from related parties with significant influence should
be recorded by the transferee at predecessor basis. Therefore, the
transfers of the assets from MVI were recorded at MVIs predecessor cost
basis and the NT$173,174 thousand was deducted from the capital surplus and
building and facilities for U.S. GAAP.
|
| | h. |  | Inventory                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|
| |    |  | As 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 affects ending inventory balances under U.S. GAAP.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

F-96



---



##### Table of Contents





| | i. |  | Capital surplus                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | -- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |    |  | Under 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 assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|
| |    |  | Under 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. 121, Accounting for the Impairment of
Long-Lived Assets and for the Long-Lived Assets to be Disposed of,
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. Under ROC GAAP, there is no requirement
to provide for impairment of long-lived assets. Based on an assessment by
the Company, there were no impairment losses for the Company as of December
31, 2001 and 2002.                                                                                                                                                                                                                                                                                                      
|
| | k. |  | Derivative financial instruments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|
| |    |  | Under 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 restricted 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 Certain 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
to the Companys financial statements. Under U.S. GAAP, the Company did not
apply hedge accounting and derivatives have historically been, and continue
to be, recorded on the balance sheets at fair value, with the changes in
fair values recorded through current period earnings under U.S. GAAP. In
addition, the Company has no embedded derivatives from January 1 to December
31, 2002. The reconciling adjustments for all periods presented reflect
lose reconciling from hedge accounting under ROC GAAP to non-hedge
accounting under U.S. GAAP.

F-97



---



##### Table of Contents





| | l. |  | Employee share purchase                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |    |  | The Company has elected to apply Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees (APB Opinion No. 25) when new
shares are issued to employees, which measures compensation expenses based
on the difference, if any, between the fair value of the common stock and
the selling price on the date of issuance. In 2000, the total compensation
expenses of NT$25,900 thousand was recognized in full immediately,
representing the excess of fair market value over the amounts paid by
employees on the date the shares were purchased.                                                                                                                                                                                           
|
| | m. |  | 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 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 when they were issued.                                                                                                                                                                                                                                                                                                                                                             
|
| | n. |  | Interest capitalization                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|
| |    |  | Under ROC GAAP, interests of borrowings during construction conceptually
should be capitalized for 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. |  | Pension expenses                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| |    |  | SFAS 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 2001, 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.
|
| | p. |  | Consolidation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|
| |    |  | Under ROC GAAP, a company is required to include in its annual consolidated
financial statements only those subsidiaries that are directly or indirectly
more than 50% owned. For directly owned subsidiaries (i) with total assets
and operating revenues less than 10% of the issuers unconsolidated total
assets and operating revenues, (ii) which are in a negative equity position
which is considered to be other than temporary and the issuer did not
guarantee the obligations of the subsidiary or commit to provide additional
financial support, or (iii) with business activities which differ from that
of the issuer, the issuer has the option of whether or not to consolidate
such subsidiaries. For purposes of applying the above test, the           

F-98



---



##### Table of Contents





| |  |  | amounts are determined on the basis of each respective subsidiarys
unconsolidated financial statements. Under U.S. GAAP, consolidation of
majority-owned subsidiaries is required in the preparing of the consolidated
financial statements. Under U.S. GAAP, the consolidated total assets were
NT$16,197,346 thousand and NT$17,295,385 thousand as of December 31, 2001
and 2002, respectively. Since the difference between ROC GAAP and U.S. GAAP
for consolidation of ChipMOS Japan and ChipMOS US is nominal, thus they do
not appear in the reconciliation below.
| |  |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | 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.
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                              |                                                                  |  |                        |          |      |  |            |         |     |  |            |         |   |  |         |        |  
|------------------------------------------------------------- | ---------------------------------------------------------------- |  | ---------------------- | -------- | ---- |  | ---------- | ------- | --- |  | ---------- | ------- | - |  | ------- | ------ | -
|                                                              |                                                                  |  | Year Ended December 31
|                                                              |                                                                  |  |                       
|                                                              |                                                                  |  | 2000                   |          | 2001 |  | 2002      
|                                                              |                                                                  |  |                        |          |      |  |           
|                                                              |                                                                  |  | NT$                    |          | NT$  |  | NT$        |         | US$
|                                                              |                                                                  |  | (In Thousands)        
|Net income (loss)                                             |                                                                  |  |                        |          |      |  |            |         |     |  |            |         |   |  |         |       
|Net income (loss) based on ROC GAAP                           |                                                                  |  | 1,539,021              |          |      |  | (1,509,064 | )       |     |  | (1,272,779 | )       |   |  | (36,469 | )     
|                                                              |                                                                  |  |                        |          |      |  |            |         |     |  |            |         |   |  |         |       
|Adjustments:                                                  |                                                                  |  |                        |          |      |  |            |         |     |  |            |         |   |  |         |       
|                                                              | Bonus to employees, directors and
supervisors-accrued            |  |                        | (166,214 | )    |  |            |        |     |  |            |        |   |  |         |       |  
|                                                              | Adjustment for employee stock
bonuses                            |  |                        | (227,650 | )    |  |            | (34,065 | )   |  |            |        |   |  |         |       |  
|                                                              | Amortization of technology transfer
in payment of capital stocks |  |                        | 150,000  |      |  |            | 150,000 |     |  |            | 95,833  |   |  |         | 2,746  |  
|                                                              | Amortization of start-up costs                                   |  |                        | 13,244   |      |  |            | 13,424  |     |  |            | 14,699  |   |  |         | 421    |  
|                                                              | Depreciation of fixed assets and
employee dormitory building     |  |                        | (13,525  | )    |  |            | (13,829 | )   |  |            | (14,270 | ) |  |         | (409   | )
|                                                              | Transfer of building and facilities
from MVI                     |  |                        | 30,007   |      |  |            | 28,841  |     |  |            | 15,634  |   |  |         | 448    |  
|                                                              | Derivative financial instruments                                 |  |                        | (2,049   | )    |  |            | 2,049   |     |  |            |        |   |  |         |       |  
|                                                              | Compensation expenses for
employees shares purchase              |  |                        | (25,900  | )    |  |            |        |     |  |            |        |   |  |         |       |  
|                                                              | Pension expenses                                                 |  |                        |         |      |  |            | (1,898  | )   |  |            |        |   |  |         |       |  
|                                                              | Marketable securities-trading                                    |  |                        |         |      |  |            | 25,647  |     |  |            | (31,139 | ) |  |         | (892   | )
|                                                              | Interest capitalization                                          |  |                        |         |      |  |            | 75,429  |     |  |            | 43,329  |   |  |         | 1,241  |  
|                                                              | Depreciation of interest capitalization                          |  |                        |         |      |  |            | (2,201  | )   |  |            | (4,254  | ) |  |         | (122   | )
|                                                              | Effect of U.S GAAP adjustment on
income taxes                    |  |                        | (35,373  | )    |  |            | (41,823 | )   |  |            | (38,217 | ) |  |         | (1,095 | )
|                                                              |                                                                  |  |                        |          |      |  |            |         |     |  |            |         |   |  |         |       
|Net increase (decrease) in net income (loss)                  |                                                                  |  | (277,460               | )        |      |  | 201,574    |         |     |  | 81,615     |         |   |  | 2,338   |       
|                                                              |                                                                  |  |                        |          |      |  |            |         |     |  |            |         |   |  |         |       
|Net income (loss) based on U.S. GAAP                          |                                                                  |  | 1,261,561              |          |      |  | (1,307,490 | )       |     |  | (1,191,164 | )       |   |  | (34,131 | )     
|                                                              |                                                                  |  |                        |          |      |  |            |         |     |  |            |         |   |  |         |       
|Earnings (loss) per share                                     |                                                                  |  | 1.54                   |          |      |  | (1.48      | )       |     |  | (1.34      | )       |   |  | (0.04   | )     
|                                                              |                                                                  |  |                        |          |      |  |            |         |     |  |            |         |   |  |         |       
|Number of weighted average shares
outstanding under U.S. GAAP |                                                                  |  | 817,016                |          |      |  | 881,467    |         |     |  | 887,227    |         |   |  | 887,227 |       
|                                                              |                                                                  |  |                        |          |      |  |            |         |     |  |            |         |   |  |         |       

F-99



---



##### Table of Contents





| |  |  | Shareholders equity
| |  |  | --------------------

|                                        |                                                              |                                                                              |                                                                       |         |                |          |           |         |          |          |         |       |         |        |  
|--------------------------------------- | ------------------------------------------------------------ | ---------------------------------------------------------------------------- | --------------------------------------------------------------------- | ------- | -------------- | -------- | --------- | ------- | -------- | -------- | ------- | ----- | ------- | ------ | -
|                                        |                                                              |                                                                              |                                                                       |         | December 31   
|                                        |                                                              |                                                                              |                                                                       |         |               
|                                        |                                                              |                                                                              |                                                                       |         | 2001           |          | 2002     
|                                        |                                                              |                                                                              |                                                                       |         |                |          |          
|                                        |                                                              |                                                                              |                                                                       |         | NT$            |          | NT$       |         | US$     
|                                        |                                                              |                                                                              |                                                                       |         | (In Thousands)
|Shareholders equity based on ROC GAAP  |                                                              |                                                                              | 11,012,281                                                            |         |                |          | 9,733,900 |         |          |          | 278,908 |      
|                                        |                                                              |                                                                              |                                                                       |         |                |          |           |         |          |          |         |      
|Adjustments:                            |                                                              |                                                                              |                                                                       |         |                |          |           |         |          |          |         |      
|                                        | Technology transfer in payment of capital stocks             |                                                                              |                                                                       |         |                |          |           |         |          |          |         |       |        
|                                        |                                                              | Original cost                                                                |                                                                       |         | (750,000       | )        |           |         | (750,000 | )        |         |       | (21,490 | )     
|                                        |                                                              | Accumulated amortization of technology
transfer in payment of capital stocks |                                                                       |         | 635,833        |          |           |         | 731,666  |          |         |       | 20,965  |       
|                                        | Start-up costs                                               |                                                                              |                                                                       |         |                |          |           |         |          |          |         |       |        
|                                        |                                                              | Original cost                                                                |                                                                       |         | (90,376        | )        |           |         | (86,523  | )        |         |       | (2,479  | )     
|                                        |                                                              | Accumulated depreciation of start-up
costs                                   |                                                                       |         | 41,245         |          |           |         | 51,998   |          |         |       | 1,490   |       
|                                        |                                                              | Net effect on inventories                                                    |                                                                       |         | (345           | )        |           |         | (252     | )        |         |       | (7      | )     
|                                        | Depreciation of fixed assets and employee
dormitory building |                                                                              |                                                                       |         |                |          |           |         |          |          |         |       |        
|                                        |                                                              | Depreciation of fixed assets and
employee dormitory building                 |                                                                       |         | (42,877        | )        |           |         | (57,032  | )        |         |       | (1,634  | )     
|                                        |                                                              | Net effects on inventories                                                   |                                                                       |         | 366            |          |           |         | 251      |          |         |       | 7       |       
|                                        | Transfer of building and facilities from MVI                 |                                                                              |                                                                       |         |                |          |           |         |          |          |         |       |        
|                                        |                                                              |                                                                              | Original cost                                                         |         |                | (173,174 | )         |         |          | (173,174 | )       |       |         | (4,962 | )
|                                        |                                                              |                                                                              | Depreciation and gain on disposal of
building and facilities from MVI |         |                | 149,881  |           |         |          | 164,952  |         |       |         | 4,726  |  
|                                        |                                                              |                                                                              | Net effects on inventories                                            |         |                | (864     | )         |         |          | (301     | )       |       |         | (9     | )
|                                        | Marketable securities  trading                              |                                                                              |                                                                       | 25,647  |                |          |           | (5,492  | )        |          |         | (157  | )      
|                                        | Unrealized holding gain on available-for-sale
securities     |                                                                              |                                                                       | 153,621 |                |          |           | 79,277  |          |          |         | 2,271 |        
|                                        | Pension expenses                                             |                                                                              |                                                                       | (1,898  | )              |          |           | (1,898  | )        |          |         | (54   | )      
|                                        | Interest capitalization                                      |                                                                              |                                                                       | 75,429  |                |          |           | 118,757 |          |          |         | 3,403 |        
|                                        | Depreciation of interest capitalization                      |                                                                              |                                                                       | (2,201  | )              |          |           | (6,455  | )        |          |         | (185  | )      
|                                        | Effect of U.S. GAAP adjustment on income tax                 |                                                                              |                                                                       | 39,745  |                |          |           | 1,528   |          |          |         | 44    |        
|                                        |                                                              |                                                                              |                                                                       |         |                |          |           |         |          |          |         |      
|                                        | Net increase (decrease) in shareholders equity              |                                                                              |                                                                       | 60,032  |                |          |           | 67,302  |          |          |         | 1,929 |        
|                                        |                                                              |                                                                              |                                                                       |         |                |          |           |         |          |          |         |      
|Shareholders equity based on U.S. GAAP |                                                              |                                                                              | 11,072,313                                                            |         |                |          | 9,801,202 |         |          |          | 280,837 |      
|                                        |                                                              |                                                                              |                                                                       |         |                |          |           |         |          |          |         |      

F-100



---



##### Table of Contents



|                                                                  |  |                        |            |      |  |      |            |     |  |  |            |   |  |  |         |  
|----------------------------------------------------------------- |  | ---------------------- | ---------- | ---- |  | ---- | ---------- | --- |  |  | ---------- | - |  |  | ------- | -
|                                                                  |  | Year Ended December 31
|                                                                  |  |                       
|                                                                  |  | 2000                   |            | 2001 |  | 2002
|                                                                  |  |                        |            |      |  |     
|                                                                  |  | NT$                    |            | NT$  |  | NT$  |            | US$
|                                                                  |  | (In Thousands)        
|Changes in shareholders equity based
on U.S. GAAP                |  |                        |            |      |  |      |            |     |  |  |            |   |  |  |         |  
|Balance, beginning of the year                                    |  |                        | 7,094,837  |      |  |      | 12,067,676 |     |  |  | 11,072,313 |   |  |  | 317,258 |  
|Issuance of capital                                               |  |                        | 3,500,000  |      |  |      |           |     |  |  |           |   |  |  |        |  
|Adjustment for compensation expense
for employee shares purchase  |  |                        | 25,900     |      |  |      |           |     |  |  |           |   |  |  |        |  
|Adjustment for common shares issued as
bonuses to employees       |  |                        | 312,790    |      |  |      | 103,515    |     |  |  |           |   |  |  |        |  
|Reversal of unrealized loss (gain) on
available-for-sale security |  |                        | (71,687    | )    |  |      | 55,382     |     |  |  | (153,621   | ) |  |  | (4,402  | )
|Unrealized gain (loss) on
available-for-sale security             |  |                        | (55,382    | )    |  |      | 153,621    |     |  |  | 79,277     |   |  |  | 2,272   |  
|Cumulative translation adjustments                                |  |                        | (343       | )    |  |      | (391       | )   |  |  | (47        | ) |  |  | (1      | )
|Adjustment for long-term investments                              |  |                        |           |      |  |      |           |     |  |  | (5,556     | ) |  |  | (159    | )
|Net income (loss) for the year                                    |  |                        | 1,261,561  |      |  |      | (1,307,490 | )   |  |  | (1,191,164 | ) |  |  | (34,131 | )
|                                                                  |  |                        |            |      |  |      |            |     |  |  |            |   |  |  |         |  
|Balance, end of the year                                          |  |                        | 12,067,676 |      |  |      | 11,072,313 |     |  |  | 9,801,202  |   |  |  | 280,837 |  
|                                                                  |  |                        |            |      |  |      |            |     |  |  |            |   |  |  |         |  



| |  |  | A reconciliation of the significant balance sheet accounts to the approximate
amounts determined under U.S. GAAP is as follows:
| |  |  | -------------------------------------------------------------------------------------------------------------------------------

|                      |                                                |                                                              |           |                |      |      |           |        |      |   |         |       |    |  
|--------------------- | ---------------------------------------------- | ------------------------------------------------------------ | --------- | -------------- | ---- | ---- | --------- | ------ | ---- | - | ------- | ----- | -- | -
|                      |                                                |                                                              |           | December 31   
|                      |                                                |                                                              |           |               
|                      |                                                |                                                              |           | 2001           |      | 2002
|                      |                                                |                                                              |           |                |      |     
|                      |                                                |                                                              |           | NT$            |      | NT$  |           | US$   
|                      |                                                |                                                              |           | (In Thousands)
|Current assets        |                                                |                                                              |           |                |      |      |           |        |      |   |         |      
|As reported           |                                                |                                                              | 4,207,669 |                |      |      | 5,301,160 |        |      |   | 151,896 |      
|U.S. GAAP adjustments |                                                |                                                              |           |                |      |      |           |        |      |   |         |      
|                      | Marketable securities  trading                |                                                              |           | 25,647         |      |      |           | (5,492 | )    |   |         | (157  | ) 
|                      | Effect of inventory adjustments:               |                                                              |           |                |      |      |           |        |      |   |         |       |   
|                      |                                                | Start-up costs                                               |           |                | (345 | )    |           |        | (252 | ) |         |       | (7 | )
|                      |                                                | Depreciation of fixed assets and
employee dormitory building |           |                | 366  |      |           |        | 251  |   |         |       | 7  |  
|                      |                                                | Transfer of building and facilities
from MVI                 |           |                | (864 | )    |           |        | (301 | ) |         |       | (9 | )
|                      |                                                |                                                              |           |                |      |      |           |        |      |   |         |      
|As adjusted           |                                                |                                                              | 4,232,473 |                |      |      | 5,295,366 |        |      |   | 151,730 |      
|                      |                                                |                                                              |           |                |      |      |           |        |      |   |         |      
|Long-term investments |                                                |                                                              |           |                |      |      |           |        |      |   |         |      
|As reported           |                                                |                                                              | 271,375   |                |      |      | 1,441,866 |        |      |   | 41,314  |      
|U.S. GAAP adjustments |                                                |                                                              |           |                |      |      |           |        |      |   |         |      
|                      | Unrealized gain on available-for-sale
security |                                                              |           | 153,621        |      |      |           | 79,277 |      |   |         | 2,272 |   
|                      |                                                |                                                              |           |                |      |      |           |        |      |   |         |      
|As adjusted           |                                                |                                                              | 424,996   |                |      |      | 1,521,143 |        |      |   | 43,586  |      
|                      |                                                |                                                              |           |                |      |      |           |        |      |   |         |      

F-101



---



##### Table of Contents



|                                    |                                                 |  |            |                |   |      |           |         |   |  |         |        |   | 
|----------------------------------- | ----------------------------------------------- |  | ---------- | -------------- | - | ---- | --------- | ------- | - |  | ------- | ------ | - | 
|                                    |                                                 |  |            | December 31   
|                                    |                                                 |  |            |               
|                                    |                                                 |  |            | 2001           |   | 2002
|                                    |                                                 |  |            |                |   |     
|                                    |                                                 |  |            | NT$            |   | NT$  |           | US$    
|                                    |                                                 |  |            | (In Thousands)
|Property, plant and equipment  net |                                                 |  |            |                |   |      |           |         |   |  |         |       
|As reported                         |                                                 |  | 10,787,452 |                |   |      | 9,690,293 |         |   |  | 277,659 |       
|U.S. GAAP adjustments               |                                                 |  |            |                |   |      |           |         |   |  |         |       
|                                    | Start-up costs                                  |  |            | (49,131        | ) |      |           | (34,525 | ) |  |         | (989   | )
|                                    | Depreciation of fixed assets                    |  |            | (37,869        | ) |      |           | (50,393 | ) |  |         | (1,444 | )
|                                    | Transfer of building and facilities from
MVI    |  |            | (23,293        | ) |      |           | (8,222  | ) |  |         | (236   | )
|                                    | Interest capitalization                         |  |            | 73,228         |   |      |           | 112,302 |   |  |         | 3,218  |  
|                                    |                                                 |  |            |                |   |      |           |         |   |  |         |       
|As adjusted                         |                                                 |  | 10,750,387 |                |   |      | 9,709,455 |         |   |  | 278,208 |       
|                                    |                                                 |  |            |                |   |      |           |         |   |  |         |       
|Intangible assets  net             |                                                 |  |            |                |   |      |           |         |   |  |         |       
|As reported                         |                                                 |  | 153,862    |                |   |      | 50,348    |         |   |  | 1442    |       
|U.S. GAAP adjustments               |                                                 |  |            |                |   |      |           |         |   |  |         |       
|                                    | Technology transfer in payment of capital
stock |  |            | (114,167       | ) |      |           | (18,334 | ) |  |         | (525   | )
|                                    |                                                 |  |            |                |   |      |           |         |   |  |         |       
|As adjusted                         |                                                 |  | 39,695     |                |   |      | 32,014    |         |   |  | 917     |       
|                                    |                                                 |  |            |                |   |      |           |         |   |  |         |       
|Other assets                        |                                                 |  |            |                |   |      |           |         |   |  |         |       
|As reported                         |                                                 |  | 754,185    |                |   |      | 745,561   |         |   |  | 21,363  |       
|U.S. GAAP adjustments               |                                                 |  |            |                |   |      |           |         |   |  |         |       
|                                    | Depreciation of employee dormitory
building     |  |            | (5,008         | ) |      |           | (6,639  | ) |  |         | (190   | )
|                                    |                                                 |  |            |                |   |      |           |         |   |  |         |       
|As adjusted                         |                                                 |  | 749,177    |                |   |      | 738,922   |         |   |  | 21,173  |       
|                                    |                                                 |  |            |                |   |      |           |         |   |  |         |       
|Other liabilities                   |                                                 |  |            |                |   |      |           |         |   |  |         |       
|As reported                         |                                                 |  | 174,913    |                |   |      | 258,434   |         |   |  | 7,405   |       
|U.S. GAAP adjustments               |                                                 |  |            |                |   |      |           |         |   |  |         |       
|                                    | Pension expenses                                |  |            | 1,898          |   |      |           | 1,898   |   |  |         | 55     |  
|                                    | Effect of U.S. GAAP adjustment on income
taxes  |  |            | (39,745        | ) |      |           | (1,528  | ) |  |         | (44    | )
|                                    |                                                 |  |            |                |   |      |           |         |   |  |         |       
|As adjusted                         |                                                 |  | 137,066    |                |   |      | 258,804   |         |   |  | 7,416   |       
|                                    |                                                 |  |            |                |   |      |           |         |   |  |         |       



| |  |  | As a result of the adjustments presented above, the approximate amounts of
total assets based on U.S. GAAP are NT$16,196,728 thousand and NT$17,296,900
thousand as of December 31, 2001 and 2002, respectively.                                                                                                                                                                                                                                             
| |  |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | The following U.S. GAAP condensed statements of operation for the years ended
December 31, 2000, 2001 and 2002 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
receivable, gain (loss) on disposal of property, plant and equipment and loss
on lease rescission are included as operating expenses.

F-102



---



##### Table of Contents



|                                    |  |                        |           |      |  |      |            |     |  |  |            |   |  |  |         |  
|----------------------------------- |  | ---------------------- | --------- | ---- |  | ---- | ---------- | --- |  |  | ---------- | - |  |  | ------- | -
|                                    |  | Year Ended December 31
|                                    |  |                       
|                                    |  | 2000                   |           | 2001 |  | 2002
|                                    |  |                        |           |      |  |     
|                                    |  | NT$                    |           | NT$  |  | NT$  |            | US$
|                                    |  | (In Thousands)        
|Net revenues                        |  |                        | 8,224,191 |      |  |      | 5,245,095  |     |  |  | 6,525,865  |   |  |  | 186,988 |  
|Cost of revenues                    |  |                        | 5,479,901 |      |  |      | 5,999,506  |     |  |  | 6,700,265  |   |  |  | 191,985 |  
|                                    |  |                        |           |      |  |      |            |     |  |  |            |   |  |  |         |  
|Gross profit (loss)                 |  |                        | 2,744,290 |      |  |      | (754,411   | )   |  |  | (174,400   | ) |  |  | (4,997  | )
|Operating expenses                  |  |                        | 1,003,784 |      |  |      | 629,992    |     |  |  | 397,700    |   |  |  | 11,396  |  
|                                    |  |                        |           |      |  |      |            |     |  |  |            |   |  |  |         |  
|Income (loss) from operations       |  |                        | 1,740,506 |      |  |      | (1,384,403 | )   |  |  | (572,100   | ) |  |  | (16,393 | )
|Non-operating income
(expenses)-net |  |                        | (110,186  | )    |  |      | 151,076    |     |  |  | (482,985   | ) |  |  | (13,839 | )
|                                    |  |                        |           |      |  |      |            |     |  |  |            |   |  |  |         |  
|Income (loss) before income tax     |  |                        | 1,630,320 |      |  |      | (1,233,327 | )   |  |  | (1,055,085 | ) |  |  | (30,232 | )
|                                    |  |                        |           |      |  |      |            |     |  |  |            |   |  |  |         |  
|Net income (loss)                   |  |                        | 1,261,561 |      |  |      | (1,307,490 | )   |  |  | (1,191,164 | ) |  |  | (34,131 | )
|                                    |  |                        |           |      |  |      |            |     |  |  |            |   |  |  |         |  



|23. |  | ADDITIONAL DISCLOSURES REQUIRED BY U.S. GAAP
|--- |  | --------------------------------------------



| | a. |  | Recent accounting pronouncements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |    |  | The Company is required by SEC Staff Accounting Bulletin No. 74, to
make certain disclosures about the effect recently issued accounting
standards will have on the financial statements upon their adoption in
future periods.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|
| |    |  | In June 2001, the Financial Accounting Standards Board issued SFAS No.
142, Goodwill and Other Intangible Assets. The Company must adopt
the standard on January 1, 2002, which may affect accounting for
existing intangible assets of the Company upon adoption. The standard
requires companies to reassess and classify the intangible assets in
accordance with the Statements criteria. Under the new standard,
intangible assets will continue to be amortized over their estimated
useful lives, which, if supportable, may be a period that exceeds the
current maximum period of 40 years. Intangible assets with
indeterminable useful lives will not be amortized but assessed for
impairment each year. The Company has completed its assessment of the
impact these new standards may have on the accompanying financial
statements and there is no material impact to be adjusted upon
adoption.
|
| |    |  | In June 2001, the FASB issued SFAS No. 143, Accounting for Asset
Retirement Obligations. The statement requires, among other
provisions, retirement obligations to be recognized when they are
incurred and displayed as liabilities, with a corresponding amount
capitalized as part of the related long-lived asset. The capitalized
element is required to be expensed using a systematic and rational
method over its useful life. SFAS No. 143 will be adopted by the
Company on January 1, 2003 and is not expected to have a material
impact on the accompanying financial statements.                                                                                                                                                                                                                                                                                                                   

F-103



---



##### Table of Contents





| |    |  | In August 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets, which is required to be
adopted by the Company by January 1, 2002. The statement supercedes SFAS
No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of and APB Opinion No. 30, Reporting the
Results of Operations  Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events.
For long-lived assets to be held and used, this Statement retains the
requirement of SFAS No. 121 whereby an impairment loss is recognized if the
carrying value of the asset is not recoverable from its undiscounted cash
flows and an impairment loss is measured as the difference between fair
values and carrying values of the asset. The new Statement requires
long-lived assets to be disposed of other than by sale to be considered
held and used until they are disposed. This statement also broadens the
scope of APB Opinion No. 30 for the presentation of discontinued operations
separately from continuing operations to include a component of an entity
that either has been disposed of or is classified as held for sale. In
addition, discontinued operations are no longer measured on a net
realizable value basis, and expected future operating losses must be
reflected in the periods incurred, rather than at the measurement date as
previously required under APB Opinion No. 30. The adoption of the
Statement is not expected to have a material impact on the accompanying
financial statements.
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b. |  | Marketable securities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|
| |    |  | On December 31, 2001 and 2002, 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 Value    
|                                                            |  |                |         |               
|                                                            |  | 2001           |         | 2002           |  | 2001 |         | 2002
|                                                            |  |                |         |                |  |      |         |     
|                                                            |  | NT$            |         | NT$            |  | NT$  |         | NT$ 
|                                                            |  | (In Thousands) |         | (In Thousands)
|Investment in trading securities
(Note 4)                   |  |                | 969,945 |                |  |      | 874,932 |      |  |  | 995,592 |  |  |  | 869,440 | 
|                                                            |  |                |         |                |  |      |         |      |  |  |         |  |  |  |         | 
|Long-term investments-available
-for-sale security (Note 7) |  |                | 218,099 |                |  |      | 218,099 |      |  |  | 371,720 |  |  |  | 297,376 | 
|                                                            |  |                |         |                |  |      |         |      |  |  |         |  |  |  |         | 



| |  |  | The Company uses the weight-average cost method for trading securities and
available-for-sale securities when determining cost basis. Proceeds from
sales of available-for-sale securities during 2000 and 2001 are NT$100
thousand and NT$0 thousand with zero realized gains (loss).
| |  |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-104



---



##### Table of Contents





| | c. |  | Income tax expense (benefit)
| | -- |  | ----------------------------

|                                        |  |                        |         |      |  |      |         |     |  |  |         |  |  |  |       | 
|--------------------------------------- |  | ---------------------- | ------- | ---- |  | ---- | ------- | --- |  |  | ------- |  |  |  | ----- | 
|                                        |  | Year Ended December 31
|                                        |  |                       
|                                        |  | 2000                   |         | 2001 |  | 2002
|                                        |  |                        |         |      |  |     
|                                        |  | NT$                    |         | NT$  |  | NT$  |         | US$
|                                        |  | (In Thousands)        
|Income tax current payable              |  |                        | 64,155  |      |  |      | 57,229  |     |  |  | 4,217   |  |  |  | 121   | 
|Deferred income tax                     |  |                        | 305,981 |      |  |      | 36,583  |     |  |  | 116,899 |  |  |  | 3,349 | 
|Adjustment of prior years
income taxes |  |                        | (1,377  | )    |  |      | (19,649 | )   |  |  | 14,963  |  |  |  | 429   | 
|                                        |  |                        |         |      |  |      |         |     |  |  |         |  |  |  |       | 
|Income tax expense                      |  |                        | 368,759 |      |  |      | 74,163  |     |  |  | 136,079 |  |  |  | 3,899 | 
|                                        |  |                        |         |      |  |      |         |     |  |  |         |  |  |  |       | 



| |  |  | 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, is as follows:
| |  |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                 |                                                  |                                                                 |                                 |            |          |                        |          |         |         |        |          |         |        |        |         |       |     |       |       | 
|------------------------------------------------ | ------------------------------------------------ | --------------------------------------------------------------- | ------------------------------- | ---------- | -------- | ---------------------- | -------- | ------- | ------- | ------ | -------- | ------- | ------ | ------ | ------- | ----- | --- | ----- | ----- | 
|                                                 |                                                  |                                                                 |                                 |            |          | Year Ended December 31
|                                                 |                                                  |                                                                 |                                 |            |          |                       
|                                                 |                                                  |                                                                 |                                 |            |          | 2000                   |          | 2001    |         | 2002  
|                                                 |                                                  |                                                                 |                                 |            |          |                        |          |         |         |       
|                                                 |                                                  |                                                                 |                                 |            |          | NT$                    |          | NT$     |         | NT$    |          | US$    
|                                                 |                                                  |                                                                 |                                 |            |          | (In Thousands)        
|Tax on pretax income at ROC
statutory rate (25%) |                                                  |                                                                 | 424,702                         |            |          |                        | (308,415 | )       |         |        | (263,771 | )       |        |        | (7,558  | )    
|SBIP tax exemption (5%)                          |                                                  |                                                                 | (93,619                         | )          |          |                        |         |         |         |        |         |         |        |        |        |      
|                                                 |                                                  |                                                                 |                                 |            |          |                        |          |         |         |        |          |         |        |        |         |      
|Tax on pretax income at SBIP
statutory rate      |                                                  |                                                                 | 331,083                         |            |          |                        | (308,415 | )       |         |        | (263,771 | )       |        |        | (7,558  | )    
|Separate and foreign income tax                  |                                                  |                                                                 |                                |            |          |                        |         |         |         |        | 4,217    |         |        |        | 121     |      
|Additional 10% on the
unappropriated earnings    |                                                  |                                                                 |                                |            |          |                        | 114,459  |         |         |        |         |         |        |        |        |      
|Tax effect of:                                   |                                                  |                                                                 |                                 |            |          |                        |          |         |         |        |          |         |        |        |         |      
|                                                 |                                                  | Tax-exempt income                                               |                                 |            | (162,578 | )                      |          |         |        |        |          |         | (3,149 | )      |         |       | (90 | )    
|                                                 |                                                  | Permanent differences
Non  taxable gain on
sales of investment |                                 |            | (19,878  | )                      |          |         | (58,175 | )      |          |         | 2,820  |        |         |       | 81  |      
|                                                 |                                                  |                                                                 | Non-deductible
investment loss  |            |          | 34,338                 |          |         |         | 18,758 |          |         |        | 65,902 |         |       |     | 1,888 |      
|                                                 |                                                  |                                                                 | Bonus to employee and
directors |            |          | 78,773                 |          |         |         | 8,600  |          |         |        |       |         |       |     |      |      
|                                                 |                                                  |                                                                 | Others                          |            |          | 47                     |          |         |         | (7,563 | )        |         |        | 6,478  |         |       |     | 185   |      
|                                                 | Tax credits  utilized                           |                                                                 |                                 | (64,155    | )        |                        |          | (57,230 | )       |        |          |        |        |        |         |      |    
|                                                 |                                                  |                                                                 |                                 | - Deferred |          |                        | (78,414  | )       |         |        | (434,872 | )       |        |        | 119,312 |       |     |       | 3,419 | 
|                                                 | Valuation allowance                              |                                                                 |                                 | 250,920    |          |                        |          | 769,000 |         |        |          | 181,633 |        |        |         | 5,204 |    
|                                                 | Effect of increase in tax rate
on deferred taxes |                                                                 |                                 |           |          |                        |          | 49,250  |         |        |          |        |        |        |         |      |    
|                                                 | Loss carry forward                               |                                                                 |                                 |           |          |                        |          |        |         |        |          | 7,674   |        |        |         | 220   |    
|Adjustment of prior years income
tax            |                                                  |                                                                 | (1,377                          | )          |          |                        | (19,649  | )       |         |        | 14,963   |         |        |        | 429     |      
|                                                 |                                                  |                                                                 |                                 |            |          |                        |          |         |         |        |          |         |        |        |         |      
|Income tax expense                               |                                                  |                                                                 | 368,759                         |            |          |                        | 74,163   |         |         |        | 136,079  |         |        |        | 3,899   |      
|                                                 |                                                  |                                                                 |                                 |            |          |                        |          |         |         |        |          |         |        |        |         |      

F-105



---



##### Table of Contents



The components of deferred income assets (liabilities) were as follows:

|                                |                                                                             |  |                |          |      |  |            |          |   |  |         |         |  
|------------------------------- | --------------------------------------------------------------------------- |  | -------------- | -------- | ---- |  | ---------- | -------- | - |  | ------- | ------- | -
|                                |                                                                             |  | December 31   
|                                |                                                                             |  |               
|                                |                                                                             |  | 2001           |          | 2002
|                                |                                                                             |  |                |          |     
|                                |                                                                             |  | NT$            |          | NT$  |  | US$       
|                                |                                                                             |  | (In Thousands)
|Deferred income tax asset       |                                                                             |  |                |          |      |  |            |          |   |  |         |        
|Current                         |                                                                             |  |                |          |      |  |            |          |   |  |         |        
|                                | Unrealized foreign exchange loss                                            |  |                | 10,556   |      |  |            | 5,439    |   |  |         | 156     |  
|                                | Loss of market price decline and
obsolete and slow-moving
inventories       |  |                | 22,733   |      |  |            | 21,652   |   |  |         | 620     |  
|                                | Sales allowance                                                             |  |                |         |      |  |            | 5,721    |   |  |         | 164     |  
|                                | Others                                                                      |  |                | 7,459    |      |  |            | 5,655    |   |  |         | 162     |  
|                                |                                                                             |  |                |          |      |  |            |          |   |  |         |         |  
|                                |                                                                             |  | 40,748         |          |      |  | 38,467     |          |   |  | 1,102   |        
|                                |                                                                             |  |                |          |      |  |            |          |   |  |         |         |  
|Non-current                     |                                                                             |  |                |          |      |  |            |          |   |  |         |        
|                                | Tax credit for investment in
machinery and equipment and
R & D expenditures |  |                | 958,838  |      |  |            | 839,526  |   |  |         | 24,055  |  
|                                | Loss carry forwards                                                         |  |                | 511,968  |      |  |            | 811,526  |   |  |         | 23,253  |  
|                                | Technologies transfer in payment
of capital stock                           |  |                | 28,542   |      |  |            | 4,584    |   |  |         | 131     |  
|                                | Start-up cost                                                               |  |                | 12,369   |      |  |            | 8,694    |   |  |         | 249     |  
|                                | Others                                                                      |  |                | 6,513    |      |  |            | 2,146    |   |  |         | 62      |  
|                                |                                                                             |  |                |          |      |  |            |          |   |  |         |         |  
|                                |                                                                             |  | 1,518,230      |          |      |  | 1,666,476  |          |   |  | 47,750  |        
|Valuation allowance             |                                                                             |  | (1,125,000     | )        |      |  | (1,306,633 | )        |   |  | (37,439 | )      
|                                |                                                                             |  |                |          |      |  |            |          |   |  |         |         |  
|                                |                                                                             |  | 393,230        |          |      |  | 359,843    |          |   |  | 10,311  |        
|                                |                                                                             |  |                |          |      |  |            |          |   |  |         |         |  
|Deferred income tax liabilities |                                                                             |  |                |          |      |  |            |          |   |  |         |        
|Non-current                     |                                                                             |  |                |          |      |  |            |          |   |  |         |        
|                                | Depreciation differences                                                    |  |                | (490,556 | )    |  |            | (561,144 | ) |  |         | (16,079 | )
|                                | Interest capitalization                                                     |  |                | (18,307  | )    |  |            | (28,076  | ) |  |         | (804    | )
|                                | Other                                                                       |  |                |         |      |  |            | (874     | ) |  |         | (25     | )
|                                |                                                                             |  |                |          |      |  |            |          |   |  |         |         |  
|                                |                                                                             |  | (508,863       | )        |      |  | (590,094   | )        |   |  | (16,908 | )      
|                                |                                                                             |  |                |          |      |  |            |          |   |  |         |         |  
|                                |                                                                             |  | (74,885        | )        |      |  | (191,784   | )        |   |  | (5,495  | )      
|                                |                                                                             |  |                |          |      |  |            |          |   |  |         |         |  

d. Pension

According to SFAS No. 132 Employers Disclosures about Pensions and Other
Post-retirement Benefits, pension information is disclosed below:

F-106



---



##### Table of Contents



|                                                           |                                        |  |                        |     |      |  |         |    |     |  |         |    |  |  |        |   | 
|---------------------------------------------------------- | -------------------------------------- |  | ---------------------- | --- | ---- |  | ------- | -- | --- |  | ------- | -- |  |  | ------ | - | 
|                                                           |                                        |  | Year Ended December 31
|                                                           |                                        |  |                       
|                                                           |                                        |  | 2000                   |     | 2001 |  | 2002   
|                                                           |                                        |  |                        |     |      |  |        
|                                                           |                                        |  | NT$                    |     | NT$  |  | NT$     |    | US$
|                                                           |                                        |  | (In Thousands)        
|Components of net periodic benefit cost                    |                                        |  |                        |     |      |  |         |    |     |  |         |    |  |  |        |  
|Service cost                                               |                                        |  | 22,375                 |     |      |  | 23,363  |    |     |  | 21,323  |    |  |  | 611    |  
|Interest cost                                              |                                        |  | 2,030                  |     |      |  | 3,384   |    |     |  | 3,529   |    |  |  | 101    |  
|Projected return on plan assets                            |                                        |  | (1,699                 | )   |      |  | (2,496  | )  |     |  | (2,802  | )  |  |  | (80    | )
|Net amortization and deferral:                             |                                        |  |                        |     |      |  |         |    |     |  |         |    |  |  |        |  
|                                                           | Unrecognized net transition
obligation |  |                        |    |      |  |         |   |     |  |         | 28 |  |  |        | 1 | 
|                                                           | Unrecognized prior service cost        |  |                        | 105 |      |  |         | 96 |     |  |         |   |  |  |        |  | 
|Curtailment gain                                           |                                        |  |                       |     |      |  | (5,004  | )  |     |  |        |    |  |  |       |  
|                                                           |                                        |  |                        |     |      |  |         |    |     |  |         |    |  |  |        |  
|Net periodic benefit cost                                  |                                        |  | 22,811                 |     |      |  | 19,343  |    |     |  | 22,078  |    |  |  | 633    |  
|                                                           |                                        |  |                        |     |      |  |         |    |     |  |         |    |  |  |        |  
|Changes in benefit obligation                              |                                        |  |                        |     |      |  |         |    |     |  |         |    |  |  |        |  
|Benefit obligation at beginning of year                    |                                        |  | 31,224                 |     |      |  | 58,009  |    |     |  | 70,572  |    |  |  | 2,022  |  
|Service cost                                               |                                        |  | 22,375                 |     |      |  | 23,363  |    |     |  | 21,323  |    |  |  | 611    |  
|Interest cost                                              |                                        |  | 2,030                  |     |      |  | 3,384   |    |     |  | 3,529   |    |  |  | 101    |  
|Curtailments                                               |                                        |  |                       |     |      |  | (7,180  | )  |     |  |        |    |  |  |       |  
|Actuarial loss (gain)                                      |                                        |  | 2,380                  |     |      |  | (7,004  | )  |     |  | 26,724  |    |  |  | 766    |  
|                                                           |                                        |  |                        |     |      |  |         |    |     |  |         |    |  |  |        |  
|Benefit obligation at end of year                          |                                        |  | 58,009                 |     |      |  | 70,572  |    |     |  | 122,148 |    |  |  | 3,500  |  
|                                                           |                                        |  |                        |     |      |  |         |    |     |  |         |    |  |  |        |  
|Changes in plan assets                                     |                                        |  |                        |     |      |  |         |    |     |  |         |    |  |  |        |  
|Fair value of plan assets at beginning of year             |                                        |  | 16,912                 |     |      |  | 33,101  |    |     |  | 49,610  |    |  |  | 1,422  |  
|Actual return on plan assets                               |                                        |  | 1,287                  |     |      |  | 1,655   |    |     |  | 1,306   |    |  |  | 37     |  
|Employer contribution                                      |                                        |  | 14,902                 |     |      |  | 14,886  |    |     |  | 15,089  |    |  |  | 432    |  
|                                                           |                                        |  |                        |     |      |  |         |    |     |  |         |    |  |  |        |  
|                                                           |                                        |  | 33,101                 |     |      |  | 49,642  |    |     |  | 66,005  |    |  |  | 1,891  |  
|                                                           |                                        |  |                        |     |      |  |         |    |     |  |         |    |  |  |        |  
|Funds status                                               |                                        |  | (24,908                | )   |      |  | (20,930 | )  |     |  | (56,143 | )  |  |  | (1,609 | )
|Unrecognized actuarial loss (gain)                         |                                        |  | 8,243                  |     |      |  | (181    | )  |     |  | 28,043  |    |  |  | 804    |  
|                                                           |                                        |  |                        |     |      |  |         |    |     |  |         |    |  |  |        |  
|Net amount recognized (recognized as
accrued pension cost) |                                        |  | (16,665                | )   |      |  | (21,111 | )  |     |  | (28,100 | )  |  |  | (805   | )
|                                                           |                                        |  |                        |     |      |  |         |    |     |  |         |    |  |  |        |  
|Actuarial assumptions                                      |                                        |  |                        |     |      |  |         |    |     |  |         |    |  |  |        |  
|Discount rate                                              |                                        |  | 6.0                    | %   |      |  | 5.0     | %  |     |  | 3.5     | %  |  |  | 3.5    | %
|                                                           |                                        |  |                        |     |      |  |         |    |     |  |         |    |  |  |        |  
|Rate of compensation increase                              |                                        |  | 5.5                    | %   |      |  | 4.5     | %  |     |  | 3.5     | %  |  |  | 3.5    | %
|                                                           |                                        |  |                        |     |      |  |         |    |     |  |         |    |  |  |        |  
|Expected return on plan assets                             |                                        |  | 6.0                    | %   |      |  | 5.0     | %  |     |  | 3.5     | %  |  |  | 3.5    | %
|                                                           |                                        |  |                        |     |      |  |         |    |     |  |         |    |  |  |        |  

The Company has no other post-retirement or post-employment benefit plans.

F-107



---



##### Table of Contents



e. Statements of cash flows

We apply ROC SFAS No. 17, Statement of Cash Flows. 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 flow 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 31
|                                                   |                      |  |                       
|                                                   |                      |  | 2000                   |            | 2001 |  | 2002     
|                                                   |                      |  |                        |            |      |  |          
|                                                   |                      |  | NT$                    |            | NT$  |  | NT$       |            | US$
|                                                   |                      |  | (In Thousands)        
|Net cash inflow (outflow) from:                    |                      |  |                        |            |      |  |           |            |     |  |           |            |   |  |        |        
|                                                   | Operating activities |  |                        | 3,008,697  |      |  |           | 2,771,734  |     |  |           | 1,335,128  |   |  |        | 38,256  |  
|                                                   | Investing activities |  |                        | (6,239,334 | )    |  |           | (1,692,567 | )   |  |           | (3,042,493 | ) |  |        | (87,178 | )
|                                                   | Financing activities |  |                        | 4,270,313  |      |  |           | (488,275   | )   |  |           | 2,496,613  |   |  |        | 71,536  |  
|                                                   |                      |  |                        |            |      |  |           |            |     |  |           |            |   |  |        |         |  
|Change in cash and cash equivalents                |                      |  | 1,039,676              |            |      |  | 590,892   |            |     |  | 789,248   |            |   |  | 22,614 |        
|Cash and cash equivalents at the
beginning of year |                      |  | 145,309                |            |      |  | 1,184,985 |            |     |  | 1,775,877 |            |   |  | 50,885 |        
|                                                   |                      |  |                        |            |      |  |           |            |     |  |           |            |   |  |        |         |  
|Cash and cash equivalents at the end
of year       |                      |  | 1,184,985              |            |      |  | 1,775,877 |            |     |  | 2,565,125 |            |   |  | 73,499 |        
|                                                   |                      |  |                        |            |      |  |           |            |     |  |           |            |   |  |        |         |  

f. Statement of comprehensive income (loss)

|                                     |                                                                   |                        |           |         |   |      |            |         |   |  |            |          |   |  |         |        |  
|------------------------------------ | ----------------------------------------------------------------- | ---------------------- | --------- | ------- | - | ---- | ---------- | ------- | - |  | ---------- | -------- | - |  | ------- | ------ | -
|                                     |                                                                   | Year Ended December 31
|                                     |                                                                   |                       
|                                     |                                                                   | 2000                   |           | 2001    |   | 2002
|                                     |                                                                   |                        |           |         |   |     
|                                     |                                                                   | NT$                    |           | NT$     |   | NT$  |            | US$    
|                                     |                                                                   | (In Thousands)        
|Net income (loss) based on U.S. GAAP |                                                                   |                        | 1,261,561 |         |   |      | (1,307,490 | )       |   |  | (1,191,164 | )        |   |  | (34,131 | )     
|Other comprehensive income (loss):   |                                                                   |                        |           |         |   |      |            |         |   |  |            |          |   |  |         |       
|                                     | Reversal of unrealized loss (gain)
on available-for-sale security |                        |           | (71,687 | ) |      |            | 55,382  |   |  |            | (153,621 | ) |  |         | (4,402 | )
|                                     | Unrealized gain (loss) on
available-for-sale security             |                        |           | (55,382 | ) |      |            | 153,621 |   |  |            | 79,277   |   |  |         | 2,272  |  
|                                     | Translation adjustment                                            |                        |           | (343    | ) |      |            | (391    | ) |  |            | (47      | ) |  |         | (1     | )
|                                     |                                                                   |                        |           |         |   |      |            |         |   |  |            |          |   |  |         |       
|Comprehensive income (loss)          |                                                                   |                        | 1,134,149 |         |   |      | (1,098,878 | )       |   |  | (1,265,555 | )        |   |  | (36,262 | )     
|                                     |                                                                   |                        |           |         |   |      |            |         |   |  |            |          |   |  |         |       

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 expenses or benefit is allocated to each component.

F-108



---



##### Table of Contents



g. Statements of accumulated comprehensive income (loss)

|                                 |  |                |          |             |  |               |      |             |  |  |          |  
|-------------------------------- |  | -------------- | -------- | ----------- |  | ------------- | ---- | ----------- |  |  | -------- | -
|                                 |  | Unrealized     |          |             |  |               |      | Accumulated
|                                 |  | Gain (Loss) on |          |             |  |               |      | Other      
|                                 |  | Long-term      |          | Translation |  | Comprehensive
|                                 |  | Investments    |          | Adjustment  |  | Income (Loss)
|                                 |  |                |          |             |  |              
|                                 |  | NT$            |          | NT$         |  | NT$          
|                                 |  | (In Thousands)
|Balance, as of January 1, 2000   |  |                | 71,687   |             |  |               | 47   |             |  |  | 71,734   |  
|Addition in 2000                 |  |                | (127,069 | )           |  |               | (343 | )           |  |  | (127,412 | )
|                                 |  |                |          |             |  |               |      |             |  |  |          |  
|Balance, as of December 31, 2000 |  |                | (55,382  | )           |  |               | (296 | )           |  |  | (55,678  | )
|Addition in 2001                 |  |                | 209,003  |             |  |               | (391 | )           |  |  | 208,612  |  
|                                 |  |                |          |             |  |               |      |             |  |  |          |  
|Balance, as of December 31, 2001 |  |                | 153,621  |             |  |               | (687 | )           |  |  | 152,934  |  
|Addition in 2002                 |  |                | (74,344  | )           |  |               | (47  | )           |  |  | (74,391  | )
|                                 |  |                |          |             |  |               |      |             |  |  |          |  
|Balance, as of December 31, 2002 |  |                | 79,277   |             |  |               | (734 | )           |  |  | 78,543   |  
|                                 |  |                |          |             |  |               |      |             |  |  |          |  

F-109



---



##### Table of Contents



EXHIBIT INDEX

|        |  |   |  |                                                                                                                                                                                                                                      
|------- |  | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |   |  |                                                                                                                                                                                                                                      
|Number  |  |   |  | Description of Exhibits                                                                                                                                                                                                              
|        |  |   |  |                                                                                                                                                                                                                                      
|3.1     |  |  |  | Articles of Incorporation of the Registrant (English translations) 1                                                                                                                                                                 
|4.1     |  |  |  | Form of the Second Amended and Restated Deposit Agreement among the
Registrant, Citibank, N.A. and Holders and Beneficial owners of American
Depositary Shares issued thereunder, including the form of American Depositary
Receipts2
|4.1     |  |  |  | Agreement for Providing Testing Services with Siliconware Corp. (effective
from November 1, 1998 to December 31, 2000) (in Chinese with English
translation)3                                                                        
|4.2     |  |  |  | Immunity Agreement with Motorola, Inc. (effective from November 5, 1996 to
December 31, 2002)4                                                                                                                                       
|4.3     |  |  |  | Technology Transfer and License Agreement with NEC Corporation (effective from
June 23, 1998 to June 22, 2003)5                                                                                                                      
|4.4     |  |  |  | License Agreement with Tessera Inc. (effective from December 31, 1998 to April
19, 2016)6                                                                                                                                            
|4.5     |  |  |  | License Agreement with Flip Chip Technologies, L.L.C. (effective from November
28, 1999 to November 27, 2009)7                                                                                                                       
|4.6     |  |  |  | Joint Venture Agreement with Mosel Vitelic, Inc. (in Chinese with English
translation)8                                                                                                                                              
|4.7     |  |  |  | Trust Deed with Citicorp Trustee Company Limited9                                                                                                                                                                                    
|4.8     |  |  |  | Merger Agreement with Siliconware Corp. (in Chinese with English translation)10                                                                                                                                                      
|13.1    |  |  |  | Certification by our
President & 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
Director & Chief Financial Officer pursuant to 18 U.S.C.
Section 1350 as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002                                                                      



---

|1  |  | Incorporated by reference to
Exhibit 3.1 to the Registrants Year 2001 Form
20-F filed with the Commission on June 25, 2002.                                      
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2  |  | Incorporated by reference to Exhibit 4.1 to the Registrants Registration
Statement on Form F-1 (File No. 333-11812) filed with the Commission on April
29, 2000. 
|  
|3  |  | Incorporated by reference to Exhibit 10.1 to the Registrants Registration
Statement on Form F-1 (File No. 333-11812) filed with the Commission on April
29, 2000.
|  
|4  |  | Incorporated by reference to Exhibit 10.2 to the Registrants Registration
Statement on Form F-1 (File No. 333-11812) filed with the Commission on April
29, 2000.
|  
|5  |  | Incorporated by reference to Exhibit 10.3 to the Registrants Registration
Statement on Form F-1 (File No. 333-11812) filed with the Commission on April
29, 2000.
|  
|6  |  | Incorporated by reference to Exhibit 10.4 to the Registrants Registration
Statement on Form F-1 (File No. 333-11812) filed with the Commission on April
29, 2000.
|  
|7  |  | Incorporated by reference to Exhibit 10.5 to the Registrants Registration
Statement on Form F-1 (File No. 333-11812) filed with the Commission on April
29, 2000.
|  
|8  |  | Incorporated by reference to Exhibit 10.6 to the Registrants Registration
Statement on Form F-1 (File No. 333-11812) filed with the Commission on April
29, 2000.
|  
|9  |  | Incorporated by reference to Exhibit 10.7 to the Registrants Registration
Statement on Form F-1 (File No. 333-11812) filed with the Commission on April
29, 2000.
|  
|10 |  | Incorporated by reference to Exhibit 10.8 to the Registrants Year 2000 Form
20-F filed with the Commission on June 28, 2001.                                     





---



##### Table of Contents



|     |  |   |  |                                                                                                                                                                
|---- |  | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |  |   |  | Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002                                                                              
|13.2 |  |  |  | Certification by our Director & Chief Financial Officer pursuant to 18 U.S.C.
Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002