##### Table of Contents



UNITED STATES SECURITIES AND UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 20-F
  o
    
    Registration statement pursuant to Section 12(b) or 12(g) of the Securities Exchange Act of 1934
 or
 þ
    
    Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the fiscal year ended December 31, 2006
 or
 o
    
    Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the transition period from ____________ ____________ to ____________
 or
 o
    
    Shell company report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 Date of event requiring this shell company report
 Commission file number 1-14700
 (Exact Name of Registrant as Specified in Its Charter)
 Siliconware Precision Industries Co., Ltd.
  Taiwan, Republic of China
 No. 123, Sec. 3, Da Fong Road, Tantzu, Taichung, Taiwan, ROC
  Title of Each Class
    
    Name of Each Exchange On Which RegisteredCommon Shares, par value NT$10 per share
    
    The NASDAQ Stock Market LLC
 None
 None
  As of December 31, 2006, 2,887,757,426 Common Shares were outstanding
 
 þ o
 o þ
 þ o
  þ o o
 o þ
 o þ




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##### 



SILICONWARE PRECISION INDUSTRIES CO., LTD.
FORM 20-F ANNUAL REPORT
FISCAL YEAR ENDED DECEMBER 31, 2006
 TABLE OF CONTENTS
 PageForward Looking Statements in This Annual Report May Not Be Accurate
    
    
    1PART I
    
    
    3Item 1. Identity of Directors, Senior Management and Advisers
    
    
    3Item 2. Offer Statistics and Expected Timetable
    
    
    3Item 3. Key Information
    
    
    3Item 4. Information on the Company
    
    
    18Item 4A. Unresolved Staff Comments
    
    
    36Item 5. Operating and Financial Review and Prospects
    
    
    36Item 6. Directors, Senior Management and Employees
    
    
    57Item 7. Major Shareholders and Related Party Transactions
    
    
    62Item 8. Financial Information
    
    
    65Item 9. The Offer and Listing
    
    
    67Item 10. Additional Information
    
    
    69Item 11. Quantitative and Qualitative Disclosures About Market Risk
    
    
    82Item 12. Description of Securities Other Than Equity Securities
    
    
    83PART II
    
    
    84Item 13. Defaults, Dividend Arrearages and Delinquencies
    
    
    84Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds
    
    
    84Item 15. Controls and Procedures
    
    
    84Item 16A. Audit Committee Financial Expert
    
    
    85Item 16B. Code of Ethics
    
    
    85Item 16C. Principal Accountant Fees and Services
    
    
    85Item 16D. Exemptions from the Listing Standards for Audit Committees
    
    
    86Item 16E. Purchase of Equity Securities by the Issuer and Affiliated Purchasers
    
    
    86PART III
    
    
    87Item 17. Financial Statements
    
    
    87Item 18. Financial Statements
    
    
    87Item 19. Exhibit Index
    
    
    88EX-1.1 ARTICLES OF INCORPORATION OF SILICONWARE PRECISION INDUSTRIES CO., LTD.EX-8.1 LIST OF SIGNIFICANT SUBSIDIARIES OF SILICONWARE PRECISION INDUSTRIES CO., LTD.EX-12.1 CERTIFICATION OF OUR CHIEF EXECUTIVE OFFICEREX-12.2 CERTIFICATION OF OUR CHIEF FINANCIAL OFFICEREX-13.1 CERTIFICATION BY OUR CHIEF EXECUTIVE OFFCIEREX-13.2 CERTIFICATION BY OUR CHIEF FINANCIAL OFFICEREX-15.1 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
  i




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##### Table of Contents



Forward Looking Statements in This Annual Report May Not Be Accurate
  
    
    the intensely competitive semiconductor and personal computer industries and markets;
    
    risks associated with international business activities;
    
    our dependence on key personnel;
    
    natural disasters, such as earthquakes and droughts, which are beyond our control;
    
    general economic and political conditions, including those related to the
semiconductor and personal computer industries;
    
    possible disruptions in commercial activities caused by human-induced
disasters, including terrorist activity and armed conflict, and outbreaks of
contagious diseases, such as avian influenza which reduce end-user purchases relative
to expectations and orders;
    
    fluctuations in foreign currency exchange rates;
    
    additional disclosures we make in our previous and future Form 20-F annual
reports and Form 6-K periodic reports to the Securities and Exchange Commission, or
the SEC; and
    
    those other risks identified in Item 3. Key InformationD. Risk Factors of
this annual report.
  1




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##### Table of Contents



PART I
 
 Item 1. Identity of Directors, Senior Management and Advisers
  
 Item 2. Offer Statistics and Expected Timetable
  
 Item 3. Key Information
 A. Selected Financial Data
  Year Ended December 31,2002
    
    2003
    
    2004
    
    2005
    
    2006NT$
    
    NT$
    
    NT$
    
    NT$
    
    NT$
    
    US$ (6)(in millions, except earnings or dividends per share and per ADS data)Income Statement Data:ROC GAAPNet operating revenues
    
    
    22,299
    
    
    
    27,411
    
    
    
    35,252
    
    
    
    43,488
    
    
    
    57,126
    
    
    
    1,752.9Cost of goods sold
    
    
    (20,210
    )
    
    
    (23,298
    )
    
    
    (28,871
    )
    
    
    (33,960
    )
    
    
    (41,894
    )
    
    
    (1,285.5
    )Gross profit
    
    
    2,089
    
    
    
    4,113
    
    
    
    6,381
    
    
    
    9,528
    
    
    
    15,232
    
    
    
    467.4Operating expenses
    
    
    (1,542
    )
    
    
    (1,592
    )
    
    
    (2,048
    )
    
    
    (2,279
    )
    
    
    (2,989
    )
    
    
    (91.7
    )Operating income
    
    
    547
    
    
    
    2,521
    
    
    
    4,333
    
    
    
    7,249
    
    
    
    12,243
    
    
    
    375.7Equity investment income (loss) (1)
    
    
    61
    
    
    
    (533
    )
    
    
    308
    
    
    
    448
    
    
    
    1,154
    
    
    
    35.4Other non-operating income (1)
    
    
    469
    
    
    
    882
    
    
    
    732
    
    
    
    853
    
    
    
    1,099
    
    
    
    33.7Other non-operating expenses
    
    
    (797
    )
    
    
    (667
    )
    
    
    (1,548
    )
    
    
    (941
    )
    
    
    (218
    )
    
    
    (6.7
    )Income before income tax (1)
    
    
    280
    
    
    
    2,203
    
    
    
    3,825
    
    
    
    7,609
    
    
    
    14,278
    
    
    
    438.1Income tax benefit (expense)
    
    
    145
    
    
    
    636
    
    
    
    457
    
    
    
    (16
    )
    
    
    (949
    )
    
    
    (29.1
    )Income from continuing operations
    
    
    425
    
    
    
    2,839
    
    
    
    4,282
    
    
    
    7,593
    
    
    
    13,329
    
    
    
    409.0Cumulative effects of changes in
accounting principles
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    651
    
    
    
    
    
    
    
    Net income (1)(2)
    
    
    425
    
    
    
    2,839
    
    
    
    4,282
    
    
    
    8,244
    
    
    
    13,329
    
    
    
    409.0Earnings per share (3)Basic
    
    
    0.17
    
    
    
    1.17
    
    
    
    1.74
    
    
    
    3.28
    
    
    
    4.91
    
    
    
    0.15Diluted
    
    
    0.17
    
    
    
    1.07
    
    
    
    1.36
    
    
    
    3.07
    
    
    
    4.61
    
    
    
    0.14Shares used in per share calculation
(average, as adjusted) (2)Basic
    
    
    2,401
    
    
    
    2,415
    
    
    
    2,453
    
    
    
    2,517
    
    
    
    2,716
    
    
    
    2,716
 2




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##### Table of Contents



Year Ended December 31,2002
    
    2003
    
    2004
    
    2005
    
    2006NT$
    
    NT$
    
    NT$
    
    NT$
    
    NT$
    
    US$ (6)(in millions, except earnings or dividends per share and per ADS data)Diluted
    
    
    2,401
    
    
    
    2,710
    
    
    
    2,883
    
    
    
    2,932
    
    
    
    2,898
    
    
    
    2,898Earnings per ADS (3)Basic
    
    
    0.85
    
    
    
    5.85
    
    
    
    8.70
    
    
    
    16.4
    
    
    
    24.55
    
    
    
    0.75Diluted
    
    
    0.85
    
    
    
    5.35
    
    
    
    6.80
    
    
    
    15.4
    
    
    
    23.05
    
    
    
    0.71Dividends per share (4)
    
    
    
    
    
    
    
    
    
    
    1.35
    
    
    
    1.55
    
    
    
    2.62
    
    
    
    0.08ADSs used in per ADS calculation
(average, as adjusted) (3)Basic
    
    
    480
    
    
    
    483
    
    
    
    491
    
    
    
    503
    
    
    
    543
    
    
    
    543Diluted
    
    
    480
    
    
    
    542
    
    
    
    577
    
    
    
    586
    
    
    
    580
    
    
    
    580US GAAPNet income (loss)
    
    
    (169
    )
    
    
    3,097
    
    
    
    3,671
    
    
    
    3,971
    
    
    
    8,413
    
    
    
    258.1Earnings (loss) per share (5)Basic
    
    
    (0.07
    )
    
    
    1.30
    
    
    
    1.51
    
    
    
    1.59
    
    
    
    3.11
    
    
    
    0.10Diluted
    
    
    (0.07
    )
    
    
    1.22
    
    
    
    1.16
    
    
    
    1.58
    
    
    
    3.10
    
    
    
    0.10Shares used in per share calculation
(average, as adjusted) (5)Basic
    
    
    2,377
    
    
    
    2,392
    
    
    
    2,439
    
    
    
    2,495
    
    
    
    2,701
    
    
    
    2,701Diluted
    
    
    2,377
    
    
    
    2,684
    
    
    
    2,654
    
    
    
    2,515
    
    
    
    2,716
    
    
    
    2,716Earnings (loss) per ADSBasic
    
    
    (0.35
    )
    
    
    6.50
    
    
    
    7.55
    
    
    
    7.95
    
    
    
    15.55
    
    
    
    0.48Diluted
    
    
    (0.35
    )
    
    
    6.10
    
    
    
    5.80
    
    
    
    7.90
    
    
    
    15.50
    
    
    
    0.48ADSs used in per ADS calculation
(average, as adjusted) (5)Basic
    
    
    475
    
    
    
    478
    
    
    
    488
    
    
    
    499
    
    
    
    540
    
    
    
    540Diluted
    
    
    475
    
    
    
    537
    
    
    
    531
    
    
    
    503
    
    
    
    543
    
    
    
    543
 Year Ended December 31,2002
    
    2003
    
    2004
    
    2005
    
    2006NT$
    
    NT$
    
    NT$
    
    NT$
    
    NT$
    
    US$ (6)(in millions)Other Data:ROC GAAPCapital expenditures
    
    
    6,445
    
    
    
    4,885
    
    
    
    9,785
    
    
    
    8,245
    
    
    
    11,039
    
    
    
    338.7Depreciation and amortization
    
    
    4,902
    
    
    
    5,185
    
    
    
    6,153
    
    
    
    6,572
    
    
    
    7,294
    
    
    
    223.8
 As of December 31,2002
    
    2003
    
    2004
    
    2005
    
    2006NT$
    
    NT$
    
    NT$
    
    NT$
    
    NT$
    
    US$ (6)(in millions)Balance Sheet Data:ROC GAAPCash and cash equivalents
    
    
    5,970
    
    
    
    12,203
    
    
    
    10,922
    
    
    
    12,341
    
    
    
    14,731
    
    
    
    452.0Working capital
    
    
    6,856
    
    
    
    4,766
    
    
    
    13,492
    
    
    
    15,475
    
    
    
    18,741
    
    
    
    575.1Total assets
    
    
    46,236
    
    
    
    54,658
    
    
    
    58,962
    
    
    
    67,175
    
    
    
    78,991
    
    
    
    2,423.8Short-term debt and
current portion of
long-term debt
    
    
    2,968
    
    
    
    10,342
    
    
    
    4,013
    
    
    
    1,885
    
    
    
    446
    
    
    
    13.7Long-term debt
    
    
    14,143
    
    
    
    8,813
    
    
    
    16,639
    
    
    
    14,644
    
    
    
    5,801
    
    
    
    178.0Total liabilities
    
    
    20,057
    
    
    
    24,960
    
    
    
    25,469
    
    
    
    26,350
    
    
    
    16,055
    
    
    
    492.6Total stockholders equity
    
    
    26,179
    
    
    
    29,698
    
    
    
    33,493
    
    
    
    40,825
    
    
    
    62,936
    
    
    
    1,931.1US GAAPTotal assets
    
    
    50,333
    
    
    
    61,756
    
    
    
    65,118
    
    
    
    81,167
    
    
    
    83,770
    
    
    
    2,570.4
 3




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##### Table of Contents



As of December 31,2002
    
    2003
    
    2004
    
    2005
    
    2006NT$
    
    NT$
    
    NT$
    
    NT$
    
    NT$
    
    US$ (6)(in millions)Total liabilities
    
    
    20,017
    
    
    
    25,419
    
    
    
    26,020
    
    
    
    29,776
    
    
    
    18,911
    
    
    
    580.2Total stockholders equity
    
    
    30,316
    
    
    
    36,337
    
    
    
    39,098
    
    
    
    51,391
    
    
    
    64,859
    
    
    
    1,990.2
 
 (1)
    
    Prior to January 1, 2005, the ROC Securities and Futures Bureau allowed us to delay our
recognition of investment income or loss in certain investee companies accounted for under the
equity method until the following accounting year. As a result, in 2002, we delayed the
recognition of investment loss of NT$366 million in relation to the financial results of
ChipMOS Technology Inc., or ChipMOS, until 2003. In addition, in 2003 and 2004, we delayed
the recognition of investment income of NT$247 million and NT$668 million, respectively, in
relation to the financial results of ChipMOS, until 2004 and 2005, respectively and recorded
the above-mentioned amount of NT$668 million as cumulative effects of changes in accounting
principles in 2005. From January 1, 2005, we adopted ROC Statement of Financial Accounting
Standards No. 5, Accounting for Long-term Equity Investment, pursuant to which we ceased to
defer the recognition of investment income or loss of investees accounted for under the equity
method until the subsequent year, and recognized investment income or loss from all investees
accounted for under the equity method based on investees audited financial statements for the
same periods. In 2005 and 2006, we recognized investment income of NT$433 million and
NT$1,125 million (US$34.5 million) from ChipMOSs financial results for the years ended
December 31, 2005 and 2006, respectively. In 2004, 2005 and 2006, our investment income (loss)
under US GAAP from ChipMOS were NT$664 million, NT$469 million and NT$1,045 million (US$32.1
million), respectively. As a result, our financial results under US GAAP would not provide
meaningful year-to-year comparison to our financial results under ROC GAAP prior to January 1,
2005We also experienced a delay in recognition of investment income in Double Win Enterprise Co.,
Ltd., or Double Win, in 2003 and 2004 and Taiwan Hi-tech, or Taiwan Hi-Tech, in 2003, and
recognized their financial results in the subsequent year. Our investment income (loss) from
Double Win and Taiwan Hi-tech for the aforementioned years was not material. Under US GAAP,
there is no provision that allows us to delay recognition of financial results of ChipMOS or
any other investee accounted for under the equity method.Pursuant to a Share Purchase and Subscription Agreement
entered into among us, ChipMOS Technologies (Bermuda) Ltd., or
ChipMOS Bermuda and ChipMOS, on March 27, 2007, we sold, and
ChipMOS Bermuda and ChipMOS purchased, all of the common shares of
ChipMOS, par value NT$10 per share, owned by us for a total cash
consideration of US$191,147,464. In addition, we
subscribed for 12,174,998 newly issued common shares of ChipMOS Bermuda, par value US$0.01 per
share, for an aggregate consideration of US$76,458,987, representing a purchase price of
US$6.28 per common share of ChipMOS Bermuda. Upon the completion of the sale and purchase, we
owned 14.7% of ChipMOS Bermuda, which in turn owned 94.19% of ChipMOS. From the date of the
completion of the sale and purchase, we are required under both ROC GAAP and US GAAP to
recognize our ownership in ChipMOS Bermuda as available-for-sale financial assets and evaluate
their fair market value on a quarterly basis (under ROC GAAP) and on an annual basis (under US
GAAP) and reflect any difference in evaluation from the previous quarter as an addition in or
a deduction from unrealized gain or loss on available-for-sale financial assets.(2)
    
    We did not have minority interest in 2002, 2003, 2004, 2005 or 2006. Therefore, no such
information is presented separately in this table.(3)
    
    Retroactively adjusted for all subsequent stock dividends and employee share bonuses.(4)
    
    Adjusted to reflect 210,497,278 shares, 187,655,305 shares and 267,794,338 shares distributed
as stock dividends and employee stock bonuses in 2004, 2005 and 2006, respectively, with
respect to the earnings of 2003, 2004 and 2005. No stock dividend was declared in 2002 and
2003.(5)
    
    Retroactively adjusted for all subsequent stock dividends only.(6)
    
    Amounts translated for convenience at the Federal Reserve Bank of New York noon buying
exchange rate of NT$32.59 to US$1.00 on December 29, 2006.  4




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Currency Translations and Exchange Rates
  Year Ended December 31,
    
    Average (1)
    
    High
    
    Low
    
    At Period-End2001
    
    
    33.91
    
    
    
    35.13
    
    
    
    32.23
    
    
    
    35.002002
    
    
    34.53
    
    
    
    35.16
    
    
    
    32.85
    
    
    
    34.702003
    
    
    34.41
    
    
    
    34.98
    
    
    
    33.72
    
    
    
    33.992004
    
    
    33.27
    
    
    
    34.16
    
    
    
    31.74
    
    
    
    31.742005
    
    
    32.16
    
    
    
    33.77
    
    
    
    30.65
    
    
    
    32.802006
    
    
    32.51
    
    
    
    33.31
    
    
    
    31.28
    
    
    
    32.59October
    
    
    33.19
    
    
    
    33.31
    
    
    
    33.05
    
    
    
    33.26November
    
    
    32.81
    
    
    
    33.16
    
    
    
    32.35
    
    
    
    32.35December
    
    
    32.51
    
    
    
    32.74
    
    
    
    32.27
    
    
    
    32.592007January
    
    
    32.77
    
    
    
    32.99
    
    
    
    32.38
    
    
    
    32.95February
    
    
    32.97
    
    
    
    33.08
    
    
    
    32.86
    
    
    
    32.98March
    
    
    33.01
    
    
    
    33.13
    
    
    
    32.84
    
    
    
    33.01April
    
    
    33.15
    
    
    
    33.33
    
    
    
    33.06
    
    
    
    33.33May
    
    
    33.28
    
    
    
    33.41
    
    
    
    32.97
    
    
    
    33.09
 
 Source:Federal Reserve Statistical Release, Board of Governors of the Federal Reserve System. (1)
    
    Annual averages are calculated using the average of the exchange rates on the last day of
each month during the period. Monthly averages are calculated using the average of the daily
rates during the relevant period.
 B.
    
    Capitalization and Indebtedness
  C.
    
    Reasons for the Offer and Use of Proceeds
  D.
    
    Risk Factors
  5




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Risks Relating to Our Financial Condition and Business
 Our operating results fluctuate significantly, which may affect the value of your investments
  
    
    our ability to develop and implement new technologies. If we are unable to
successfully implement new technologies in a timely manner, our operating results
could suffer because we would allow our competitors to seize the opportunities in
developing new markets.
    
    changes in our mix of manufacturing services or our customers preferences.
When we discontinue or add manufacturing service or when our customers demand
change, our operating results usually fluctuate.
    
    changes in capacity utilization. When capacity utilization is low, such as in
times of market downturns, we may need to adjust our mix of manufacturing services to
respond to changes in demand and to adjust our prices sufficiently enough to maintain
the level of our capacity utilization.
  The cyclical nature of the semiconductor industry makes us particularly vulnerable to economic
downturns and changes in the semiconductor industry
   We are dependent on the personal computer industry and any downturn in the personal computer
industry would harm our operating results
  6




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We do not have any significant backlog because our customers do not place purchase orders far in
advance, which makes us vulnerable to sudden changes in customer demand
  Potential conflicts of interest with ChipMOS Bermuda may cause us to lose opportunities to expand
and improve our operations
  If we are unable to maintain a steady return to our former capacity utilization rates, our
profitability would be adversely affected
    
    
    ensure that our packaging and testing technologies meet our customers needs;
    
    install advanced equipment in anticipation of new business; and
    
    prevent disruption of operations due to fire, accidents, mechanical and
technical failures, expansion, introduction of new packages or relocation of
equipment.
  7




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We depend on a small number of customers for a substantial portion of our revenues and a loss of
any one of these customers would result in the loss of a significant portion of our revenues
  If capital resources required for our future expansion plans are not available, we may be unable to
successfully implement our services strategy
  If we cannot compete successfully in our industry, our current and potential customers would likely
decide not to use our manufacturing services, which would seriously harm our business
  If the outsourcing trend for packaging and testing services does not continue, we could lose a
significant number of our current customers and we may be unable to implement our manufacturing
services strategy plan in the future
  8




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##### Table of Contents



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
  If we are unable to obtain raw materials from our suppliers, our production schedules would be
delayed and we may lose customers
  If we are unable to obtain equipment from our suppliers, we may be forced to delay any future
expansion plans
  If we are unable to manage our growth effectively, our expansion plans could be jeopardized
  We are exploring the possibility of expanding our operations or making additional investments in
the PRC, which may expose us to additional political, regulatory, economic and foreign investment
risks
  9




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We depend on key management and the loss of any key management personnel may disrupt our
manufacturing services
  We depend on our technical personnel and the inability to attract and retain them would jeopardize
our operations and future expansion plans
  Our failure to comply with environmental regulations or to defend against environmental claims
could expose us to serious liabilities
  We and many Taiwan customers and suppliers are vulnerable to natural disasters and other events
outside our control, the occurrence of which may seriously harm our manufacturing services
  10




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Disruptions in the international trading environment may seriously decrease our international sales
   The differences between Taiwan and U.S. accounting standards resulted in different amounts of our
net income under those standards, which makes evaluating our financial performance difficult
    11




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Risks Relating to Our Technologies
 If we cannot respond to rapid technology changes in the semiconductor packaging and testing industry,
our profitability will suffer
   If we are unable to successfully perform manufacturing services within the acceptable range of
precision, we will not be able to achieve satisfactory production yields and our results of
operations will suffer
  
    
    the level of contaminants in the manufacturing environment;
    
    human error;
    
    equipment malfunction;
    
    incorrect process condition setting;
    
    use of defective raw materials; and
    
    inadequate sample testing.
  We rely on technology provided by third parties
  12




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##### Table of Contents



Disputes over intellectual property rights could be costly and could deprive us of technologies to
stay competitive
  
    
    discontinue using disputed process technologies which would prevent us from
offering some of our packaging and testing services;
    
    pay substantial monetary damages;
    
    seek to develop non-infringing technologies, which may not be feasible; or
    
    seek to acquire licenses to the infringed technology, which may not be
available on commercially reasonable terms, if at all.
    Political and Economic Risks
 We face substantial political risks associated with doing business in Taiwan, particularly due to
the tense relationship between the ROC and the PRC
  13




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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
    Currency fluctuations could increase our costs relative to our revenues, which could adversely
affect our profitability.
  Any future outbreak of contagious diseases may materially and adversely affect our manufacturing
services and operations, as well as our financial condition and results of operations.
  14




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##### Table of Contents



Our future tax obligations may adversely affect our profitability
  Risks Related to Ownership of Our Shares or ADSs
 Restrictions on the ability to deposit shares into our ADS program may adversely affect the
liquidity and price of the ADSs
  
    
    distribution of share dividends or free distribution of our shares;
    
    exercise of the preemptive rights of ADS holders applicable to the shares
evidenced by ADSs in the event of capital increases for cash; or
    
    if permitted under the deposit agreement and the custody agreement, purchases
of our shares in the domestic market in Taiwan by the investor directly or through
the depositary or the surrender of shares under the possession of investors and then
delivery of such shares to the custodian for deposit into our ADS program, subject to
the following conditions: (a) the depositary may accept deposit of those shares and
issue the corresponding number of ADSs with regard to such deposit only if the total
number of ADSs outstanding after the deposit does not exceed the number of ADSs
previously approved by ROC SFB, plus any ADSs issued pursuant to the events described
in the above two bullet points; and (b) this deposit may only be made to the extent
previously issued ADSs have been cancelled.
  Holders of our ADSs will not have the same proposal or voting rights as the holders of our shares,
which may affect the value of your investment
  15




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##### Table of Contents



The rights of holders of our ADSs to participate in our rights offerings may be limited, which may
cause dilution to their holdings
  Our public shareholders may have more difficulty protecting their interests than they would as
shareholders of a U.S. corporation
  Holders of our ADSs will be required to appoint several local agents in Taiwan if they withdraw
shares from our ADS program and become our shareholders, which may make ownership burdensome
  16




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You may not be able to enforce a judgment of a foreign court in the ROC
  
    
    the court rendering the judgment does not have jurisdiction over the subject
matter according to ROC law;
    
    the judgment or the court procedures resulting in the judgment is contrary to
the public order or good morals of the ROC;
    
    the judgment was rendered by default, except where the summons or order
necessary for the commencement of the action was duly served on us within the
jurisdiction of the court rendering the judgment within a reasonable period of time
and in accordance with the laws and regulations of such jurisdiction, or with
judicial assistance of the ROC; or
    
    judgments of ROC courts are not recognized and enforceable in the jurisdiction
of the court rendering the judgment on a reciprocal basis.
 We may become a passive foreign investment company, or PFIC, which could result in adverse U.S. tax
consequences to U.S. investors.
  
 Item 4. Information on the Company
 A. History and Development of the Company
 www.spil.com.tw
 17




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##### Table of Contents




    
    providing a full range of packaging and testing services including turnkey
capabilities to simplify our customers supply chain management;
    
    offering leading packaging and testing technology to attract and retain
customers;
    
    focusing on customer service and working with our customers on developing and
fulfilling their current and future semiconductor packaging and testing needs;
    
    leveraging our existing foundry relationships and Taiwan location to enable
our customers to easily integrate all of their outsourced semiconductor manufacturing
needs; and
    
    diversifying and expanding our customer base geographically, by customer type
and by end-market application to capitalize on growing markets including
communications and increased outsourcing from vertically integrated semiconductor
device manufacturers and systems original equipment manufacturers.
 - - - -
 B. Business Overview
 Our Business
  18




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##### Table of Contents



Year Ended December 31,2004
    
    2005
    
    2006NT$
    
    %
    
    NT$
    
    %
    
    NT$
    
    %(audited) (consolidated)(in millions, except for percentages)Ball grid array packages
    
    
    16,416
    
    
    
    46.6
    
    
    
    21,963
    
    
    
    50.5
    
    
    
    31,538
    
    
    
    55.2Quad flat packages
    
    
    9,435
    
    
    
    26.7
    
    
    
    8,823
    
    
    
    20.3
    
    
    
    10,224
    
    
    
    17.9Small outline packages
    
    
    3,800
    
    
    
    10.8
    
    
    
    3,911
    
    
    
    9.0
    
    
    
    3,751
    
    
    
    6.6Other packages
    
    
    1,467
    
    
    
    4.2
    
    
    
    3,259
    
    
    
    7.5
    
    
    
    3,800
    
    
    
    6.7Total packaging revenues
    
    
    31,118
    
    
    
    88.3
    
    
    
    37,956
    
    
    
    87.3
    
    
    
    49,313
    
    
    
    86.4Testing and other revenues
    
    
    4,134
    
    
    
    11.7
    
    
    
    5,532
    
    
    
    12.7
    
    
    
    7,813
    
    
    
    13.6Total net operating revenues
    
    
    35,252
    
    
    
    100.0
    
    
    
    43,488
    
    
    
    100.0
    
    
    
    57,126
    
    
    
    100.0
  Our Packaging Services
   
    
    the size of the package;
    
    the number of electrical connections the package can support; and
    
    the thermal and electrical requirements of the package.
 19




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##### Table of Contents



Lead-Frame Packages
    
  20




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##### Table of Contents



Quad Flat Packages
 Package
    
    Lead-count
    
    Major Applications
    
    End UsesQuad Flat Package
    
    
    100-256
    
    
    Package with leads
on four sides
designed for
advanced
processors,
consumer and
industrial
controllers,
digital signal
processors and
application
specific integrated
circuits, or ICs
    
    Desktop personal
computers, consumer
and industrial
products,
commercial and
office equipment,
automotive systemsLow-Profile Quad Flat 
Package
    
    
    32-256
    
    
    Low-profile and
lightweight package
designed for
application
specific ICs,
digital signal
processors,
microprocessors/controllers, graphic
processors, gate
arrays, static
random access
memory and personal
computer chipsets
    
    Wireless
communication
products, laptop
computers, digital
cameras,
cordless/radio
frequency devicesThin Quad Flat Package
    
    
    44-176
    
    
    Designed for
lightweight,
portable
electronics
requiring broad
performance
characteristics
    
    Laptop computers,
personal computers,
disk drives, office
equipment, audio
and video products,
wireless
communication
productsVery Thin Quad Flat Package
    
    
    80
    
    
    Designed for
lightweight,
portable
electronics
requiring low
profile packages
    
    Laptop computers,
personal computers,
disk drives, office
equipment, audio,
video products,
wireless
communication
productsQuad Flat No-lead Package
    
    
    5-252
    
    
    Small and light
package with
improved thermal
and electrical
performance makes
it suitable for
wireless
transmitters RF
front end, hard
disk devices and
micro-controllers
    
    Wireless
communication
products, disk
drives, portable
products, consumer
products
 Small Outline Packages
 Package
    
    Lead-count
    
    Major Applications
    
    End UsesPlastic Dual In-line Package
    
    
    14-42
    
    
    General purpose
plastic package
used in consumer
electronic products
    
    Games, telephones,
televisions, audio
equipment, computer
peripheralsSmall Outline Package
    
    
    28-70
    
    
    Small lead-frame
package designed
for applications
requiring reduced
height
    
    Cordless
telephones, fax
machines, copiers,
printers, computer
peripherals, audio
and video products,
automotive systemsShrink Small Outline Package
    
    
    28-56
    
    
    Small lead-frame
package designed
for applications
requiring reduced
height
    
    Cordless
telephones, fax
machines, copiers,
printers, computer
peripherals, audio
and video products,
automotive systems
 21




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##### Table of Contents



Package
    
    Lead-count
    
    Major Applications
    
    End UsesSmall Outline J-lead Package
    
    
    20-44
    
    
    Package designed
for memory and low
pin-count
applications
    
    Consumer
(audio/video/ entertainment),
communications
(cordless phones),
radiofrequency
devices, cable TV,
office appliances
(fax/copiers/printers/personal computer
peripherals)Thin Small Outline Package I
    
    
    32-56
    
    
    Package designed
for high-volume
production of
low-lead count
memory devices
including flash
memory, static
random access
memory and dynamic
random access
memory
    
    Laptop computers,
personal computers,
still and video
cameras and
standard
connections for
peripherals to
computersVery Thin Small Outline 
Package I
    
    
    48
    
    
    Package designed
for a variety of
applications where
small sized memory
devices are
required, such as
static random
access memory,
flash memory and
electrically
erasable
programmable
read-only-memory
    
    Memory module,
mobile phones,
PDAs, laptop
computers, digital
still camerasThin Small Outline Package II
    
    
    40-86
    
    
    Package designed
for logic and
analog devices and
memory devices
including flash
memory, static
random access
memory, erasable
and electrically
erasable
programmable read
only memory and
dynamic random
access memory
    
    Disk drives,
recordable optical
disks, audio and
video products,
consumer
electronics,
communication
productsThin Shrink Small Outline 
Package I
    
    
    32
    
    
    Smaller version of
Thin Small Outline
Package II designed
for logic and
analog devices and
memory devices
including flash
memory, static
random access
memory, erasable
and electrically
erasable
programmable read
only memory and
dynamic random
access memory
    
    Disk drives,
recordable optical
disks, audio and
video products,
consumer
electronics,
communication
products
 Substrate Packages
   22




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
    
    smaller size;
    
    greater pin count;
    
    greater reliability;
    
    better electrical signal integrity; and
    
    easier attachment to a printed circuit board.
    
   
 23




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##### Table of Contents



Package
    
    Lead-count
    
    Major Applications
    
    End UsesFlip-Chip Ball Grid Array
    
    256-2,401
    
    Much higher
electrical
performance than
traditional ball
grid array for
modern, more
demanding
applications
    
    Workstations,
networking,
graphics,
application
specific ICs,
personal digital
assistants,
processorsThin and Fine Pitch Ball
Grid Array
    
    14-780
    
    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 ICs, radio
frequency devices,
personal digital
assistants,
communications,
mobile phones,
laptop computers,
sub-notebooks,
wireless systemsBall Grid Array
    
    119-1,521
    
    Ball grid array
package designed
for applications
which require high
performance
    
    Laptop computers,
disk drives, video
cameras, global
positioning
systems, wireless
communication
products, standard
connections for
peripherals to
computersThermal Enhanced Ball 
Grid Array
    
    195-1,152
    
    Optimum low cost
solution for high
speed, high power
applications with
multiple routing
layers for high
performance
applications
    
    Application
specific ICs,
microprocessors,
gate arrays,
network
communicationsLow Profile Ball Grid 
Array
    
    324-484
    
    Low-profile and
light-weight
package designed
for applications
which require a
smaller package
size
    
    Laptop computers,
wireless
communication
products, computer
peripheralsLand Grid Array
    
    7-245
    
    Land grid array
package designed
for applications
which require a
smaller package
size
    
    Laptop computers,
disk drives, video
cameras, global
positioning
systems, wireless
communication
products, standard
connections for
peripherals to
computersFlip Chip Scale Package
    
    25-591
    
    Flip Chip Scale
Package designed
for high speed
memory products,
high performance
communication
products and
consumer products
    
    Mobile phones,
WLAN, PDAs, digital
still cameras and
camcordersWafer Level Chip Scale 
Package
    
    n/a
    
    Flip Chip Scale
Package designed
for high speed
memory products,
high performance
communication
products and
consumer products
    
    Mobile phones,
WLAN, PDAs, hard
disks, digital
still cameras and
camcordersOrganic Leadless Chip 
Carrier
    
    28-48
    
    Package designed
for CMOS image
sensor chip, which
offers small and
light-weight for
image applications
    
    Mobile phones,
PDAs, laptop
computers, digital
still cameras,
personal computer
cameras, toys,
automobile,
security and
surveillance
 24




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Package
    
    Lead-count
    
    Major Applications
    
    End UsesCeramic Leadless Chip 
Carrier
    
    28-48
    
    Offers similar
feature as organic
leadless chip
carrier, but only
using ceramic
substrate material
    
    Mobile phones,
PDAs, laptop
computers, digital
still cameras,
personal computer
cameras, toys,
automobile,
security and
surveillanceOrganic Leadless Grid 
Array
    
    28-48
    
    Offers small and
light-weight for
image sensor
applications and is
made of organic
substrate designed
for better thermal
performance
    
    Mobile phones,
PDAs, laptop
computers, digital
still cameras,
personal computer
cameras, toys,
automobile,
security and
surveillanceCMOS Image Sensor Module
    
    Not applicable
    
    Offers
manufacturing
flexibility for
customized
solutions for image
sensor applications
that require short
time-to-market
    
    Mobile phones,
PDAs, laptop
computers, digital
still cameras,
personal computer
cameras, toys,
automobile,
security and
surveillance
 Testing and Other Services
   Wafer Probing.
 Logic and Mixed Signal Final Testing.
 Memory DDR II Final Testing.
 Other Testing Services.
 25




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##### Table of Contents



Customers
    Year Ended December 31,2004
    
    2005
    
    2006NT$
    
    %
    
    NT$
    
    %
    
    NT$
    
    %(audited) (consolidated)(in millions, except for percentages)Taiwan
    
    
    14,127
    
    
    
    40.1
    
    
    
    16,544
    
    
    
    38.0
    
    
    
    20,500
    
    
    
    35.9U.S. and Canada
    
    
    20,001
    
    
    
    56.7
    
    
    
    24,349
    
    
    
    56.0
    
    
    
    34,045
    
    
    
    59.6Others (1)
    
    
    1,124
    
    
    
    3.2
    
    
    
    2,595
    
    
    
    6.0
    
    
    
    2,581
    
    
    
    4.5Total
    
    
    35,252
    
    
    
    100.0
    
    
    
    43,488
    
    
    
    100.0
    
    
    
    57,126
    
    
    
    100.0
 
 (1)
    
    Includes primarily Japan, Germany, Singapore and Hong Kong.    26




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##### Table of Contents



Sales and Marketing
     Quality Control
  27




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Research and Development
  
    
    reduction of the size and thickness of semiconductor device packages;
    
    increasing input/output density of semiconductor device packages;
    
    enhancement of the electrical, thermal and reliability performance of
semiconductor device packages;
    
    reduction of spacing between leads;
    
    reduction of the height of gold wire used in the wire bonding process;
    
    increasing packaging yields;
    
    shortening cycle times; and
    
    investigating the use of new or replacement raw materials.
   28




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##### Table of Contents



Supplies
 Raw Materials
    Equipment
   Competition
 We face substantial competition from established packaging and testing 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), STATS ChipPAC Ltd. (Singapore), Hana
Microelectronics Public Co. Ltd. (Thailand), Astra International (Indonesia), Carsem Bhd.
(Malaysia) 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 testing
capabilities of many of our customers.
 29




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##### Table of Contents




    
    the breadth of package and test offerings;
    
    technical competence;
    
    manufacturing yields;
    
    manufacturing cycle times;
    
    customer service; and
    
    price.
  
    
    we offer a broader and more complex range of services as compared to the IDMs,
which tend to focus their resources on improving their front-end operations;
    
    we generally have lower unit costs because of our higher utilization rates; and
    
    we offer a wider range of services in terms of complexity and technology.
 Strategic Investments
  
    
    Sigurd Microelectronics Corp. As of December 31, 2006, we held a 17.9% equity
interest in Sigurd Microelectronics Corp. Sigurd provides lower-end packaging and
testing services. Mr. Byron Chiang, one of our officers, is a director of Sigurd.
    
    Phoenix Precision Technology Corporation. As of December 31, 2006, we held,
directly and indirectly, a 17.2% equity interest in Phoenix Precision, a supplier of
semiconductor raw materials, including substrates. Mr. Bough Lin, our Chairman, Mr.
Yen-Chun Chang, one of our directors, and Ms. Teresa Wang, one of our supervisors,
are directors of Phoenix Precision. Ms. Teresa Wang is also the Chief Financial
Officer of Phoenix Precision. Jerome Tsai, one of our directors, is supervisor of
Phoenix Precision. Mr. Wen-Lung Cheng, one of our supervisors, is supervisor of
Phoenix Precision.
    
    Pursuant to a Share Purchase and Subscription Agreement
entered into among us, ChipMOS Technologies (Bermuda) Ltd., or
ChipMOS Bermuda and ChipMOS, on March 27, 2007, we sold, and
ChipMOS Bermuda and ChipMOS purchased, all of the common shares of
ChipMOS, par value NT$10 per share, owned by us for a total cash
consideration of US$191,147,464. In addition, we subscribed for 12,174,998 newly issued common
shares of ChipMOS Bermuda, par value US$0.01 per share, for an aggregate consideration of
US$76,458,987, representing a purchase price of US$6.28 per common
share of ChipMOS Bermuda.
 30




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Intellectual Property
   
    
    Flip Chips Wafer Bumping and Redistribution technology, which enables us to
form and/or redistribute bumps on the chip to make a silicon die, is able to be
directly attached to the substrate using the aforementioned bumps rather than wire
bonding. This license will expire in November 2014.
    
    Flip Chips wafer Level CSP technology, which enables us to produce a chip
scale package at the stage of wafer level. This license will expire in January 2011.
    
    FujiTsu Limiteds electroplating bumping technology which enables us to
produce a bumped wafer with cost-effective, fine-pitch and high-reliability features
instead of screen printing bump to meet current market requirements. This license
will expire in December 2007.
    
    LSI Logic Corporations packaging technology pertaining to flip-chips, which
offer us a cost-effective solution for high performance ASIC and system-on-chip, or
SoC, designs. We acquired this license in August 2001. This license will expire in
January 2010.
    
    Tessera, Inc.s TCC technology which enables us to produce micro ball grid
array. This license will terminate at the expiration of the patent.
    
    ITRIs electrical enchanced-PBGA technology which enables us to produce a high
electrical performance packages by consolidated power ring and ground ring. This license will terminate at the expiration of the patent.
    
    
    discontinue the use of disputed process technologies;
    
    pay substantial damages;
 31




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##### Table of Contents




    
    develop non-infringing technologies; or
    
    acquire licenses to the technologies that we had allegedly infringed.
 Environmental Matters
     Insurance
  Employees
  Capital Expenditures and Divestitures
   32




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Year Ended December 31,2004
    
    2005
    
    2006NT$
    
    NT$
    
    NT$
    
    US$(in millions)Equipment purchases
    
    
    8,777
    
    
    
    7,673
    
    
    
    9,094
    
    
    
    279.0Land and building construction and purchases
    
    
    1,008
    
    
    
    572
    
    
    
    1,945
    
    
    
    59.7
 Material Effects of Regulation
  Litigation
  C. Organizational Structure
  Total Paid-inCapital (1) of
    
    Direct/IndirectCompany
    
    Main Activities
    
    Location
    
    Such Entity
    
    Equity Interest(in millions)SPIL (B.V.I.) Holding Limited
    
    Investment activities
    
    British Virgin
Islands
    
    US$77.8
    
    
    100.0
    %Siliconware Investment
Company Ltd.
    
    Investment activities
    
    Taipei, Taiwan
    
    NT$1,770.0
    
    
    100.0
    %Siliconware U.S.A. Inc.
    
    Communicating and
maintaining
relationships with
companies
headquartered in the
North America
    
    San Jose, CA, USA
    
    US$1.3
    
    
    100.0
    %SPIL (Cayman) Holding Limited
    
    Investment activities
    
    Cayman Islands
    
    US$50.1
    
    
    100.0
    %Siliconware Technology
(Suzhou) Limited
    
    Manufacturing and
processing of module
assembly, flash
memory card and
related products
    
    Suzhou, Jiangsu,
China
    
    US$50.0
    
    
    100.0
    %
 
 (1)
    
    Aggregate par value of all issued shares. 33




---



##### Table of Contents



Total Paid-in
    
    Direct/IndirectCapital (1) of
    
    EquityCompany
    
    Main Activities
    
    Location
    
    Such Entity
    
    Interest(in millions)ChipMOS Technologies Inc.
    
    Testing and assembly of ICs
    
    Hsinchu, Taiwan
    
    NT$8,934
    
    
    28.8
    %Sigurd Microelectronics
Corp.
    
    Testing and assembly of ICs
    
    Hsinchu, Taiwan
    
    NT$2,602
    
    
    17.9
    %Double Win Enterprise
Co., Ltd.
    
    PCB, SMT process and hand
insert
    
    Taoyuan, Taiwan
    
    NT$280
    
    
    24.1
    %Phoenix Precision
Technology Corp.
    
    Researching, developing,
manufacturing and selling
ball grid array substrate
    
    Hsinchu, Taiwan
    
    NT$6,695
    
    
    17.2
    %King Yuan Electronics
Co., Ltd.
    
    IC testing
    
    Hsinchu, Taiwan
    
    NT $10,905
    
    
    7.9
    %
 
 (1)
    
    Aggregate par value of all issued shares. D. Property, Plants and Equipment
   Wire Bonding orFacility
    
    Location of Facility
    
    Size of Facility
    
    Size of Land (1)
    
    Testing Capacity(square meters)
    
    (square meters)Facility I
    
    Taichung, Taiwan
    
    
    81,000
    
    
    
    26,000
    
    
    1,967 wire bondersFacility II
    
    Taichung, Taiwan
    
    
    141,000
    
    
    
    47,000
    
    
    2,034 wire bonders
and 137 testersFacility III
    
    Hsinchu, Taiwan
    
    
    33,000
    
    
    
    14,000
    
    
    169 testersFacility IV
    
    Changhua, Taiwan
    
    Under construction
    
    
    42,000
    
    
    Under construction
 
 (1)
    
    We own all of our properties except otherwise noted.   34




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Item 4A. Unresolved Staff Comments
  
 Item 5. Operating and Financial Review and Prospects
  A. Operating Results
 Overview
     
    
    negotiate better pricing terms with our suppliers, including quantity discounts;
    
    find alternative, less expensive sources of raw materials;
    
    maximize production efficiency of our employees; and
    
    engage in utility conservation programs.
  35




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Consolidation
   Delay in Recognition of Investment Income in Certain Investee Companies Accounted for Under Equity
Method
 ChipMOS
    36




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Double Win and Taiwan Hi-tech Corporation
  Change in Mix of Services
   Year Ended December 31,2004
    
    
    
    
    
    2005
    
    
    
    
    
    2006NT$
    
    %
    
    NT$
    
    %
    
    NT$
    
    %(audited) (consolidated)(in millions, except for percentages)Ball grid array packages
    
    
    16,416
    
    
    
    46.6
    
    
    
    21,963
    
    
    
    50.5
    
    
    
    31,538
    
    
    
    55.2Quad flat packages
    
    
    9,435
    
    
    
    26.7
    
    
    
    8,823
    
    
    
    20.3
    
    
    
    10,224
    
    
    
    17.9Small outline packages
    
    
    3,800
    
    
    
    10.8
    
    
    
    3,911
    
    
    
    9.0
    
    
    
    3,751
    
    
    
    6.6Other packages
    
    
    1,467
    
    
    
    4.2
    
    
    
    3,259
    
    
    
    7.5
    
    
    
    3,800
    
    
    
    6.7Total packaging revenues
    
    
    31,118
    
    
    
    88.3
    
    
    
    37,956
    
    
    
    87.3
    
    
    
    49,313
    
    
    
    86.4Testing and other revenues
    
    
    4,134
    
    
    
    11.7
    
    
    
    5,532
    
    
    
    12.7
    
    
    
    7,813
    
    
    
    13.6Total net operating revenues
    
    
    35,252
    
    
    
    100.0
    
    
    
    43,488
    
    
    
    100.0
    
    
    
    57,126
    
    
    
    100.0
 Expansion and Utilization Rate
   Applications of Critical Accounting Policies
  37




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##### Table of Contents



Revenue Recognition
  Accounts Receivable and Allowances for Doubtful Accounts
  Inventory Reserves
   Impairment of Long-Lived Assets
  38




---



##### Table of Contents



Impairment of Equity Investments
   Provision for Income Taxes and Deferred Tax Asset Valuation Allowances
  Employee Bonuses
  39




---



##### Table of Contents



Goodwill
  Embedded Derivatives
      40




---



##### Table of Contents



Description of Revenue and Cost Items
 Net Operating Revenues
      Cost of Goods Sold
  
    
    cost of raw materials purchased for semiconductor packaging services;
    
    direct labor costs; and
    
    overhead including depreciation and maintenance of production equipment,
indirect labor costs, indirect material costs, utilities and royalties.
  Operating Expenses
  
    
    Selling Expenses. Selling expenses consist primarily of salaries and related
personnel expenses and other marketing expenses.
 41




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##### Table of Contents




    
    General and Administrative Expenses. General and administrative expenses
consist primarily of salaries for our executive, administrative, finance and human
resource personnel, fees for professional services, and the cost of computers to
support our operations.
    
    Research and Development Expenses. Research and development expenses consist
primarily of salaries, bonuses and related costs for technology development,
technology license fees allocated to research and development, and depreciation on
and maintenance of equipment and various materials used in our research and
development processes. We expect our research and development expenses to grow as we
hire additional staff and purchase additional equipment for research and development
purposes.
 Results of Operations
  Year Ended December 31,2004
    
    2005
    
    2006%
    
    %
    
    %(audited) (consolidated)Net operating revenues
    
    
    100.0
    
    
    
    100.0
    
    
    
    100.0Cost of goods sold
    
    
    81.9
    
    
    
    78.1
    
    
    
    73.3Gross profit
    
    
    18.1
    
    
    
    21.9
    
    
    
    26.7Operating expenses:Selling expenses
    
    
    1.6
    
    
    
    1.3
    
    
    
    1.3General and administrative expenses
    
    
    2.1
    
    
    
    1.9
    
    
    
    1.8Research and development expenses
    
    
    2.1
    
    
    
    2.0
    
    
    
    2.1Operating expenses
    
    
    5.8
    
    
    
    5.2
    
    
    
    5.2Operating income
    
    
    12.3
    
    
    
    16.7
    
    
    
    21.5Investment income
    
    
    0.9
    
    
    
    1.0
    
    
    
    2.0Net non-operating income (loss)
    
    
    (2.3
    )
    
    
    (0.2
    )
    
    
    1.5Income before income tax and minority interest
    
    
    10.9
    
    
    
    17.5
    
    
    
    25.0Income tax benefit (expense)
    
    
    1.3
    
    
    
    
    
    
    
    (1.7
    )Income from continuing operations
    
    
    12.2
    
    
    
    17.5
    
    
    
    23.3Cumulative effects of changes in accounting principle
    
    
    
    
    
    
    1.5
    
    
    
    Net income
    
    
    12.2
    
    
    
    19.0
    
    
    
    23.3
 2006 Compared to 2005
 Net operating revenues.
 42




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##### Table of Contents



Gross profit and gross margin.
 Operating expenses.
 
    
    Selling expenses. Selling expenses increased by 26.7% from NT$566 million in
2005 to NT$717 million (US$22.0 million) in 2006 mainly due to an increase in
expenses for customer support.
    
    General and administrative expenses. General and administrative expenses
increased by 25.9% from NT$856 million in 2005 to NT$1,078 million (US$33.1 million)
in 2006 due primary to increased salaries paid to administrative personnel.
    
    Research and development expenses. Research and development expenses increased
by 39.2% from NT$858 million in 2005 to NT$1,194 million (US$36.6 million) in 2006
due to increased salaries paid to R&D personnel and cost for developing new
technology.
 Operating income and operating margin.
 Net non-operating income.
 43




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##### Table of Contents



Cumulative effects of changes in accounting principles
 Income tax (expense) benefit.
 Net income.
 2005 Compared to 2004
 Net operating revenues.
    Gross profit and gross margin.
 Operating expenses.
 
    
    Selling expenses. Selling expenses increased by 3.1% from NT$549 million in
2004 to NT$566 million in 2005 mainly due to an increase in salaries.
 44




---



##### Table of Contents




    
    General and administrative expenses. General and administrative expenses
increased by 14.6% from NT$747 million in 2004 to NT$856 million in 2005 due primary
to increased salaries paid to administrative personnel.
    
    Research and development expenses. Research and development expenses increased
by 13.9% from NT$753 million in 2004 to NT$858 million in 2005 due to increased
salaries paid to R&D personnel and cost for developing new technology .
 Operating income and operating margin.
 Net non-operating income (loss).
 Cumulative effects of changes in accounting principles
 Income tax (expense) benefit.
 Net income (loss).
 B.
    
    Liquidity and Capital Resources
  45




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##### Table of Contents



Liquidity
   Year Ended December 31,2004
    
    2005
    
    2006NT$
    
    NT$
    
    NT$
    
    US$(in millions)Net cash provided by operating activities
    
    
    8,767
    
    
    
    13,215
    
    
    
    20,250
    
    
    
    621.4Net cash used in investing activities
    
    
    (11,620
    )
    
    
    (6,397
    )
    
    
    (11,827
    )
    
    
    (362.9
    )Net cash provided by (used in) financing activities
    
    
    1,659
    
    
    
    (5,435
    )
    
    
    (6,040
    )
    
    
    (185.3
    )Effect of exchange rate changes on cash
    
    
    (86
    )
    
    
    36
    
    
    
    8
    
    
    
    0.2Net increase (decrease) in cash and cash equivalents
    
    
    (1,280
    )
    
    
    1,419
    
    
    
    2,391
    
    
    
    73.4
 Net Cash Provided by Operating Activities
   Net Cash Used in Investing Activities
  46




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Net Cash Provided by (Used in) Financing Activities
   Capital Resources
     47




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
    
    On January 28, 2002, we issued convertible bonds in the amount of US$200
million due 2007, the proceeds of which were used to purchase raw materials and to
finance the exercise of the put options by bondholders on July 21, 2002 with respect
to, and for our repurchase of, certain convertible bonds due 2004, which we issued in
1997 and are no longer outstanding. The zero coupon convertible bonds due 2007 are
convertible into our shares or ADSs. As of December 31, 2006, US$158.5 million of
these convertible bonds had been converted. We had repurchased US$33.7 million of
these convertible bonds and had redeemed US$7.2 million of these convertible bonds at
the option of the bondholders. On January 28, 2007, the maturity date of such bonds,
we redeemed the bonds in full.
    
    On February 5, 2004, we issued another series of convertible bonds in the
amount of US$200 million due 2009, the proceeds of which were used to purchase
equipment and raw materials. The zero coupon convertible bonds due 2009 are
convertible into our shares or ADSs. As of December 31, 2006, US$117.0 million of
these convertible bonds had been converted. These bonds are scheduled to mature in
February 2009 and will be redeemable by us on February 5, 2008 at the option of the
bondholder.
  Transactions with Related Parties
   Inflation/Deflation
  Taxation
  48




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US GAAP Reconciliation
  Reconciliation of Consolidated Net Income
 For the Years Ended December 31,2004
    
    2005
    
    2006NT$
    
    NT$
    
    NT$
    
    US$(in millions)Net income as reported under ROC GAAP
    
    
    4,282
    
    
    
    8,244
    
    
    
    13,329
    
    
    
    409.0US GAAP adjustments:Compensated absences
    
    
    1
    
    
    
    (10
    )
    
    
    (13
    )
    
    
    (0.4
    )Compensation
    
    
    (699
    )
    
    
    (1,235
    )
    
    
    (1,909
    )
    
    
    (58.6
    )Employee stock option
    
    
    
    
    
    
    
    
    
    
    (27
    )
    
    
    (0.8
    )Impairment on long-term investments
    
    
    
    
    
    
    13
    
    
    
    29
    
    
    
    0.9Embedded derivative
    
    
    (80
    )
    
    
    (2,422
    )
    
    
    (2,987
    )
    
    
    (91.7
    )Adjustment to the gain on disposal of available for
sale marketable securities
    
    
    (2
    )
    
    
    
    
    
    
    
    
    
    
    Treasury stock transferred to employee
    
    
    (193
    )
    
    
    
    
    
    
    
    
    
    
    Equity investments:Timing difference
    
    
    399
    
    
    
    (658
    )
    
    
    
    
    
    
    Net income/(loss) variance between US GAAP and
ROC GAAP
    
    
    (8
    )
    
    
    37
    
    
    
    9
    
    
    
    0.3Accounting for income (loss) in preferred stock
    
    
    (29
    )
    
    
    
    
    
    
    
    
    
    
    Total US GAAP adjustments
    
    
    (611
    )
    
    
    (4,275
    )
    
    
    (4,898
    )
    
    
    (150.3
    )Taxation effect
    
    
    
    
    
    
    2
    
    
    
    (18
    )
    
    
    (0.6
    )Net income under US GAAP
    
    
    3,671
    
    
    
    3,971
    
    
    
    8,413
    
    
    
    258.1
 Reconciliation of Consolidated Shareholders Equity
  49




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##### Table of Contents



As of December 31,2004
    
    2005
    
    2006NT$
    
    NT$
    
    NT$
    
    US$(in millions)Total shareholders equity as reported under
ROC GAAP
    
    
    33,493
    
    
    
    40,825
    
    
    
    62,936
    
    
    
    1,931.1US GAAP adjustments:Compensated absences
    
    
    (20
    )
    
    
    (30
    )
    
    
    (43
    )
    
    
    (1.3
    )Compensation
    
    
    (438
    )
    
    
    (881
    )
    
    
    (1,294
    )
    
    
    (39.7
    )Impairment on long-term investments
    
    
    (213
    )
    
    
    (199
    )
    
    
    (171
    )
    
    
    (5.2
    )Embedded derivative
    
    
    7
    
    
    
    (2,416
    )
    
    
    (1,186
    )
    
    
    (36.4
    )Available for sale marketable securities
    
    
    852
    
    
    
    9,177
    
    
    
    
    
    
    
    Defined Benefit Pension Plan
    
    
    
    
    
    
    
    
    
    
    (210
    )
    
    
    (6.4
    )Equity investments:Timing difference
    
    
    658
    
    
    
    
    
    
    
    
    
    
    
    Net income variance between US
GAAP and ROC GAAP
    
    
    88
    
    
    
    125
    
    
    
    186
    
    
    
    5.7Technology and know-how
contributed to a joint venture
investee
    
    
    (210
    )
    
    
    (210
    )
    
    
    (210
    )
    
    
    (6.4
    )Siguard merged Universal
    
    
    
    
    
    
    117
    
    
    
    
    
    
    
    Adjustment for variances between
net income and equity
    
    
    
    
    
    
    
    
    
    
    (15
    )
    
    
    (0.5
    )Acquisition of Siliconware Corp.
    
    
    4,874
    
    
    
    4,874
    
    
    
    4,874
    
    
    
    149.5Taxation effect
    
    
    7
    
    
    
    9
    
    
    
    (8
    )
    
    
    (0.2
    )Shareholders equity under US GAAP
    
    
    39,098
    
    
    
    51,391
    
    
    
    64,859
    
    
    
    1,990.2
 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 31 to our
consolidated financial statements included elsewhere in this annual report.
 Employee Bonuses
  Employee Stock Option
  50




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Equity Investments
     Defined Benefit Pension Plan
  51




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Taxation Effect
  Goodwill Acquired through Acquisition
   Impairment of Long-lived Assets
  Impairment of Investments
   52




---



##### Table of Contents



Embedded Derivatives
    Stock Dividends
  Marketable Securities
   53




---



##### Table of Contents



Treasury Stock Transferred to Employees
  Calculation of EPS
    Merger between Equity-Method Investees
  Recent Accounting Pronouncements
  54




---



##### Table of Contents



C. Research and Development, Patents and Licenses, etc.
  D. Trend Information
  E. Off-Balance Sheet Arrangements
  F. Tabular Disclosure of Contractual Obligations
  55




---



##### Table of Contents



Payments Due by PeriodLess Than
    
    
    
    
    
    
    
    
    
    More ThanContractual Obligations
    
    Total
    
    1 Year
    
    1-3 Years
    
    4-5 Years
    
    5 Years(in NT$ millions) (consolidated)Long-term debtSecured long-term loans
    
    
    104
    
    
    
    
    
    
    
    
    
    
    
    104
    
    
    
    Unsecured long-term loans (3)
    
    
    3,000
    
    
    
    
    
    
    
    750
    
    
    
    2,250
    
    
    
    Secured bonds
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Unsecured bonds
    
    
    2,727
    
    
    
    19
    
    
    
    2,708
    
    
    
    
    
    
    
    Operating leases (1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Purchase obligations (2)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total contractual cash obligations
    
    
    5,831
    
    
    
    19
    
    
    
    3,458
    
    
    
    2,354
    
    
    
    
 
 (1)
    
    Represents our obligations to make lease payments to use the land on which our facilities are
located, primarily in Taichung and Hsinchu in Taiwan.(2)
    
    Represents the agreements to purchase goods or services that are enforceable and legally
binding on us that specify all significant terms, including: fixed or minimum quantities to be
purchased; fixed, minimum or variable price provisions; and the approximate timing of the
transaction.(3)
    
    Excludes interest payments because our interest rates on these loans are variable. 
 Item 6. Directors, Senior Management and Employees
 A. Directors and Senior Management
  Years
    
    Principal Business ActivitiesName
    
    Age
    
    Position
    
    with Us
    
    Performed Outside Our CompanyBough Lin
    
    55
    
    Chairman
    
    24
    
    Director of Phoenix Precision Technology;
Director of SPILs subsidiaries; EVP of
SPIL.Chi-Wen Tsai
    
    59
    
    Vice Chairman; President
    
    24
    
    President of SPIL; Director of SPILs
subsidiaries.Wen-Lung Lin
    
    55
    
    Director;
    
    2
    
    Chairman of Ku-Ming Investment Co.Yen-Chun Chang
    
    52
    
    Director; Senior Vice President
    
    24
    
    SVP of SPIL; Director of Phoenix
Precision Technology; Director of SPILs
subsidiary.Wen-Jung Lin
    
    60
    
    Director
    
    16
    
    NoneJerome Tsai (1)
    
    53
    
    Director
    
    2
    
    Director of ChipMOS (Bermuda); Supervisor
of Phoenix Precision Technology.Hsiu-Li Liu
    
    52
    
    Independent Director (3)
    
    16
    
    Chairman of So Dar Investment; Director of  Chi Cheng Enterprise, Li
Fu Investment, More Power Electronic Corp.Ing Dar Liu
    
    59
    
    Independent Director (3)
    
    2
    
    Director of Sercomm Corp., AME Inc.Jing-Shan Aur
    
    58
    
    Independent Director (3)
    
    2
    
    Director of Clientron Corp., Bcom
Electronic Inc.Wen-Lung Cheng
    
    59
    
    Supervisor
    
    5
    
    Chairman of Joinwin Investment;
Supervisor of Phoenix Precision
Technology; Director of SPILs subsidiary.Fu-Mei Tang
    
    55
    
    Supervisor
    
    2
    
    NoneTeresa Wang (2)
    
    51
    
    Supervisor
    
    5
    
    Director of Phoenix Precision Technology;
CFO of Phoenix Precision Technology.Johnson Tien
    
    53
    
    Senior Vice President
    
    11
    
    NoneKuo-Jui Tai
    
    44
    
    Vice President
    
    4
    
    None
 56




---



##### Table of Contents



Years
    
    Principal Business ActivitiesName
    
    Age
    
    Position
    
    with Us
    
    Performed Outside Our CompanyChien-An Chen
    
    57
    
    Vice President
    
    16
    
    NoneChien-Hua Chen
    
    52
    
    Vice President
    
    8
    
    NoneMichael Chang
    
    45
    
    Vice President
    
    8
    
    NoneEva Chen
    
    48
    
    Chief Financial Officer
    
    2
    
    None
 
 (1)
    
    Representing Pei-Sheng Cultural Educational Foundation.(2)
    
    Representing Siliconware Investment Company Ltd.(3)
    
    Our independent directors independency complies with SECs and Nasdaqs independency
requirements. Bough Lin
 Chi-Wen Tsai
 Wen-Lung Lin
 Yen-Chun Chang
 Wen-Jung Lin
 Jerome Tsai
 Hsiu-Li Liu
 Ing-Dar Liu
 Jing-Shan Aur
 Wen-Lung Cheng
 Fu-Mei Tang
 57




---



##### Table of Contents



Teresa Wang
 Johnson Tien
 Kuo-Jui Tai
 Chien-An Chen
 Chien-Hua Chen
 Michael Chang
 Eva Chen
 B.
    
    Compensation of Directors, Supervisors and Executive Officers
  C.
    
    Board Practices
  Audit Committee
  Difference between NASDAQ Requirement and Home Country Practices
  58




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Under the Rule 4350(c)(1) a majority of the board of directors must comprise of independent
directors.
 Under Rule 4350(c)(2) , the company is required to have regularly scheduled meetings at which
only independent directors are present.
 Rule 4350(c)(3) requires that compensation of the chief executive officer of the company must
be determined, or recommended to the board, either by a majority of the independent director or an
independent compensation committee.
 Under Rule 4350(c)(4) , director nominees must either be selected, or recommended for the
Boards selection, either by a majority of the independent directors or an independent nominations
committee.
 Under the Rule 4350(h) , each issuer shall conduct a review of all related party transactions
on an ongoing basis and all such transactions shall be approved by the companys audit committee or
another comparable independent body. Under Rule 4350(i)(1) (A), each issuer shall require
shareholder approval when a stock option or purchase plan is to be established or materially
amended or other equity compensation arrangement made or materially amended, pursuant to which
stock may be acquired by officers, directors, employees, or consultants.
 D.
    
    Employees
  59




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Number of shares issuableupon exercise of options
    
    Expiration Date
    
    Exercise price11,315,200
    
    February 2008
    
    NT$9.21,316,100
    
    May 2008
    
    NT$9.7
   E.
    
    Share Ownership
  60




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##### Table of Contents



Number of OrdinaryNumber of Shares
    
    Percentage of
    
    Shares Issuable on
    
    Per Share Exercise
    
    ExercisableName
    
    Owned
    
    Shares Owned
    
    Exercise of Option
    
    Price (NT$)
    
    PeriodBough Lin
    
    
    44,181,690
    
    
    
    1.50
    %
    
    
    
    
    
    
    9.2
    
    
    February 2005 to February 2008Chi-Wen Tsai
    
    
    37,205,736
    
    
    
    1.26
    %
    
    
    110,000
    
    
    
    9.2
    
    
    February 2005 to February 2008Wen-Lung Lin
    
    
    32,030,319
    
    
    
    1.09
    %
    
    
    
    
    
    
    
    
    
    Yen-Chun Chang
    
    
    10,528,006
    
    
    
    *
    
    
    
    
    
    
    
    9.2
    
    
    February 2005 to February 2008Wen-Jung Lin
    
    
    6,390,554
    
    
    
    *
    
    
    
    
    
    
    
    
    
    
    Jerome Tsai (1)
    
    
    7,625,121
    
    
    
    *
    
    
    
    
    
    
    
    
    
    
    Hsiu-Li Liu
    
    
    13,695,214
    
    
    
    *
    
    
    
    
    
    
    
    
    
    
    Ing-Dar Liu
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Jing-Shan Aur
    
    
    142,042
    
    
    
    *
    
    
    
    
    
    
    
    
    
    
    Wen-Lung Cheng
    
    
    6,909,481
    
    
    
    *
    
    
    
    
    
    
    
    
    
    
    Fu-Mei Tang
    
    
    8,763,657
    
    
    
    *
    
    
    
    
    
    
    
    9.2
    
    
    February 2005 to February 2008Teresa Wang (2)
    
    
    35,176,054
    
    
    
    1.19
    %
    
    
    
    
    
    
    
    
    
    Johnson Tien
    
    
    584,246
    
    
    
    *
    
    
    
    72,000
    
    
    
    9.2
    
    
    February 2005 to February 2008Kuo-Jui Tai
    
    
    473,767
    
    
    
    *
    
    
    
    
    
    
    
    9.2
    
    
    February 2005 to February 2008Chien-An Chen
    
    
    162,276
    
    
    
    *
    
    
    
    140,000
    
    
    
    9.2
    
    
    February 2005 to February 2008Chien-Hua Chen
    
    
    42,000
    
    
    
    *
    
    
    
    
    
    
    
    9.2
    
    
    February 2005 to February 2008Michael Chang
    
    
    255,669
    
    
    
    *
    
    
    
    
    
    
    
    9.2
    
    
    February 2005 to February 2008Eva Chen
    
    
    296,307
    
    
    
    *
    
    
    
    
    
    
    
    
    
    
    
 
 *
    
    Less than 1%.(1)
    
    Representing Pei-Sheng Cultural Educational Foundation.(2)
    
    Representing Siliconware Investment Company.  
 Item 7. Major Shareholders and Related Party Transactions
 A.
    
    Major Shareholders
  61




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##### Table of Contents



62




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##### Table of Contents



December 31, 2005
    
    December 31, 2006
    
    April 15, 2007(3)Percentage
    
    
    
    
    
    PercentageNumber of
    
    of Shares
    
    Number of
    
    of Shares
    
    Number of
    
    PercentageName of beneficial owner
    
    Shares Owned
    
    Owned
    
    Shares Owned
    
    Owned
    
    Shares Owned
    
    of Shares OwnedCitibank (1)
    
    
    177,076,825
    
    
    
    7.60
    %
    
    
    381,406,646
    
    
    
    13.21
    %
    
    
    578,526,411
    
    
    
    19.64
    %Kuming Investment
Company Ltd. (2)
    
    
    46,019,524
    
    
    
    1.98
    %
    
    
    54,472,728
    
    
    
    1.89
    %
    
    
    54,472,728
    
    
    
    1.85
    %Government of Singapore
Investment Corp. PFE.
Ltd.
    
    
    19,617,600
    
    
    
    0.84
    %
    
    
    41,995,428
    
    
    
    1.45
    %
    
    
    46,196,805
    
    
    
    1.57
    %Bough Lin
    
    
    53,721,979
    
    
    
    2.31
    %
    
    
    43,821,690
    
    
    
    1.52
    %
    
    
    44,181,690
    
    
    
    1.50
    %Citibank in Custody for
Citigroup Global
Markets Ltd.
    
    
    6,480,530
    
    
    
    0.28
    %
    
    
    3,305,026
    
    
    
    0.11
    %
    
    
    44,079,309
    
    
    
    1.50
    %Sanford C. Bemstein &
Co. Delaware Business
Trust-Emerging Market
Value Series
    
    
    
    
    
    
    
    
    
    
    37,003,438
    
    
    
    1.28
    %
    
    
    39,498,168
    
    
    
    1.34
    %Chi-Wen Tsai
    
    
    33,059,323
    
    
    
    1.42
    %
    
    
    37,108,736
    
    
    
    1.29
    %
    
    
    37,205,736
    
    
    
    1.26
    %HSBC in Custody for
Goldman Sachs
International Company
    
    
    6,306,804
    
    
    
    0.27
    %
    
    
    3,686,403
    
    
    
    0.13
    %
    
    
    36,358,924
    
    
    
    1.23
    %Siliconware Investment
Company Ltd.
    
    
    32,089,876
    
    
    
    1.38
    %
    
    
    35,176,054
    
    
    
    1.22
    %
    
    
    35,176,054
    
    
    
    1.19
    %Wen-Lung Lin
    
    
    29,220,133
    
    
    
    1.25
    %
    
    
    32,030,319
    
    
    
    1.11
    %
    
    
    32,030,319
    
    
    
    1.09
    %Directors and
Supervisors as a group
    
    
    200,819,715
    
    
    
    8.62
    %
    
    
    205,240,874
    
    
    
    7.11
    %
    
    
    202,647,874
    
    
    
    6.88
    %
 
 (1)
    
    As record owner of our ADSs(2)
    
    Wen-Lung Lin is the president of Kuming Investment Company Ltd.(3)
    
    Our most recent record date.    B.
    
    Related Party Transactions
 Related Party Transactions Policies
  Sigurd Microelectronics Corp.
  63




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##### Table of Contents



ChipMOS Technologies Inc.
  
    
    We were obligated under a joint venture agreement with Mosel Vitelic to
severally guarantee up to 30% of ChipMOSs indebtedness if ChipMOS required a
guarantee to secure financing. We did not guarantee any of ChipMOSs indebtedness.
Mr. Frank Lee, one of our officers, was a director of ChipMOS as of December 31,
2006.
    
    Pursuant to a Share Purchase and Subscription Agreement
entered into among us, ChipMOS Technologies (Bermuda) Ltd., or
ChipMOS Bermuda and ChipMOS, on March 27, 2007, we sold, and
ChipMOS Bermuda and ChipMOS purchased, all of the common shares of
ChipMOS, par value NT$10 per share, owned by us for a total cash
consideration of US$191,147,464. In addition, we subscribed for 12,174,998 newly
issued common shares of ChipMOS Bermuda, par value US$0.01 per share, for an
aggregate consideration of US$76,458,987, representing a purchase
price of US$6.28 per
common share of ChipMOS Bermuda.
 Phoenix Precision Technology Corporation
  
    
    Mr. Bough Lin, our Chairman, Mr.Yen-Chun Chang, one of our officers, and Ms.
Teresa Wang, one of our supervisors, are directors of Phoenix Precision. Ms. Teresa
Wang is also the Chief Financial Officer of Phoenix Precision. Jerome Tsai, one of
our directors, is a supervisor of Phoenix Precision. Wen-Lung Cheng, one of our
supervisors, is a supervisor of Phoenix Precision.
 C.
    
    Interests of Experts and Counsel
  
 Item 8. Financial Information
 A.
    
    Consolidated Statements and Other Financial Information
  Litigation
  64




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##### Table of Contents



Dividend Policy and Distributions
  Total Number ofCash Dividend per
    
    Stock Dividend per
    
    Shares Issued as
    
    Outstanding Sharesshare
    
    share(1)
    
    Stock Dividend(2)
    
    at Year End(NT$)
    
    (NT$)1995
    
    
    0
    
    
    
    4.00
    
    
    
    70,048,800
    
    
    
    280,668,0001996
    
    
    0
    
    
    
    6.00
    
    
    
    168,400,800
    
    
    
    457,800,0001997
    
    
    0
    
    
    
    4.00
    
    
    
    183,120,000
    
    
    
    654,200,0001998
    
    
    0
    
    
    
    3.60
    
    
    
    235,512,000
    
    
    
    904,162,0001999
    
    
    0
    
    
    
    2.30
    
    
    
    207,957,260
    
    
    
    1,127,092,4022000
    
    
    0
    
    
    
    1.40
    
    
    
    157,793,537
    
    
    
    1,449,882,8702001
    
    
    0
    
    
    
    1.45
    
    
    
    235,421,212
    
    
    
    1,852,761,6832002
    
    
    0
    
    
    
    0
    
    
    
    
    
    
    
    1,853,668,6832003
    
    
    0
    
    
    
    0
    
    
    
    
    
    
    
    1,876,625,6832004
    
    
    0.35
    
    
    
    1.00
    
    
    
    189,447,578
    
    
    
    2,105,073,0602005
    
    
    0.75
    
    
    
    0.80
    
    
    
    168,889,805
    
    
    
    2,328,919,3372006
    
    
    1.73
    
    
    
    1.00
    
    
    
    241,014,905
    
    
    
    2,887,757,426
 
 (1)
    
    Our stock dividend is declared in NT dollar amount per Share. The number of Shares received
by a shareholder equals to the NT dollar amount per share of dividend declared multiplied by
the number of Shares owned by the shareholder and divided by the par value of NT$10 per Share.(2)
    
    Total number of Shares issued as stock dividends include Shares issued from retained earnings
and from capital reserve.(3)
    
    We did not declare a dividend in 2002 because we incurred a net loss in 2001.(4)
    
    We did not declare a dividend in 2003 because our shareholders did not elect to declare such
dividend, even though we generated net income in 2002. B.
    
    Significant Changes
  65




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##### Table of Contents



Item 9. The Offer and Listing
 A.
    
    Offer and Listing Details
 Market Price Information for Our Shares
  Closing Price for Each Share
    
    
    
    
    
    Taiwan Stock Exchange(1)
    
    
    
    
    
    IndexAverage DailyPeriod
    
    High
    
    Low
    
    Trading Volume
    
    High
    
    LowNT$
    
    NT$
    
    (in thousandsof shares)2002
    
    
    39.6
    
    
    
    15.3
    
    
    
    18,277
    
    
    
    6,462.30
    
    
    
    3,850.042003
    
    
    37.4
    
    
    
    15.3
    
    
    
    19,698
    
    
    
    6,182.20
    
    
    
    4,044.732004
    
    
    42.2
    
    
    
    19.8
    
    
    
    20,556
    
    
    
    7,135.00
    
    
    
    5,255.062005
    
    
    46.9
    
    
    
    21.9
    
    
    
    20,048
    
    
    
    6,267.32
    
    
    
    5,565.41First Quarter
    
    
    29.6
    
    
    
    21.9
    
    
    
    21,717
    
    
    
    6,267.52
    
    
    
    5,734.87Second Quarter
    
    
    32.9
    
    
    
    26.8
    
    
    
    17,325
    
    
    
    6,373.86
    
    
    
    5,715.16Third Quarter
    
    
    35.8
    
    
    
    29.3
    
    
    
    17,502
    
    
    
    6,455.57
    
    
    
    5,925.54Fourth Quarter
    
    
    46.9
    
    
    
    29.1
    
    
    
    25,098
    
    
    
    6,575.53
    
    
    
    5,632.972006
    
    
    52.5
    
    
    
    33.7
    
    
    
    18,554
    
    
    
    7,823.72
    
    
    
    6,257.80First Quarter
    
    
    48.5
    
    
    
    38.2
    
    
    
    28,477
    
    
    
    6,742.39
    
    
    
    6,364.60Second Quarter
    
    
    47.2
    
    
    
    34.7
    
    
    
    17,794
    
    
    
    7,474.05
    
    
    
    6,299.59Third Quarter
    
    
    41.6
    
    
    
    33.7
    
    
    
    14,410
    
    
    
    6,946.27
    
    
    
    6,257.80Fourth Quarter
    
    
    52.5
    
    
    
    38.9
    
    
    
    14,444
    
    
    
    7,823.72
    
    
    
    6,874.98November
    
    
    52.5
    
    
    
    41.6
    
    
    
    19,470
    
    
    
    7,567.72
    
    
    
    7,013.99December
    
    
    51.3
    
    
    
    47.1
    
    
    
    8,972
    
    
    
    7,823.72
    
    
    
    7,450.302007 (up to May 31)
    
    
    71.7
    
    
    
    47.9
    
    
    
    12,423
    
    
    
    8,221.79
    
    
    
    7,344.56First Quarter
    
    
    64.5
    
    
    
    47.9
    
    
    
    13,308
    
    
    
    7,935.54
    
    
    
    7,344.56January
    
    
    56.3
    
    
    
    47.9
    
    
    
    14,188
    
    
    
    7,935.54
    
    
    
    7,618.55February
    
    
    59.9
    
    
    
    54.4
    
    
    
    13,303
    
    
    
    7,901.96
    
    
    
    7,701.54March
    
    
    64.5
    
    
    
    56.1
    
    
    
    12,470
    
    
    
    7,884.41
    
    
    
    7,344.56Second Quarter
    
    
    71.7
    
    
    
    61.2
    
    
    
    11,221
    
    
    
    8,221.79
    
    
    
    7,875.42April
    
    
    70.8
    
    
    
    61.2
    
    
    
    11,299
    
    
    
    8,084.45
    
    
    
    7,875.42May
    
    
    71.7
    
    
    
    63.0
    
    
    
    11,149
    
    
    
    8,221.79
    
    
    
    7,903.04
 
 Sources:
    
    Taiwan Stock Exchange Statistical Data 1999-2007, Taiwan Stock Exchange and Bloomberg.(1)
    
    As reported.  Market Price Information for Our American Depositary Shares
  66




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##### Table of Contents



Closing Pricefor Each ADS(1)
    
    Average DailyPeriod
    
    High
    
    Low
    
    Trading VolumeUS$
    
    US$2002
    
    
    5.48
    
    
    
    2.23
    
    
    
    394,0062003
    
    
    5.27
    
    
    
    1.98
    
    
    
    730,0262004
    
    
    6.00
    
    
    
    2.83
    
    
    
    1,047,141First Quarter
    
    
    6.00
    
    
    
    4.24
    
    
    
    2,040,297Second Quarter
    
    
    5.21
    
    
    
    2.83
    
    
    
    1,052,894Third Quarter
    
    
    3.85
    
    
    
    2.84
    
    
    
    551,108Fourth Quarter
    
    
    4.40
    
    
    
    3.23
    
    
    
    544,2672005
    
    
    6.95
    
    
    
    3.08
    
    
    
    719,177First Quarter
    
    
    4.32
    
    
    
    3.08
    
    
    
    461,689Second Quarter
    
    
    4.87
    
    
    
    3.82
    
    
    
    520,471Third Quarter
    
    
    5.38
    
    
    
    4.55
    
    
    
    821,256Fourth Quarter
    
    
    6.95
    
    
    
    4.39
    
    
    
    1,030,9622006
    
    
    7.94
    
    
    
    4.74
    
    
    
    1,786,700First Quarter
    
    
    7.19
    
    
    
    5.54
    
    
    
    2,156,481Second Quarter
    
    
    6.80
    
    
    
    4.97
    
    
    
    1,589,954Third Quarter
    
    
    6.35
    
    
    
    4.74
    
    
    
    1,683,423Fourth Quarter
    
    
    7.94
    
    
    
    5.90
    
    
    
    1,722,812November
    
    
    7.83
    
    
    
    6.17
    
    
    
    2,238,184December
    
    
    7.94
    
    
    
    7.35
    
    
    
    1,058,5112007 (up to May 31)
    
    
    11.16
    
    
    
    7.45
    
    
    
    1,812,227First Quarter
    
    
    10.11
    
    
    
    7.45
    
    
    
    1,696,505January
    
    
    8.77
    
    
    
    7.45
    
    
    
    1,957,370February
    
    
    9.37
    
    
    
    8.66
    
    
    
    1,629,621March
    
    
    10.11
    
    
    
    8.65
    
    
    
    1,517,118Second Quarter
    
    
    11.16
    
    
    
    9.56
    
    
    
    1,980,299April
    
    
    11.16
    
    
    
    9.70
    
    
    
    2,374,943May
    
    
    10.65
    
    
    
    9.56
    
    
    
    1,621,531
 
 Source:
    
    NASDAQ Stock Exchange. (1)
    
    As reported.
 B.
    
    Plan of Distribution
  C.
    
    Markets
  D.
    
    Selling Shareholders
  E.
    
    Dilution
  67




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##### Table of Contents



F.
    
    Expenses of the Issue
  
 Item 10. Additional Information
 A.
    
    Share Capital
  B.
    
    Memorandum and Articles of Association
 The following statements summarize the material elements of our capital structure and the more
important rights and privileges of our shareholders conferred by Taiwan law and our articles of
incorporation.
 Objects and Purpose
    Directors
   68




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Shares
    New Shares and Preemptive Rights
  Shareholders
  69




---



##### Table of Contents



Transfer of Shares
  Shareholders Meetings
  Voting Rights
     Dividends and Distributions
  70




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##### Table of Contents




    
    allocation of 10% of our net income as legal reserve; and
 
    
    payment of 2% of the balance after deducting the 10% legal reserve as
remuneration to our directors and supervisors. The remaining amount may be
distributed or reserved in a ratio of 10% and 90%, respectively, to our employees as
their bonuses and to our shareholders as their dividends.
   
    
    10% is distributable as bonus shares for employees.
    
    4% is set aside as remuneration of directors and supervisors.
    
    86% is allocated as a dividend to shareholders.
  Acquisition of Our Shares by Us
   
    
    to transfer shares to our employees;
    
    to transfer upon conversion of bonds with warrants, preferred shares with
warrants, convertible bonds, convertible preferred shares or certificates of warrants
issued by us; and
    
    if necessary, to maintain our credit and our shareholders interests; provided
that the shares so purchased shall be cancelled thereafter.
 71




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##### Table of Contents



Liquidation Rights
  Other Rights of Shareholders
   Voting of Deposited Securities
     
    
    the notice of the meeting sent by us; and
 
    
    a statement that the owners will be entitled to instruct the depositary or its
nominee as to the exercise of the voting rights.
 72




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##### Table of Contents



C. Material Contracts
 Immunity Agreement with Motorola, Inc.
   License Agreement with Flip Chip Technologies, L.L.C.
  Joint Venture Agreement with Mosel Vitelic, Inc.
  73




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##### Table of Contents



D. Exchange Controls
    E. Taxation
 ROC Tax Considerations
 The following summarizes the principal Taiwan tax consequences of owning and disposing of ADSs
and shares for non-residents of Taiwan. Investors in our ADSs are advised to consult their own tax
advisers as to United States, Taiwan or other tax consequences of the purchase, ownership and
disposition of ADSs.
  
    
    an individual who is not an ROC citizen, who owns ADSs and who is not
physically present in the ROC for 183 days or more during any calendar year; or
 
    
    a corporation or a non-corporate body that is organized under the laws of a
jurisdiction other than the ROC for profit-making purposes and has no fixed place of
business or other permanent establishment in the ROC.
  Dividends
  74




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##### Table of Contents



Capital Gains
  Securities Transaction Tax
  Estate and Gift Tax
  Tax Treaty
  U.S. Federal Income Tax Considerations For U.S. Persons
  
    
    an individual citizen or resident of the United States;
    
    a corporation (or other entity treated as a corporation) created or organized
in or under the laws of the United States, any state thereof or the District of
Columbia;
    
    an estate the income of which is subject to U.S. federal income taxation
regardless of its source;
    
    a trust that is subject to the primary supervision of a court within the
United States and one or more U.S. persons have the authority to control all
substantial decisions of the trust; or
    
    a trust that has a valid election in effect under applicable U.S. Treasury
regulations to be treated as a U.S. person.
 75




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##### Table of Contents




    
    a dealer in securities or currencies;
    
    a trader in securities if you elect to use a mark-to-market method of
accounting for your securities holdings;
    
    a financial institution or an insurance company;
    
    a tax-exempt organization;
    
    a regulated investment company;
    
    a real estate investment trust;
    
    a person liable for alternative minimum tax;
    
    a person holding shares or ADSs as part of a hedging, integrated or conversion
transaction, constructive sale or straddle;
    
    a partnership or other pass-through entity for U.S. federal income tax purposes;
    
    a person owning, actually or constructively, 10% or more of our voting stock; or
    
    a U.S. holder whose functional currency is not the United States dollar.
     76




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Taxation of Dividends
      77




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##### Table of Contents



Taxation of Capital Gains
   Passive Foreign Investment Company
   
    
    at least 75% of its gross income is passive income, which generally includes
income derived from certain dividends, interest, royalties and rents (other than
royalties and rents derived in the active conduct of a trade or business or not
derived from a related person), annuities or property transactions; or
 
    
    at least 50% of the value of its assets is attributable to assets that produce
or are held for the production of passive income.
   78




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##### Table of Contents




    
    the excess distribution or gain will be allocated ratably over your holding
period for our shares or ADSs;
 
    
    the amount allocated to the current taxable year, and any taxable year prior
to the first taxable year in which we were a PFIC, will be treated as ordinary
income; and
 
    
    the amount allocated to each other year will be subject to tax at the highest
tax rate in effect for that year and the interest charge generally applicable to
underpayments of tax will be imposed on the resulting tax attributable to each such
year.
      79




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##### Table of Contents



Information Reporting and Backup Withholding
   Inheritance and Gift Tax
  F. Dividends and Paying Agents
  G. Statement by Experts
  H. Documents on Display
   www.sec.gov
 80




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##### Table of Contents



I. Subsidiary Information
  
 Item 11. Quantitative and Qualitative Disclosures About Market Risk
  Foreign Exchange Risk
  Expected Maturity DateExpressed in NT$ amount
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    There-
    
    
    
    Fair(in millions)
    
    2007
    
    2008
    
    2009
    
    2010
    
    2011
    
    after
    
    Total
    
    valueOn-balance sheet
financial instrumentsAssetsMarketable Securities
Time Deposit (US$)
    
    
    1,084
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,084
    
    
    
    1,084LiabilitiesLong-term Debt:Fixed Rate (US$)
    
    
    19
    
    
    
    2,708
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,727
    
    
    
    4,123Variable Rate (US$)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Average interest rate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 Interest Rate Risk
   2011 andDebt Obligations
    
    2007
    
    2008
    
    2009
    
    2010
    
    thereafter(in millions, except percentages)US$-denominated debt:Fix rate
    
    
    19
    
    
    
    2,708
    
    
    
    
    
    
    
    
    
    
    
    Interest rate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    NT$-denominated debt:Variable rate
    
    
    
    
    
    
    
    
    
    
    750
    
    
    
    1,500
    
    
    
    750
 81




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##### Table of Contents



2011 andDebt Obligations
    
    2007
    
    2008
    
    2009
    
    2010
    
    thereafter(in millions, except percentages)Average interest rate
    
    
    
    
    
    
    
    
    
    
    2.093
    %
    
    
    2.093
    %
    
    
    2.093
    %Fix rate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Interest rate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    RMB-denominated debt:Variable rate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    104Average interest rate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6.156
    %Fair value
    
    
    37
    
    
    
    4,086
    
    
    
    750
    
    
    
    1,500
    
    
    
    854
 
 Item 12. Description of Securities Other Than Equity Securities
  82




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##### Table of Contents



PART II
 
 Item 13. Defaults, Dividend Arrearages and Delinquencies
  
 Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds
  
 Item 15. Controls and Procedures
 Disclosure Controls and Procedures
  Managements Annual Report on Internal Control over Financial Reporting.
    83




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##### Table of Contents



Attestation report of the registered public accounting firm
  Changes in Internal Control over Financial Reporting
  
 Item 16A. Audit Committee Financial Expert
  
 Item 16B. Code of Ethics
  
 Item 16C. Principal Accountant Fees and Services
   2005
    
    2006
    
    2006NT$ (in thousands)
    
    NT$ (in thousands)
    
    US$ (in thousands)Audit Fees (1)
    
    
    7,490
    
    
    
    22,180
    
    
    
    680.6Audit-related Fees (2)
    
    
    1,231
    
    
    
    2,090
    
    
    
    64.1Tax Fees (3)
    
    
    900
    
    
    
    6,050
    
    
    
    185.6All Other Fees (4)
    
    
    140
    
    
    
    
    
    
    
    Total
    
    
    9,761
    
    
    
    30,320
    
    
    
    930.3
 
 (1)
    
    Audit fees consist of fees billed for the audit or review of our annual financial
statements, internal control over financial reporting, quarterly financial statements, and
related statutory and regulatory filings.(2)
    
    Audit-related fees consist of fees billed for assurance and related services that are
reasonably related to the performance of the audit or review of our financial statements and
are not reported above as Audit Fees, including consultations of financial accounting and
reporting standards and reviews of internal control.(3)
    
    Tax fees include fees billed for tax compliance services and tax advice services.(4)
    
    All other fees include fees billed for the review of the registration of capitalization of
retained earnings. 84




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##### Table of Contents



Pre-approval Policies and Procedures
  
 Item 16D. Exemptions from the Listing Standards for Audit Committees
  
 Item 16E. Purchase of Equity Securities by the Issuer and Affiliated Purchasers
  85




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##### Table of Contents



PART III
 
 Item 17. Financial Statements
  
 Item 18. Financial Statements
  PageSILICONWARE PRECISION INDUSTRIES CO., LTD.Report of Independent Registered Public Accounting Firm
    
    
    F-2Consolidated Balance Sheets as of December 31, 2005 and 2006
    
    
    F-5Consolidated Statements of Income for the Years Ended December 31, 2004, 2005 and 2006
    
    
    F-7Consolidated Statements of Changes in Stockholders Equity for the Years Ended
December 31, 2004, 2005 and 2006
    
    
    F-8Consolidated Statements of Cash Flows for the Years Ended December 31, 2004, 2005 and 2006
    
    
    F-10Notes to Consolidated Financial Statements
    
    
    F-12CHIPMOS TECHNOLOGIES INC.Report
of Independent Registered Public Accounting Firm
    
    
    F-73Consolidated Balance Sheets as of December 31, 2005, and 2006
    
    
    F-74Consolidated
Income Statement for the Years Ended December 31, 2004, 2005 and 2006
    
    
    F-76Consolidated Statements of Changes in Shareholders Equity for the Years Ended
December 31, 2004, 2005 and 2006
    
    
    F-78Consolidated Statements of Cash Flows for the Years Ended December 31, 2004, 2005 and 2006
    
    
    F-79Notes to Consolidated Financial Statements
    
    
    F-81
 86




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##### Table of Contents



Item 19. Exhibit Index
 ExhibitNumber
    
    Description of Exhibits*1.1
    
    Articles of Incorporation of Siliconware Precision Industries Co., Ltd. (English translation)2.1
    
    Form of the Second Amended and Restated Deposit Agreement among Siliconware Precision
Industries Co., Ltd., Citibank, N.A. and Holders and Beneficial owners of American
Depositary Shares issued thereunder, including the form of American Depositary Receipts (1)4.1
    
    Immunity Agreement with Motorola, Inc. (effective from November 5, 1996 to December 31,
2010) (2)4.2
    
    License Agreement with Flip Chip Technologies, L.L.C. (effective from November 28, 1999 to
November 27, 2009) (3)4.3
    
    Joint Venture Agreement with Mosel Vitelic, Inc. (English translation) (4)*8.1
    
    List of Significant Subsidiaries of Siliconware Precision Industries Co., Ltd.11.1
    
    Code of Ethics (5)*12.1
    
    Certification of our Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002*12.2
    
    Certification of our Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002*13.1
    
    Certification by our Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*13.2
    
    Certification by our Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*15.1
    
    Consent of Independent Registered Public Accounting Firm
 
 *
    
    filed herewith.(1)
    
    Incorporated by reference to Exhibit 4.1 to our Registration Statement on Form F-1 (File No.
333-11812) filed with the SEC on April 29, 2000.(2)
    
    Incorporated by reference to Exhibit 10.2 to our Registration Statement on Form F-1
(File No. 333-11812) filed with the SEC on April 29, 2000.(3)
    
    Incorporated by reference to Exhibit 10.5 to our Registration Statement on Form F-1
(File No. 333-11812) filed with the SEC on April 29, 2000.(4)
    
    Incorporated by reference to Exhibit 10.6 to our Registration Statement on Form F-1
(File No. 333-11812) filed with the SEC on April 29, 2000.(5)
    
    Incorporated by reference to Exhibit 11.1 to our Year 2003 Form 20-F filed with the
Commission on June 28, 2004. 87




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##### Table of Contents



SIGNATURES
  SILICONWARE PRECISION INDUSTRIES CO., LTDBy:
    /s/ Eva ChenName:
    Eva ChenTitle:
    Chief Financial Officer  88




---



##### 



INDEX TO THE FINANCIAL STATEMENTS
 PageSILICONWARE PRECISION INDUSTRIES CO., LTD.Report of Independent Registered Public Accounting Firm
    
    
    F-2Consolidated Balance Sheets as of December 31, 2004, 2005 and 2006
    
    
    F-5Consolidated Statements of Income for the Years Ended December 31, 2004, 2005 and 2006
    
    
    F-7Consolidated Statements of Changes in Stockholders Equity for the Years Ended
December 31, 2004, 2005 and 2006
    
    
    F-8Consolidated Statements of Cash Flows for the Years Ended December 31, 2004, 2005 and 2006
    
    
    F-10Notes to Consolidated Financial Statements
    
    
    F-12CHIPMOS TECHNOLOGIES INC.Report of Independent Registered Public Accounting Firm
    
    
    F-73Consolidated Balance Sheets as of December 31, 2004, 2005 and 2006
    
    
    F-74Consolidated
Income Statement for the Years Ended December 31, 2004, 2005 and 2006
    
    
    F-76Consolidated Statements of Changes in Shareholders Equity for the Years Ended
December 31, 2004, 2005 and 2006
    
    
    F-78Consolidated Statements of Cash Flows for the Years Ended December 31, 2004, 2005 and 2006
    
    
    F-79Notes to Consolidated Financial Statements
    
    
    F-81
  F-1




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##### Table of Contents



Report of Independent Registered Public Accounting Firm
 
  Consolidated financial statements
    F-2




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##### Table of Contents



Internal control over financial reporting
 Internal
Control  Integrated Framework Internal Control  Integrated Framework
    
 
 F-3




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
  December 31,2005
    
    2006NT$
    
    NT$
    
    US$(Note 2)ASSETSCurrent AssetsCash (Note 4)
    
    
    12,340,833
    
    
    
    14,731,488
    
    
    
    452,025Notes receivable, net
    
    
    156,899
    
    
    
    41,111
    
    
    
    1,261Accounts receivable, net (Notes 5 and 24 )
    
    
    9,516,426
    
    
    
    9,182,701
    
    
    
    281,764Other financial assets, current (Note 25)
    
    
    823,295
    
    
    
    677,241
    
    
    
    20,781Inventories (Note 6)
    
    
    2,805,287
    
    
    
    2,838,810
    
    
    
    87,107Deferred income tax assets, current (Note 21)
    
    
    759,226
    
    
    
    726,822
    
    
    
    22,302Other current assets  other
    
    
    540,185
    
    
    
    504,996
    
    
    
    15,49526,942,151
    
    
    
    28,703,169
    
    
    
    880,735Long-term InvestmentsAvailable for sale financial assets (Note 7)
    
    
    2,379,209
    
    
    
    7,883,601
    
    
    
    241,903Financial assets carried at cost (Note 8)
    
    
    168,331
    
    
    
    824,942
    
    
    
    25,313Long-term investments under the equity method (Note 9)
    
    
    4,653,136
    
    
    
    4,998,596
    
    
    
    153,3787,200,676
    
    
    
    13,707,139
    
    
    
    420,594Property, Plant and Equipment (Notes 10 and 25)Cost:Land
    
    
    2,128,476
    
    
    
    2,940,997
    
    
    
    90,242Buildings
    
    
    7,158,668
    
    
    
    7,922,133
    
    
    
    243,085Machinery and equipment
    
    
    39,596,050
    
    
    
    45,294,231
    
    
    
    1,389,820Utility equipment
    
    
    785,110
    
    
    
    845,050
    
    
    
    25,930Furniture and fixtures
    
    
    638,432
    
    
    
    663,820
    
    
    
    20,369Other equipment
    
    
    1,562,453
    
    
    
    1,876,598
    
    
    
    57,58251,869,189
    
    
    
    59,542,829
    
    
    
    1,827,028Less:Accumulated depreciation
    
    
    (23,894,328
    )
    
    
    (27,537,920
    )
    
    
    (844,981
    )Construction in progress and prepayments for equipment
    
    
    2,277,389
    
    
    
    1,844,789
    
    
    
    56,60630,252,250
    
    
    
    33,849,698
    
    
    
    1,038,653Other AssetsRefundable deposits
    
    
    10,112
    
    
    
    11,122
    
    
    
    341Deferred charges
    
    
    804,700
    
    
    
    690,805
    
    
    
    21,197Deferred income tax asset, noncurrent (Note 21)
    
    
    1,709,675
    
    
    
    1,644,254
    
    
    
    50,453Other assets  other (Note 11)
    
    
    255,649
    
    
    
    385,191
    
    
    
    11,8192,780,136
    
    
    
    2,731,372
    
    
    
    83,810TOTAL ASSETS
    
    
    67,175,213
    
    
    
    78,991,378
    
    
    
    2,423,792
   F-5




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES
 CONSOLIDATED BALANCE SHEETS (CONTINUED)
  December 31,2005
    
    2006NT$
    
    NT$
    
    US$(Note 2)LIABILITIES AND STOCKHOLDERS EQUITYCurrent LiabilitiesShort-term loans
    
    
    93,768
    
    
    
    427,206
    
    
    
    13,108Notes payable
    
    
    5,493
    
    
    
    
    
    
    
    Accounts payable (Note 25)
    
    
    5,124,110
    
    
    
    4,116,616
    
    
    
    126,315Income tax payable (Note 21)
    
    
    153,016
    
    
    
    947,382
    
    
    
    29,070Accrued expenses
    
    
    1,657,575
    
    
    
    2,223,225
    
    
    
    68,218Other payables (Note 12)
    
    
    2,532,728
    
    
    
    1,829,129
    
    
    
    56,125Current portion of long-term loans (Notes 13 and 14)
    
    
    1,790,895
    
    
    
    18,687
    
    
    
    574Other current liabilities
    
    
    109,860
    
    
    
    400,285
    
    
    
    12,28311,467,445
    
    
    
    9,962,530
    
    
    
    305,693Long-term LiabilitiesBonds payable (Note 13)
    
    
    11,310,300
    
    
    
    2,708,145
    
    
    
    83,098Long-term loans (Note 14)
    
    
    3,333,300
    
    
    
    3,092,609
    
    
    
    94,89414,643,600
    
    
    
    5,800,754
    
    
    
    177,992Other Liabilities
    
    
    239,161
    
    
    
    291,881
    
    
    
    8,956Total Liabilities
    
    
    26,350,206
    
    
    
    16,055,165
    
    
    
    492,641Stockholders EquityCapital stock (Notes 1 and 16)
    
    
    23,289,193
    
    
    
    28,877,574
    
    
    
    886,087Capital reserve (Note 17)Additional paid in capital
    
    
    6,863,226
    
    
    
    12,526,844
    
    
    
    384,377Premium arising from merger
    
    
    1,951,563
    
    
    
    1,951,563
    
    
    
    59,882Other
    
    
    38,590
    
    
    
    167,246
    
    
    
    5,132Retained earnings (Note 18)Legal reserve
    
    
    1,179,104
    
    
    
    2,003,494
    
    
    
    61,476Special reserve
    
    
    141,053
    
    
    
    50,029
    
    
    
    1,535Unappropriated earnings
    
    
    8,241,034
    
    
    
    13,413,928
    
    
    
    411,597Unrealized gain (loss) on available for sale financial assets
    
    
    (737
    )
    
    
    4,765,148
    
    
    
    146,215Cumulative translation adjustments
    
    
    (47,463
    )
    
    
    (22,276
    )
    
    
    (684
    )Net loss not recognized as pension cost
    
    
    (1,828
    )
    
    
    (1,787
    )
    
    
    (55
    )Treasury stock (Note 19)
    
    
    (828,728
    )
    
    
    (795,550
    )
    
    
    (24,411
    )Total Stockholders Equity
    
    
    40,825,007
    
    
    
    62,936,213
    
    
    
    1,931,151Commitments and Contingencies (Note 26)TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
    
    
    67,175,213
    
    
    
    78,991,378
    
    
    
    2,423,792
  F-6




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF INCOME
  For the years ended December 31,2004
    
    2005
    
    2006NT$
    
    NT$
    
    NT$
    
    US$(Note 2)Net Operating Revenues
    
    
    35,252,156
    
    
    
    43,487,877
    
    
    
    57,125,920
    
    
    
    1,752,866Cost of Goods Sold (Note 24)
    
    
    (28,871,540
    )
    
    
    (33,959,940
    )
    
    
    (41,893,872
    )
    
    
    (1,285,482
    )Gross Profit
    
    
    6,380,616
    
    
    
    9,527,937
    
    
    
    15,232,048
    
    
    
    467,384Operating ExpensesSelling expenses
    
    
    (548,694
    )
    
    
    (565,765
    )
    
    
    (717,065
    )
    
    
    (22,003
    )General and administrative expenses
    
    
    (746,695
    )
    
    
    (855,917
    )
    
    
    (1,078,217
    )
    
    
    (33,084
    )Research and development expenses
    
    
    (752,473
    )
    
    
    (857,730
    )
    
    
    (1,194,178
    )
    
    
    (36,642
    )(2,047,862
    )
    
    
    (2,279,412
    )
    
    
    (2,989,460
    )
    
    
    (91,729
    )Operating Income
    
    
    4,332,754
    
    
    
    7,248,525
    
    
    
    12,242,588
    
    
    
    375,655Non-operating Income and GainInterest income (Note 29)
    
    
    157,015
    
    
    
    304,237
    
    
    
    396,461
    
    
    
    12,165Investment income recognized under
the equity method
    
    
    307,728
    
    
    
    447,950
    
    
    
    1,153,630
    
    
    
    35,399Others
    
    
    575,965
    
    
    
    548,813
    
    
    
    703,427
    
    
    
    21,5841,040,708
    
    
    
    1,301,000
    
    
    
    2,253,518
    
    
    
    69,148Non-operating Expenses and LossesInterest expenses (Note 29)
    
    
    (353,321
    )
    
    
    (241,578
    )
    
    
    (130,443
    )
    
    
    (4,003
    )Impairment loss (Notes 3 and 20)
    
    
    
    
    
    
    (202,650
    )
    
    
    (27,013
    )
    
    
    (829
    )Others (Note 11)
    
    
    (1,194,922
    )
    
    
    (496,386
    )
    
    
    (61,007
    )
    
    
    (1,872
    )(1,548,243
    )
    
    
    (940,614
    )
    
    
    (218,463
    )
    
    
    (6,704
    )Income from Continuing Operations Before Income
    
    
    3,825,219
    
    
    
    7,608,911
    
    
    
    14,277,643
    
    
    
    438,099Income Tax (Expense) Benefit (Note 21)
    
    
    456,958
    
    
    
    (15,517
    )
    
    
    (948,574
    )
    
    
    (29,106
    )Income from Continuing Operations
    
    
    4,282,177
    
    
    
    7,593,394
    
    
    
    13,329,069
    
    
    
    408,993Cumulative Effects of Changes
in Accounting Principles (Note 3)
    
    
    
    
    
    
    650,508
    
    
    
    
    
    
    
    Net Income
    
    
    4,282,177
    
    
    
    8,243,902
    
    
    
    13,329,069
    
    
    
    408,993
 For the years ended December 31,2004
    
    2005
    
    2006NT$
    
    NT$
    
    NT$
    
    US$Basic Earnings Per Share (in dollars) (Note 22)Income from continuing operations
    
    
    1.55
    
    
    
    3.02
    
    
    
    5.26
    
    
    
    0.16Cumulative effects of changes
in accounting principles
    
    
    
    
    
    
    0.26
    
    
    
    
    
    
    
    Net Income (Before Tax)
    
    
    1.55
    
    
    
    3.28
    
    
    
    5.26
    
    
    
    0.16Net Income (After Tax)
    
    
    1.74
    
    
    
    3.28
    
    
    
    4.91
    
    
    
    0.15Diluted
Earnings Per Share (in dollars) (Note 22)Income from continuing operations
    
    
    1.18
    
    
    
    2.86
    
    
    
    4.93
    
    
    
    0.15Cumulative effects of changes
in accounting principles
    
    
    
    
    
    
    0.22
    
    
    
    
    
    
    
    Net Income (Before Tax)
    
    
    1.18
    
    
    
    3.08
    
    
    
    4.93
    
    
    
    0.15Net Income (After Tax)
    
    
    1.36
    
    
    
    3.07
    
    
    
    4.61
    
    
    
    0.14
  F-7




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
  Unrealized LossCapital Stock Issued
    
    
    
    
    
    Retained Earnings
    
    on Available
    
    Cumulative
    
    Net Loss NotShares
    
    Capital
    
    Capital
    
    Legal
    
    Special
    
    Unappropriated
    
    for Sale
    
    Translation
    
    Recognized As
    
    Treasury(Thousand)
    
    Stock
    
    Reserve
    
    Reserve
    
    Reserve
    
    Earnings
    
    Financial Assets
    
    Adjustments
    
    Pension Cost
    
    Stock
    
    TotalNT$
    
    NT$
    
    NT$
    
    NT$
    
    NT$
    
    NT$
    
    NT$
    
    NT$
    
    NT$
    
    NT$2004Balance at January 1, 2004
    
    
    1,885,174
    
    
    
    18,851,737
    
    
    
    8,099,110
    
    
    
    467,014
    
    
    
    302,780
    
    
    
    2,918,612
    
    
    
    
    
    
    
    3,278
    
    
    
    
    
    
    
    (944,322
    )
    
    
    29,698,209Appropriation for legal reserve
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    283,872
    
    
    
    
    
    
    
    (283,872
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Reversal of special reserve to
unapppropriated earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (302,780
    )
    
    
    302,780
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Remuneration to directors and
supervisors
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (57,153
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (57,153
    )Employees cash bonus
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (73,674
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (73,674
    )Employees stock bonus
    
    
    21,050
    
    
    
    210,497
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (210,497
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Cash dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (663,066
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (663,066
    )Stock dividends
    
    
    189,447
    
    
    
    1,894,476
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,894,476
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Conversion of Euro convertible bonds
    
    
    9,402
    
    
    
    94,021
    
    
    
    213,140
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    307,161Long-term investment adjustments for investee
companys additional paid-in captal
    
    
    
    
    
    
    
    
    
    
    (10,862
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10,862
    )Long-term investment adjustments for investee
companys cumulative translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (144,331
    )
    
    
    
    
    
    
    
    
    
    
    (144,331
    )Cash dividends for treasury stock held
by subsidiaries
    
    
    
    
    
    
    
    
    
    
    9,455
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,455Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,282,177
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,282,177Transfer of treasury stock to employees
    
    
    
    
    
    
    
    
    
    
    (5,011
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    150,138
    
    
    
    145,127Balance at December 31, 2004
    
    
    2,105,073
    
    
    
    21,050,731
    
    
    
    8,305,832
    
    
    
    750,886
    
    
    
    
    
    
    
    4,320,831
    
    
    
    
    
    
    
    (141,053
    )
    
    
    
    
    
    
    (794,184
    )
    
    
    33,493,0432005Balance at January 1, 2005
    
    
    2,105,073
    
    
    
    21,050,731
    
    
    
    8,305,832
    
    
    
    750,886
    
    
    
    
    
    
    
    4,320,831
    
    
    
    
    
    
    
    (141,053
    )
    
    
    
    
    
    
    (794,184
    )
    
    
    33,493,043Appropriation for legal reserve
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    428,218
    
    
    
    
    
    
    
    (428,218
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Appropriation for special reserve
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    141,053
    
    
    
    (141,053
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Remuneration to directors and
supervisors
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (74,258
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (74,258
    )Employees cash bonus
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (175,927
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (175,927
    )Employees stock bonus
    
    
    18,766
    
    
    
    187,655
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (187,655
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Cash dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,583,342
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,583,342
    )Stock dividends
    
    
    168,890
    
    
    
    1,688,898
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,688,898
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Unrealized loss on available for sale
financial assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (737
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (737
    )Conversion of Euro convertible bonds
    
    
    26,934
    
    
    
    269,342
    
    
    
    494,719
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    764,061Employee stock option exercised
    
    
    9,257
    
    
    
    92,567
    
    
    
    28,890
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    121,457Long-term investment adjustment for
investee companys additional paid-in capital
    
    
    
    
    
    
    
    
    
    
    1,696
    
    
    
    
    
    
    
    
    
    
    
    (41,705
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (40,009
    )Long-term investment adjustment for
investee companys cumulative translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,643
    )
    
    
    
    
    
    
    93,590
    
    
    
    
    
    
    
    
    
    
    
    90,947Long-term investment adjustment for
investee companys unrecognized pension cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,828
    )
    
    
    
    
    
    
    (1,828
    )Long-term investment adjustment for
investee companys treasury stock variances
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (34,544
    )
    
    
    (34,544
    )Cash dividends for treasury stock held
by subsidiaries
    
    
    
    
    
    
    
    
    
    
    22,242
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    22,242Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,243,902
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,243,902Balance at December 31, 2005
    
    
    2,328,919
    
    
    
    23,289,193
    
    
    
    8,853,379
    
    
    
    1,179,104
    
    
    
    141,053
    
    
    
    8,241,034
    
    
    
    (737
    )
    
    
    (47,463
    )
    
    
    (1,828
    )
    
    
    (828,728
    )
    
    
    40,825,007
   F-8




---



##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
 (EXPRESSED IN THOUSANDS OF DOLLARS)
 UnrealizedGain (Loss) on
    
    
    
    
    
    Net Loss NotCapital Stock Issued
    
    
    
    
    
    Retained Earnings
    
    Available for
    
    Cumulative
    
    RecognizedShares
    
    Capital
    
    Capital
    
    Legal
    
    Special
    
    Unappropriated
    
    Sale Financial
    
    Translation
    
    As
    
    Treasury(Thousand)
    
    Stock
    
    Reserve
    
    Reserve
    
    Reserve
    
    Earnings
    
    Assets
    
    Adjustments
    
    Pension Cost
    
    Stock
    
    TotalNT$
    
    NT$
    
    NT$
    
    NT$
    
    NT$
    
    NT$
    
    NT$
    
    NT$
    
    NT$
    
    NT$2006Balance at January 1, 2006
    
    
    2,328,919
    
    
    
    23,289,193
    
    
    
    8,853,379
    
    
    
    1,179,104
    
    
    
    141,053
    
    
    
    8,241,034
    
    
    
    (737
    )
    
    
    (47,463
    )
    
    
    (1,828
    )
    
    
    (828,728
    )
    
    
    40,825,007Appropriation for legal reserve
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    824,390
    
    
    
    
    
    
    
    (824,390
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Appropriation for special reserve
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (91,024
    )
    
    
    91,024
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Remuneration to directors and supervisors
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (149,324
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (149,324
    )Employees cash bonus
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (463,284
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (463,284
    )Employees stock bonus
    
    
    26,779
    
    
    
    267,794
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (267,794
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Cash dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,169,558
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,169,558
    )Stock dividends
    
    
    241,015
    
    
    
    2,410,149
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,410,149
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Unrealized gain on available for sale financial assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,765,885
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,765,885Conversion of Euro convertible bonds
    
    
    277,870
    
    
    
    2,778,697
    
    
    
    5,692,509
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,471,206Employee stock option exercised
    
    
    13,174
    
    
    
    131,741
    
    
    
    15,729
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    147,470Long-term investment adjustment for
investee companys additional paid-in capital
    
    
    
    
    
    
    
    
    
    
    30,645
    
    
    
    
    
    
    
    
    
    
    
    37,300
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    67,945Long-term investment adjustment for
investee companys cumulative translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25,187
    
    
    
    
    
    
    
    
    
    
    
    25,187Long-term investment adjustment for
investee companys unrecognized pension cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    41
    
    
    
    
    
    
    
    41Long-term investment adjustment for
investee companys treasury stock variances
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    33,178
    
    
    
    33,178Cash dividends for treasury stock held by subsidiaries
    
    
    
    
    
    
    
    
    
    
    53,391
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    53,391Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,329,069
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,329,069Balance at December 31, 2006
    
    
    2,887,757
    
    
    
    28,877,574
    
    
    
    14,645,653
    
    
    
    2,003,494
    
    
    
    50,029
    
    
    
    13,413,928
    
    
    
    4,765,148
    
    
    
    (22,276
    )
    
    
    (1,787
    )
    
    
    (795,550
    )
    
    
    62,936,213
  F-9




---



##### Table of Contents



December 31,2004
    
    2005
    
    2006NT$
    
    NT$
    
    NT$
    
    US$(Note 2)Cash flows from operating activitiesNet income
    
    
    4,282,177
    
    
    
    8,243,902
    
    
    
    13,329,069
    
    
    
    408,993Adjustments to reconcile net income to net cash provided
by operating activities:Depreciation
    
    
    5,727,223
    
    
    
    6,053,840
    
    
    
    6,752,711
    
    
    
    207,202Amortization
    
    
    425,383
    
    
    
    518,024
    
    
    
    541,718
    
    
    
    16,622Bad debts expense
    
    
    
    
    
    
    2,911
    
    
    
    11,982
    
    
    
    368Recovery of decline in market value of
short-term investments
    
    
    (12
    )
    
    
    
    
    
    
    
    
    
    
    Provision for (reversal of) reserve for sales allowance
    
    
    36,082
    
    
    
    (25,457
    )
    
    
    (11,705
    )
    
    
    (359
    )Gain on disposal of investments
    
    
    (69,584
    )
    
    
    (37,173
    )
    
    
    (82,908
    )
    
    
    (2,544
    )Provision for (recovery of) loss on obsolescence and decline
in market value of inventory
    
    
    (12,746
    )
    
    
    5,603
    
    
    
    (2,329
    )
    
    
    (72
    )Long-term investment income under the equity method
    
    
    (307,728
    )
    
    
    (1,098,458
    )
    
    
    (1,153,630
    )
    
    
    (35,398
    )Cash dividend received from long-term investment under
the equity method
    
    
    27,832
    
    
    
    198,805
    
    
    
    175,742
    
    
    
    5,393Impairment loss
    
    
    17,803
    
    
    
    202,650
    
    
    
    27,013
    
    
    
    829(Gain) loss on disposal of property, plant and equipment
    
    
    52,291
    
    
    
    (26,792
    )
    
    
    (45,268
    )
    
    
    (1,389
    )Provision for loss on idle assets
    
    
    460,539
    
    
    
    68,766
    
    
    
    27,672
    
    
    
    849Amortization of discount on long-term notes
    
    
    2,367
    
    
    
    1,712
    
    
    
    6,537
    
    
    
    201Compensation interest on bonds payable
    
    
    172,127
    
    
    
    137,367
    
    
    
    30,810
    
    
    
    945Foreign currency exchange (gain) loss on bonds payable
    
    
    (668,742
    )
    
    
    408,777
    
    
    
    (113,157
    )
    
    
    (3,472
    )Loss on redemption of bonds payable
    
    
    8,117
    
    
    
    
    
    
    
    
    
    
    
    (Increase) decrease in assets:Notes receivable
    
    
    46,448
    
    
    
    (84,816
    )
    
    
    115,788
    
    
    
    3,553Accounts receivable
    
    
    (405,172
    )
    
    
    (3,767,018
    )
    
    
    336,037
    
    
    
    10,311Other financial assets, current
    
    
    14,937
    
    
    
    (435,260
    )
    
    
    131,029
    
    
    
    4,021Inventories
    
    
    (68,977
    )
    
    
    (831,822
    )
    
    
    (30,214
    )
    
    
    (927
    )Deferred income tax assets
    
    
    (464,386
    )
    
    
    (159,586
    )
    
    
    97,824
    
    
    
    3,002Other current assets
    
    
    16,989
    
    
    
    (20,433
    )
    
    
    41,987
    
    
    
    1,288Increase (decrease) in liabilities:Notes payable
    
    
    (1,071,912
    )
    
    
    4,509
    
    
    
    (5,493
    )
    
    
    (169
    )Accounts payable
    
    
    (34,962
    )
    
    
    3,020,326
    
    
    
    (1,009,711
    )
    
    
    (30,982
    )Income tax payable
    
    
    (4,256
    )
    
    
    116,664
    
    
    
    794,366
    
    
    
    24,374Accrued expenses
    
    
    255,763
    
    
    
    593,046
    
    
    
    561,278
    
    
    
    17,222Other payables
    
    
    471,388
    
    
    
    61,747
    
    
    
    (368,631
    )
    
    
    (11,311
    )Other current liabilities
    
    
    (168,362
    )
    
    
    60,690
    
    
    
    94,763
    
    
    
    2,907Other liabilities
    
    
    (4,987
    )
    
    
    193
    
    
    
    
    
    
    
    Accrued pension liabilities
    
    
    31,008
    
    
    
    1,900
    
    
    
    (3,268
    )
    
    
    (100
    )Net cash provided by operating activities
    
    
    8,766,648
    
    
    
    13,214,617
    
    
    
    20,250,012
    
    
    
    621,357
   F-10




---



##### Table of Contents



December 31,2004
    
    2005
    
    2006NT$
    
    NT$
    
    NT$
    
    US$(Note 2)Cash flows from investing activitiesRefund of (payment for) security deposits
    
    
    (78,200
    )
    
    
    34,295
    
    
    
    9,200
    
    
    
    282Purchase of financial assets at fair value through profit or loss, current
    
    
    (4,759,999
    )
    
    
    (4,774,000
    )
    
    
    
    
    
    
    Proceeds from disposal of financial assets at fair value through profit
or loss, current
    
    
    2,830,000
    
    
    
    6,730,250
    
    
    
    
    
    
    
    Purchase of financial assets carried at costs
    
    
    
    
    
    
    
    
    
    
    (695,523
    )
    
    
    (21,342
    )Purchase of long-term investments under equity method
    
    
    (265,156
    )
    
    
    (6,334
    )
    
    
    
    
    
    
    Proceeds on capital reduction from equity investee
    
    
    16,900
    
    
    
    
    
    
    
    7,683
    
    
    
    236Proceeds from disposal of long-term investments
    
    
    736,118
    
    
    
    303,477
    
    
    
    91,386
    
    
    
    2,804Acquisition of property, plant and equipment
    
    
    (9,784,816
    )
    
    
    (8,244,928
    )
    
    
    (11,038,964
    )
    
    
    (338,722
    )Proceeds from disposal of property, plant and equipment
    
    
    259,587
    
    
    
    58,090
    
    
    
    268,735
    
    
    
    8,246Payment for deferred charges
    
    
    (578,977
    )
    
    
    (502,050
    )
    
    
    (468,465
    )
    
    
    (14,375
    )Payment for refundable deposits
    
    
    (1,825
    )
    
    
    (1,151
    )
    
    
    (1,191
    )
    
    
    (36
    )Refund from refundable deposits
    
    
    5,995
    
    
    
    5,394
    
    
    
    
    
    
    
    Net cash used in investing activities
    
    
    (11,620,373
    )
    
    
    (6,396,957
    )
    
    
    (11,827,139
    )
    
    
    (362,907
    )Cash flows from financing activitiesProceeds from short-term loans
    
    
    
    
    
    
    93,768
    
    
    
    331,107
    
    
    
    10,160Proceeds from long-term loans
    
    
    6,300,000
    
    
    
    
    
    
    
    3,086,072
    
    
    
    94,694Repayment of long-term loans
    
    
    (9,149,169
    )
    
    
    (3,216,965
    )
    
    
    (5,132,256
    )
    
    
    (157,479
    )Redemption of bonds payable
    
    
    (1,483,391
    )
    
    
    (800,000
    )
    
    
    
    
    
    
    Proceeds from issuance of bonds payable
    
    
    6,646,000
    
    
    
    
    
    
    
    
    
    
    
    Proceeds from deposit-in
    
    
    110
    
    
    
    200,990
    
    
    
    256,495
    
    
    
    7,870Repayment of deposit-in
    
    
    
    
    
    
    (1,045
    )
    
    
    (42
    )
    
    
    (1
    )Decrease in deferred credit accounts
    
    
    (5,562
    )
    
    
    
    
    
    
    
    
    
    
    Proceeds from the exercise of employee stock option
    
    
    
    
    
    
    121,457
    
    
    
    147,470
    
    
    
    4,525Proceeds from disposal of treasury stock
    
    
    145,128
    
    
    
    
    
    
    
    
    
    
    
    Remuneration to directors and supervisors
    
    
    (57,153
    )
    
    
    (74,258
    )
    
    
    (149,324
    )
    
    
    (4,582
    )Payment for stockholders dividends and employees bonuses
    
    
    (736,712
    )
    
    
    (1,759,232
    )
    
    
    (4,579,452
    )
    
    
    (140,517
    )Net cash provided by (used in) financing activities
    
    
    1,659,251
    
    
    
    (5,435,285
    )
    
    
    (6,039,930
    )
    
    
    (185,330
    )Effect on foreign currency exchange
    
    
    (85,734
    )
    
    
    36,065
    
    
    
    7,712
    
    
    
    237Net (decrease) increase in cash and cash equivalents
    
    
    (1,280,208
    )
    
    
    1,418,440
    
    
    
    2,390,655
    
    
    
    73,357Cash and cash equivalents at beginning of year
    
    
    12,202,601
    
    
    
    10,922,393
    
    
    
    12,340,833
    
    
    
    378,669Cash and cash equivalents at end of year
    
    
    10,922,393
    
    
    
    12,340,833
    
    
    
    14,731,488
    
    
    
    452,026Supplemental disclosures of cash flow information:Cash paid for interest (excluding capitalized interest)
    
    
    324,148
    
    
    
    162,849
    
    
    
    134,525
    
    
    
    4,128Cash paid for income tax
    
    
    17,242
    
    
    
    14,978
    
    
    
    51,222
    
    
    
    1,572Supplemental disclosures of partial cash paid for investing activities:Acquisition of property, plant and equipment
    
    
    9,320,818
    
    
    
    9,200,968
    
    
    
    10,703,697
    
    
    
    328,434Add: Payable at beginning of the year
    
    
    1,170,337
    
    
    
    706,339
    
    
    
    1,662,379
    
    
    
    51,009Less: Payable at end of the year
    
    
    (706,339
    )
    
    
    (1,662,379
    )
    
    
    (1,327,112
    )
    
    
    (40,721
    )Cash paid
    
    
    9,784,816
    
    
    
    8,244,928
    
    
    
    11,038,964
    
    
    
    338,722
  F-11




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 History and Organization
 (1)
    
    Siliconware Precision Industries Co., Ltd. (the Company) was incorporated as a
company limited by shares under the Company Law of the Republic of China (ROC) in May 1984
and was listed on the Taiwan Stock Exchange in April 1993. As of December 31, 2006, issued
common stock was NT$28,877,574. The Company is mainly engaged in the assembly, testing and
turnkey services of integrated circuits. As of December 31, 2006, the Company has 14,300
employees.(2)
    
    Consolidated subsidiaries
 % of ownershipheld by theCompany as ofName of investor
    
    Name of subsidiaries
    
    Main operating activities
    

December 31, 2006The Company
    
    Siliconware Investment Company Ltd.
    
    Investment activities
    
    
    100
    %The Company
    
    SPIL (B.V.I.) Holding Limited
    
    Investment activities
    
    
    100
    %SPIL (B.V.I.) Holding Limited
    
    Siliconware USA, Inc.
    
    Communications and relationships with companies headquartered in North America
    
    
    100
    %SPIL (B.V.I.) Holding Limited
    
    SPIL (Cayman) Holding Limited
    
    Investment activities
    
    
    100
    %SPIL (Cayman) Holding Limited
    
    Siliconware Technology (Suzhou) Limited
    
    Manufacturing and processing of module assembly, flash memory card and related products
    
    
    100
    %
 (3)
    
    Non-consolidated subsidiariesNone.
 Summary of Significant Accounting Policies
   F-12




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SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Basic of Consolidation
  Use of Estimates
  Translation of Foreign Currency Transactions on Subsidiaries Financial Statements
  Foreign Currency Transactions
  Convenience Translation into US Dollars
  Classification of current and non-current assets/liabilities
 A.
    
    Assets with any one of the following characteristics are classified as current assets;
all other assets are classified as non-current assets.
 (1)
    
    Assets arising from operating activities that are expected to be realized or consumed, or
are intended to be sold within the normal operation cycle;(2)
    
    Assets held mainly for trading purposes;(3)
    
    Assets that are expected to be realized within twelve months from the balance
sheet date;(4)
    
    Cash or cash equivalents, excluding restricted cash and cash equivalents and
those that are to be exchanged or used to pay off liabilities more than twelve
months after the balance sheet date.
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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 B.
    
    Liabilities with any one of the following characteristics are classified as current
liabilities; all other liabilities are classified as non-current liabilities.
 (1)
    
    Liabilities arising from operating activities that are expected to be paid off
within the normal operating cycle;(2)
    
    Liabilities arising mainly from trading activities;(3)
    
    Liabilities that are to be paid off within twelve months from the balance sheet
date;(4)
    
    Liabilities for which the repayment date cannot be extended unconditionally to
more than twelve months after the balance sheet date.
 Financial assets at fair value through profit or loss
  Cash and Cash Equivalents
  Accounts Receivable
  Allowance for Doubtful Accounts
  Allowance for Sales Discounts
  Inventories
  F-14




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Available-for-sale securities
  Financial assets measured at cost
  Long-term Investments Accounted for under Equity Method
      Property, Plant and Equipment
 A.
    
    Property, plant and equipment are stated at historical cost. Interest incurred relating
to the construction of property, plant and equipment is capitalized and depreciated
accordingly.
 F-15




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##### Table of Contents



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




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Income Tax
 A.
    
    In accordance with ROC FAS No. 22, Accounting for Income Taxes, the income tax effect
resulting from temporary differences and investment tax credits is recorded as income tax
assets or liabilities using the asset and liability method. Deferred tax assets or
liabilities are further classified as current or noncurrent and carried at net balance.
Valuation allowance on deferred tax assets is provided to the extent that it is more likely
than not that the tax benefit will not be realized.B.
    
    The Company adopted ROC SFAS No. 12, Accounting for Investment Tax Credits in
determining the investment tax credit. The investment tax credits relating to the
acquisition cost of qualifying machinery and technology, qualifying research and
development expenditure, qualifying personnel training expenditure and qualifying
investments in significant technology companies are recognized as income tax adjustment in
the period the tax credits arise.C.
    
    Over or under provisions of prior years income tax liabilities are included in the
current years income tax expense.D.
    
    The Taiwan imputation tax system requires that any undistributed earnings be subject to
an additional 10% corporate income tax, which is recognized as expense at the time the
stockholders resolve to retain the earnings.
 Revenue Recognition
  Research and Development
  Employee Stock Option Plan
  Treasury Stock
 A.
    
    The Company records treasury stock purchases under the cost method whereby the entire
cost of the acquired stock is recorded as treasury stock and as a reduction of
shareholders equity.B.
    
    Upon subsequent disposal of the treasury stock, the excess of the proceeds from
disposal over the book value, determined by the weighted-average method, is credited to
capital reserve. However, if the book value of the treasury stock exceeds the proceeds from
disposal, the excess is first charged against capital reserve arising from treasury stock and the remainder, if any, is charged against retained earnings.
 F-17




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 C.
    
    Stocks of the Company held by the subsidiaries are treated as treasury stock.
Subsidiaries gain on disposal of the Companys stocks and the cash dividend income
received from the Company are recorded as additional paid-in capital  treasury stock.
 Earnings Per Share
 A.
    
    Basic earnings per share is calculated by dividing net income by the weighted average
number of shares outstanding during the period after considering the retroactive effect of
stock dividend, capitalization of capital reserve, and stock bonus to employees. Diluted
earnings per share is calculated by taking into consideration additional common shares that
would have been outstanding if the dilutive potential common shares had been issued.B.
    
    The Companys dilutive potential common shares are employee stock options and
convertible bonds. In computing the dilutive effects of the employee stock options and
convertible bonds, the Company applies the treasury stock method and if-converted method,
respectively.
 Impairment loss
 A.
    
    The Company recognizes impairment loss whenever event occurs or evidence indicates the
carrying amount of an asset exceeds its recoverable amount. Recoverable amount is measured
as the higher of net selling price and value in use. Net selling price is the amount
obtainable from the sale of an asset in an arms-length transaction between knowledgeable,
willing parties, after deducting any direct incremental disposal costs. The value in use
is the present value of estimated future cash flows expected to arise from continuing use
of an asset and from its disposal at the end of its useful life.B.
    
    An impairment loss recognized in prior years is reversed if there has been a change in
the estimates used to determine recoverable amount since the last impairment loss was
recognized, or the impairment loss caused by a specific external event of an exceptional
nature that is not expected to recur. However, an impairment loss is reversed only to the
extent that it does not increase the carrying amount of an asset above the carrying amount
that would have been determined for the asset (net of amortization or depreciation) had no
impairment loss been recognized in prior years. Impairment loss for goodwill is not
reversed.
 Effects of Changes in Accounting Principle
 A.
    
    Effective January 1, 2005, the Company adopted Statement of Financial Accounting
Standards No. 35, Accounting for Assets Impairment in the Republic of China. As a result
of the adoption of SFAS No. 35, total assets and shareholders equity decreased by
$163,650 as of December 31, 2005 and net income decreased by $163,650 for the year ended
December 31, 2005. As a result of recognition of impairment loss, basic earnings per share
decreased by $0.07 for the year ended December 31, 2005.B.
    
    Effective January 1, 2005, the Company ceased to delay in recognizing investment income
(loss) from certain equity-method investees in accordance with the amended Statement of
Financial Accounting Standards No. 5, Accounting for Long-term Equity Investment in the
Republic of China. The cumulative effect attributable to this change in accounting
principle for the year ended December 31, 2005 was $650,508, which was based on the
investees financial statements for the year ended December 31, 2004.
 F-18




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 C.
    
    Effective January 1, 2006, the Company adopted the amended SFAS No. 1,Conceptual
Framework for Financial Accounting and Preparation of Financial Statements, SFAS No.
5,Accounting for Long-term Equity Investment, SFAS No. 7,Consolidated Financial
Statements, SFAS No. 25, Business Combinations  Accounting Treatment under Purchase
Method, and SFAS No. 35, Accounting for Assets Impairment, which discontinued
amortization of goodwill. This change of accounting principle had no effect on the
financial statements as of and for the year ended December 31, 2006.D.
    
    Effective January 1, 2006, the Company adopted the newly released SFAS No. 34,
Accounting for Financial Instruments and No. 36, Disclosure and Presentation of
Financial Instruments. The Company has properly reclassified certain accounts on December
31, 2005 based on its holding purpose and abilities in accordance with such standard and
the Rules Governing the Preparation of Financial Reports by Securities Issuers.
Accounting policies through December 31, 2005 are summarized as follows:
 (1)
    
    Short-term InvestmentsShort-term investments 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 values of listed
stocks and close-end mutual funds are determined by the average closing price of the last
month of the accounting period. The market value of open-end funds is determined by the
net asset value at the balance sheet date. The excess of aggregate cost over market
value is recorded as a loss in the current year.(2)
    
    Long-term investments in equity securities  under the cost methodLong-term equity investments in which the Company owns less than 20% of the voting rights
and has no significant influence over the investee companies are accounted for (a) at
cost, if the investee company is not listed or (b) at the lower of cost or market value,
if the investee company is listed. Valuation allowance for the unrealized loss under
this method is shown in the stockholders equity. When it becomes evident that there has
been a permanent impairment in value and the chance of recovery is minimal, loss is
recognized in the current year. However, if there is evidence that the Company has
significant influence over the investee company, the investment is accounted for under
the equity method.(3)
    
    As a result of the adoption of SFAS No. 34 and No. 36, total assets and total
shareholders equity increased by $9,277,206 as of January 1, 2006 with no material
impact on net income and earnings per share for the year ended December 31, 2006.
 Cash
 December 31,2005
    
    2006NT$
    
    NT$Cash on hand
    
    
    1,809
    
    
    
    1,967Savings accounts and checking accounts
    
    
    3,074,661
    
    
    
    900,744Time deposits
    
    
    9,264,363
    
    
    
    13,828,77712,340,833
    
    
    
    14,731,488
  F-19




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Accounts Receivable
 December 31,2005
    
    2006NT$
    
    NT$Accounts receivable
    
    
    9,595,886
    
    
    
    9,262,446Less: Allowance for sales discounts
    
    
    (67,180
    )
    
    
    (55,475
    )Allowance for doubtful accounts
    
    
    (12,280
    )
    
    
    (24,270
    )9,516,426
    
    
    
    9,182,701
 Inventories
 December 31,2005
    
    2006NT$
    
    NT$Raw materials and supplies
    
    
    2,418,288
    
    
    
    2,495,977Work in process
    
    
    336,923
    
    
    
    305,710Finished goods
    
    
    100,769
    
    
    
    84,9102,855,980
    
    
    
    2,886,597Less: Allowance for loss on obsolescence and
decline in market value of inventory
    
    
    (50,693
    )
    
    
    (47,787
    )2,805,287
    
    
    
    2,838,810
 Available-for-sale Financial Assets  Non-Current
 December 31,2005
    
    2006NT$
    
    NT$Cost of listed Securities
    
    
    2,379,209
    
    
    
    3,118,283Valuation adjustment
    
    
    
    
    
    
    4,765,3182,379,209
    
    
    
    7,883,601
 Financial Assets Carried at Cost  Non-Current
 December 31,2005
    
    2006NT$
    
    NT$Unlisted securities
    
    
    168,331
    
    
    
    824,942
  F-20




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Long-term Investments Accounted for Under The Equity Method
 A.
    
    Details of long-term investments in stocks are summarized as follows:
 December 31,2005
    
    2006Percentage of
    
    
    
    
    
    Percentage ofInvestee company
    
    Amount
    
    ownership
    
    Amount
    
    ownershipNT$
    
    
    
    
    
    NT$Equity methods:ChipMOS Technologies Inc.
    
    
    3,924,937
    
    
    
    28.75
    %
    
    
    4,998,596
    
    
    
    28.76
    %Sigurd Microelectronics Corp.
    
    
    728,199
    
    
    
    24.03
    %
    
    
    
    
    
    
    Artest Corporation
    
    
    
    
    
    
    30.09
    %
    
    
    
    
    
    
    30.09
    %Double Win Enterprise Co., Ltd.
    
    
    84,450
    
    
    
    24.14
    %
    
    
    84,450
    
    
    
    24.14
    %4,737,586
    
    
    
    
    
    
    
    5,083,046Less : Accumulated impairment loss
    
    
    (84,450
    )
    
    
    
    
    
    
    (84,450
    )4,653,136
    
    
    
    
    
    
    
    4,998,596
 B.
    
    The recognition of investment income (loss) for ChipMOS Technologies Inc. (ChipMOS),
an investee accounted for under the equity method, was based on the financial statements
of the investee for the same period in 2001 and before. Commencing from January 1, 2002,
with the approval from ROC SFB, recognition of investment income (loss) has been delayed
until the subsequent year. Therefore, the Company recognized investment loss of
NT$365,669 and investment income of NT$247,238 for the years ended December 31, 2003 and
2004, based on ChipMOSs audited financial statements for the years ended December 31,
2002 and 2003. Commencing from January 1, 2005, the Company ceased to delay in recognition
of investment income. Therefore, the Company recognized investment income of NT$432,715
for the year ended December 31, 2005. The deferred recognition of the investment income of
NT$667,770, which was based on ChipMOSs audited financial statements for the year ended
December 31, 2004, was added to the cumulative effects of changes in accounting principles
in 2005 in accordance with SFAS No. 5.C.
    
    The Companys investment in Universal consists of cumulative preferred stock and
common stock, both with voting right. The holders of the preferred stock are entitled to
receive cumulative dividends at the rate of 10% per annum. In the event of any
liquidation of the investee, the holders of the preferred stock shall be entitled to
receive, in preference to the holders of the common stock, an amount equal to original
investment amount plus any undeclared and unpaid dividends. The recognition of investment
income (loss) for Universal has been delayed until the subsequent year. Commencing from
January 2003, the Company recognizes the investment income for Universal based on the
financial statements of the investee for the same period. For the year ended December 31,
2004, the Company recognized investment income of NT$7,600 for preferred stock in
accordance with the preference of the preferred stock of Universal. As for the common
stock investment in Universal, in 2004, the investment loss of NT$23,825 for common stock
was recognized based on Universal Communication Technology Inc.s (Universal) audited
financial statements for the year ended December 31, 2004. At March 1, 2005, Universal
merged with Sigurd Microelectronics Corp. (Sigurd). Universal was dissolved as a result
of this transaction and the Company obtained 6,595 thousand shares of
Sigurds common shares. For the year ended December 31, 2005, the investment loss of NT$9,775 was
recognized based on Universals unreviewed financial statements for the two months ended
February 28, 2005.D.
    
    Recognition of investment income has been consistently delayed until the subsequent
year for Taiwan Hi-tech Corporation and Double Win Enterprise Co., Ltd. Accordingly, the investment incomes
of NT$95 and NT$4,490 in Taiwan Hi-tech Corporation and Double Win Enterprise Co., Ltd ,
respectively, for the year ended December 31, 2004 were based on the audited financial
statements of the investee companies for the year ended December 31, 2003. The Company
disposed all of its ownership in Taiwan Hi-tech Corporation in 2004. The deferred
recognition of the investment loss of NT$17,262 from Double Wins 2004 financial results
was added to the cumulative effects of changes in accounting principles in 2005.
 F-21




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
 E.
    
    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 is 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 2003 and 2004.
Therefore, no investment income was recognized in 2004 and 2005. However, for the years
ended December 31, 2004 and 2005, Artest Corporation, has 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 of NT$7,720 in 2004 on this long-term equity investment to write off
the carrying value of the investment to its fair value. As of December 31, 2004, the
carrying amount of investment in Artest was written down to $0.F.
    
    Due to the merger of Sigurd, one of the Companys investees originally accounted for under
the equity method, with the other company on June 12, 2006, the Company is not able to
exercise significant influence on Sigurd and its percentage of ownership has been reduced to
below 20%. The Company reclassified the investment in Sigurd as available-for-sale financial
asset  non-current and recorded unrealized gain on available-for-sale financial asset of
NT$123,950.G.
    
    For the years ended December 31, 2004, 2005 and 2006, the Company recognized investment
income (loss) of NT$(11,523), NT$485,503 and NT$1,153,630, respectively, for all other
investees accounted for under the equity method based on investees audited financial
statements for the same periods.
 F-22




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Property, Plant and Equipment
 December 31, 2005AccumulatedCost
    
    depreciation
    
    Book valueNT$
    
    NT$
    
    NT$Land
    
    
    2,128,476
    
    
    
    
    
    
    
    2,128,476Buildings
    
    
    7,158,668
    
    
    
    (1,735,422
    )
    
    
    5,423,246Machinery and equipment
    
    
    39,596,050
    
    
    
    (20,639,321
    )
    
    
    18,956,729Utility equipment
    
    
    785,110
    
    
    
    (362,988
    )
    
    
    422,122Furniture and fixtures
    
    
    638,432
    
    
    
    (338,418
    )
    
    
    300,014Other equipment
    
    
    1,562,453
    
    
    
    (818,179
    )
    
    
    744,274Construction in progress and
prepayments for equipment
    
    
    2,277,389
    
    
    
    
    
    
    
    2,277,38954,146,578
    
    
    
    (23,894,328
    )
    
    
    30,252,250
 December 31, 2006AccumulatedCost
    
    depreciation
    
    Book valueNT$
    
    NT$
    
    NT$Land
    
    
    2,940,997
    
    
    
    
    
    
    
    2,940,997Buildings
    
    
    7,922,133
    
    
    
    (2,139,091
    )
    
    
    5,783,042Machinery and equipment
    
    
    45,294,231
    
    
    
    (23,649,108
    )
    
    
    21,645,123Utility equipment
    
    
    845,050
    
    
    
    (413,059
    )
    
    
    431,991Furniture and fixtures
    
    
    663,820
    
    
    
    (363,940
    )
    
    
    299,880Other equipment
    
    
    1,876,598
    
    
    
    (972,722
    )
    
    
    903,876Construction in progress and
prepayments for equipment
    
    
    1,844,789
    
    
    
    
    
    
    
    1,844,78961,387,618
    
    
    
    (27,537,920
    )
    
    
    33,849,698
  Other Assets  Other
 December 31,2005
    
    2006NT$
    
    NT$Land
    
    
    108,087
    
    
    
    108,087Others
    
    
    147,562
    
    
    
    277,104255,649
    
    
    
    385,191
  F-23




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SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Other Payables
 December 31,2005
    
    2006NT$
    
    NT$Payables for equipment
    
    
    1,662,380
    
    
    
    1,326,811Accrued value-added tax payable
    
    
    232,307
    
    
    
    Other payables
    
    
    638,041
    
    
    
    502,3182,532,728
    
    
    
    1,829,129
  Bonds Payable
 December 31,2005
    
    2006NT$
    
    NT$Euro convertible bonds payable
    
    
    10,819,494
    
    
    
    2,724,455Add: Compensation interest payable
    
    
    490,806
    
    
    
    2,37711,310,300
    
    
    
    2,726,832Less: Current portion of long-term
bonds payable
    
    
    
    
    
    
    (18,687
    )11,310,300
    
    
    
    2,708,145
 A.
    
    On January 28, 2002, the Company issued five-year (from January 28, 2002 to January 28, 2007)
zero coupon
Euro Convertible bonds amounting to US$200,000 (in thousands) listed on the Luxembourg Stock
Exchange. Major terms of the issue are as follows:
 (1)
    
    The Company may redeem the bonds at any time on or after July 29, 2004 and prior to
December 29, 2006 at their principal amount together with accrued interest, if (i) the market
price of the shares of the Company for 20 out of 30 consecutive trading days is at least 130%
of the conversion price or (ii) at least 90% in principal amount of the bonds has already been
redeemed, repurchased and cancelled or converted.(2)
    
    Redemption at the option of the bondholders:The Company will, at the option of the bondholders, redeem such bonds on July 28, 2004 at
105.9185% of its principal amount, or on January 28, 2007 at 111.837% of its principal
amount.(3)
    
    Conversion period:At any time between April 16, 2002 and December 29, 2006.(4)
    
    Conversion price and adjustment:
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SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 The conversion price was established on the issuance date at NT$32.9 (in dollars)
per share. The conversion price is subject to adjustment for bonus issues, right
issues, distributions of cash and stock dividends and other dilutions. As of
December 31, 2006, the conversion price was NT$24.01 (in dollars) per share.(5)
    
    As of December 31, 2006, the convertible bonds with the principal amount of
US$158,515 (in thousands) have been converted into 202,691 thousand shares, which resulted
in an increase of capital reserve of NT$3,707,790. For the years ended December 31, 2005
and 2006, the convertible bonds with the principal amount of US$21,315 (in thousands) and
US$128,360 (in thousands), respectively, were converted into the Companys shares. For the
years ended December 31, 2005 and 2006, no repurchase or redemption was occurred. As of
December 31, 2006, the Company repurchased and cancelled the bonds with the principal
amount of US$40,985 (in thousands) from open market.(6)
    
    As of December 31, 2005 and 2006, the principal amounts of unconverted bonds
aforementioned were US$128,860 (in thousands) and US$500 (in thousands)(7)
    
    The principal amount of the unconverted bonds aforementioned of US$500 (in thousands)
was redeemed on January 28, 2007.
 B.
    
    On February 5, 2004, the Company issued five-year (from February 5, 2004 to February 5,
2009) zero coupon
Euro Convertible bonds amounting to US$200,000 (in thousands) listed on the Luxembourg
Stock Exchange. Major terms of the issue are as follows:
 (1)
    
    The Company may redeem the bonds at any time on or after February 5, 2006 and prior
to January 29, 2009 at their principal amount, if (i) the market price of the shares of
the Company for 20 out of 30 consecutive trading days is at least 120% of the conversion
price or (ii) at least 90% in principal amount of the bonds has already been redeemed,
repurchased and cancelled or converted.(2)
    
    Redemption at the option of the bondholders:The Company will, at the option of the bondholders, redeem such bonds on February 5,
2008 at the principal amount.(3)
    
    Conversion period:At any time between March 17, 2004 and January 29, 2009.(4)
    
    Conversion price and adjustment:The conversion price was established on the issuance date at NT$47.035 (in dollars)
per share. The conversion price will be subject to adjustment for bonus issues,
right issues, distributions of cash and stock dividends and other dilutions. As of
December 31, 2006, the conversion price was NT$34.42 (in dollars) per share.(5)
    
    As of December 31, 2006, the convertible bonds with the principal amount of
US$116,979 (in thousands) has been converted into 111,515 thousand shares, which resulted
in an increase of capital reserve of NT$2,692,576. For the year ended December 31, 2005,
no convertible bond was converted into the Companys shares. As of December 31, 2006,
the Company did not repurchase any of the bonds from the open market.
 F-25




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (6)
    
    As of December 31, 2005 and 2006, the principal amounts of unconverted bonds
aforementioned were US$200,000 (in thousands) and US$83,021 (in thousands)
 C.
    
    According to Interpretation letter ref. (95) 078, Compound Financial Instrument with
Multiple Embedded
Derivatives Issue, issued by ARDF, the Company decides not to bifurcate the embedded
derivatives from their host contacts issued on or prior to December 31, 2005.
 Long-term Loans
 December 31,Nature of loans
    
    Repayment period
    
    2005
    
    2006NT$
    
    NT$Commercial papers
    
    Repayable in 4 semi-annual installments from November 2009
    
    
    
    
    
    
    3,000,000Secured loans
    
    Repayable in August 2011
    
    
    
    
    
    
    104,135Credit loans
    
    Repayable in 3 semi-annual installments from July 2006
    
    
    4,800,000
    
    
    
    Credit loans
    
    Repayable in July 2006
    
    
    324,195
    
    
    
    5,124,195
    
    
    
    3,104,135Less: Current portion of long-term loans
    
    
    (1,790,895)
    
    
    
    Discount on commercial paper
    
    
    
    
    
    
    (11,526
    )3,333,300
    
    
    
    3,092,609Interest rates
    
    
    
    
    2.06%~5.18
    %
    
    
    2.093%~6.156
    %
  Pension Plan and Net Pension Cost
 A.
    
    In accordance with the Labor Standards Act, the Company has a funded defined benefit pension
plan covering all eligible employees prior to the enforcement of the Labor Pension Act (the
Act), effective on July 1, 2005 and employees choosing to continue to be subject to the
pension mechanism under the Labor Standards Law after the enforcement of the Act. Under the
funding policy of the plan, the Company contributes monthly an amount equal to 2% (5% before
July 2005) of the employees monthly salaries and wages to the pension fund deposited with the
Central Trust of China, the custodian. Pension benefits are generally based on service years
(two units earned per year for the first 15 years of service and one unit earned for each
additional year of service with a maximum of 45 units). One unit represents six-month
average wages and salaries before retirement of the employees.B.
    
    In accordance with the Labor Pension Act, effective July 1, 2005, the Company has a defined
contribution pension plan covering employees (excluding foreign employees) who chose to be
subject to the pension mechanism under this Act. The Company makes monthly contributions to the
employees individual pension accounts on a basis no less than 6% of each employees monthly
salary or wage. The principal and accrued dividends from an employees personal pension account
are claimed monthly or in full at one time. Under this pension plan, net pension costs
amounting to NT$101,629 and NT$245,742 was recognized for the six months ended December 31,
2005 and for the year ended December 31, 2006, respectively.
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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 C.
    
    The following tables set forth the actuarial assumptions, funded status and amounts
recognized for SPILs defined benefit pension plan:
 (1)
    
    Assumptions used in actuarial calculations as of December 31, 2004, 2005 and 2006:
 2004
    
    2005
    
    2006Discount rate
    
    
    2.50
    %
    
    
    3.00
    %
    
    
    3.25
    %Long-term rate of compensation increase
    
    
    2.00
    %
    
    
    2.00
    %
    
    
    2.00
    %Expected rate of return on plan assets
    
    
    2.50
    %
    
    
    3.00
    %
    
    
    3.25
    %
 2005
    
    2006NT$
    
    NT$Vested benefit
    
    
    (19,968
    )
    
    
    (40,207
    )Vested benefit obligation
    
    
    (19,444
    )
    
    
    (39,145
    )Accumulated benefit obligation
    
    
    (903,265
    )
    
    
    (974,226
    )
 (2)
    
    Changes in benefit obligation during the years ended December 31, 2005 and 2006:
 2005
    
    2006NT$
    
    NT$Projected benefit obligation at beginning of year
    
    
    (1,041,495
    )
    
    
    (1,193,899
    )Service cost
    
    
    (85,852
    )
    
    
    (37,095
    )Interest cost
    
    
    (32,987
    )
    
    
    (38,802
    )Loss on projected benefit obligation
    
    
    (46,193
    )
    
    
    (80,790
    )Benefit paid
    
    
    12,628
    
    
    
    3,677Projected benefit obligation at end of year
    
    
    (1,193,899
    )
    
    
    (1,346,909
    )
 (3)
    
    Changes in plan assets during the years ended to December 31, 2005 and 2006:
 2005
    
    2006NT$
    
    NT$Fair value of plan assets at beginning of year
    
    
    808,825
    
    
    
    905,531Actual return on plan assets
    
    
    12,298
    
    
    
    23,270Employer contributions
    
    
    97,036
    
    
    
    56,125Benefits paid
    
    
    (12,628
    )
    
    
    (3,677
    )Fair value of plan assets at end of year
    
    
    905,531
    
    
    
    981,249
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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (4)
    
    Funded status at December 31, 2005 and 2006:
 2005
    
    2006NT$
    
    NT$Fair value of plan assets
    
    
    905,531
    
    
    
    981,249Projected benefit obligation
    
    
    (1,193,899
    )
    
    
    (1,346,909
    )Funded status
    
    
    (288,368
    )
    
    
    (365,660
    )Unrecognized transition assets
    
    
    (4,564
    )
    
    
    (3,651
    )Unrecognized net actuarial loss
    
    
    260,133
    
    
    
    339,675Accured pension cost
    
    
    (32,799
    )
    
    
    (29,636
    )
 (5)
    
    Components of net periodic cost for the years ended December 31, 2004, 2005 and 2006:
 2004
    
    2005
    
    2006NT$
    
    NT$
    
    NT$Service cost
    
    
    145,610
    
    
    
    85,852
    
    
    
    37,095Interest cost
    
    
    26,172
    
    
    
    32,987
    
    
    
    38,802Expected return on plan assets
    
    
    (16,760
    )
    
    
    (25,150
    )
    
    
    (29,430
    )Recognition of transition assets
    
    
    (913
    )
    
    
    (913
    )
    
    
    (913
    )Recognition of actuarial loss
    
    
    14,201
    
    
    
    6,160
    
    
    
    7,408Net periodic pension cost
    
    
    168,310
    
    
    
    98,936
    
    
    
    52,962
 D.
    
    SUI has established a defined contribution pension plan covering substantially all
employees. The plan provides for up to 15% of voluntary salary reduction contributions by
eligible participants as well as discretionary matching contributions from SUI to its
employees individual pension accounts. The contribution from SUI is recorded as pension costs
in the current period.E.
    
    Siliconware Technology (Suzhou) Limited has a funded defined contribution plan covering
certain employees who are qualified as permanent residents of Suzhou. According to the
retirement plan, Siliconware Technology (Suzhou) Limited contributes monthly an amount equal
to certain percentage of employees monthly salaries and wages to the Bureau of Social
Insurance and recognizes as pension expense.
 Capital Stock
 A.
    
    As of December 31, 2006, the authorized capital of the Company was NT$31,500,000 represented
by 3,150,000,000 common shares with par value of NT$10 (in dollars) per share. As of December
31, 2006, issued common stock was NT$28,877,574 represented by 2,887,757,400 shares.B.
    
    On June 12, 2006, the stockholders of the Company resolved to capitalize the unappropriated
earnings of NT$2,410,149 and the employee bonus of NT$267,794 by issuing 267,794 thousand new
shares. Registration for the capitalization has been completed.C.
    
    The Company issued NT$1,500,000 thousand American Depositary Shares (ADSs), represented by
30,000,000 units of ADSs, in June 2000. Each ADS represents five shares of common stock of the
Company with an offering price of US$8.49 per ADS. As of December 31, 2006, the outstanding
ADSs amounted to 102,369,388 units. Major terms and conditions of the ADSs are summarized as
follows:
 (1)
    
    Voting Rights
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SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 ADS holders will have no rights to vote directly in shareholders meetings with
respect to the Deposited Shares. The Depositary shall provide voting instruction to
the Chairman of the Company and vote on behalf of the Deposited shares evidenced by
ADSs. If the Depositary receives voting instructions from holders of at least 51% of
the outstanding ADSs to vote in the same direction on a resolution, the Depositary
will vote in the manner as instructed.(2)
    
    Distribution of DividendsADS holders are deemed to have the same rights as holders of common shares with
respect to the distribution of dividends.
 D.
    
    In July 2002, the Board of directors of the Company resolved to issue up to 40,000 units of
employee stock option. Each unit of employee stock option is entitled to subscribe 1,000
shares of the Companys common stock. The Company has to issue additional 40,000,000 shares of
common stock if all of the employee stock options are exercised. The exercise price of the
employee stock option is subject to adjustment for distribution of cash dividend or changes in
capital stock in accordance with certain formula. The granted employee stock option will
expire in five years and graded vested after two years of service in accordance with the
employee stock option plan.
 (1)
    
    For the year ended December 31, 2006, details of the employee stock option granted,
exercised and cancelled and exercise price of the employee stock option were as follows:
 WeightedaverageNumber
    
    exercise priceof shares
    
    (in NT dollars)Outstanding options at January 1, 2004
    
    
    37,511
    
    
    $
    15.67Granted
    
    
    
    
    
    
    Forfeited/cancelled
    
    
    (1,683
    )
    
    
    13.76Outstanding options at December 31, 2004
    
    
    35,828
    
    
    
    13.76Exercised
    
    
    (9,257
    )
    
    
    13.12Forfeited/cancelled
    
    
    (223
    )
    
    
    15.10Outstanding options at December 31, 2005
    
    
    26,348
    
    
    
    11.95Exercised
    
    
    (13,174
    )
    
    
    11.23Forfeited/cancelled
    
    
    (543
    )
    
    
    11.07Outstanding options at December 31, 2006
    
    
    12,631
    
    
    
    9.25
 (2)
    
    As of December 31, 2006, the details of the outstanding employee stock option were as follows:
 Options granted
    
    
    Options vestedExercise
    
    
    
    
    
    Weighted
    
    Weighted
    
    
    
    
    
    
    Weightedprice
    
    
    
    
    
    average
    
    average
    
    
    
    
    
    
    average(in NT
    
    Number
    
    
    remaining
    
    exercise price
    
    
    Number
    
    
    exercise pricedollars)
    
    of options
    
    
    contractual life
    
    (in NT dollars)
    
    
    of options
    
    
    (in NT dollars)$9.2~$9.7
    
    
    12,631
    
    
    1.14 Years
    
    $
    9.25
    
    
    
    2,113
    
    
    $
    9.27
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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 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 and from donation shall be exclusively used to cover accumulated deficits
or transferred to capital. Other capital reserve shall be exclusively used to cover
accumulated deficits. The amount of capital reserve used to increase capital is limited to
10% of the common stock each year when the Company has no accumulated deficits. The capital
reserve can only be used to cover accumulated deficits when the legal reserve is
insufficient to cover the deficits.B.
    
    According to the Company Law of the ROC, the capital reserve arising from paid-in
capital in excess of par on the issuance of stocks can only be transferred to capital once
every year. The transfer of capital reserve to capital can not be made in the year the
company issued new shares and the amount to be capitalized is subject to certain
limitation.
 Retained Earnings
 A.
    
    According to the Companys Articles of Incorporation, current years earnings before
tax, if any, shall be distributed in the following order:
 (1)
    
    Pay all taxes and duties;(2)
    
    Offset prior years operating losses, if any;(3)
    
    Set aside 10% of the remaining amount after deducting (1) and (2) as legal
reserve;(4)
    
    Set aside no more than 1% of the remaining amount after deducting items
(1), (2), and (3) as directors and supervisors remunerations.(5)
    
    After items (1), (2), (3), and (4) were deducted, 10% of the remaining
amount may be allocated as employee bonus and 90% as stockholders dividend. The
distributed amount is subject to the resolution adopted by the Board of Directors and
approved at the stockholders meeting.
 B.
    
    The Company currently maintains modified business growth. The Company will adopt
surplus dividend payout policy according to its operation plans, business development,
capital expenditure, and capital demand. Among the total dividends distributed, cash
dividend payout ratio is 0% ~ 50% and the rest is stock dividend. However, the Company
reserves the right to adjust the payout ratios of cash dividends and stock dividends in
correspondence to the actual economic environment, business operation, and cash holding
position. The new payout policy will be implemented after resolved by the board and
approved by shareholders.C.
    
    As of March 21, 2007, the board of directors of the Company has not resolved the
distribution of the year 2006 earnings. Therefore, any information in relation to the
year 2006 earnings will be posted in the Market Observation Post System at the website
of the Taiwan Stock Exchanges after the boards resolution and the shareholders approval
is obtained.D.
    
    Legal reserve can only be used to offset deficits or increase capital. The legal
reserve can be used to increase capital when and only when the reserve balance exceeds 50%
of the capital stock, and the amount capitalized should be limited to 50% of the legal
reserve.E.
    
    In accordance with the ROC SFB regulation, in addition to legal reserve and prior to
distribution of earnings, the Company should set aside a special reserve in an amount equal to the net change in the
reduction of prior years stockholders equity, resulting from adjustments such as
cumulative foreign currency translation adjustment and unrealized loss on available-for-
sale financial assets. Such special reserve is not available for dividend distribution.
In the subsequent year(s), if the year-end balances of the cumulative foreign currency
translation adjustment and unrealized losses on 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.
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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 F.
    
    The Taiwan imputation tax system requires that any undistributed current earnings of
a company derived on or after January 1, 1998 be subject to an additional 10% corporate
income tax if the earnings are not distributed in the following year. This 10% additional
tax on undistributed earnings can be used as tax credit by the stockholders, including
foreign stockholders, against the withholding tax on dividends. In addition, the domestic
shareholders can claim a proportionate share in the Companys corporate income tax as tax
credit against its individual income tax liability effective 1998. As of December 31,
2006, the undistributed earnings derived on or after January 1, 1998 was NT$13,413,928.G.
    
    As of December 31, 2006, the balance of stockholders imputation tax credit account
of the Company was NT$37,339. The rate of stockholders imputation tax credit to
undistributed earnings is approximately 0.28%. However, the actual stockholders
imputation rate is subject to change since the actual stockholders tax credit rate is
based on the rate on the dividend allocation day. In 2006, the stockholders imputation
rate on the distributed earnings is 1.08%.H.
    
    On June 12, 2006, the stockholders of the Company resolved to distribute stock
dividends of NT$2,410,149 and cash dividends of NT$4,169,558, respectively. The total
amount of dividends per share, including stock dividends of NT$0.96 (in dollars) per share
and cash dividends of NT$1.66 (in dollars) per share, was NT$2.62 (in dollars).J.
    
    The Companys earnings distribution of 2005 for employee bonuses and directors and
supervisors remunerations were as follow:
 The amount of the actualearnings distributionsapproved by shareholders in 2006NT$(a) The amount of the retained earnings distributed1. Employees cash bonuses
    
    $
    463,2842. Employees stock bonuses(i) Shares (in thousands of shares)
    
    
    26,780(ii) Amounts
    
    $
    267,794(iii) As a percentage of outstanding common shares
    
    
    1.17
    %3. Directors and supervisors remunerations
    
    $
    149,324(b) Informations regarding earnings per common share(in dollors)1. Original earnings per common share (note 1)
    
    $
    3.592. Adjusted earnings per common share (note 2)
    
    $
    3.21
 
 Note 1:
    
    Not retroactively adjusted by the common shares issued on
capitalization of earnings in 2006.Note 2:
    
    Adjusted earnings per share = (Net income-Employees
bonus-Remunerations to directors and supervisors)/Weighted average
outstanding common shares.
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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Treasury Stock
 As of December 31, 2006, Siliconware Investment Company Ltd., the subsidiary of the Company,
holds 35,176thousand shares of the Companys stock, with book value of NT$22.58 (in
dollars) per share. None of the treasury stock held by the subsidiary was sold in 2006. The
closing price of the Companys stock was NT$51.2 (in dollars) per share on December 31, 2006.
 Impairment of Assets
 Effective January 1, 2005, the Company adopted ROC Statement of Financial Accounting Standards
No. 35, Accounting for Impairment of Assets. For the years ended December 31, 2005 and 2006,
the Company recognized asset impairment losses of NT$202,650 and NT$27,013 as follows:
 Impairment loss on long-term investmentFor the year ended December 31,2005
    
    2006NT$
    
    NT$Recognized in income statement
    
    
    202,650
    
    
    
    27,013Recognized in shareholders equity
    
    
    
    
    
    
    
 F.
    
    Impairment loss of NT$79,200 recognized for the year ended December 31, 2005 for
long-term investment in Universal, which was triggered by the merger with Sigurd and the
investments carrying amount exceeded the recoverable amount.G.
    
    Impairment loss of NT$84,450 recognized for the year ended December 31, 2005 for
long-term investment in Double Win. The management believed the impairment loss was
triggered by the downturn of the overall market and industry where Double Win operated,
as well as the fact that Double Win withdrew from public trading in 2005.H.
    
    For the year ended December 31, 2006, SPIL (B.V.I) Holding Limited, an subsidiary
of the Company, recognized an impairment loss of NT$39,000.I.
    
    For the year ended December 31, 2006, Siliconware Investment Company Ltd. and SPIL
(B.V.I) Holding Limited, subsidiaries of the Company, recognized a total amount of
impairment loss of NT$27,013.
 F-32




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SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 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:
 2004
    
    2005
    
    2006NT$
    
    NT$
    
    NT$Income tax expense calculated at the statutory tax rate (25%)
    
    
    963,891
    
    
    
    2,083,671
    
    
    
    3,613,846Tax exempt income and other permanent differences
    
    
    (367,301
    )
    
    
    (780,039
    )
    
    
    (1,518,940
    )Investment tax credits
    
    
    (1,434,949
    )
    
    
    (834,025
    )
    
    
    (1,147,432
    )Tax on interest income separately taxed
    
    
    3,671
    
    
    
    1,006
    
    
    
    Changes in valuation allowance for deferred tax assets
    
    
    366,342
    
    
    
    (579,627
    )
    
    
    (28,798
    )Prior years (over) under provision
    
    
    (3,935
    )
    
    
    112,570
    
    
    
    29,898Income tax (benefit) expense for current year
    
    
    (472,281
    )
    
    
    3,556
    
    
    
    948,574Additonal 10% tax on undistributed earnings
    
    
    15,323
    
    
    
    11,961
    
    
    
    Income tax (benefit) expense
    
    
    (456,958
    )
    
    
    15,517
    
    
    
    948,574Adjustments:Net change of deferred tax assets
    
    
    464,386
    
    
    
    272,156
    
    
    
    (102,987
    )Decrease (increase) in income tax payable
    
    
    3,935
    
    
    
    (112,570
    )
    
    
    127,778Tax on interest income separately taxed
    
    
    (3,671
    )
    
    
    (1,006
    )
    
    
    Prepaid and withholding tax
    
    
    (20,957
    )
    
    
    (25,176
    )
    
    
    (49,487
    )Subsidiarys tax (refund receivable) payable
    
    
    (6,565
    )
    
    
    (12,510
    )
    
    
    6,899Income tax (refund receivable) payable
    
    
    (19,830
    )
    
    
    136,411
    
    
    
    930,777Income tax payable carried over from prior year
    
    
    36,352
    
    
    
    16,605
    
    
    
    16,605
 A.
    
    For the years ended December 31, 2004,2005 and 2006, significant portion of the
permanent differences are derived from the income tax exemption of capital gain resulted
from the security transactions, long-term investment income accounted for under the equity
method, and the revenue from assembly of certain integrated circuit products exempted from
income tax.B.
    
    As of December 31, 2005 and 2006, deferred tax assets and liabilities were as follows:
 December 31,2005
    
    2006NT$
    
    NT$Deferred tax assets, current
    
    
    759,226
    
    
    
    726,963Deferred tax liabilities, current
    
    
    
    
    
    
    (141
    )759,226
    
    
    
    726,822Deferred tax assets, noncurrent
    
    
    2,232,063
    
    
    
    1,991,506Deferred tax liabilities, noncurrent
    
    
    (219,101
    )
    
    
    (172,909
    )2,012,962
    
    
    
    1,818,597Valuation allowance for deferred tax assets
    
    
    (303,287
    )
    
    
    (174,343
    )1,709,675
    
    
    
    1,644,254
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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, 2005 and 2006 were as follows:
 December 31,2005
    
    2006Amount
    
    Tax effect
    
    Amount
    
    Tax effectNT$
    
    NT$
    
    NT$
    
    NT$CurrentTemporary differencesUnrealized loss on obsolescence and
decline in market value of inventories
    
    
    55,803
    
    
    
    13,951
    
    
    
    56,715
    
    
    
    14,179Compensation interest from bonds payable
    
    
    
    
    
    
    
    
    
    
    2,377
    
    
    
    594Unrealized loss on sales allowance
    
    
    67,180
    
    
    
    16,795
    
    
    
    55,475
    
    
    
    13,868Unrealized foreign exchange (gain) loss
    
    
    155,641
    
    
    
    38,910
    
    
    
    (7,370
    )
    
    
    (1,842
    )Allowance for doubtful accounts
    
    
    12,280
    
    
    
    3,070
    
    
    
    23,904
    
    
    
    5,976Others
    
    
    
    
    
    
    
    
    
    
    8,752
    
    
    
    2,188Investment tax credit
    
    
    
    
    
    
    686,500
    
    
    
    
    
    
    
    692,000759,226
    
    
    
    
    
    
    
    726,963Allowance for deferred tax assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (141
    )759,226
    
    
    
    
    
    
    
    726,822NoncurrentTemporary differenceUnrealized loss on long-term investments
    
    
    667,009
    
    
    
    166,753
    
    
    
    78,303
    
    
    
    19,576Depreciation expense
    
    
    (669,724
    )
    
    
    (167,431
    )
    
    
    (639,742
    )
    
    
    (159,936
    )Unrealized foreign currency exchange gain
arising from bonds payable
    
    
    (206,678
    )
    
    
    (51,670
    )
    
    
    (51,892
    )
    
    
    (12,973
    )Compensation interest from bonds payable
    
    
    490,806
    
    
    
    122,702
    
    
    
    
    
    
    
    Unrealized loss on idle assets
    
    
    322,543
    
    
    
    80,636
    
    
    
    259,203
    
    
    
    64,801Others
    
    
    
    
    
    
    
    
    
    
    11,895
    
    
    
    2,974Loss carryforwards
    
    
    25,513
    
    
    
    6,378
    
    
    
    120,850
    
    
    
    30,212Investment tax credit
    
    
    
    
    
    
    1,855,594
    
    
    
    
    
    
    
    1,873,9432,012,962
    
    
    
    
    
    
    
    1,818,597Allowance for deferred tax assets
    
    
    
    
    
    
    (303,287
    )
    
    
    
    
    
    
    (174,343
    )1,709,675
    
    
    
    
    
    
    
    1,644,254
 Valuation allowance for deferred tax assets relates primarily to unrealized loss on
long-term investments and allowance for investment tax credits.D.
    
    The Companys income tax returns have been assessed and approved by the Tax Authority
through 2003.E.
    
    The income tax returns of Siliconware Investment Company Ltd. have been assessed and
approved by the Tax Authority through 2004.F.
    
    According to the income tax regulation of the People Republic of China applied to
qualifying foreign investment production enterprise, Siliconware Technology (Suzhuo)
Limited is entitled to two years exemption from income taxes followed by three years of a
50% tax reduction which applies to the tax rate of 7.5%, 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 40%
of the income tax already paid in relation to the reinvested amount.
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SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 G.
    
    As of December 31, 2006, the Companys unused portion of investment tax credits,
under the Statue for Upgrading Industries, were as follows:
 Nature of investment tax credit
    
    Deductible amount
    
    Unused amount
    
    Expiration YearsNT$
    
    NT$Acquisition cost of qualifying machinery
and equipment
    
    
    2,752,167
    
    
    
    1,924,947
    
    
    
    2008 to 2010Qualifying research and development
expenditure
    
    
    755,763
    
    
    
    622,646
    
    
    
    2008 to 2010Qualifying investments in significant
technology companies
    
    
    22,175
    
    
    
    18,350
    
    
    
    20083,530,105
    
    
    
    2,565,943
 H.
    
    The Company has met the requirement of Statute for Upgrading Industries and is exempted
from income tax for revenues arising from the assembly and testing of certain integrated
circuit products for a five-year period from January 2004 and from January 2006. The
5-years income tax exemption will expire in December 2008 and 2010, respectively. Also,
in order to entitle to 5-year income tax exemption, the Company filed registration of
capitalization plan in 2005 for its expansion of assembly and testing of integrated
circuited business to the Industrial Development Bureau of Ministry of Economic Affairs
and has received the approval in 2006.
 Earnings Per Share
 For the year ended December 31, 2004WeightedaverageIncome
    
    outstanding
    
    Earnings per shareBefore tax
    
    After tax
    
    common stock
    
    Before tax
    
    After taxNT$
    
    NT$
    
    (in thousand)
    
    NT$ (in dollars)Basic earnings per share
    
    
    3,825,219
    
    
    
    4,282,177
    
    
    
    2,453,630
    
    
    
    1.55
    
    
    
    1.74Dilutive effect of employee
stock option
    
    
    
    
    
    
    
    
    
    
    30,643Dilutive effect of 2nd Euro
convertible bonds
    
    
    (116,658
    )
    
    
    (134,373
    )
    
    
    211,255Dilutive effect of 3rd Euro
convertible bonds
    
    
    (286,427
    )
    
    
    (214,820
    )
    
    
    186,715Diluted earnings per share
    
    
    3,422,134
    
    
    
    3,932,984
    
    
    
    2,882,244
    
    
    
    1.18
    
    
    
    1.36
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SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 For the year ended December 31, 2005WeightedaverageIncome
    
    outstanding
    
    Earnings per shareBefore tax
    
    After tax
    
    common stock
    
    Before tax
    
    After taxNT$
    
    NT$
    
    (in thousand)
    
    NT$ (in dollars)Basic earnings per shareIncome from continuing operations
    
    
    7,608,911
    
    
    
    7,593,394
    
    
    
    
    
    
    
    3.02
    
    
    
    3.02Cumulative effects of changes in
accounting principles
    
    
    650,508
    
    
    
    650,508
    
    
    
    
    
    
    
    0.26
    
    
    
    0.26Net income
    
    
    8,259,419
    
    
    
    8,243,902
    
    
    
    2,516,506
    
    
    
    3.28
    
    
    
    3.28Dilutive effect of
employee stock option
    
    
    
    
    
    
    
    
    
    
    20,271Dilutive effect of
2nd Euro convertible bonds
    
    
    396,552
    
    
    
    424,053
    
    
    
    206,027Dilutive effect of
3rd Euro convertible bonds
    
    
    368,262
    
    
    
    349,696
    
    
    
    189,068Diluted earnings per share
    
    
    9,024,233
    
    
    
    9,017,651
    
    
    
    2,931,872
    
    
    
    3.08
    
    
    
    3.07
 For the year ended December 31, 2006WeightedaverageIncome
    
    outstanding
    
    Earnings per shareBefore tax
    
    After tax
    
    common stock
    
    Before tax
    
    After taxNT$
    
    NT$
    
    (in thousand)
    
    NT$ (in dollars)Basic earnings per shareNet income
    
    
    14,277,643
    
    
    
    13,329,069
    
    
    
    2,716,477
    
    
    
    5.26
    
    
    
    4.91Dilutive effect of
employee stock option
    
    
    
    
    
    
    
    
    
    
    12,650Dilutive effect of
3rd Euro convertible bonds
    
    
    22,562
    
    
    
    33,421
    
    
    
    168,743Diluted earnings per share
    
    
    14,300,205
    
    
    
    13,362,490
    
    
    
    2,897,870
    
    
    
    4.93
    
    
    
    4.61
  F-36




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Personnel Costs, Depreciation and Amortization
 For the year ended December 31, 2004Operating costs
    
    Operating expenses
    
    TotalNT$
    
    NT$
    
    NT$Personnel costsPayroll
    
    
    3,490,892
    
    
    
    1,006,299
    
    
    
    4,497,191Labor and health
insurance
    
    
    232,279
    
    
    
    70,448
    
    
    
    302,727Pension expense
    
    
    132,973
    
    
    
    41,254
    
    
    
    174,227Others
    
    
    347,540
    
    
    
    53,985
    
    
    
    401,5254,203,684
    
    
    
    1,171,986
    
    
    
    5,375,670Depreciation
    
    
    5,586,033
    
    
    
    141,190
    
    
    
    5,727,223Amortization
    
    
    270,576
    
    
    
    108,338
    
    
    
    378,914
 For the year ended December 31, 2005Operating costs
    
    Operating expenses
    
    TotalNT$
    
    NT$
    
    NT$Personnel CostPayroll
    
    
    4,097,484
    
    
    
    1,145,219
    
    
    
    5,242,703Labor and health
insurance
    
    
    289,956
    
    
    
    80,644
    
    
    
    370,600Pension expense
    
    
    160,601
    
    
    
    46,144
    
    
    
    206,745Other
    
    
    493,121
    
    
    
    72,690
    
    
    
    565,8115,041,162
    
    
    
    1,344,697
    
    
    
    6,385,859Depreciation
    
    
    5,896,261
    
    
    
    157,579
    
    
    
    6,053,840Amortization
    
    
    342,091
    
    
    
    141,039
    
    
    
    483,130
 For the year ended December 31, 2006Operating costs
    
    Operating expenses
    
    TotalNT$
    
    NT$
    
    NT$Personnel CostPayroll
    
    
    5,280,258
    
    
    
    1,337,313
    
    
    
    6,617,571Labor and health
insurance
    
    
    414,906
    
    
    
    104,812
    
    
    
    519,718Pension expense
    
    
    245,299
    
    
    
    60,541
    
    
    
    305,840Other
    
    
    597,393
    
    
    
    102,805
    
    
    
    700,1986,537,856
    
    
    
    1,605,471
    
    
    
    8,143,327Depreciation
    
    
    6,579,537
    
    
    
    173,174
    
    
    
    6,752,711Amortization
    
    
    358,635
    
    
    
    167,361
    
    
    
    525,996
 F-37




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Related Party Transactions
 1.
    
    Name and Relationship with Related Parties:
 Name of related parties
    
    Relationship with the CompanyChipMOS Technologies Inc.
    
    Investee company accounted for
under the equity methodSigurd Microelectronics Corporation
    
    The Company holds directorshipPhoenix Precision Technology Corporation
    
    The Company holds directorshipHai-Feng Fundation
    
    Same chairman of the board of the directiors
 2.
    
    Significant Transactions with Related Parties
 (1)
    
    Sales
 For the years ended December 31,2004
    
    2005
    
    2006% of
    
    
    
    
    
    % of
    
    
    
    
    
    % ofAmount
    
    net sale
    
    Amount
    
    net sale
    
    Amount
    
    net saleNT$
    
    
    
    
    
    NT$
    
    
    
    
    
    NT $Sigurd Microelectronics
Corporation
    
    
    
    
    
    
    
    
    
    
    31,218
    
    
    
    
    
    
    
    5,217
    
    
    
    
  (2)
    
    Purchases
 For the years ended December 31,2004
    
    2005
    
    2006% of net
    
    
    
    
    
    % of net
    
    
    
    
    
    % of netAmount
    
    purchase
    
    Amount
    
    purchase
    
    Amount

    purchaseNT$
    
    
    
    
    
    NT$
    
    
    
    
    
    NT $Phoenix Precision
Technology
    
    
    2,875,934
    
    
    
    18
    
    
    
    3,600,039
    
    
    
    18
    
    
    
    3,100,909
    
    
    
    13Others
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    83
    
    
    
    2,875,934
    
    
    
    18
    
    
    
    3,600,039
    
    
    
    18
    
    
    
    3,100,992
    
    
    
    13
  (3)
    
    Other Income
 For the years ended December 31,2004
    
    2005
    
    2006% of
    
    
    
    
    
    % of
    
    
    
    
    
    % ofother
    
    
    
    
    
    other
    
    
    
    
    
    otherAmount
    
    income
    
    Amount
    
    income
    
    Amount
    
    incomeNT$
    
    
    
    
    
    NT$
    
    
    
    
    
    NT $Others
    
    
    411
    
    
    
    
    
    
    
    2,021
    
    
    
    
    
    
    
    12,614
    
    
    
    2
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SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (4)
    
    Other Expenses
 For the years ended December 31,2004
    
    2005
    
    2006% of
    
    
    
    
    
    % of
    
    
    
    
    
    % ofother
    
    
    
    
    
    other
    
    
    
    
    
    otherAmount
    
    expenses
    
    Amount
    
    expenses
    
    Amount
    
    expensesNT$
    
    
    
    
    
    NT$
    
    
    
    
    
    NT $Others
    
    
    6,711
    
    
    
    
    
    
    
    11,505
    
    
    
    
    
    
    
    12,153
    
    
    
    
 (5)
    
    Accounts Receivable
 December 31,2005
    
    2006% of
    
    
    
    
    
    % ofaccounts
    
    
    
    
    
    accountsAmount
    
    receivable
    
    Amount
    
    receivableNT$
    
    
    
    
    
    NT $Sigurd Microelectronics
Corporation
    
    
    9,695
    
    
    
    
    
    
    
    0
    
    
    
    
 (6)
    
    Accounts payable
 December 31,2005
    
    2006% of
    
    
    
    
    
    % ofaccounts
    
    
    
    
    
    accountsAmount
    
    payable
    
    Amount
    
    payableNT$
    
    
    
    
    
    NT $Phoenix Precision Technology
Corporation
    
    
    694,261
    
    
    
    14
    
    
    
    345,745
    
    
    
    8
 (7)
    
    Other Receivables
 December 31,2005
    
    2006% of other
    
    
    
    
    
    % of otherAmount
    
    receivables
    
    Amount
    
    receivablesNT$
    
    
    
    
    
    NT $Others
    
    
    79
    
    
    
    
    
    
    
    11,288
    
    
    
    2
 (8)
    
    Other payable
 December 31,2005
    
    2006% of other
    
    
    
    
    
    % of otherAmount
    
    payable
    
    Amount
    
    payableNT$
    
    
    
    
    
    NT $Others
    
    
    7,741
    
    
    
    
    
    
    
    4,807
    
    
    
    
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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Assets Pledged as Collaterals
  December 31,Assets
    
    2005
    
    2006
    
    Subject of collateralNT$
    
    NT $Buildings
    
    
    
    
    
    
    284,633
    
    
    Long-term loansLand use rights
    
    
    
    
    
    
    38,465
    
    
    Long-term loansMachinery and other equipment
    
    
    92,208
    
    
    
    
    
    
    Loan-term loansTime
deposits (shown as other financial assets, current)
    
    
    215,905
    
    
    
    206,705
    
    
    Guarantees for custom duties and income tax liabilities308,113
    
    
    
    529,803
 Commitments and Contingencies
 A.
    
    As of December 31, 2006, the Companys issued but unused letters of credit for imported
machinery and equipment were NT$392,396.B.
    
    For its future expansion, the Company entered into several contracts with a total
purchasing price of NT$1,748,822, of which a total amount of NT$723,113 has not been paid
as of December 31, 2006.C.
    
    The Company entered into 6 contracts with five entities for the use of certain
technologies and patents related to packaging system of integrated circuit products. The
Company agreed to pay royalty fees based on the total number of certain products sold.
Four contracts are valid through December 2007, November 2014, January 2010 and January
2011, respectively. The other two contracts are valid through when all patents included in
the contract expire.D.
    
    On March 1, 2006, we were informed of a civil lawsuit brought by Tessera Inc., or
Tessera, in the United States District Court for the Northern District of California
against us, our subsidiary, Siliconware USA, Inc., several other subcontractor companies
and their subsidiaries. Tessera alleges that we infringed patents owned by Tessera and/or
breached technology license agreements between us and Tessera by providing some of our
packaging services. All parties in the lawsuit stipulated a stay of this action in its
entirety, pending a final determination of investigation by the International Trade
Commission with regard to an action that is directed against other parties, including some
co-defendants in the litigation in the Northern District of California. Pursuant to the
stipulation, the court stayed the litigation on May 24, 2007. Currently, we are unable to
assess the potential liabilities arising out of this claim due to the fact that information
provided with regard to the infringement scope is insufficient. In February 2007, we filed
a request for reexamination with the U.S. Patent and Trademark Office, or the PTO, of all
patents being asserted by Tessera in the lawsuit. The PTO has granted the reexamination for
all patents.
 Significant Disaster Loss
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SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Significant Subsequent Event
 A.
    
    On December 21, 2006, the board of the Company resolved to sell its Taipei office with an
amount of NT$185,009 suggested by China Credit Information Service, Ltd. The passage of title
was completed on February 26, 2007 with a disposal loss of NT$32,276.B.
    
    On March 27, 2007, the Company disposed its common stock ownership in ChipMOS Technologies
Inc. for US$191,147 thousands and recorded an investment income of $246,552 for the period
form January 1, 2007 to March 27, 2007, based on the Companys unreviewed financial
statements as of and for the three-month period ended March 31, 2007. The Company recognized
gain on disposal of investment of NT$793,350 in the first quarter of 2007. Also, the Company
acquired common stock ownership in ChipMOS Technologies (Bermuda) Ltd., the parent company of
ChipMOS Technologies Inc., through private stock offering for US$76,459 thousands in the
first quarter of 2007.
 Other
 1.
    
    Financial Statement ReclassificationCertain accounts stated in the December 31, 2005 financial statements have been reclassified to
conform to the presentation of December 31, 2006 financial statements.
 2.
    
    Fair Values of Financial Instruments:
 December 31,2005
    
    2006Fair Value
    
    
    
    
    
    Fair ValueEstimated
    
    
    
    
    
    
    
    
    
    EstimatedQuotation in an
    
    using a
    
    
    
    
    
    Quotation in an
    
    using aBook Value
    
    active market
    
    valuation
    
    Book Value
    
    active market
    
    valuationNT$
    
    NT$
    
    NT$
    
    NT$
    
    NT$
    
    NT$Non-derivative financial instruments:Financial assetsFinancial assets with book value
equal to fair value
    
    
    22,847,565
    
    
    
    
    
    
    
    22,847,565
    
    
    
    24,643,663
    
    
    
    
    
    
    
    24,643,663Available-for-sale financial assets
 non-current
    
    
    2,379,209
    
    
    
    11,669,769
    
    
    
    
    
    
    
    7,883,601
    
    
    
    7,883,601
    
    
    
    Financial assets carried at cost  non-current
    
    
    168,331
    
    
    
    
    
    
    
    
    
    
    
    824,942
    
    
    
    
    
    
    
    25,395,105
    
    
    
    11,669,769
    
    
    
    22,847,565
    
    
    
    33,352,206
    
    
    
    7,883,601
    
    
    
    24,643,663Financial liabilitiesFinancial liabilities with book value
equal to fair value
    
    
    11,675,727
    
    
    
    
    
    
    
    11,675,727
    
    
    
    9,449,061
    
    
    
    
    
    
    
    9,449,061Bonds payable (including current portion)
    
    
    11,310,300
    
    
    
    15,528,396
    
    
    
    
    
    
    
    2,726,832
    
    
    
    4,122,897
    
    
    
    Long-term loans
    
    
    3,333,300
    
    
    
    
    
    
    
    3,333,300
    
    
    
    3,092,609
    
    
    
    
    
    
    
    3,127,99226,319,327
    
    
    
    15,528,396
    
    
    
    15,009,027
    
    
    
    15,268,502
    
    
    
    4,122,897
    
    
    
    12,577,053
  (1)
    
    Financial assets and liabilities with book value proxies to fair value are cash,
notes receivable, accounts receivable, other current financial assets, refundable
deposits, notes payable, accounts payable, income tax payable, accrued expenses, other payables, current
portion of long-term debts, other current liabilities and other liabilities because of
their short maturities.
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SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
 (2)
    
    Available-for-sale financial assets  non-current are recorded at quoted market prices as
their fair values due to the availability of the quoted price in an active market.(3)
    
    Financial assets carried at cost are recorded at costs due to the lack of quoted market
prices derived from the active market and the reasonable measurement for the fair value.(4)
    
    The fair value of long-term loans with fixed interest rates is estimated by the discounted
future cash flows. The discount rate, 1.875%, is based on the interest rate of the similar
long-term loan, which the Company would have acquired. The fair value of long-term loans with
floating interest rates is based on book values.(5)
    
    The fair value of bonds payable and current portion of bonds payable is based on its
quoted market price.
 3.
    
    Financial assets and liabilities with the risk of interest rate fluctuation:As of December 31, 2006, the Companys financial assets and liabilities with fair value risk of
interest rate fluctuation were NT$14,535,482 and NT$5,715,306, respectively. The financial
liabilities with cash flow risk of interest rate fluctuation were NT$104,135.
 4.
    
    Financial assets and liabilities whose changes in fair value are not recognized in earnings:The Companys interest income and interest expense from financial assets and liabilities whose
changes in fair value were not recognized in earnings were NT$396,461 and NT$130,443, respectively,
for the year ended December 31, 2006. Available-for-sale financial assets are measured at fair
value at balance sheet date. Changes in fair value recorded as the adjustment of the shareholders
equity in 2006 were NT$4,765,318.5.
    
    Financial risk control:The Company has implemented appropriate risk management and control processes to identify, measure,
and control the risks associated with the market, credit, liquidity, and cash flows.6.
    
    Financial risk information:
 A.
    
    Financial Assets: investments in equity instruments
 December 31, 2006NT$Available-for-sale financial assets
    
    
    7,883,601Financial assets carried at cost
    
    
    824,9428,708,543
 (1)
    
    Market risk:The Companys investments in equity instruments are exposed to the market price risk. However,
the Company performs risk management controls to minimize the potential loss to an acceptable
level. The Company believes that the probability of significant market risk is low.
 (2)
    
    Credit risk:
 F-42




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SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 The Companys investments in available-for-sale financial assets are through creditable financial
institutions. The expected credit exposure to such financial institutions is low. For equity
investments carried at cost, the Company has evaluated counter parties credit condition each
time when the Company entered the investment transaction. Thus the credit risk is low.
 (3)
    
    Liquidity risk:The Companys available-for-sale financial assets are traded in active markets, which can be
sold at the prices not significantly different from their market value. The Company is exposed to
a greater liquidity risk for equity instruments measured at cost due to the fact that no active
market exists for these instruments.
 (4)
    
    Cash flow risk of interest rate:The Companys investments in equity financial assets are non-interest related, so the
cash flows from equity instruments are independent of change on market interest rates.
 B.
    
    Financial liabilities: debt instruments
 December 31, 2006NT$Bonds payable
    
    
    2,726,832Long-term loans
    
    
    3,092,6095,819,441
 (1)
    
    Market risk:Debt instruments include zero-coupon convertible bonds embedded with call and put options,
fixed interest-bearing bonds, and long-term loans. The fair value changes of our USD denominated
convertible bonds are affected by the stock price. However, the Company can minimize the market
price risk by exercising the call option and reduce the foreign exchange rate exposure by
maintaining equivalent amounts of assets denominated in USD. The Companys long-term loans are
not exposed to fair value risks because the borrowings were issued at variable rates.(2)
    
    Credit risk:Debt instruments issued by the Company do not have significant credit risk.(3)
    
    Liquidity risk:The Company maintains sufficient working capital to meet its cash requirements. The
Company believes that there is no significant liquidity risk.(4)
    
    Cash flow risk of interest rate:The Companys zero-coupon bonds, fixed interest rate bearing bonds, and fixed interest rate
borrowings are not exposed to cash flow interest rate risk. The Companys floating interesting
rate borrowings which effective interest rate moves together with the market interest rate
exposed the Company to the future cash flow risk. However, the Company believes that there is no
significant cash flow risk.
 F-43




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
  Name of the counter party and amountSiliconwarePrecision
    
    Siliconware
    
    SPIL (B.V.I.)Industries Co.,
    
    Investment
    
    Holding
    
    SiliconwareTransactions
    
    Ltd.
    
    Company Ltd.
    
    Limited
    
    USA Inc.NT$
    
    NT$
    
    NT$
    
    NT$For the year ended December 31, 2004Eliminate long-term investment and stockholders equity
    
    
    (2,586,396
    )
    
    
    932,002
    
    
    
    1,654,394
    
    
    
    Eliminate subsidiarys long-term investment on parent company
    
    
    758,684
    
    
    
    (758,684
    )
    
    
    
    
    
    
    Eliminate accrued expense and accounts receivable
    
    
    42,078
    
    
    
    
    
    
    
    
    
    
    
    (42,078
    )Eliminate coompensation expense and revenue
    
    
    (414,501
    )
    
    
    
    
    
    
    
    
    
    
    414,501For the year ended December 31, 2005Eliminate long-term investment and stockholdersequity
    
    
    (3,548,866
    )
    
    
    1,754,547
    
    
    
    1,794,319
    
    
    
    Eliminate subsidiarys long-term investment on parent company
    
    
    794,184
    
    
    
    (794,184
    )
    
    
    
    
    
    
    Eliminate accrued expense and accounts receivable
    
    
    63,003
    
    
    
    
    
    
    
    
    
    
    
    (63,003
    )Eliminate coompensation expense and revenue
    
    
    (417,418
    )
    
    
    
    
    
    
    
    
    
    
    417,418For the year ended December 31, 2006Eliminate long-term investment and stockholdersequity
    
    
    (5,321,470
    )
    
    
    3,073,571
    
    
    
    2,247,899
    
    
    
    Eliminate subsidiarys long-term investment on parent company
    
    
    1,801,014
    
    
    
    (1,801,014
    )
    
    
    
    
    
    
    Eliminate prepaid comission and unearned revenue
    
    
    (4,865
    )
    
    
    
    
    
    
    
    
    
    
    4,865Eliminate coompensation expense and revenue
    
    
    (478,608
    )
    
    
    
    
    
    
    
    
    
    
    478,608
 
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SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  A.
    
    Operation in Different IndustriesThe Company principally operates in one industry. The Companys operation involves
assembly, testing and turnkey services of integrated circuits. Besides, the chief
operating decision makers review the operating results of the entire consolidated
company to make decisions for allocating resources and evaluating performance. The
Company as a whole is treated as only one operating and reportable segment.B.
    
    Operations in Different Geographic AreasThe Company has no significant foreign operations. Therefore, ROC FAS No. 20,
Segmental Information Disclosure is not applicable.C.
    
    Sales
 Geographic areas
    
    2004
    
    2005
    
    2006NT$
    
    NT$
    
    NT$Taiwan
    
    
    14,127,011
    
    
    
    16,535,182
    
    
    
    20,500,146U.S.
    
    
    17,097,454
    
    
    
    19,925,903
    
    
    
    28,278,609Canada
    
    
    2,903,942
    
    
    
    4,423,182
    
    
    
    5,766,647Others
    
    
    1,123,749
    
    
    
    2,603,610
    
    
    
    2,580,51835,252,156
    
    
    
    43,487,877
    
    
    
    57,125,920
 Sales by geographic region are identified by the location where customers are headquartered.D.
    
    Major CustomersA major customer is identified as the party that accounts for more than 10% of the
Companys net sales in any given year. No identity of segment for each major customer
listed below is applicable due to the Companys unclassified segment operation.
 2004
    
    
    2005
    
    
    2006% of
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    % ofCustomers
    
    Amount
    
    
    net sale
    
    
    Amount
    
    
    net sale
    
    
    Amount
    
    
    net saleNT$
    
    
    
    
    
    
    NT$
    
    
    
    
    
    
    NT$Customer A
    
    $
    4,065,553
    
    
    
    12
    
    
    $
    4,125,562
    
    
    
    10
    
    
    $
    4,540,738
    
    
    
    8Customer B
    
    
    4,068,676
    
    
    
    12
    
    
    
    4,762,838
    
    
    
    11
    
    
    
    5,733,910
    
    
    
    108,134,229
    
    
    
    24
    
    
    
    8,888,400
    
    
    
    21
    
    
    $
    10,274,648
    
    
    
    18
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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    Reconciliation of consolidated net income:
 For the years ended December 31,2004
    
    
    2005
    
    
    2006NT$
    
    
    NT$
    
    
    NT$
    
    
    US$Net income as reported under ROC GAAP
    
    
    4,282,177
    
    
    
    8,243,902
    
    
    
    13,329,069
    
    
    
    408,993US GAAP adjustments:Compensated absences
    
    
    800
    
    
    
    (9,800
    )
    
    
    (12,868
    )
    
    
    (395
    )Compensation
    
    
    (699,072
    )
    
    
    (1,234,862
    )
    
    
    (1,909,445
    )
    
    
    (58,590
    )Employee stock option
    
    
    
    
    
    
    
    
    
    
    (27,331
    )
    
    
    (839
    )Impairment on long-term investments
    
    
    
    
    
    
    13,260
    
    
    
    28,885
    
    
    
    886Embedded derivative
    
    
    (80,154
    )
    
    
    (2,422,617
    )
    
    
    (2,986,828
    )
    
    
    (91,648
    )Adjustment to the gain on disposal of available
for sale marketable securities
    
    
    (1,431
    )
    
    
    
    
    
    
    
    
    
    
    Treasury stock transferred to employee
    
    
    (192,498
    )
    
    
    
    
    
    
    
    
    
    
    Equity investments:
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Timing difference
    
    
    398,686
    
    
    
    (657,851
    )
    
    
    
    
    
    
    Net income (loss) variance between US
GAAP and ROC GAAP
    
    
    (8,322
    )
    
    
    36,820
    
    
    
    9,409
    
    
    
    289Accounting for loss in preferred stock
    
    
    (28,885
    )
    
    
    
    
    
    
    
    
    
    
    Total US GAAP adjustments
    
    
    (610,876
    )
    
    
    (4,275,050
    )
    
    
    (4,898,178
    )
    
    
    (150,297
    )Taxation effect
    
    
    (260
    )
    
    
    2,450
    
    
    
    (17,529
    )
    
    
    (538
    )Net income under US GAAP
    
    
    3,671,041
    
    
    
    3,971,302
    
    
    
    8,413,362
    
    
    
    258,158Earnings per share under US GAAP (in dollars)Basic
    
    $
    1.51
    
    
    $
    1.59
    
    
    $
    3.11
    
    
    $
    0.10Diluted
    
    $
    1.16
    
    
    $
    1.58
    
    
    $
    3.10
    
    
    $
    0.10Weighted average number of common
stock outstanding (in thousands)Basic
    
    
    2,438,942
    
    
    
    2,495,182
    
    
    
    2,700,950
    
    
    
    2,700,950Effect of dilutive securites
Employee stock option
    
    
    30,339
    
    
    
    20,070
    
    
    
    14,840
    
    
    
    14,8403rd Euro convertible bonds
    
    
    184,860
    
    
    
    
    
    
    
    
    
    
    
    Diluted
    
    
    2,654,141
    
    
    
    2,515,252
    
    
    
    2,715,790
    
    
    
    2,715,790
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##### Table of Contents



Reconciliation of consolidated shareholders equity
 For the years ended December 31,2004
    
    
    2005
    
    
    2006NT$
    
    
    NT$
    
    
    NT$
    
    
    US$Total
shareholders equity as reported under ROC GAAP
    
    
    33,493,043
    
    
    
    40,825,007
    
    
    
    62,936,213
    
    
    
    1,931,151US GAAP adjustments:Compensated absences
    
    
    (20,300
    )
    
    
    (30,100
    )
    
    
    (42,968
    )
    
    
    (1,319
    )Compensation
    
    
    (437,841
    )
    
    
    (880,403
    )
    
    
    (1,294,248
    )
    
    
    (39,713
    )Impairment on long-term investments
    
    
    (212,569
    )
    
    
    (199,309
    )
    
    
    (170,424
    )
    
    
    (5,229
    )Embedded derivative
    
    
    7,177
    
    
    
    (2,415,440
    )
    
    
    (1,185,762
    )
    
    
    (36,384
    )Available for sale marketable securities
    
    
    852,678
    
    
    
    9,177,049
    
    
    
    
    
    
    
    Defined benefit
    
    
    
    
    
    
    
    
    
    
    (209,558
    )
    
    
    (6,430
    )Equity investments:Timing difference
    
    
    657,853
    
    
    
    
    
    
    
    
    
    
    
    Net income variance between US
GAAP and ROC GAAP
    
    
    88,411
    
    
    
    125,160
    
    
    
    185,989
    
    
    
    5,707Technology and know-how contributed to
a joint venture investee
    
    
    (210,417
    )
    
    
    (210,417
    )
    
    
    (210,417
    )
    
    
    (6,457
    )Siguard merged Universal
    
    
    
    
    
    
    116,662
    
    
    
    
    
    
    
    Equity adjustment for ChipMOSs pension
    
    
    
    
    
    
    
    
    
    
    (14,730
    )
    
    
    (452
    )Acquisition of Siliconware Corp.
    
    
    4,873,500
    
    
    
    4,873,500
    
    
    
    4,873,500
    
    
    
    149,540Taxation effect
    
    
    6,598
    
    
    
    9,048
    
    
    
    (8,481
    )
    
    
    (260
    )Shareholders equity under US GAAP
    
    
    39,098,133
    
    
    
    51,390,757
    
    
    
    64,859,114
    
    
    
    1,990,154
 Movements in shareholders equity in accordance with US GAAP:
 2005
    
    
    2006NT$
    
    
    NT$
    
    
    US$Balance at January 1, as reported
    
    
    39,098,133
    
    
    
    51,390,757
    
    
    
    1,576,887Net income under US GAAP
    
    
    3,971,302
    
    
    
    8,413,362
    
    
    
    258,158Employee stock bonus
    
    
    542,114
    
    
    
    882,991
    
    
    
    27,094Employee stock option-amortized compensation
    
    
    
    
    
    
    27,331
    
    
    
    839Adjustment for investee companies capital reserve
    
    
    (40,009
    )
    
    
    67,945
    
    
    
    2,085Long-term investment write-off
    
    
    (71
    )
    
    
    
    
    
    
    Cumulative translation adjustment on long-term investment
    
    
    90,947
    
    
    
    25,187
    
    
    
    773Change in fair value of available for sale marketable
securities
    
    
    8,323,633
    
    
    
    (4,576,257
    )
    
    
    (140,419
    )Employee stock option exercised
    
    
    121,457
    
    
    
    147,470
    
    
    
    4,525Conversion of Euro convertible bonds
    
    
    764,061
    
    
    
    8,471,206
    
    
    
    259,933Sigurd merged Universal
    
    
    116,662
    
    
    
    
    
    
    
    Cash Dividends
    
    
    (1,583,342
    )
    
    
    (4,169,558
    )
    
    
    (127,940
    )Adjustment for investee companys unrecognized pension
cost
    
    
    (1,828
    )
    
    
    41
    
    
    
    1Adjustment for investee companys treasury stock variances
    
    
    (34,544
    )
    
    
    33,178
    
    
    
    1,018Cash dividends for treasury stock held by subsidiaries
    
    
    22,242
    
    
    
    53,391
    
    
    
    1,638ECB conversion  APIC
    
    
    
    
    
    
    4,316,358
    
    
    
    132,444Pension Plan
    
    
    
    
    
    
    (209,558
    )
    
    
    (6,430
    )Adjustment for ChipMOSs pension
    
    
    
    
    
    
    (14,730
    )
    
    
    (452
    )Balance at December 31
    
    
    51,390,757
    
    
    
    64,859,114
    
    
    
    1,990,154
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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 The balance sheet accounts under US GAAP is as follows:
 2005
    
    
    2006NT$
    
    
    NT$
    
    
    US$Current AssetsCash and cash equivalents
    
    
    12,274,391
    
    
    
    6,098,188
    
    
    
    187,118Short-term investments
    
    
    66,442
    
    
    
    8,633,300
    
    
    
    264,907Notes receivable, net
    
    
    156,899
    
    
    
    41,111
    
    
    
    1,262Accounts receivable, net
    
    
    9,516,426
    
    
    
    9,182,701
    
    
    
    281,764Inventories
    
    
    2,805,287
    
    
    
    2,838,810
    
    
    
    87,107Other current assets
    
    
    2,145,608
    
    
    
    2,127,710
    
    
    
    65,28726,965,053
    
    
    
    28,921,820
    
    
    
    887,445Long-term investments
    
    
    16,309,673
    
    
    
    13,497,558
    
    
    
    414,162Property, plant and equipment
    
    
    30,252,250
    
    
    
    33,635,348
    
    
    
    1,032,076Intangible assets
    
    
    4,873,500
    
    
    
    4,873,500
    
    
    
    149,540Other assets
    
    
    2,766,281
    
    
    
    2,841,933
    
    
    
    87,202Total Assets
    
    
    81,166,757
    
    
    
    83,770,159
    
    
    
    2,570,425Current liabilities
    
    
    15,770,704
    
    
    
    11,330,304
    
    
    
    347,662Long-term liabilities
    
    
    13,766,135
    
    
    
    6,978,404
    
    
    
    214,127Other liabilities
    
    
    239,161
    
    
    
    602,337
    
    
    
    18,482Total Liabilities
    
    
    29,776,000
    
    
    
    18,911,045
    
    
    
    580,271Total Stockholders Equity
    
    
    51,390,757
    
    
    
    64,859,114
    
    
    
    1,990,154Total Liabilities and Stockholders Equity
    
    
    81,166,757
    
    
    
    83,770,159
    
    
    
    2,570,425
  (1)
    
    ConsolidationUnder ROC GAAP, Statement of Accounting Standards No. 7 Consolidated Financial Statements
requires that an entity fully consolidate all of the subsidiaries which it owns, directly or
indirectly, more than 50% of the voting rights and which it owns, directly or indirectly, less
than 50% of the voting rights but has effective control. Significant inter-company transactions
and balances between the Company and its subsidiaries are eliminated.Under US GAAP, the FASB released Interpretation No. 46 (R), Consolidation of Variable Interest
Entitiesan interpretation of ARB No. 51 (FIN No. 46) in December 2003, which clarifies
Accounting Research Bulletin No. 51, Consolidated Financial Statements and replaces FASB
Interpretation No. 46, Consolidation of Variable Interest Entities. This interpretation
requires existing unconsolidated variable interest entities (VIE) to be consolidated by their
primary beneficiaries if the entities do not effectively disperse risks among parties involved.
In other words, the Company would be the primary beneficiary of such entity if it absorbs a
majority of the entitys expected losses, receives a majority of its expected residual returns,
or both. The Company performed analysis for VIEs and did not identify any variable interest
entity pursuant to FIN No. 46.
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SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    Employee Stock Option
  For the years ended December 31,2004
    
    2005NT$
    
    NT$Net income
    
    
    3,671,041
    
    
    
    3,971,302Less: Stock compensation expense
    
    
    (95,870
    )
    
    
    (64,825
    )Pro forma
    
    
    3,575,171
    
    
    
    3,906,477
 For the years ended December 31,2004
    
    2005NT$
    
    NT$Basic earnings per shareAs reported
    
    
    1.51
    
    
    
    1.59Pro forma
    
    
    1.47
    
    
    
    1.57Diluted earnings per shareAs reported
    
    
    1.16
    
    
    
    1.58Pro forma
    
    
    1.12
    
    
    
    1.55
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SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  For the year endedDecember 31, 2006NT$
    
    US$Effects in net income from employee stock option
    
    
    (27,331
    )
    
    
    (839
    )Net effects of employee stock option on basic earnings per share (in dollars)
    
    
    (0.02
    )
    
    
    (0.0006
    )Net effects of employee stock option on diluted earnings per share (in dollars)
    
    
    (0.01
    )
    
    
    (0.0003
    )
  Grant
    
    ModificationVolatility
    
    59.96%~67.12%
    
    39.2%~39.4%Risk-free interest rate
    
    1.70%~3.04%
    
    1.861%Expected holding period
    
    3~5 years
    
    1.5~1.83 yearsDividend yield
    
    0%
    
    5.62%
 
 *
    
    No options granted in year 2006.  As of December 31, 2006NT$Total intrinsic value of the options exercised in 2006
    
    
    413,106Total fair value of options vested in 2006
    
    
    113,174Aggregate intrinsic value of exercisable options
    
    
    88,584Aggregate intrinsic value of outstanding options
    
    
    529,857
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SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Compensation to Directors and Employees
 For the years ended December 31,Net income impact of compensation adjustment
    
    2004
    
    
    2005
    
    
    2006NT$
    
    
    NT$
    
    
    NT$
    
    
    US$US GAAP adjustment:Remuneration to directors
    
    
    74,258
    
    
    
    149,324
    
    
    
    120,798
    
    
    
    3,707Employee bonuses accrual
    
    
    363,583
    
    
    
    731,079
    
    
    
    1,173,450
    
    
    
    36,006Adjustment to fair market value
    
    
    261,231
    
    
    
    354,459
    
    
    
    615,197
    
    
    
    18,877Total employee bonuses
    
    
    624,814
    
    
    
    1,085,538
    
    
    
    1,788,647
    
    
    
    54,883Total net income adjustment
to compensation
    
    
    699,072
    
    
    
    1,234,862
    
    
    
    1,909,445
    
    
    
    58,590
 December 31,Shareholders equity adjustment
    
    2004
    
    
    2005
    
    
    2006NT$
    
    
    NT$
    
    
    NT$
    
    
    US$US GAAP adjustment:Remuneration to directors
    
    
    74,258
    
    
    
    149,324
    
    
    
    120,798
    
    
    
    3,707Employee bonuses
    
    
    363,583
    
    
    
    731,079
    
    
    
    1,173,450
    
    
    
    36,006Total shareholders equity
relating to compensation
    
    
    437,841
    
    
    
    880,403
    
    
    
    1,294,248
    
    
    
    39,713
 (i)
    
    Remuneration to DirectorsThe Companys Articles of Incorporation require a cash remuneration payment to its
directors. Under ROC GAAP, such payments are charged directly to retained earnings for
the period in which shareholders approve such payment. Under US GAAP, such cash payments
should be recorded as compensation expense in the period when services are rendered.(ii)
    
    Employee BonusesCertain employees of the Company are entitled to bonuses in accordance with applicable
provisions of the Companys Articles of Incorporation. Employee bonuses are set at 10% of
distributable retained earnings. Distributable retained earnings are calculated as
retained earnings after various reserves have been made in accordance with ROC regulations
and the Companys Articles of Incorporation and after appropriation for remuneration to
directors. Employee bonuses may be granted in cash, shares, or a combination of both.
Regardless of the form of the bonus, however, the shareholders are required by the Article
of Incorporation to approve a 10% of distributable earnings as the employee bonus whenever there is a dividend
distribution. Under ROC GAAP, such bonuses are appropriated from retained earnings in the
period shareholders approval is obtained. If such employee bonuses are settled through
the issuance of shares of the Company, the amount charged against retained earnings is
based on the par value of the common shares issued. Under US GAAP, employee bonus expense
is initially accrued at the end of the period when services are rendered, at 10% of the
distributable retained earnings, which is considered the minimum liability the Company has
to pay. When bonuses are approved by the shareholders in the subsequent year, an
additional compensation expense is recorded for the difference between the par value and
the fair market value of shares granted to employees.
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SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 The difference between US GAAP and ROC GAAP in this area would result in adjustments to
the Companys net income and shareholders equity as shown in reconciliation tables set
forth at the beginning of this note. This accounting treatment for employees is based on
the guidance of the US SEC Staff Paper entitled International Reporting and Disclosure
Issues in the Division of Corporate Finance dated November 1, 2004. The Board of
Directors of the Company resolved to distribute employee bonuses of NT$363,583 from 2004
earnings in 2005 and NT$731,079 from 2005 earnings in 2006. In addition to the
adjustments to net income and shareholders equity as shown in the above schedules, the
application of US GAAP to employee bonuses would also result in a reclassification from
retained earnings to additional paid-in capital of NT$4,690,000 and NT$5,305,000 for the
years ended December 31, 2005 and 2006, respectively.(4)
    
    Equity InvestmentsUnder both ROC and US GAAP, investments representing at least twenty percent of the
voting interest of each investee for which the Company exercises significant influence
over operating and financial policies are generally accounted for under the equity
method. However, there are the following differences in applying equity accounting under
ROC and US GAAP.
 (i)
    
    Timing differenceUnder the equity method, the Companys proportionate share of the income (loss) of the
investee is generally recognized in the year the income (loss) is earned. Under ROC
GAAP, if financial statements of an investee are not prepared in a sufficiently timely
manner to enable the Company to apply the equity method currently and such equity
interests are below certain materiality thresholds, the Company is permitted to delay
the recognition of income (loss) until the subsequent year. However, effective January
1, 2005, the Company ceased to delay in recognizing investment income (loss) from
certain equity-method investees in accordance with the amended Statement of Financial
Accounting Standards No. 5, Accounting for Long-term Equity Investment in the
Republic of China. Under US GAAP, there are no provisions that allow the investor
company to delay recognition of its equity in the investees income or loss. The US
GAAP adjustment is to adjust the timing difference by deducting the delayed income/loss
recognized under ROC GAAP and adding the current years investment income/loss to
arrive the net income under US GAAP. No timing difference will occur for the year 2006
and thereafter.(ii)
    
    Net income (loss) variance between US GAAP and ROC GAAPThe Companys proportionate share of the income (loss) from an equity investee may
differ if the equity investees net income (loss) under ROC GAAP differs from US GAAP,
resulting in differences in the carrying amount of the equity investment reported under
ROC GAAP and US GAAP. The differences between ROC GAAP and US GAAP for the equity
investees include, but are not limited to, accounting for compensation, joint venture
accounting, investment in marketable securities, embedded derivatives, deferred tax,
and compensated absences. Such differences would be recognized when the Company sells
the equity investment.(iii)
    
    Technology and know-how contributed to a joint venture investeeIn 1997, the Company established a joint venture, ChipMOS. Both SPIL and its joint
venture partner contributed cash as well as technological know-how to the joint
venture. The Company contributed cash in the amount of NT$1.4 billion. The
technological know-how contributed was not carried on the Companys balance sheet and was valued at NT$0.1 billion, a deemed value agreed to by
both parties.
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SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Under ROC GAAP, the Company recognized an initial cost of investment for NT$1.5 billion
for cash and the value of know-how contributed. The value of know-how was recognized
as a deferred gain under other liabilities and was amortized over a period during which
the know-how transfer was completed and implemented.Under US GAAP, generally, an investor initially records its joint venture investment at
cost (i.e. the amount of cash contributed or net book value of non-cash assets
contributed) and a gain should not be recognized on receipt of an interest in a joint
venture if some or all of the investors interest was received for the know-how
contributed. Therefore, under US GAAP, the Company initially recorded its joint
venture investment of NT$1.4 billions, the amount of cash contributed, and did not
recognize the deemed value for the know-how contributed. In addition, the excess of
the Companys cost of investment of NT$1.4 billion over the Companys proportionate
share of fair value of ChipMOS identifiable net assets is being amortized over a
period of 5 years under US GAAP. Effective January 1, 2002, Statement of Financial
Accounting Standards (SFAS) No. 142 requires that we cease amortization for the
difference between the cost of an investment accounted for under the equity method and
the amount of underlying equity in net assets of the investee. The difference between
the cost of the investment and the amount of underlying equity in net assets of ChipMOS
was fully written off in 2002.(iv)
    
    Adjustments for the variances between net income and shareholders equity under US GAAPThe Companys proportionate share of the income (loss) from an equity investee may
differ from its share in the investees equity. Under both ROC GAAP and US GAAP, the
Company is required to adjust its investment in corresponded to its pro rata share of the
investees equity. Under ROC GAAP, adjustments may include, but are not limited to,
cumulative translation and unrecognized pension cost. For reconciliation to US GAAP,
additional adjustments are made for the variances exclusively resulting from US GAAP,
such as defined benefit pension plan pursuant to SFAS No. 158.
 (5)
    
    Pension PlanUnder ROC GAAP, pension liability is accrued without reflecting the funded status. Under US
GAAP, additional pension liability or asset is accrued pursuant to SFAS No. 158 (effective
December 15, 2006), Employers Accounting for Defined Benefit Pension and Other
Postretirement Plans  an amendment of FASB Statements No. 87, 88, 106, and 132(R), which
requires the recognition of the overfunded or underfunded status of a defined benefit
postretirement plan through other comprehensive income, net of tax, at the balance sheet
date. Gains and loss, prior service costs, or transition assets and liabilities
unrecognized as components of net periodic benefit cost of the period in accordance with
SFAS No. 87 are now recognized as a component of other comprehensive income.(6)
    
    Taxation EffectUnder ROC GAAP, a 10% tax on undistributed earnings is recognized as a tax expense in the
year of shareholders approval. Under US GAAP, the 10% tax on undistributed earnings should
be accrued during the period the earnings generated and adjusted to the extent that
distributions are approved by the shareholders in the following year.
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SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (7)
    
    Earnings Per Share (EPS)In calculating weighted average number of shares outstanding for EPS purposes under ROC
GAAP, employee bonus shares have been treated as outstanding for all periods, in a manner
similar to a stock split or dividend, and are retroactively adjusted to previous years
calculation of weighted-average outstanding shares. Under US GAAP, employee bonus shares
have been considered separately from the stock dividend or split and have been treated as
outstanding from the date when they were issued. The numbers of employee bonus shares
issued in 2004, 2005, and 2006 were 21,049,700 shares, and 18,765,500 shares, and
26,779,433 shares, respectively.In computing the dilutive effect of convertible bonds when calculating net income
available to common stockholders for diluted EPS, the after-tax results of compensated
interest expenses, unrealized foreign exchange gain/loss, amortization of bond issuance
costs are taken into consideration under ROC GAAP. However, under US GAAP, in addition
to the above three items, the after tax result of mark-to-market gain or loss on embedded
derivatives bifurcated from the host bonds is also taken into consideration.
Anti-dilutive effects are not adjusted for both under ROC GAAP and under US GAAP.For the purpose of computing the dilutive effect of the employee stock option, the
treasury-stock method is used. Treasury shares that could be repurchased with assumed
proceeds from the exercise of employee stock options may not be sufficient for the share
issued upon exercising options. Therefore, incremental shares are added to the weighted
average number of shares outstanding. Under ROC GAAP, the assumed proceeds is the
exercise price. Under US GAAP, the assumed proceeds is the sum of (a) the exercise price,
(b) the amount of compensation cost attributed to future services and not yet recognized,
and (c) the amount of excess tax benefits that would be credited to additional paid-in
capital assuming exercise of the options. Therefore, the amount of incremental shares
calculated under US GAAP would be different from the one calculated under ROC GAAP.(8)
    
    Marketable SecuritiesBefore the adoption of ROC FAS No. 34 effective January 1, 2006, 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.
After the adoption of new released statement, the Company is required to reclassify its
equity investments into financial assets at fair value through profit or loss,
available-for-sale, held-to-maturity securities or financial assets carried at costs.
Unrealized gains or losses on available-for-sale securities are reported through
shareholders equity.Under US GAAP FAS 115, Accounting for Certain Investments in Debt and Equity
Securities, debt and equity securities that have readily determinable fair values are to
be classified as either trading, available-for-sale or held-to-maturity securities. Debt
securities that the Company has the positive intent and ability to hold to maturity are
classified as held-to-maturity securities and reported at amortized cost. Debt and
equity securities that are bought and traded for short-term profits are classified as
trading securities and reported at fair value, with unrealized gains and losses included
in earnings. Debt and equity securities not classified as either held-to-maturity or
trading are classified as available-for-sale securities and reported at fair value, with
unrealized gains and losses excluded from earnings and reported as a separate component
of shareholders equity. The fair value of listed stock under US GAAP is generally determined by the
closing price at the balance sheet date. For individual securities classified as either
available-for-sale or held-to-maturity, the Company performs an analysis to determine
whether a decline in fair value below cost is other than temporary. No such impairment
has been identified during the periods presented.
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SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (9)
    
    Goodwill Acquired from MergerUnder ROC GAAP, 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 US GAAP, in connection with acquisition of Siliconware Corporation in 2000, the
Company recorded net assets and goodwill of NT$5,415,439, respectively, based on
independent appraisal report. Prior to the adoption of SFAS No. 142, goodwill was
amortized on straight-line basis over ten years. Effective January 1, 2002, we adopted
SFAS No. 142 and ceased amortization of goodwill and performed the annual impairment
analysis using a fair value approach. As of December 31, 2006, the net carrying amount
of goodwill was NT$4,873,500 and no impairment of goodwill was identified during 2004 to
2006.(10)
    
    Stock DividendsUnder ROC GAAP, an issuance of stock dividend is recorded at par with a charge to
retained earnings. Under US GAAP, if the ratio of distribution is less than 25 percent
of shares of the same class outstanding, the fair value of the shares issued should be
charged to retained earnings. This different treatment results, under US GAAP, in a
reclassification from retained earnings to additional paid-in capital of NT$24,809,988
and NT$30,346,758 at December 31, 2005 and 2006, respectively. These adjustments have no
effect on shareholders equity.(11)
    
    Impairment of Long-lived Assets and Investments
 (i)
    
    Impairment of Long-Lived AssetsThe ROC released SFAS No. 35 to account for impairment of long-lived assets, which is
effective for financial statements issued for fiscal years ended on and after December
31, 2005 and interim periods within the fiscal year. Under both ROC GAAP and US GAAP, the
Company is required to valuate whether long-lived assets are subject to impairment.
Impairment test is performed whenever event occurs or evidence indicates the carrying
amount of an asset may not be recoverable. Under ROC GAAP, a long-lived asset is
considered impaired when the anticipated recoverable amount is less than the assets
carrying value. Recoverable amount is measured as the higher of net selling price or
value in use (discounted cash flows). The difference between the recoverable amount and
the assets carrying amount is recognized as a loss in earnings. Under US GAAP, a
long-lived asset is considered impaired when the anticipated undiscounted cash flows are
less than the assets carrying value. In that event, a loss is recognized based on the
amount by which the carrying value exceeds the fair value of the long-lived assets. The
estimate of fair value is generally based on quoted market prices, on the best available
information, including prices for similar assets and the results of using other valuation
techniques, or discounted cash flows. There was no impairment on long-lived assets in
2004, 2005 and 2006 after the Companys valuation.(ii)
    
    Impairment of Investments
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SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Both under ROC GAAP and US GAAP, the Company valuates its equity investments for
impairment due to declines in the market value that are considered other than temporary.
Such valuations 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
other than temporary, loss is recognized in the current years income. The valuation 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 2005, the Company adopted ROC SFAS 35, Accounting for Assets Impairment , and
recognized impairment loss for Double Win of NT$84,450 and brought the investment
balance down to nil. Therefore, the impairment loss of NT$13,260 of Double Win, which
was recognized during 2002 under US GAAP, was reversed in 2005. Impairment loss on
investment in Artest was recognized under ROC GAAP and decreased the carrying amount to
nil. Therefore, the impairment loss of NT$28,885 was reversed in 2006.
 (12)
    
    Embedded Derivative
 (i)
    
    The Companys Accounting as an IssuerUnder ROC GAAP, when an issuer issues convertible bonds, the entire instrument is
recorded as a liability at an amount equal to the proceeds received. Any discount or
premium to the par value of the convertible bond is amortized in the statement of
operations by using the effective interest rate method. If the convertible bonds
contain a redemption premium above their par value amount, the excess is accrued,
using the effective interest rate method, over the period to redemption as a charge
to interest expense. Upon conversion, the carrying value of the bond is credited to
common stock at its par value and the difference between the carrying value of the
bond and the par value of the stock is recorded to additional paid-in capital. No
gain or loss is recognized.Under US GAAP, in accordance with SFAS 133, Accounting for Derivative Instruments
and Hedging Activities, the conversion feature embedded in a bond does not have to
be separately accounted for as a derivative at fair value, if the feature is indexed
only to the issuers own stock and would otherwise be classified in stockholders
equity in the issuers statement of financial position (the Scope Exception).The Company issued zero-coupon convertible bonds on January 28, 2002 amounting to
US$200,000 (the 2002 Bonds). The 2002 Bonds are denominated in US dollars and
allow the bondholders to redeem at 105.9185% of their par value on July 29, 2004.
The premium put option and the conversion option are treated as a single-compound
derivative instrument. Further, under US GAAP, the embedded feature with the
combination of mutually exclusive choices, i.e., conversion of the debt to equity or
redemption at a multiple of the 2002 Bonds par value, does not qualify for the Scope
Exception. Additionally, our 2002 Bonds allow bondholders to convert into either the
Companys common stock which is traded on the Taiwan Stock Exchange (denominated in
New Taiwan Dollar) or into the Companys ADSs, which are traded on NASDAQ
(denominated in US Dollars). The conversion terms contain a fixed foreign exchange
feature determining the rate at which the bonds are to be converted into New Taiwan
Dollar stock. As a result of the combination of the conversion option and the fixed
foreign exchange rate, the 2002 Bonds are dual indexed and therefore not eligible for
the Scope Exception. On February 5, 2004, the Company issued zero-coupon convertible
bonds amounting to US$200,000 (the 2004 Bonds).
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SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Similar to the 2002 Bonds, the 2004 Bonds permit the bondholders to convert
those bonds into either the Companys New Taiwan Dollar shares or ADSs resulting in
those bonds being dual indexed and also not eligible for the Scope Exception. Both
the compound embedded derivative in the 2002 Bonds and the embedded conversion option
in the 2004 Bonds are accounted for as derivative instruments in accordance with FAS
133 with changes in fair value recognized in the income statement. The Company also
recognized interest expense of NT$461,114, NT$431,962, and NT$240,446 arising from
the amortization of bond discount and gain (loss) of NT$(193,684), NT$(4,442), and
NT$(945,956), respectively, on subsequent conversion and/or buyback of convertible
bonds for the year ended December 31, 2004, 2005 and 2006.For the years ended December 31, 2004, 2005 and 2006, the net gain (loss) recognized
from applying derivative accounting amounting to NT$3,894, NT$(2,422,617) and
NT$(2,986,828), respectively.(ii)
    
    The Companys Accounting as an InvestorUnder ROC GAAP, investment in convertible or exchangeable bonds is carried at the
lower of cost or 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 as though it was a discrete derivative instrument. The
derivative instrument is measured at fair value, with changes in the fair value
reported in earnings. Such adjustments to the carrying amount of the embedded
derivative would remain part of the carrying amount of that asset until the asset is
sold, at which time the entire carrying amount of the embedded derivative would be
recognized as the cost of the item sold in determining earnings. 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.
 (13)
    
    Treasury Stock Transferred to EmployeeUnder ROC GAAP, treasury shares transferred to employees are recorded as capital contributions for the cash amount received from the employees. Under US GAAP, in
addition to the capital contribution recorded for the cash amount received from the employees, compensation expense would be recorded, for the difference between the shares
transfer price and the fair market value of the shares issued at the issuance date, during the period when such transfers were made.(14)
    
    Merger between Sigurd and UniversalUniversal Communication technology Inc. (Universal), an equity-method investee of the
Company, was merged into Sigurd Microelectronics Corp (Sigurd), another equity-method
investee of the Company, on March 1, 2005. Under ROC GAAP, the Company recognized its
change of proportional interest in Sigurd based on the fair value of Universals net
assets at the acquisition date. However, under US GAAP, the Company recognized its
change of proportional interest in Sigurd based on the fair value of Sigurds newly
issued stocks at the acquisition date.
 Additional disclosure required by US GAAP
 (1)
    
    Risks and Uncertainties
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SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 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 35.9% and North
America of 59.6% in 2006. The Companys largest customer accounted for 11% and 10 %
for 2005 and 2006, respectively, and its five largest customers accounted for 42% and
40% of the Companys total sales in 2005 and 2006, respectively.In 2005 and 2006, significant portion of the Companys net operating revenue was
denominated in U.S. dollars. On the other hand, in 2005 and 2006, significant portion
of 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 amounted to NT$4,141,102 and NT$3,392,955 as of December 31, 2005
and 2006, respectively. The Company performs periodic credit evaluations of its
customers financial condition and generally does not require collateral. Receivables
are generally due within 90 days.Other factors that could affect the Companys future operating results and cause
actual results to vary materially from historical results include, but are not limited
to, dependence on the highly cyclical nature of both the semiconductor and the personal
computer industries, competitive pricing and declines in average selling prices,
availability of manufacturing capacity, dependence on raw materials and competition.(2)
    
    Impairment of Long-lived AssetsProperty, plant and equipment are subject to review for impairment whenever events or
changes in circumstances indicate that the recoverability of the carrying amount of an
asset may be impaired. Measurement of an impairment loss for assets that the Company
expects to hold and use is based on the fair value of the asset. Idle assets and
long-lived assets to be disposed of are reported at the lower of carrying amount or
fair value less cost to sell. As of December 31, 2005 and 2006, the carrying amounts
of property, plant and equipment held for disposal were NT$68,766 and NT$27,672,
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, 2004,
2005, and 2006 were NT$460,539, NT$68,766 and NT$27,672, respectively. The impairment
charge in 2006 was mainly related to the Companys decision to dispose certain
machinery and equipment due to technology phase out and replacement.(3)
    
    Maturity of Long-term Liabilities
 F-58




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SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Aggregate maturities for the Companys bonds payable and long-term loans as of December 31,
2006 are as follows:
 Years ending December 31,
    
    AmountsNT$
    
    US$2007
    
    
    18,244
    
    
    
    5602008
    
    
    2,502,204
    
    
    
    76,7782009
    
    
    750,000
    
    
    
    23,0132010
    
    
    1,500,000
    
    
    
    46,0262011
    
    
    854,135
    
    
    
    26,2095,624,583
    
    
    
    172,586Less:current portion of long-tern
    
    
    (18,244
    )
    
    
    (560
    )5,606,339
    
    
    
    172,026
 (4)
    
    Cash and Cash Flow StatementUnder ROC GAAP, all certificates of deposit are classified as cash and cash
equivalents. Under US GAAP, cash equivalents are short-term, highly liquid investments
that are readily convertible to known amounts of cash and have original maturities of
three months or less. Summarized cash flow information under US GAAP would be
presented as follows:
 For the years ended December 31,2005
    
    2006NT$
    
    NT$
    
    US$Net cash provided by operating activities
    
    
    13,214,617
    
    
    
    20,250,012
    
    
    
    621,357Net cash used in investing activities
    
    
    (6,263,357
    )
    
    
    (20,393,997
    )
    
    
    (625,775
    )Net cash provided by financing activies
    
    
    (5,435,285
    )
    
    
    (6,039,930
    )
    
    
    (185,331
    )Effect on foreign exchange
    
    
    36,065
    
    
    
    7,712
    
    
    
    237Net increase in cash and cash equivalents
    
    
    1,552,040
    
    
    
    (6,176,203
    )
    
    
    (189,512
    )Cash and cash equivalents at beginning of the
    
    
    10,722,351
    
    
    
    12,274,391
    
    
    
    376,630Cash and cash equivalents at the end of the year
    
    
    12,274,391
    
    
    
    6,098,188
    
    
    
    187,118
 F-59




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SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Comprehensive income under ROC GAAP for the years ended December 31, 2004, 2005 and 2006 and
accumulated other comprehensive income balances as of December 31, 2005 and 2006 are summarized as
follows:
 As of December 31,2004
    
    2005
    
    2006NT$
    
    NT$
    
    NT$
    
    US$Net income
    
    
    4,282,177
    
    
    
    8,243,902
    
    
    
    13,329,069
    
    
    
    408,993Other comprehensive income (loss), net of taxesCumulative translation adjustment on equity investment
    
    
    (144,331
    )
    
    
    90,947
    
    
    
    25,187
    
    
    
    773Remuneration to directors and supervisors
    
    
    (57,153
    )
    
    
    (74,258
    )
    
    
    (149,324
    )
    
    
    (4,582
    )Employees cash bonus
    
    
    (73,674
    )
    
    
    (175,927
    )
    
    
    (463,284
    )
    
    
    (14,216
    )Adjustment for unrealized (loss) gain on available for sale
financial assets
    
    
    
    
    
    
    (737
    )
    
    
    4,765,885
    
    
    
    146,238Adjustment for investee companies capital reserve
    
    
    (10,862
    )
    
    
    (40,009
    )
    
    
    67,945
    
    
    
    2,085Adjustment for investee companies unrecognized pension cost
    
    
    
    
    
    
    (1,828
    )
    
    
    41
    
    
    
    1Comprehensive income
    
    
    3,996,157
    
    
    
    8,042,090
    
    
    
    17,575,519
    
    
    
    539,292
 As of December 31,2005
    
    2006NT$
    
    NT$
    
    US$Accumulated other comprehensive income balancesCumulative translation adjustment on equity investment
    
    
    (50,106
    )
    
    
    (24,919
    )
    
    
    (765
    )Remuneration to directors and supervisors
    
    
    (131,411
    )
    
    
    (280,735
    )
    
    
    (8,614
    )Employees cash bonus
    
    
    (249,601
    )
    
    
    (712,885
    )
    
    
    (21,874
    )Adjustment for change in equity investment holding ratio
    
    
    15,063
    
    
    
    15,063
    
    
    
    462Adjustment for unrealized loss on available for sale financial assets
    
    
    (737
    )
    
    
    4,765,148
    
    
    
    146,215Adjustment for investee companies capital reserve
    
    
    (50,254
    )
    
    
    17,691
    
    
    
    543Adjustment for investee companies unrecognized pension cost
    
    
    (1,828
    )
    
    
    (1,787
    )
    
    
    (55
    )Accumulated other comprehensive income
    
    
    (468,874
    )
    
    
    3,777,576
    
    
    
    115,912
  (i)
    
    Disclosures under No. 158 as of December 31, 2006 are as follows:
 
 Before application
    
    
    
    
    
    After applicationof Statement 158
    
    Adjustments
    
    of Statement 158NT$
    
    NT$
    
    NT$Deferred income tax assets, non-current
    
    
    1,653,918
    
    
    
    100,898
    
    
    
    1,754,816Total assets
    
    
    83,669,261
    
    
    
    100,898
    
    
    
    83,770,159Liability for pension benefits
    
    
    29,636
    
    
    
    310,456
    
    
    
    340,092Total liabilities
    
    
    18,600,589
    
    
    
    310,456
    
    
    
    18,911,045Accumulated other comprehensive income
    
    
    3,777,576
    
    
    
    (209,558
    )
    
    
    3,568,018Total stockholders equity
    
    
    65,068,672
    
    
    
    (209,558
    )
    
    
    64,859,114
 F-60




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SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (ii)
    
    Additional disclosures under FAS132 (R) regarding pension benefits are as follows:
 A.
    
    Estimated future benefit payments:The following benefit payments, which reflect expected future service, as appropriate, are expected
to be paid:
 AmountsNT$
    
    US$2007
    
    
    9,267
    
    
    
    2842008
    
    
    4,155
    
    
    
    1272009
    
    
    7,839
    
    
    
    2412010
    
    
    18,035
    
    
    
    5532011
    
    
    17,942
    
    
    
    551Year 2012 to 2016
    
    
    191,338
    
    
    
    5,871
 B.
    
    Contributions:The Company expects to contribute NT$55,149 to its pension plan in 2007.
  The Company evaluates its inventory based on the lower of cost or market value. Under ROC GAAP, the
recovery of write-downs from the lower of cost or market (LCM) is allowed. Under US GAAP, no
recovery from the LCM is permitted. There is no such recovery recognized in 2006 ROC GAAP
financial statements. The Companys recovery results from the disposal and sales of idle
inventory, which has no impact on US GAAP reconciliation. Therefore, no adjustment is required for
the restoration of write-downs in 2006.
  The Company derives its revenues from the provision of independent assembly, testing services, and
turnkey services and recognizes service revenues upon shipment or upon completion of various stages
of turnkey services, based upon transaction terms and when collection is reasonable assured, which
is essentially the same under US GAAP. If multiple services are negotiated in one contract, the
Company recognizes revenues based on their relative fair values when all of the revenue recognition
criteria are met.
  The Company derives revenues only from providing independent testing and assembly services to
semiconductor companies. As the Company does not engage in product sales, it does not account for
sales returns.
  The major covenants of the Companys long-term loans are as follows:
 F-61




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 a.
    
    Current ratio should be larger than 100%.b.
    
    Liability to equity ratio should be lower than 100%.c.
    
    Interest coverage ratio should be larger than 400%.
  The information about our valuation and qualifying accounts and reserves are as follows:
 Balance atbeginning of
    
    Balance at end ofDescription
    
    period
    
    periodNT$
    
    NT$For the year ended 2004Allowance for doubtful accounts
    
    
    9,369
    
    
    
    9,369Allowance for sales discounts
    
    
    56,556
    
    
    
    92,638Allowance for loss on obsolescence
and decline in market value of inventory
    
    
    58,195
    
    
    
    45,449Allowance for deferred tax assets, current
    
    
    25,372
    
    
    
    0Allowance for deferred tax assets,
non-current
    
    
    804,884
    
    
    
    882,914For the year ended 2005Allowance for doubtful accounts
    
    
    9,369
    
    
    
    12,280Allowance for sales discounts
    
    
    92,638
    
    
    
    67,180Allowance for loss on obsolescence
and decline in market value of inventory
    
    
    45,449
    
    
    
    50,693Allowance for deferred tax assets, current
    
    
    0
    
    
    
    0Allowance for deferred tax assets,
non-current
    
    
    882,914
    
    
    
    303,287For the year ended 2006Allowance for doubtful accounts
    
    
    12,280
    
    
    
    24,270Allowance for sales discounts
    
    
    67,180
    
    
    
    55,475Allowance for loss on obsolescence
and decline in market value of inventory
    
    
    50,693
    
    
    
    47,787Allowance for deferred tax assets, current
    
    
    0
    
    
    
    141Allowance for deferred tax assets,
non-current
    
    
    303,287
    
    
    
    174,343
  A.
    
    In February 2006, the FASB issued SFAS No. 155, Accounting for Certain Hybrid Financial
Instruments  an amendment of FASB Statements No. 133 and 140. This statement allows financial
instruments that have embedded derivatives requiring bifurcation from the host to be accounted for
as a whole, if the holder irrevocably elects to account for the whole instrument on a fair value
basis. Subsequent changes in the fair value of the instrument would be recognized in earnings. This
statement is effective for all financial instruments acquired, issued, or subject to a
remeasurement (new basis) event occurring after the beginning of an entitys first fiscal year that
begins after September 15, 2006. We do not expect the adoption of SFAS No. 155 will have a
material impact on our financial statements and disclosures.B.
    
    In June 2006, the FASB issued Interpretation No. (FIN) 48, Accounting for Uncertainty in
Income TaxesAn Interpretation of FASB Statement No. 109, which requires the recognition of the
impact of a tax position in our financial statements if that position is more likely than not of
being sustained on audit. This interpretation also prescribes measurement of a tax position taken or expected to be
taken in a tax return and provides guidance on derecognition, classification, interest and
penalties, accounting in interim periods, disclosure, and transition. FIN 48 is effective for
fiscal years beginning after December 15, 2006 and we will be adopting the provisions of FIN 48
beginning with January 2007. We continue to evaluate the impact that the adoption of FIN 48 will
have, if any, on our consolidated financial statements.
 F-62




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 C.
    
    In September 2006, the FASB issued SFAS No. 157, Fair Value Measurement to define fair value,
establishes a framework for measuring fair value in generally accepted accounting principles, and
expands disclosures about fair value measurements. This statement will apply whenever another
statement requires or permits assets or liabilities to be measured at fair value. The standard does
not expand the use of fair value in any new
circumstances. SFAS No. 157 is effective for financial statements issued for fiscal years beginning
after November 15, 2007. Currently, we are evaluating the impact of this standard on our financial
statements and disclosures.D.
    
    In February 2007, FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and
Financial Liabilities  Including an amendment of FASB Statement No. 115 , which permits all
entities to choose, at specified election dates, to measure eligible financial instruments and
certain other items at fair value. Unrealized gains and losses on items for which the fair value
option has been elected will be recognized in earnings at each subsequent reporting date. SFAS 159
is effective for an entitys fiscal year beginning after November 15, 2007. The Company currently
believes that the adoption of SFAS 159 will not have significant impact on our financial
statements.
 
 Summary financial information of the Companys equity investees, except ChipMOS, has been prepared
on an aggregate basis under ROC GAAP.
 Balance Sheet Information
 2005NT$Current assets
    
    
    1,531,397Non-current assets
    
    
    3,586,049Total assets
    
    
    5,117,446Current liabilities
    
    
    938,289Non-current liabilities
    
    
    885,098Total liabilities
    
    
    1,823,387
 Income Statement Information
 2004
    
    2005NT$
    
    NT$Net sales
    
    
    2,504,656
    
    
    
    2,419,851Gross profit
    
    
    700,965
    
    
    
    520,854Income before tax
    
    
    356,156
    
    
    
    243,335Net income
    
    
    272,064
    
    
    
    200,088
 F-63




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##### Table of Contents



A.
    
    Significant Transaction Information
 (1)
    
    Loans to third parties attributed to financial activities:For the year ended December 31, 2006: None.(2)
    
    Endorsement and guarantee provided to third parties:For the year ended December 31, 2006: None.(3)
    
    The ending balance of securities are summarized as follows:As of December 31, 2006:
 The relationship
    
    
    
    Number
    
    
    
    
    
    Percentage
    
    Market valueType of
    
    
    
    of the issuers with
    
    General ledger
    
    of shares
    
    
    
    
    
    of
    
    per shareInvestor
    
    securities
    
    Name of securities
    
    the Company
    
    accounts
    
    (in thousands)
    
    Book value
    
    ownership
    
    (in dollars)NT$Siliconware Precision
Industries Co., Ltd.
    
    Stock
    
    Siliconware Investment Company
Ltd.
    
    Investee accounted for
under the equity
method
    
    Long-term investments
accounted for under
the equity method
    
    
    177,000
    
    
    
    1,272,557
    
    
    
    100.00
    %
    
    
    17.36
    
    
    (Notes 1, 3)Siliconware Precision
Industries Co., Ltd.
    
    Stock
    
    Double Win Enterprise Co., Ltd.
    
    Investee accounted for
under the equity method
    
    Long-term investments
accounted for under
the equity method
    
    
    6,760
    
    
    
    
    
    
    
    24.14
    %
    
    
    8.23
    
    
    (Note 2)Siliconware Precision
Industries Co., Ltd.
    
    Stock
    
    ChipMOS Technologies Inc.
    
    Investee accounted for
under the equity
method
    
    Long-term investments
accounted for under
the equity method
    
    
    254,863
    
    
    
    4,998,596
    
    
    
    28.76
    %
    
    
    19.95
    
    
    (Note 1)Siliconware Precision
Industries Co., Ltd.
    
    Stock
    
    SPIL (B.V.I.) Holding Limited
    
    Investee accounted for
under the equity
method
    
    Long-term investments
accounted for under
the equity method
    
    
    77,800
    
    
    
    2,247,899
    
    
    
    100.00
    %
    
    
    28.89
    
    
    (Notes 1, 3)Siliconware Precision
Industries Co., Ltd.
    
    Stock
    
    Phoenix Precision Technology
Corporation
    
    The Company holds
directorship
    
    Available-for-sale
financial assets
    
    
    109,854
    
    
    
    4,284,295
    
    
    
    16.41
    %
    
    
    39.00Siliconware Precision
Industries Co., Ltd.
    
    Stock
    
    King Yuan Electronics Co., Ltd.
    
    
    
    Available-for-sale
financial assets
    
    
    85,698
    
    
    
    2,330,977
    
    
    
    7.86
    %
    
    
    27.20Siliconware Precision
Industries Co., Ltd.
    
    Stock
    
    Siguard Microelectronics Corp.
    
    The Company holds
directorship
    
    Available-for-sale
financial assets
    
    
    46,236
    
    
    
    1,005,635
    
    
    
    17.91
    %
    
    
    21.75Siliconware Precision
Industries Co., Ltd.
    
    Stock
    
    NPL
    
    
    
    Financial assets
carried at cost
    
    
    130
    
    
    
    3,891
    
    
    
    
    
    
    
 
 Note 1:
    
    The market value is not available. Therefore, the net equity per share as of
December 31, 2006 was used.Note 2:
    
    The market value is not available. Therefore, the net equity per share as of December
31, 2005 was used.Note 3:
    
    Eliminated under consolidation. F-64




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  (4)
    
    Securities for which total buying or selling exceeds the lower of NT$100,000 or 20 percent
of the capital stock:For the year ended December 31, 2006:
 The
    
    Beginning balance
    
    Addition
    
    Disposal
    
    Ending balanceName
    
    relationshipof
    
    of the
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    GainGeneral
    
    the
    
    issuers
    
    Number
    
    
    
    
    
    Number
    
    
    
    
    
    Number
    
    
    
    
    
    (loss)
    
    NumberName of
    
    ledger
    
    counter
    
    with the
    
    of shares/unit
    
    
    
    
    
    of shares/unit
    
    
    
    
    
    of shares/unit
    
    
    
    
    
    from
    
    of shares/unitInvestor
    
    the security
    
    accounts
    
    party
    
    Company
    
    (in thousands)
    
    Amount
    
    (in thousands)
    
    Amount
    
    (in thousands)
    
    Sale price
    
    Book value
    
    disposal
    
    (in thousands)
    
    AmountNT$
    
    
    
    
    
    NT$
    
    
    
    
    
    
    
    
    
    
    
    
    
    NT$Siliconware Precision
Industries Co., Ltd.
    
    SPIL (B.V.I.) Holding
Limited stock
    
    Long-term investments
under the equity
method
    
    
    
    
    
    
    62,800
    
    
    
    1,794,319
    
    
    
    15,000
    
    
    
    487,050
    
    
    
    
    
    
    
    
    
    
    
    77,800
    
    
    (Note 1) 2,247,899
 
 Note 1:
    
    The ending balance includes the investment gain and loss under the equity method. F-65




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SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (5)
    
    Acquisition of real estate with an amount exceeding the lower of NT$100,000 or 20 percent
of the capital stock:For the year ended December 31, 2006:
 Related party as counter partyOriginalowner which
    
    
    TheRelation-
    
    
    sold the
    
    
    relationship
    
    
    
    
    
    
    
    
    
    
    The bases orship with
    
    
    property to
    
    
    of the original
    
    
    Date of the
    
    
    
    
    
    
    reference used
    
    Purpose andDate of
    
    
    Transaction
    
    
    Status of
    
    
    
    
    
    
    the
    
    
    the counter
    
    
    owner with
    
    
    original
    
    
    
    
    
    
    in deciding the
    
    status of theName of the properties
    
    transaction
    
    
    amount
    
    
    payment
    
    
    Counter party
    
    Company
    
    
    party
    
    
    the Company
    
    
    transaction
    
    
    Amount
    
    
    price
    
    acquisition
    
    Other commitmentNT$Building
    
    Nobember 2005
    
    $
    169,000
    
    
    $
    169,000
    
    
    Sheng-Hui ConstructionCorporation Ltd.
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    As specified incontract
    
    For operatinguse
    
    Payment made accordingto construction progressBuilding
    
    December 2005
    
    
    348,800
    
    
    
    125,000
    
    
    Chung-Rui ConstructionCorporation Ltd.
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    As specified incontract
    
    For operatinguse
    
    Payment made accordingto construction progressBuilding
    
    February 2006
    
    
    180,000
    
    
    
    180,000
    
    
    CNet ConstructionCorporation Ltd.
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    As specified incontract
    
    For operatinguse
    
    
    
    Land
    
    August 2006
    
    
    809,021
    
    
    
    807,834
    
    
    Jou Mu TextileCorporation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    As specified incontract
    
    For operatinguse
    
    
    
    Building
    
    November 2006
    
    
    432,000
    
    
    
    90,720
    
    
    Johnny Ko (c) &Leeming Mis
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    As specified incontract
    
    For operatinguse
    
    Payment made accordingto construction progressBuilding
    
    November 2006
    
    
    223,800
    
    
    
    
    
    
    Chung-Rui ConstructionCorporation Ltd.
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    As specified incontract
    
    For operatinguse
    
    Payment made accordingto construction progress
 (6)
    
    Disposal of real estate with an amount exceeding the lower of NT$100,000 or 20 percent of
the capital stock:For the year ended December 31, 2006: None.
 F-66




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (7)
    
    Related party transactions with purchases and sales amounts exceeding the lower of
NT$100,000 or 20 percent of the capital stock:For the year ended December 31, 2006:
 Description of and reasons fordifference in transaction termscompared to non-related party
    
    
    Notes or accounts receivable /Description of the transaction
    
    
    transactions
    
    
    payablePercentage
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Percentage ofRelationship
    
    
    
    
    
    
    
    
    
    
    of net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    notes or accountsPurchase / sales
    
    Name of
    
    
    with the
    
    
    Purchases
    
    
    
    
    
    
    purchases
    
    
    Credit
    
    
    Unit
    
    
    Credit
    
    
    
    
    
    
    receivable /company
    
    the counter parties
    
    
    counter parties
    
    
    / sales
    
    
    Amount
    
    
    / sales
    
    
    terms
    
    
    price
    
    
    terms
    
    
    Amount
    
    
    payableNT$
    
    
    
    
    
    
    
    
    
    
    NT$Siliconware
    
    Phoenix Precision
    
    The Company
    
    Purchase
    
    
    3,100,909
    
    
    
    13%
    
    
    Three
    
    
    
    
    
    
    
    
    
    Accounts
    
    
    8%Precision
    
    Technology
    
    holds
    
    
    
    
    
    
    
    
    
    
    
    
    
    months
    
    
    
    
    
    
    
    
    
    payableIndustries Co., Ltd.
    
    Corporation
    
    directorship
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    345,745
 (8)
    
    Receivables from related parties exceeding the lower of NT$100,000 or 20 percent of the
capital stock:As of December 31, 2006: None.(9)
    
    Transaction of derivative financial instruments:For the year ended December 31, 2006: None.
 F-67




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##### Table of Contents



B.
    
    Related Information on Investee Companies
 (1)
    
    Basic information on investee companies:For the year ended December 31, 2006:
 The Company / majorityOriginal investments
    
    owned subsidiary owns
    
    Current periodCurrent
    
    Priorperiod
    
    period
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income
    
    Income (loss)ending
    
    ending
    
    Shares ( in
    
    Ownership
    
    Book
    
    (loss)
    
    recognized byInvestor
    
    Name of Investee
    
    Location
    
    Main activities
    
    balance
    
    balance
    
    thousands )
    
    Percentage
    
    value
    
    of investee
    
    the Company
    
    NoteNT$
    
    NT$
    
    
    
    
    
    
    
    
    
    NT$
    
    NT$
    
    NT$Siliconware
Precision
Industries Co.,
Ltd.
    
    Siliconware
Investment Company
Ltd.
    
    Taipei
    
    Investment activities
    
    
    1,770,000
    
    
    
    1,770,000
    
    
    
    177,000
    
    
    
    100.00
    %
    
    
    1,272,557
    
    
    
    144,941
    
    
    
    91,550
    
    
    (Notes 1, 2, 6 )Siliconware
Precision
Industries Co.,
Ltd.
    
    Double Win
Enterprise Co., Ltd.
    
    Ping-chen City,
Taoyuan
    
    SMT process and hand insert
    
    
    152,100
    
    
    
    152,100
    
    
    
    6,760
    
    
    
    24.14
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    (Note 1 )Siliconware
Precision
Industries Co.,
Ltd.
    
    ChipMOS Technologies
Inc.
    
    Science-based
Industrial Park,
Hsin-Chu
    
    Testing and assembly of
integrated circuits
    
    
    2,332,768
    
    
    
    2,332,768
    
    
    
    254,863
    
    
    
    28.76
    %
    
    
    4,998,596
    
    
    
    4,138,270
    
    
    
    1,124,990
    
    
    (Note 1 )Siliconware
Precision
Industries Co.,
Ltd.
    
    Sigurd
Microelectronics
Corp.
    
    Chu-tung, Hsin-Chu
    
    Testing and assembly of
integrated circuits
    
    
    459,274
    
    
    
    459,274
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    28,640
    
    
    (Note 7 )Siliconware
Precision
Industries Co.,
Ltd.
    
    SPIL (B.V.I.)
Holding Limited
    
    British Virgin Islands
    
    Investment activities
    
    
    2,620,869
    
    
    
    2,133,819
    
    
    
    77,800
    
    
    
    100.00
    %
    
    
    2,247,899
    
    
    
    (58,980
    )
    
    
    (58,980
    )
    
    (Notes 1, 2, 6 )SPIL (B.V.I.)
Holding Limited
    
    Siliconware USA, Inc.
    
    San Jose, CA, USA
    
    Communications and
relationships with
companies headquartered in
North America
    
    
    68,464
    
    
    
    68,464
    
    
    
    1,250
    
    
    
    100.00
    %
    
    
    89,072
    
    
    
    23,744
    
    
    
    23,744
    
    
    (Notes 3, 6 )SPIL (B.V.I.)
Holding Limited
    
    SPIL (Cayman)
Holding Limited
    
    Cayman Islands,
British West India
    
    Investment activities
    
    
    1,644,625
    
    
    
    1,157,575
    
    
    
    50,100
    
    
    
    100.00
    %
    
    
    1,229,451
    
    
    
    (117,552
    )
    
    
    (117,552
    )
    
    (Notes 3, 6 )SPIL (Cayman) 
Holding Limited
    
    Siliconware
Technology (Suzhou)
Limited
    
    Suzhou Jiangsu, China
    
    Manufacturing and
processing of module
assembly, flash memory
card and related products
    
    
    1,641,380
    
    
    
    1,154,330
    
    
    (Note 5)
    
    
    100.00
    %
    
    
    1,228,638
    
    
    
    (116,740
    )
    
    
    (116,740
    )
    
    (Note 4 )
 
 Note 1:
    
    The Companys investee accounted for under the equity method.Note 2:
    
    The Companys 100% owned subsidiary.Note 3:
    
    An investee accounted for under the equity method of SPIL (B.V.I.) Holding
Limited, a 100% owned subsidiary of the Company.Note 4:
    
    An investee accounted for under the equity method of SPIL (Cayman) Holding
Limited, a 100% owned subsidiary of SPIL (B.V.I) Holding Limited.Note 5:
    
    The contributed capital was US$50,000 thousand dollars.Note 6:
    
    Eliminated under consolidation.Note 7:
    
    The Companys long-term investments accounted for under the equity method
was reclassified as available-for-sale financial assets (non-current) for the year
ended December 31, 2006.
 F-68




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (2)
    
    The ending balance of securities held by investee companies:As of December 31, 2006:
 The relationship
    
    General
    
    Number of
    
    Book
    
    percentage
    
    Market valueType of
    
    Name of
    
    of the issuers with
    
    ledger
    
    shares
    
    value
    
    of
    
    per shareInvestor
    
    securities
    
    securities
    
    the Company
    
    accounts
    
    (in thousands)
    
    (Note 2)
    
    Ownership
    
    (in dollar)NT$
    
    
    
    
    
    NT$Siliconware Investment Company Ltd.
    
    Stock
    
    Siliconware Precision Industries Co., Ltd.
    
    The Company
    
    Available-for-sale financial assets (non-current)
    
    
    35,176
    
    
    
    1,801,014
    
    
    
    1.22
    %
    
    
    51.20Siliconware Investment Company Ltd.
    
    Stock
    
    Hsieh Yong Capital Co., Ltd.
    
    
    
    Financial assets carried at cost
    
    
    50,000
    
    
    
    500,000
    
    
    
    7.58
    %
    
    Siliconware Investment  Company Ltd.
    
    Stock
    
    Phoenix Precision Technology Corporation
    
    The company holds directorship
    
    Available-for-sale financial assets (non-current)
    
    
    5,593
    
    
    
    218,111
    
    
    
    0.84
    %
    
    
    39.00Siliconware Investment Company Ltd.
    
    
    
    Mega Mission Limited Partnership
    
    
    
    Financial assets carried at cost
    
    (Note 4)
    
    
    195,523
    
    
    
    4.00
    %
    
    Siliconware Investment Company Ltd.
    
    Stock
    
    Others (Note 1)
    
    
    
    Available-for-sale financial assets (non-current) and financial assets carried at costs
    
    
    
    
    
    
    170,111
    
    
    
    
    
    
    SPIL (B.V.I.) Holding Limited
    
    Stock
    
    Siliconware USA, Inc.
    
    Indirect subsidiary of the Company
    
    Long-term investments accounted for under the equity method
    
    
    1,250
    
    
    
    89,072
    
    
    
    100.00
    %
    
    71.26 (Notes 2, 5)SPIL (B.V.I.) Holding Limited
    
    Stock
    
    SPIL (Cayman) Holding Limited
    
    Indirect subsidiary of the Company
    
    Long-term investments accounted for under the equity method
    
    
    50,100
    
    
    
    1,229,451
    
    
    
    100.00
    %
    
    24.54 (Notes 2, 5)SPIL (Cayman) Holding Limited
    
    Stock
    
    Siliconware Technology (Suzhou) Limited
    
    Indirect subsidiary of the Company
    
    Long-term investments accounted for under the equity method
    
    (Note 3)
    
    
    1,228,638
    
    
    
    100.00
    %
    
    
 
 (1)
    
    Combined amount for individual security less than $100,000.(2)
    
    The market value is not available; therefore the net equity per share as of December 31,
2006 was used.(3)
    
    The contributed capital was US$50,000 thousand dollars.(4)
    
    The contributed capital was US$6,000 thousand dollars.(5)
    
    Eliminated under consolidation. F-69




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (3)
    
    Securities for which total buying or selling amount exceed the lower of
NT$100,000 or 20 percent of the capital stock:
  Beginning balance
    
    Addition
    
    Disposal
    
    Ending balanceThe relationship ofName of the counter
    
    the issuers with
    
    Number of shares
    
    
    
    
    
    Number of shares
    
    
    
    
    
    Number of shares
    
    
    
    
    
    Gain (loss) from
    
    Number of sharesInvestor
    
    Name of the security
    
    General ledger accounts
    
    party
    
    the Company
    
    (in thousands)
    
    Amount
    
    (in thousands)
    
    Amount
    
    (in thousands)
    
    Sale price
    
    Book value
    
    disposal
    
    (in thousands)
    
    AmountNT$
    
    
    
    
    
    NT$
    
    
    
    NT$
    
    NT$
    
    NT$
    
    
    
    
    
    NT$Siliconware
Investment
Company Ltd.
    
    Hsieh Yong Capital
Co., Ltd.
    
    Financial assets
carried at costs
    
    N/A
    
    N/A
    
    
    
    
    
    
    
    
    
    
    50,000
    
    
    
    500,000
    
    
    
    
    
    
    
    
    
    
    
    50,000
    
    
    
    500,000Siliconware
Investment
Company Ltd.
    
    Mega Mission Limited
Partnership
    
    Financial assets
carried at costs
    
    N/A
    
    N/A
    
    
    
    
    
    
    
    
    
    (Note 5)
    
    
    
    195,523
    
    
    
    
    
    
    
    
    
    
    (Note 5)
    
    
    195,523SPIL (B.V.I.)
Holding Limited
    
    SPIL (Cayman)
Holding Limited
    
    Long-term investment
accounted for under
the equity method
    
    Cash capitalization
    
    
    
    
    35,100
    
    
    
    826,252
    
    
    
    15,000
    
    
    
    486,300
    
    
    
    
    
    
    
    
    
    
    
    50,100
    
    
    
    1,229,451
    
    
    (Notes 4, 6 )SPIL (Cayman) 
Holding Limited
    
    Siliconware Technology
(Suzhou) Limited
    
    Long-term investment
accounted for under
the equity method
    
    Cash capitalization
    
    
    
    (Note 1)
    
    
    824,617
    
    
    (Note 2)
    
    
    
    487,050
    
    
    
    
    
    
    
    
    
    
    (Note 3)
    
    
    1,228,638
    
    
    (Notes 4, 6 )
 Note 1:
    
    The contributed capital was US$35,000 thousand dollars.Note 2:
    
    The contributed capital was US$15,000 thousand dollars.Note 3:
    
    The contributed capital was US$50,000 thousand dollars.Note 4:
    
    The ending balance includes the investment gain and loss under the equity
method.Note 5:
    
    The contributed capital was US$6,000 thousand dollars.Note 6:
    
    Eliminated under consolidation.
 F-70




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (4)
    
    Acquisition of real estate with an amount exceeding the lower of NT$100,000 or 20 percent
of the capital stock:
  Related party as counter partyOriginal owner which
    
    The relationship of
    
    
    
    
    
    The bases orsold the property
    
    the original owner
    
    
    
    
    
    reference usedName of the
    
    
    
    
    
    
    
    
    
    
    
    
    
    Relationship with
    
    to the counter
    
    with the
    
    Date of the
    
    
    
    in deciding the
    
    Purpose and statusInvestor
    
    properties
    
    Date of transaction
    
    Transaction amount
    
    Status of payment
    
    Counter party
    
    the Company
    
    party
    
    Company
    
    original transaction
    
    Amount
    
    price
    
    of the acquisition
    
    Other commitmentNT$
    
    NT$
    
    
    
    
    
    
    
    
    
    
    
    NT$Siliconware 
Technology
(Suzhou) 
Limited
    
    Building
    
    July 2006
    
    
    135,363
    
    
    
    104,771
    
    
    Nantong Yingxiong
Construction
Corporation Ltd.
    
    N/A
    
    
    
    
    
    
    
    
    
    As specified in
contract
    
    For operating use
    
    Payment made
according to
construction
progress
 F-71




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 C.
    
    Information of investment in Mainland China:
 (1)
    
    Information of investment in Mainland China :
 OwnershipName of investee
    
    
    
    
    
    
    
    Accumulated
    
    Remitted or
    
    Accumulated
    
    held byin Mainland
    
    Main activities
    
    
    
    Investment
    
    remittance as of
    
    (collected)
    
    remittance as of
    
    the CompanyChina
    
    of investee
    
    Capital
    
    method
    
    December 31,2005
    
    this period
    
    December 30, 2006
    
    (Direct and indirect)NT$
    
    
    
    NT$
    
    NT$
    
    NT$Siliconware 
Technology (Suzhou) 
Limited
    
    Manufacturing
and processing of
module assembly,
flash memory card
and related
products
    
    1,620,500
(Note 2)
    
    (Note 1)
    
    1,134,350
(Note 2)
    
    486,150
(Note 2)
    
    1,620,500
(Note 2)
    
    
    100%
 The investmentincome (loss)Investment income
    
    Ending
    
    remitted back as
    
    Accumulated
    
    The investment balance
    
    The ceiling of investment(loss) recognized
    
    balance
    
    of
    
    remittance
    
    approved by
    
    in Mainland China according toby the Company
    
    of
    
    December 31,
    
    from Taiwan to
    
    Investment Commissions,
    
    Investment Commissions,during the period
    
    investment
    
    2006
    
    Mainland China
    
    Ministry of Economic Affairs
    
    Ministry of Economic AffairsNT$
    
    NT$
    
    
    
    NT$
    
    NT$
    
    NT$(116,740)
    
    
    1,228,638
    
    
    
    
    
    1,620,500
    
    
    
    1,620,500
    
    
    
    14,087,242(Note 3)
    
    (Note 2)
 
 Note 1:
    
    The Company set up a subsidiary in Cayman Island to invest 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.Note 3:
    
    Eliminated under consolidation.
 (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.
 D.
    
    The business relationships and the significant transactions as well as amounts between
the parent company and the subsidiary.
 RELATED PARTY TRANSACTIONS% of consolidatedName of
    
    Name of the Company
    
    Relationship with
    
    
    
    
    
    
    
    
    
    revenuesNo.
    
    Related Parties
    
    Transactions
    
    Related Parties
    
    Account
    
    Amount
    
    Term
    
    or total assetsNT$0
    
    Siliconware
Precision
Industries Co.,
Ltd.
    
    Siliconware USA, Inc.
    
    Indirect owned
subsidiary
    
    Operating expense
    
    
    478,608
    
    
    as specified in
contract
    
    
    0.84
    %
 F-72




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##### Table of Contents



MOORE STEPHENSCERTIFIED PUBLIC ACCOUNTANTS(CHINESE CHARACTERS)(CHINESE CHARACTERS)7 Fl., 53 Nanjing E. Rd., Sec.2,Taipei 10464, TaiwanThe Board of Directors and Shareholders
    
    
    
    Tel: 886 2 25629889ChipMOS TECHNOLOGIES INC.
    
    
    
    Fax: 886 2 25815955E-Mail: tpe@moorestephens.com.tw
     
 F-73




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##### Table of Contents



December 312005
    
    
    2006NT$
    
    
    NT$
    
    
    US$(Note 3)ASSETSCURRENT ASSETSCash and cash equivalents (Note 2)
    
    
    3,154,097
    
    
    
    1,877,501
    
    
    
    57,601Restricted cash and cash equivalents (Note 20)
    
    
    123,947
    
    
    
    81,283
    
    
    
    2,494Financial assets at fair value through profit and loss (Notes 2 and 4)
    
    
    186,136
    
    
    
    1,929,124
    
    
    
    59,185Notes receivable
    
    
    30,581
    
    
    
    31,103
    
    
    
    954Accounts receivable  net of allowance for doubtful receivables and
sales return allowances of NT$373,597 in 2005 and NT$117,046 in 2006
(Notes 2 and 6)
    
    
    2,401,045
    
    
    
    3,045,346
    
    
    
    93,430Receivables from related parties (Notes 2, 6 and 19):Notes and accounts  net of allowance for doubtful receivables and
sales return allowances of NT$9,429 in 2005 and NT$22,837 in 2006
    
    
    1,419,976
    
    
    
    1,838,964
    
    
    
    56,419Others receivable  net of allowance for doubtful receivables of
NT$8,520 in 2005 and NT$8,520 in 2006
    
    
    5,315
    
    
    
    9,979
    
    
    
    306Other receivable  net of allowance for doubtful receivables of
NT$9,754 in 2005 and NT$9,754 in 2006 (Notes 2 and 6)
    
    
    169,337
    
    
    
    36,276
    
    
    
    1,113Inventories  net (Notes 2 and 7)
    
    
    540,422
    
    
    
    888,518
    
    
    
    27,259Deferred income tax  net (Notes 2 and 18)
    
    
    239,202
    
    
    
    134,337
    
    
    
    4,121Prepaid expenses and other current assets
    
    
    60,807
    
    
    
    95,381
    
    
    
    2,926Total Current Assets
    
    
    8,330,865
    
    
    
    9,967,812
    
    
    
    305,808FUNDS AND LONG-TERM INVESTMENTS (Notes 2, 8 and 9)
    
    
    413,125
    
    
    
    366,743
    
    
    
    11,252PROPERTY, PLANT AND EQUIPMENT (Notes 2 and 10)CostLand
    
    
    530,268
    
    
    
    530,269
    
    
    
    16,269Buildings and auxiliary equipment
    
    
    4,626,061
    
    
    
    5,454,623
    
    
    
    167,345Machinery and equipment
    
    
    23,510,371
    
    
    
    35,580,645
    
    
    
    1,091,598Furniture and fixtures
    
    
    579,390
    
    
    
    713,646
    
    
    
    21,895Transportation equipment
    
    
    30,351
    
    
    
    28,596
    
    
    
    877Tools
    
    
    1,390,087
    
    
    
    2,221,133
    
    
    
    68,143Leasehold improvements
    
    
    3,167
    
    
    
    1,915
    
    
    
    59Total cost
    
    
    30,669,695
    
    
    
    44,530,827
    
    
    
    1,366,186Accumulated depreciation
    
    
    (15,029,981
    )
    
    
    (19,250,030
    )
    
    
    (590,582
    )Construction in progress and advance payment
    
    
    3,346,985
    
    
    
    2,573,585
    
    
    
    78,956Net Property, Plant and Equipment
    
    
    18,986,699
    
    
    
    27,854,382
    
    
    
    854,560INTANGIBLE ASSETS  NET (Notes 2 and 11)
    
    
    103,371
    
    
    
    144,317
    
    
    
    4,427OTHER ASSETSEmployee dormitory building  net of accumulated depreciation
of NT$64,911 in 2005 and NT$80,868 in 2006 (Note 2)
    
    
    165,380
    
    
    
    170,110
    
    
    
    5,219Refundable deposits
    
    
    17,846
    
    
    
    29,529
    
    
    
    906Restricted cash and cash equivalents (Note 20)
    
    
    1,500
    
    
    
    
    
    
    
    Goodwill (Note 2)
    
    
    75,773
    
    
    
    102,134
    
    
    
    3,133Total Other Assets
    
    
    260,499
    
    
    
    301,773
    
    
    
    9,258TOTAL ASSETS
    
    
    28,094,559
    
    
    
    38,635,027
    
    
    
    1,185,305
 (Forward)
 F-74




---



##### Table of Contents



December 312005
    
    
    2006NT$
    
    
    NT$
    
    
    US$(Note 3)LIABILITIES AND SHAREHOLDERS EQUITYCURRENT LIABILITIESBank loans (Note 12)
    
    
    467,834
    
    
    
    853,360
    
    
    
    26,181Commercial paper payable (Note 13)
    
    
    149,413
    
    
    
    
    
    
    
    -Notes payable
    
    
    3,927
    
    
    
    
    
    
    
    Accounts payable
    
    
    657,963
    
    
    
    728,150
    
    
    
    22,339Payables to related parties (Note 19):Accounts payable
    
    
    2,214
    
    
    
    4,295
    
    
    
    132Others
    
    
    45,490
    
    
    
    30,990
    
    
    
    951Payables to contractors and equipment suppliers
    
    
    372,329
    
    
    
    855,228
    
    
    
    26,238Accrued expenses and other current liabilities
    
    
    884,930
    
    
    
    1,402,613
    
    
    
    43,031Current portion of long-term liabilities (Notes 14)
    
    
    2,300,916
    
    
    
    2,335,284
    
    
    
    71,645Total Current Liabilities
    
    
    4,885,016
    
    
    
    6,209,920
    
    
    
    190,517LONG-TERM LIABILITIESLong-term loans (Note 14)
    
    
    4,433,851
    
    
    
    10,202,068
    
    
    
    312,995Total Long-Term Liabilities
    
    
    4,433,851
    
    
    
    10,202,068
    
    
    
    312,995OTHER LIABILITIESDeferred income tax  net (Notes 2 and 18)
    
    
    148,951
    
    
    
    298,223
    
    
    
    9,149Accrued pension cost (Notes 2 and 15)
    
    
    81,658
    
    
    
    47,572
    
    
    
    1,460Deferred credits(Note 19)
    
    
    593,666
    
    
    
    561,137
    
    
    
    17,215Guarantee deposits
    
    
    1,454
    
    
    
    5,833
    
    
    
    179Total Other Liabilities
    
    
    825,729
    
    
    
    912,765
    
    
    
    28,003Total Liabilities
    
    
    10,144,596
    
    
    
    17,324,753
    
    
    
    531,515Minority Interests
    
    
    3,494,210
    
    
    
    3,482,966
    
    
    
    106,856COMMITMENTS AND CONTINGENCIES (Note 21)SHAREHOLDERS EQUITY (Notes 2, 16 and 17)Capital stock  NT$10 par valueAuthorized  970,000 thousand sharesIssued   893,442 thousand shares in 2005 and 2006
    
    
    8,934,423
    
    
    
    8,934,423
    
    
    
    274,104Capital surplus
    
    
    2,145,998
    
    
    
    2,154,694
    
    
    
    66,105Retained earnings:Appropriated as legal reserve
    
    
    577,474
    
    
    
    801,311
    
    
    
    24,584Unappropriated earnings
    
    
    2,921,486
    
    
    
    6,062,385
    
    
    
    185,991Unrealized loss on financial instrument
    
    
    (1,673
    )
    
    
    
    
    
    
    Cumulative translation adjustments
    
    
    (1,803
    )
    
    
    (2,162
    )
    
    
    (66
    )Treasury stock (Note 2 and 16)
    
    
    (120,152
    )
    
    
    (123,343
    )
    
    
    (3,784
    )Total Shareholders Equity
    
    
    14,455,753
    
    
    
    17,827,308
    
    
    
    546,934TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
    
    
    28,094,559
    
    
    
    38,635,027
    
    
    
    1,185,305
 The accompanying notes are an integral part of the condolidated financial statements.
 F-75




---



##### Table of Contents



Year
Ended December 312004
    

2005
    

2006NT$
    
    NT$
    
    NT$
    
    US$(Note 3)NET REVENUES (Notes 2 and 19)Related parties
    
    
    4,847,570
    
    
    
    4,614,013
    
    
    
    5,660,398
    
    
    
    173,659Third parties
    
    
    10,020,307
    
    
    
    10,142,510
    
    
    
    14,164,163
    
    
    
    434,550Total Net Revenues
    
    
    14,867,877
    
    
    
    14,756,523
    
    
    
    19,824,561
    
    
    
    608,209COST OF REVENUE (Note 19)Related parties
    
    
    3,236,183
    
    
    
    3,435,771
    
    
    
    4,222,566
    
    
    
    129,546Third parties
    
    
    7,508,045
    
    
    
    7,401,916
    
    
    
    9,246,407
    
    
    
    283,676Total Cost of Revenue
    
    
    10,744,228
    
    
    
    10,837,687
    
    
    
    13,468,973
    
    
    
    413,222GROSS PROFIT
    
    
    4,123,649
    
    
    
    3,918,836
    
    
    
    6,355,588
    
    
    
    194,987OPERATING EXPENSES (Note 19)Research and development
    
    
    295,777
    
    
    
    274,433
    
    
    
    274,751
    
    
    
    8,429General and administrative
    
    
    480,596
    
    
    
    557,983
    
    
    
    555,715
    
    
    
    17,050Marketing
    
    
    323,300
    
    
    
    228,329
    
    
    
    101,352
    
    
    
    3,109Total Operating Expenses
    
    
    1,099,673
    
    
    
    1,060,745
    
    
    
    931,818
    
    
    
    28,588INCOME FROM OPERATIONS
    
    
    3,023,976
    
    
    
    2,858,091
    
    
    
    5,423,770
    
    
    
    166,399NON-OPERATING INCOMEGain on sales of investments (Note 2)
    
    
    
    
    
    
    
    
    
    
    1,032
    
    
    
    32Rental (Note 19)
    
    
    28,467
    
    
    
    27,698
    
    
    
    23,373
    
    
    
    717Interest
    
    
    31,463
    
    
    
    45,584
    
    
    
    29,558
    
    
    
    907Subsidy income
    
    
    6,100
    
    
    
    9,769
    
    
    
    9,592
    
    
    
    294Cash dividends
    
    
    
    
    
    
    16,897
    
    
    
    3,490
    
    
    
    107Recovery of allowance for loss on
inventory
    
    
    67,002
    
    
    
    74,581
    
    
    
    
    
    
    
    Gain on appraisal of financial assets
(Notes 2 and 4)
    
    
    
    
    
    
    85,958
    
    
    
    41,427
    
    
    
    1,271Gain on disposal of property, plant and equipment
(Note 2)
    
    
    45,520
    
    
    
    41,511
    
    
    
    24,929
    
    
    
    765Gain on disposal of idle assets
    
    
    
    
    
    
    29,846
    
    
    
    
    
    
    
    Foreign exchange gain  net (Note2)
    
    
    
    
    
    
    61,501
    
    
    
    12,332
    
    
    
    378Other (Note 19)
    
    
    96,094
    
    
    
    117,596
    
    
    
    96,988
    
    
    
    2,976Total Non-Operating Income
    
    
    274,646
    
    
    
    510,941
    
    
    
    242,721
    
    
    
    7,447
 (Forward)
 F-76




---



##### Table of Contents



Year Ended December 312004
    
    2005
    
    2006NT$
    
    NT$
    
    NT$
    
    US$(Note 3)NON-OPERATING EXPENSESLoss on sales of investments (Note 2)
    
    
    6,561
    
    
    
    33,024
    
    
    
    
    
    
    
    Interest
    
    
    257,144
    
    
    
    223,389
    
    
    
    258,770
    
    
    
    7,939Loss on appraisal of financial assets (Note 4)
    
    
    52,274
    
    
    
    
    
    
    
    
    
    
    
    Investments loss recognized by equity
method  net (Notes 2 and 8)
    
    
    29,160
    
    
    
    126,802
    
    
    
    
    
    
    
    Other investment loss
    
    
    49,833
    
    
    
    4,854
    
    
    
    
    
    
    
    Impairment loss (Notes 2 and 8)
    
    
    214,403
    
    
    
    320,293
    
    
    
    58,379
    
    
    
    1,791Financing cost
    
    
    15,369
    
    
    
    6,474
    
    
    
    10,437
    
    
    
    320Loss on disposal of property, plant and equipment
(Note 2)
    
    
    21,447
    
    
    
    24,231
    
    
    
    521
    
    
    
    16Foreign exchange loss  net (Note 2)
    
    
    141,496
    
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    43,278
    
    
    
    156,370
    
    
    
    78,206
    
    
    
    2,400Total Non-Operating Expenses
    
    
    830,965
    
    
    
    895,437
    
    
    
    406,313
    
    
    
    12,466INCOME BEFORE INCOME TAX AND MINORITY INTERESTS
    
    
    2,467,657
    
    
    
    2,473,595
    
    
    
    5,260,178
    
    
    
    161,380INCOME TAX BENEFIT (EXPENSE) (Notes 2 and 18)
    
    
    132,599
    
    
    
    (44,665
    )
    
    
    (546,604
    )
    
    
    (16,770
    )INCOME FOR MINORITY INTERESTS
    
    
    (305,151
    )
    
    
    (320,894
    )
    
    
    (575,304
    )
    
    
    (17,650
    )PRE-ACQUISITION EARNINGS
    
    
    27,655
    
    
    
    
    
    
    
    
    
    
    
    NET INCOME
    
    
    2,322,760
    
    
    
    2,108,036
    
    
    
    4,138,270
    
    
    
    126,960EARNINGS PER SHAREBased on weighted-average number of shares
outstanding of 887,227 thousand shares in 2004
and 885,686 thousand shares in 2005 and 886,012 thousand
shares in 2006
    
    
    2.62
    
    
    
    2.38
    
    
    
    4.67
    
    
    
    0.14Based on weighted-average number of shares
outstanding  retroactively adjusted
    
    
    2.62
    
    
    
    2.38
    
    
    
    4.67
    
    
    
    0.14
 The accompanying notes are an integral part of the consolidated financial statements.
 F-77




---



##### Table of Contents



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



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



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



ChipMOS TECHNOLOGIES INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 1.
    
    GENERALChipMOS TECHNOLOGIES INC. (ChipMOS Taiwan) was incorporated on July 28, 1997 as a joint venture
company of Mosel Vitelic Inc. (MVI) and Siliconware Precision Industries Co. Ltd. (SPIL). Its
operations, which began on August 12, 1997, consist of research, development, manufacturing,
testing, and assembly of integrated circuits, LCD and other Flat-Panel Display Driver
Semiconductors. ChipMOS Taiwan also provides semiconductor testing and assembly services on a
turnkey basis, in which ChipMOS Taiwan purchases fabricated wafers and sells tested and
assembled semiconductors to application and system manufacturers.On January 12, 2001, the holders of an aggregate of 583,419 thousand common shares of ChipMOS
Taiwan executed a Purchase and Subscription Agreement whereby they transferred their shares to
ChipMOS TECHNOLOGIES (Bermuda) LTD. (ChipMOS Bermuda) in exchange for 58,342 thousand newly
issued common shares of ChipMOS Bermuda. The selling shareholders, who previously held in an
aggregate 70.25% of the outstanding common shares of ChipMOS Taiwan, thus, became the holders
of the entire outstanding common shares of ChipMOS Bermuda. As of December 31, 2006, ChipMOS
Bermuda owned 70.42% of the outstanding common shares of ChipMOS Taiwan.
 
    F-81




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##### Table of Contents



2.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESBasis of presentationFor 2005, the consolidated financial statements include the accounts of ChipMOS Taiwan and all
subsidiaries (hereinafter, referred to individually or collectively as the Company),
including ThaiLin, ChipMOS USA, ChipMOS Japan; CHANTEK and ChipMOS Logic up to their respective
dates of merger, and FST up to the date of sale in which ChipMOS Taiwan holds a controlling
interest or voting interests in excess of 50% in accordance with the requirements of ROC
Statement of Financial Accounting
 F-82




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Standards (SFAS No. 7) which was revised on December 9, 2004 and effective on January 1,
2005. For 2004, among aforementioned entities, the accounts of ChipMOS USA and ChipMOS Japan
were too nominal, so they were not included in the consolidated financial statement. All
significant intercompany accounts and transactions have been eliminated.The consolidated financial statements were prepared in conformity with Guidelines for
Securities Issuers Financial Reporting, Commercial Accounting Law, accounting principles
generally accepted in Republic of China (ROC), other relevant laws and regulations. The
Company significant accounting policies are summarized as follows:Classification in the balance sheetA year is used to classify assets/liabilities as current or non-current in the balance sheet.Cash equivalentsCommercial papers acquired under resale agreements with original maturity dates of less than
three months are classified as cash equivalents.Financial assetsThe financial assets are categorized into financial assets at fair value through profit or
loss, available-for-sale, held-to-maturity financial assets, and financial assets carried at
cost, etc. The financial assets are initially recognized at fair value. The transaction costs
directly attributable to the acquisition of financial assets at fair value through profit and
loss shall be expensed as incurred, whereas for others shall be included in the original costs.The financial assets at fair value through profit or loss include investments for trading
purpose and those designated as financial assets reported at fair value, with the subsequent
changes in fair value recognized in earnings.The available-for-sale financial assets are carried at fair value, with the subsequent changes
in fair value reported as a separate component of shareholders equity. If there is objective
evidence indicating that impairment has occurred, the impairment loss shall be recognized. For
equity securities, the subsequent reversal of impairment loss shall be recorded as an
adjustment of shareholders equity; for debt securities, the adjustment shall be recognizedin earnings, provided that the reversal is related to the event which occurred after the
impairment loss was recognized.The held-to-maturity financial assets are carried at amortized cost. If there is objective
evidence indicating that impairment has occurred, the impairment loss shall be recognized. The
subsequent reversal of impairment loss shall be recognized in earnings to the extent of the
amortized cost, provided that the reversal is related to the event, which occurred after the
impairment loss was recognized.Investments that do not have a quoted market price in an active market and their fair value
cannot be readily determinable are carried at original cost. The recognized impairment
loss cannot be reversed subsequently.
 F-83




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Allowance for doubtful receivablesAllowance for doubtful accounts is provided based on evaluation of the collectibility of the
receivables evaluated based upon the overall financial condition and payment history of the
individual customers as well as the age of the receivables.Allowances for sales returns and discountsAllowances for sales returns and discounts are provided based on the sales returns from the past
experience; such provisions are deducted from sales and the related costs of products are
deducted from cost of products sold.InventoriesInventories are stated at the lower of standard cost (which approximates actual weighted average
cost) or market value. Market value represents replacement cost for raw materials and net
realizable value for other inventories.Investments Accounted for Using Equity MethodEffective January 1, 2006, pursuant to the revised SFAS No.5 Long-term Investments in Equity
Securities, the existing difference between the cost of investment and the Companys share of
the investees net equity treated as either goodwill with investment premium, has no longer
being amortized; or deferred credit with negative premium, shall continue to be amortized over
the remaining periods. The future difference shall be allocated to the related assets according
to the method applied to identify net assets at the process of acquisition in accordance with
SFAS No. 25 Business Combination.Property, plant and equipment and non-operating propertiesProperty, plant and equipment and non-operating properties are stated at cost less accumulated
depreciation. Major additions, renewals and betterment are capitalized, while maintenance and
repairs are expensed currently.The initial estimate of the service lives of the property, plant and equipment is as
follows: Machinery and equipment, 1 to 6 years; buildings and auxiliary equipment, 1 to 54
years; furniture and fixtures, 1 to 5 years; tooling, 1 to 2 years; transportation
equipment, 5 years; and leasehold improvements, 1 to 10 years. The foregoing service lives
plus one year to represent the estimated salvage value are used to depreciate the property,
plant and equipment using the straight-line method. The carrying value of property, plant
and equipment, which were fully depreciated using the foregoing service lives, but are
still being used by the Company are depreciated over their remaining estimated service
lives.Upon sale or disposal of items of properties, the related cost and accumulated depreciation
are removed from the accounts, and any gain or loss is credited or charged to current
income.GoodwillGoodwill arising on consolidation represents the excess of the cost of acquisition over the
groups interest in the fair value of the identifiable assets and liabilities of a subsidiary,
associate or jointly controlled entity at the date of acquisition. Goodwill is recognized as
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an asset and not to be amortized any more since January 1, 2006.Goodwill arising on the acquisition of an associate or a jointly controlled entity is included
within the carrying amount of the associate or jointly controlled entity. Goodwill arising on
the acquisition of subsidiaries is presented separately in the balance sheet.Intangible assetsIntangible assets are amortized using the straight-line method over the following periods:
Technology know-how, 5 years; technology license fee, and deferred charges, 3 to 10 years.Revenue recognitionSales are recognized when titles of products and risks of ownerships are transferred to
customers, primarily upon shipment.Foreign-currency transactionsForeign-currency transactions, except derivative financial instruments, are recorded in New
Taiwan dollars at the rates of exchange in effect when the transactions occur. Gains or losses
resulting from the application of different foreign exchange rates when cash in foreign currency
is converted into New Taiwan dollars, or when foreign-currency receivables or payables are
settled, are credited or charged to income in the year of conversion or settlement. On the
balance sheet dates, the balances of foreign-currency assets and liabilities are restated at the
prevailing exchange rates and the resulting differences are charged to current income except
those foreign currency denominated investments in shares of stock where such differences are
accounted for as translation adjustments under stockholders equity.Pension costsPension costs are recorded based on actuarial calculations. Unrecognized net transition
obligation is amortized over 15 years.Retirement benefit contributions are made to independent pension funds, Contributions are made
based on a percentage of the employees salaries, and are charged to current income as
incurred.Income taxThe Company adopts inter-period income tax allocation method. Deferred income tax assets are
recognized for the tax effects of deductible temporary differences, unused tax credits, and
operating loss carry forwards and those of taxable temporary differences are recognized as
deferred income tax liabilities. Valuation allowance is provided for deferred tax assets that
are not certain to be realized. A deferred tax asset or liability is classified as current or
non-current based on the classification of the related asset or liability. However, if a
deferred asset or liability cannot be related to an asset or liability in the financial
statements, then it is classified as current or non-current based on the
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expected reversal dates of the temporary difference.Any tax credit arising from the purchase of machinery, equipment and technology, research and
development expenditures, personnel training, investments in important technology-based
enterprise are recognized by the flow-through method.Adjustments of prior years tax liabilities are added to or deducted from the current years tax
provision.Income taxes (10%) on unappropriated earnings generated are recorded as expense in the year when
the stockholders have effectively resolved that earnings shall be retained.With the Income Basic Tax Act takes effect as of January 1, 2006, the
calculation base for income tax payment should be either the taxable income calculated by
the Income Tax Act plus tax exemptions granted under other laws, taxed at rate of 10% as
set by the Executive Yuan of the ROC, or that calculated in accordance with the Income Tax
Act, which ever is higher. The Company has included this effect in the current income tax
provision.Derivative financial instrumentsForeign currency forward exchange contracts (forward contracts), entered into for purposes other
than trading, are recorded as follows: the differences in the New Taiwan dollar amounts
translated using the spot rates as of the contract date and the amounts translated using the
contracted forward rates are amortized over the terms of the forward contracts using the
straight-line method. At the balance sheet dates, the receivables or payables arising from
forward contracts are restated using the prevailing spot rates and the resulting differences are
recognized in income. Also, the receivables and payables related to the forward contract are
netted and the resulting net amount is presented as either an asset or liability.The aggregate amount of the foreign currency to be acquired or sold under European option
contracts, entered into as hedge of anticipated transactions, is not recorded as assets or
liabilities. The amounts received on options written and the amounts paid on options purchased
are amortized using the straight-line method over the term of the contract. The gains arising
from the exercise of the options or the losses arising from options not exercised are
recognized as adjustments to the carrying values when the hedged transaction occurs.Treasury stockThe Company adopted ROC SFAS No. 30, Accounting for Treasury Stock. The Company purchases its
own outstanding shares and the shares of parent company held by its subsidiaries are regarded
as treasury stock.Impairment losses of assetsThe Company adopted ROC SFAS No. 35, Accounting for asset impairment on January 1, 2005,
which requires that certain assets, including properties, assets leased to others and deferred
charges, are subject to an impairment review in order to look for any indication that the value
of assets might be impaired on the balance date. An impairment
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loss should be recognized whenever the recoverable amount of the asset or the cash-generating
unit is below the carrying value of an asset.The recoverability is determined by comparing the carrying amount of the asset (or asset group)
on the date it is being tested for recoverability to the higher of the net fair value of the
assets or the sum of the expected net present value of future cash flows generated by the
assets and eventual disposal. A cash-generating unit, which includes allocation of goodwill,
shall be tested for impairment on an annual basis. The impairment loss shall first credit to
the portion of goodwill, then allocate to other assets according to the proportional ratio of
their book value. The recognized impairment losses of goodwill cannot be reversed.If any evidence indicates that the impairment loss recognized in previous years has decreased,
the Company shall re-perform the recoverability test and adjust the carrying value of the
assets to the extent of recoverable amount. However, the adjusted carrying value of the assets
due to loss reversal should not be in excess of the original book value, net of depreciation or
amortization, had the impairment loss not been recognized.After the recognition of an impairment loss, the depreciation (amortization) charged on the
assets shall be adjusted in future periods by the revised carrying values of the assets (net of
accumulated impairment), less their salvage value, on a systematic basis over their remaining
useful lives.ReclassificationsCertain accounts in 2004 and 2005 have been reclassified to conform to 2006 classifications.
 3.
    
    TRANSLATION INTO U.S. DOLLAR AMOUNTSThe Company maintains its accounts and expresses its consolidated financial statements in New
Taiwan dollars. For convenience purposes, U.S. dollar amounts presented in the accompanying
consolidated financial statements have been translated from New Taiwan dollars at the mid-price
of the USD as quoted by Bank of Taiwan as of December 31, 2006, which was NT$32.595 to US$1.00.
The convenience translations should not be construed as representations that the New Taiwan
dollar amounts have been, or could in the future be, converted into U.S. dollars at this or any
other rate of exchange.
 4.
    
    FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
 December 312005
    
    
    2006NT$
    
    
    NT$
    
    
    US$(In Thousands)Trading Purpose Financial Assets:Stocks
    
    
    153,303
    
    
    
    257,652
    
    
    
    7,905Open-ended funds
    
    
    32,833
    
    
    
    1,671,472
    
    
    
    51,280Total
    
    
    186,136
    
    
    
    1,929,124
    
    
    
    59,185
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reclassified the short-term investments as of December 31, 2005 as trading purpose
financial assets.Short-term investment as of December 31, 2005, which was originally, valuated using the lower of
cost or market method, starting from 2006, is valuated by fair value with the adoption of ROC
SFAS No. 34. The fair value is based on the market price at year-end.During 2005, ChipMOS Taiwan sold its investment in common stock of MVI and of ProMOS
Technologies Inc. (ProMOS) at a loss of NT$68,401 thousand and at a gain of NT$907 thousand,
respectively.During 2006, ChipMOS Taiwan sold its investment in common stock of MVI at a price of NT$30,436
thousand.As of December 31, 2006, ChipMOS Taiwan held 0 thousand (2005: 2,069 thousand) shares of common
stock of MVI and 4,201 thousand (2005: 701 thousand) shares of common stock of ProMOS.5.
    
    AVAILABLE-FOR-SALE FINANCIAL ASSETS
 December 312005
    
    2006NT$
    
    NT$
    
    US$(In Thousands)Integrated Silicon Solution, Inc. (ISSI)
    
    
    2,856
    
    
    
    
    
    
    
    Loss on appraisal of financial assets
    
    
    (2,856
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 During 2005, ThaiLin acquired 6 thousand preference shares of ISSI with the mergence with
ChipMOS Logic. Since January 1, 2006, ThaiLin adopted ROC GAAP No.34 reclassifying the asset
into available-for-sale securities- non-current and recognizing unrealized losses on financial
assets as reduction in shareholders equity.During 2006, ThaiLin sold the 6 thousand preference shares of ISSI after reclassifying the share
from non-current assets into current, and reversed unrealized losses on financial assets of
2,856 thousand.6.
    
    ALLOWANCE FOR DOUBTFUL RECEIVABLES
 Year Ended December 312004
    
    2005
    
    2006NT$
    
    
    
    NT$
    
    
    
    NT$
    
    
    
    
    
    
    
    US$(In Thousands)Balance, beginning of year
    
    
    97,288
    
    
    
    292,051
    
    
    
    401,300
    
    
    
    
    
    
    
    12,312Additions
    
    
    194,763
    
    
    
    109,249
    
    
    
    88,413
    
    
    
    
    
    
    
    2,712Reversals
    
    
    
    
    
    
    
    
    
    
    (54,684
    )
    
    
    
    
    
    
    (1,678
    )Write offs
    
    
    
    
    
    
    
    
    
    
    (276,872
    )
    
    
    
    
    
    
    (8,494
    )
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Year Ended December 312004
    
    2005
    
    2006NT$
    
    NT$
    
    NT$
    
    
    
    
    
    US$(In Thousands)Balance, end of year
    
    
    292,051
    
    
    
    401,300
    
    
    
    158,157
    
    
    
    
    
    
    
    4,852
 7.
    
    INVENTORIES  NET
 December 312005
    
    2006NT$
    
    NT$
    
    US$(In Thousands)Finished goods
    
    
    25,672
    
    
    
    38,113
    
    
    
    1,169Work in process
    
    
    202,951
    
    
    
    216,839
    
    
    
    6,653Raw materials
    
    
    394,261
    
    
    
    709,668
    
    
    
    21,772622,884
    
    
    
    964,620
    
    
    
    29,594Less  allowance for losses
    
    
    (82,462
    )
    
    
    (76,102
    )
    
    
    (2,335
    )540,422
    
    
    
    888,518
    
    
    
    27,259
 The changes in the inventory valuation allowance are summarized as follows:
 Year Ended December 312004
    
    2005
    
    2006NT$
    
    NT$
    
    NT$
    
    US$(In Thousands)Balance, beginning of year
    
    
    41,546
    
    
    
    111,074
    
    
    
    82,462
    
    
    
    2,530Additions
    
    
    150,231
    
    
    
    45,969
    
    
    
    
    
    
    
    Reversals
    
    
    (67,002
    )
    
    
    (74,581
    )
    
    
    (6,360
    )
    
    
    (195
    )Write offs
    
    
    (13,701
    )
    
    
    
    
    
    
    
    
    
    
    Balance, end of year
    
    
    111,074
    
    
    
    82,462
    
    
    
    76,102
    
    
    
    2,335
 8.
    
    LONG-TERM INVESTMENTS UNDER EQUITY METHOD
 December 312005
    
    
    2006Carrying
    
    
    % of
    
    
    Carrying
    
    
    % ofValue
    
    
    Ownership
    
    
    Value
    
    
    OwnershipNT$
    
    
    
    
    
    
    NT$
    
    
    US$Ultima Technology Corp.
(Ultima Technology)
    
    
    246,434
    
    
    
    30
    
    
    
    246,089
    
    
    
    7,550
    
    
    
    30Less: Accumulated impairment
    
    
    (188,310
    )
    
    
    
    
    
    
    (246,089
    )
    
    
    (7,550
    )58,124
    
    
    
    
    
    
    
    
    
    
    
    
 The equity in net income or loss of investee companies which is based on audited financial
statements for the years ended December 31, 2004 and 2005 were as follows:
 Year Ended December 312004
    
    2005NT$
    
    NT$(In Thousands)ChipMOS Japan
    
    
    704
    
    
    
    ChipMOS USA
    
    
    4,584
    
    
    
    AMCT
    
    
    (24,953
    )
    
    
    Hua Shen
    
    
    (84
    )
    
    
    Chantek International
    
    
    (9,411
    )
    
    
    Ultima Technology
    
    
    
    
    
    
    (126,802
    )(29,160
    )
    
    
    (126,802
    )
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In 2006, ChipMOS Taiwan did not share the loss of Ultima Technology as no audited
financial statements were available.Certain changes on the shareholders equity of investee companies result in the adjustments
on ChipMOS Taiwans equity according to its ownership to the respective accounts, which in 2005
increased unappropriated earnings by NT$130,330 thousand and decreased capital surplus by
NT$170,713 thousand, and in 2006 increased capital surplus by NT$8,696 thousand.CHANTEK sold 3,846 thousand shares of AMCT during 2004. The gain from disposal of each
investment was NT$8,803 thousand.The difference between the costs of the investment and ChipMOS Taiwans proportionate share
in the net assets of the investees at the date of acquisition is no longer amortized since
January 1, 2006.On May 5, 2004, ChipMOS Taiwan acquired a 30% interest in Ultima Technology for US$11,250
thousand (NT$374,625 thousand). In accordance with ROC SFAS 5, ChipMOS Taiwan deferred its
recognition of the proportionate share of loss of Ultima Technology for one year to 2005.
Therefore, the share of net loss of Ultima Technology in 2005 also included the share of 2004
loss of Ultima Technology.The company has been recognized impairment losses for the years ended December 31, 2005 and
2006, which were summarized as follow:
 December 312005
    
    2006NT$
    
    NT$
    
    US$(In Thousands)Ultima Technology
    
    
    188,310
    
    
    
    57,779
    
    
    
    1,773
 The summarized financial information for equity investees is as follows:
 December 312005
    
    2006NT$
    
    NT$
    
    US$(In Thousands)Ultima Technology:Current assets
    
    
    2,216
    
    
    
    150
    
    
    
    5Non-current assets
    
    
    53,015
    
    
    
    (21,736
    )
    
    
    (667
    )Current liabilities
    
    
    317
    
    
    
    1,734
    
    
    
    53Non-current liabilities
    
    
    
    
    
    
    
    
    
    
    
 December 312005
    
    2006NT$
    
    NT$
    
    US$(In Thousands)Ultima Technology.Net revenue
    
    
    
    
    
    
    
    
    
    
    Cost of revenues
    
    
    
    
    
    
    
    
    
    
    Gross loss
    
    
    
    
    
    
    
    
    
    
    Net loss
    
    
    (111,624
    )
    
    
    (74,629
    )
    
    
    (2,281
    )
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9.
    
    FINANICIAL ASSETS VALUATED BY COST
 December 312005
    
    2006Carrying
    
    % of
    
    Carrying
    
    % ofValue
    
    Ownership
    
    Value
    
    OwnershipNT$
    
    
    
    
    
    NT$
    
    US$G-Link Technology.,
Taiwan (G-Link)
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    DigiMedia Technology
Co., Ltd., Taiwan
(DigiMedia Taiwan)
    
    
    197,880
    
    
    
    19
    
    
    
    
    
    
    
    
    
    
    
    DigiMedia Technology
Co., Ltd., Cayman
(DigiMedia Cayman)
    
    
    
    
    
    
    
    
    
    
    198,666
    
    
    
    6,095
    
    
    
    12Best Home Corp. Ltd.
(Best Home)
    
    
    
    
    
    
    19
    
    
    
    
    
    
    
    
    
    
    
    Sun Fund Securities
Ltd. (Sun Fund)
    
    
    148,120
    
    
    
    17
    
    
    
    148,120
    
    
    
    4,544
    
    
    
    17CDIB High Tech
Investment Inc.
(CDIB)
    
    
    9,001
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    Validity Sensors Inc.
(VSI)
    
    
    
    
    
    
    
    
    
    
    19,957
    
    
    
    613
    
    
    
    355,001
    
    
    
    
    
    
    
    366,743
    
    
    
    11,252
 During 2004, Sun Fund and CDIB reduced their issued capital by 17% and 50%,
respectively.A loss of NT$49,833 thousand was recognized in respect of the reduction in capital in Sun
Fund. The investment of NT$9,000 thousand was returned to ThaiLin in respect of the reduction in
capital in CDIB.In 2005, G-Link reduced their issued capital. A loss of NT$4,854 thousand was recognized in
respect of the reduction in capital.The company has been recognized impairment losses for the years ended December 31, 2004,
2005 and 2006, which were summarized as follow:
 Year Ended December 312004
    
    2005
    
    2006NT$
    
    NT$
    
    NT$
    
    US$(In Thousands)G-Link
    
    
    
    
    
    
    4,855
    
    
    
    
    
    
    
    Sun Fund
    
    
    83,217
    
    
    
    17,830
    
    
    
    
    
    
    
    Best Home
    
    
    89,850
    
    
    
    
    
    
    
    
    
    
    
    Vigour
    
    
    41,336
    
    
    
    
    
    
    
    
    
    
    
    214,403
    
    
    
    22,685
    
    
    
    
    
    
    
    
 The Company sold shares of G-Link and CDIB during 2006. The gain (loss) from disposal
of each investment was NT$391 thousand and (NT$27 thousand), respectively.During 2006, CCI liquidated and return the investment of NT$38 thousand to the company.During 2006, the company sold the shares of ISSI. The gain from disposal of the investment
was NT$630 thousand.
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During 2006, the company transferred 14,550 thousand shares of DigiMedia Taiwan to DigiMedia
Cayman in exchange for 8,184 thousand shares of DigiMedia Cayman. The exchange ratio was
1:0.5625.10.
    
    PROPERTY, PLANT AND EQUIPMENT  NETAccumulated depreciation consists of the following:
 December 312005
    
    2006NT$
    
    NT$
    
    US$(In Thousands)Buildings and auxiliary equipment
    
    
    1,543,312
    
    
    
    1,760,726
    
    
    
    54,018Machinery and equipment
    
    
    12,266,880
    
    
    
    15,994,968
    
    
    
    490,719Furniture and fixtures
    
    
    345,307
    
    
    
    338,698
    
    
    
    10,391Transportation equipment
    
    
    15,976
    
    
    
    14,155
    
    
    
    434Tools
    
    
    857,137
    
    
    
    1,141,078
    
    
    
    35,008Leasehold improvements
    
    
    1,369
    
    
    
    405
    
    
    
    1215,029,981
    
    
    
    19,250,030
    
    
    
    590,582
 In 2005, the investee companies, in accordance with FABS No.35, recognized impairment
losses of NT$109,298 (US$3,353) for property, plant and equipment.As of December 31, 2006, certain of the above buildings and machinery were mortgaged as
collateral for the long-term loans (Note 14).11.
    
    INTANGIBLE ASSETS  NET
 December 312005
    
    2006NT$
    
    NT$
    
    US$(In Thousands)CostTechnology know-how
    
    
    115,803
    
    
    
    148,498
    
    
    
    4,556Software and other deferred
expense
    
    
    314,330
    
    
    
    389,746
    
    
    
    11,957430,133
    
    
    
    538,244
    
    
    
    16,513Accumulated amortization
Technology know-how
    
    
    (105,402
    )
    
    
    (143,297
    )
    
    
    (4,397
    )Software and other
deferred expense
    
    
    (221,360
    )
    
    
    (250,630
    )
    
    
    (7,689
    )(326,762
    )
    
    
    (393,927
    )
    
    
    (12,086
    )Carrying value
    
    
    103,371
    
    
    
    144,317
    
    
    
    4,427
 12.
    
    BANK LOANS
 December 312005
    
    2006NT$
    
    NT$
    
    US$(In Thousands)Unsecured loan:Working capital loans
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December 312005
    
    2006NT$
    
    NT$
    
    US$(In Thousands)NT$50,000 thousand,
repayable by December
2006, annual interest
at 3.75%
    
    
    50,000
    
    
    
    
    
    
    
    NT$100,000 thousand,
repayable by January
2006, annual interest
at 2.20%
    
    
    100,000
    
    
    
    
    
    
    
    NT$100,000 thousand,
repayable by January
2006, annual interest
at 1.55%
    
    
    100,000
    
    
    
    
    
    
    
    USD$26,181 thousand,
repayable by June 2007,
annual interest at
6.02%-6.35%
    
    
    
    
    
    
    853,360
    
    
    
    26,181Loan for imports of machinery
JPY$779,090 thousand,
repayable by June
2006, annual interest
at 0.7505% - 0.90%
    
    
    217,834
    
    
    
    
    
    
    
    467,834
    
    
    
    853,360
    
    
    
    26,181
 Unused credit lines as of December 31, 2006 aggregated approximately NT$7,230,798 thousand
and USD$128,089 thousands, which will expire from January 2007 to December 2007.13.
    
    COMMERCIAL PAPER PAYABLE
 December 312005
    
    2006NT$
    
    NT$
    
    US$(In Thousands)Commercial paper
    
    
    150,000
    
    
    
    
    
    
    
    Discount on par value
    
    
    (587
    )
    
    
    
    
    
    
    149,413
    
    
    
    
    
    
    
    
 The commercial papers actual interest rate is 1.55%-1.622% in 2005 and it expires in February
2006.
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December 312005
    
    
    2006NT$
    
    
    NT$
    
    
    US$(In Thousands)Bank loans, repayable quarterly from November
2004 to February 2007, interest at fixed
rate (3.4% as of December 31, 2005 and
2006 respectively)
    
    
    150,000
    
    
    
    30,000
    
    
    
    920Bank loans, repayable quarterly from February
2006 to November 2009, interest at fixed
rate (4.69% as of December 31, 2005 and
2006, respectively)
    
    
    500,000
    
    
    
    375,000
    
    
    
    11,505Bank loans, repayable semi-annually from
March 2005 to September 2006, interest at
floating rate ( 3.645% as of December 31,
2005)
    
    
    134,000
    
    
    
    
    
    
    
    Syndicated bank loans collateralized by
equipment, repayable semi-annually from
September 2004 to September 2007, interest
at floating rate (4.72% and 5.03% as of
December 31, 2005 and 2006, respectively)
    
    
    1,142,840
    
    
    
    571,400
    
    
    
    17,530Syndicated bank loans, repayable
semi-annually from September 2004 to
September 2007, interest at floating rate
(4.845% and 5.155% as of December 31, 2005
and 2006, respectively)
    
    
    285,710
    
    
    
    142,850
    
    
    
    4,383Syndicated bank loans collateralized by
equipment, repayable quarterly from June
2004 to March 2008, interest at floating
rate (3.97% and 4.24% as of December 31,
2005 and 2006 respectively)
    
    
    1,277,308
    
    
    
    709,615
    
    
    
    21,770Syndicated bank loans collateralized by
equipment, repayable semi-annually from
November 2006 to May 2010, interest rate
at floating rate (3.72% and 3.99% as of
December 31, 2005 and 2006 respectively)
    
    
    1,000,000
    
    
    
    875,000
    
    
    
    26,845
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December 312005
    
    
    2006NT$
    
    
    NT$
    
    
    US$(In Thousands)Research and development subsidy loan,
collateralized by time deposits in amounts
of NT25,000 thousand, repayable quarterly
from July 2003 to July 2006, with zero
interest rate
    
    
    6,181
    
    
    
    
    
    
    
    Research and development subsidy loan,
repayable quarterly from January 2006 to
April 2010, interest at fixed rate (1% as
of December 31, 2005 and 2006)
    
    
    29,120
    
    
    
    22,649
    
    
    
    695Syndicated bank loans collateralized by
equipment, repayable on September 2009,
interest at floating rate (3.195% and
3.505% as of December 31, 2005 and 2006
respectively)
    
    
    500,000
    
    
    
    500,000
    
    
    
    15,340Bank loans collateralized by equipment,
repayable quarterly from December 2004 to
September 2007, interest at floating rate
(3.89% and 4.25% as of December 31, 2005
and 2006 respectively)
    
    
    103,000
    
    
    
    39,000
    
    
    
    1,197Bank loans collateralized by equipment,
repayable quarterly from February 2005 to
November 2008, interest at floating rate
(2.9% and 3.14% as of December 31, 2005
and 2006 respectively)
    
    
    262,505
    
    
    
    175,005
    
    
    
    5,369Bank loans collateralized by equipment,
repayable quarterly from March 2006 to
December 2010, interest at floating rate.
(3.2% and 3.08% as of December 31, 2005
and 2006 respectively)
    
    
    440,000
    
    
    
    352,000
    
    
    
    10,799Bank loans collateralized by property, repaid
at January 2006, interest at floating
rate, (2.5% as of December 31, 2005)
    
    
    130,000
    
    
    
    
    
    
    
    Syndicated bank loans collateralized by
equipment, repayable quarterly April 2005
to January 2011, interest at floating rate
(3.08% and 3.45% as of December 31, 2005
and 2006 respectively)
    
    
    539,131
    
    
    
    431,305
    
    
    
    13,232Syndicated bank loans collateralized by
equipment, repayable quarterly December
2003 to September 2008, interest at
floating rate (3.08% and 3.45% as of
December 31, 2005 and 2006 respectively)
    
    
    234,972
    
    
    
    149,528
    
    
    
    4,587
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December 312005
    
    
    2006NT$
    
    
    NT$
    
    
    US$(In Thousands)Syndicated bank loans collateralized by
equipment, repayable semi-annually from
April 2008 to April 2011, interest at
floating rate (3.14% as of December 31,
2006)
    
    
    
    
    
    
    6,000,000
    
    
    
    184,077Bank loans, repayable on April 2008, interest
at floating rate (3.655% as of December
31, 2006)
    
    
    
    
    
    
    500,000
    
    
    
    15,340Syndicated bank loans collateralized by
equipment, repayable quarterly from July
2006 to April 2008, interest at fixed rate
(3.2% as of December 31, 2006)
    
    
    
    
    
    
    150,000
    
    
    
    4,602Bank loans, repayable quarterly from
September 2007 to June 2009, interest at
floating rate (3.24% as of December 31,
2006)
    
    
    
    
    
    
    200,000
    
    
    
    6,136Bank loans, repayable on April 2009 interest
at fixed rate (2.89% as of December 31,
2006)
    
    
    
    
    
    
    200,000
    
    
    
    6,136Bank loans, repayable quarterly from December
2007 to December 2009, interest at
floating rate (3.01% as of December 31,
2006)
    
    
    
    
    
    
    400,000
    
    
    
    12,272Syndicated bank loans collateralized by
equipment, repayable semi-annually from
June 2009 to December 2013, interest at
floating rate (3.09% as of December 31,
2006)
    
    
    
    
    
    
    450,000
    
    
    
    13,806Syndicated bank loans collateralized by
equipment, repayable quarterly from May
2007 to February 2012, interest at
floating rate (2.75% as of December 31,
2006)
    
    
    
    
    
    
    264,000
    
    
    
    8,0996,734,767
    
    
    
    12,537,352
    
    
    
    384,640Less: current portion
    
    
    (2,300,916
    )
    
    
    (2,335,284
    )
    
    
    (71,645
    )4,433,851
    
    
    
    10,202,068
    
    
    
    312,995
   (1)
    
    Ensure that ChipMOS Bermuda and SPIL maintain a percentage of direct ownership in
ChipMOS Taiwan of at least 50% of outstanding shares and have control over its operation.(2)
    
    Maintain certain financial ratios.
ChipMOS Taiwan was in compliance with the financial ratio requirements as of December 31,
2005.
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Future minimum principal payments under the Company long-term loans as of December 31, 2006
are as follows:
 AmountNT$
    
    US$(In Thousands)2007
    
    
    2,335,284
    
    
    
    71,6452008
    
    
    3,465,885
    
    
    
    106,3322009
    
    
    3,361,873
    
    
    
    103,1412010
    
    
    2,181,138
    
    
    
    66,9162011 and thereafter
    
    
    1,193,172
    
    
    
    36,60612,537,352
    
    
    
    384,640
 15.
    
    PENSION PLANChipMOS Taiwan and ThaiLin have established defined benefit pension plans for all of their
regular employees, which provide benefits based on the length of service and the average
monthly salary for the six months period immediately before retirement.ChipMOS Taiwan and ThaiLin make monthly contributions, equal to 2% of salaries and wages, to a
pension fund that is administered by a pension fund monitoring committee and deposited in its
name in the Central Trust of China in the Republic of China.The new Labor Pension Act effective July 2005, required that ChipMOS Taiwan and ThaiLin make
monthly deposits, equal to 6% of salaries and wages of employees who chose to join new pension
scheme, into individual pension account in Bureau of Labor Insurance.Certain pension information is as follows:
 a.
    
    Net pension cost
 Year Ended December 312004
    
    2005
    
    2006NT$
    
    NT$
    
    NT$
    
    US$(In Thousands)Service cost
    
    
    56,065
    
    
    
    30,021
    
    
    
    1,688
    
    
    
    52Interest cost
    
    
    8,038
    
    
    
    8,159
    
    
    
    7,790
    
    
    
    239Projected return on plan assets
    
    
    (5,304
    )
    
    
    (4,500
    )
    
    
    (4,740
    )
    
    
    (146
    )Amortization
    
    
    (143
    )
    
    
    1,031
    
    
    
    780
    
    
    
    24Unrecognized net (gain)/loss
    
    
    655
    
    
    
    53
    
    
    
    53
    
    
    
    259,311
    
    
    
    34,764
    
    
    
    5,571
    
    
    
    171
 b.
    
    Reconciliation of the fund status of the plan and accrued pension cost
 December 312004
    
    2005
    
    2006NT$
    
    NT$
    
    NT$
    
    US$(In Thousands)Actuarial present value of
benefit obligationsVested benefit obligation
    
    
    374
    
    
    
    415
    
    
    
    1,028
    
    
    
    32Nonvested accumulated
benefit obligation
    
    
    169,835
    
    
    
    142,011
    
    
    
    141,408
    
    
    
    4,338
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December 312004
    
    2005
    
    2006NT$
    
    NT$
    
    NT$
    
    US$(In Thousands)Additional benefits
based on future salaries
    
    
    143,915
    
    
    
    140,827
    
    
    
    175,209
    
    
    
    5,375Projected benefit obligation
    
    
    314,124
    
    
    
    283,253
    
    
    
    317,645
    
    
    
    9,745Plan assets at fair value
    
    
    (174,349
    )
    
    
    (156,989
    )
    
    
    (199,991
    )
    
    
    (6,135
    )Projected benefit obligation
in excess of plan assets
    
    
    139,775
    
    
    
    126,264
    
    
    
    117,654
    
    
    
    3,610Unrecognized net transition
obligation
    
    
    (3,043
    )
    
    
    (663
    )
    
    
    (610
    )
    
    
    (19
    )Unrecognized net loss
    
    
    (34,058
    )
    
    
    (43,943
    )
    
    
    (69,472
    )
    
    
    (2,131
    )Accrued pension cost
    
    
    102,674
    
    
    
    81,658
    
    
    
    47,572
    
    
    
    1,460
 c.
    
    Actuarial assumptions
 Year Ended December 312004
    
    2005
    
    2006Discount rate
    
    
    3.25
    %
    
    
    2.75
    %
    
    
    2.75
    %Future salary increase rate
    
    
    3.25
    %
    
    
    3.25
    %
    
    
    3.50%~5.00
    %Expected rate of return on plan assets
    
    
    3.25
    %
    
    
    2.75
    %
    
    
    2.75
    %
 d.
    
    Changes in pension fund
 Year Ended December 312004
    
    2005
    
    2006NT$
    
    NT$
    
    NT$
    
    US$(In Thousands)Contributions
    
    
    32,160
    
    
    
    29,892
    
    
    
    39,656
    
    
    
    1,217Payment of benefits
    
    
    
    
    
    
    
    
    
    
    
 16.
    
    TREASURY STOCK
 December 312005
    
    2006NT$
    
    NT$
    
    US$(In Thousands)Outstanding shares held by subsidiaries
    
    
    4,750
    
    
    
    4,750
    
    
    
    146Purchase of treasury stock
    
    
    115,402
    
    
    
    118,593
    
    
    
    3,638120,152
    
    
    
    123,343
    
    
    
    3,784
 As of December 31, 2006, ThaiLin held 254 thousand outstanding shares of ChipMOS Taiwan as
longterm investment. The treasury stocks were carried with an amount of NT$4,750 thousand,
according to ChipMOS Taiwans equity in the cost of the investment recorded by ThaiLin.In 2005 and 2006, ChipMOS Taiwan purchased 7,098 thousand and 210 shares of treasury stock at
the cost of NT$115,402 thousand and NT$3,191 thousand, respectively. These
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shares shall be transferred to employees, resold or deregistered within three years. These shares
do not possess shareholders equity.
 17.
    
    SHAREHOLDERS EQUITYUnder ROC Company Law, the capital surplus can only be used to offset deficits, except that
capital surplus generated from (1) donations (donated capital) or (2) the excess of the issue
price over the par value of capital stock (including stocks issued for new capital and mergers,
and the purchase of treasury stock) can be transferred to capital as stock dividends when no
deficit remains and shareholders approve such distribution.ChipMOS Taiwans Articles of Incorporation provides that the following may be appropriated, from
the accumulated net income after deducting any previously accumulated deficit and 10% legal
reserve, subject to shareholder approval: (a) 10% as bonus to employees, (b) not more than 2% as
remuneration to directors and supervisors, (c) a special reserve, if deemed necessary, and (d)
dividends to shareholders.These appropriations and the disposition of the remaining net income shall be resolved by the
shareholders in the following year and given effect in the financial statements of that year.The aforementioned appropriation for legal reserve shall be made until the reserve equals
aggregate par value of ChipMOS Taiwans outstanding capital stock. The reserve can only be used
to offset a deficit; or, when its balance has reaches 50% of the aggregate par value of the
outstanding capital stock of ChipMOS Taiwan, up to 50% thereof can be distributed as stock
dividend.Under the Integrated Income Tax System that became effective on January 1, 1998, ROC resident
individual shareholders are allowed a tax credit for the income paid by ChipMOS Taiwan on
earnings generated from the effective date. An Imputation Credit Account (ICA) is maintained by
ChipMOS Taiwan for such income tax and the tax credit allocated to each shareholder. The
maximum credit available for allocation to each resident shareholder cannot exceed the balance
shown in the ICA on the date of distribution of dividends.
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18.
    
    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 312004
    
    
    2005
    
    
    2006NT$
    
    
    NT$
    
    
    NT$
    
    
    US$(In Thousands)Income tax expense on
income before income tax
at statutory rate
    
    
    674,082
    
    
    
    709,515
    
    
    
    1,391,161
    
    
    
    42,680Tax effects of adjustments:Loss carry forward
    
    
    (260,217
    )
    
    
    (489,380
    )
    
    
    (253,116
    )
    
    
    (7,766
    )Tax-exempt income
    
    
    (166,653
    )
    
    
    (157,808
    )
    
    
    (234,689
    )
    
    
    (7,200
    )Permanent difference
    
    
    (19,795
    )
    
    
    40,061
    
    
    
    (113,928
    )
    
    
    (3,495
    )Temporary difference
    
    
    175,091
    
    
    
    41,694
    
    
    
    (97,278
    )
    
    
    (2,984
    )Income tax expense-
current before tax credits
    
    
    402,508
    
    
    
    144,082
    
    
    
    692,150
    
    
    
    21,235
 b.
    
    Income tax expense (benefit) consists of:
 Year Ended December 312004
    
    
    2005
    
    
    2006NT$
    
    
    NT$
    
    
    NT$
    
    
    US$(In Thousands)Income tax expense  current
before tax credits
    
    
    402,508
    
    
    
    144,082
    
    
    
    692,150
    
    
    
    21,235Tax on the unappropriated earnings
    
    
    
    
    
    
    163,838
    
    
    
    111,066
    
    
    
    3,407Separate and foreign income tax
    
    
    86
    
    
    
    746
    
    
    
    209
    
    
    
    6Income tax credits
    
    
    (355,923
    )
    
    
    (218,672
    )
    
    
    (506,285
    )
    
    
    (15,532
    )Income tax for the current year
    
    
    46,671
    
    
    
    89,994
    
    
    
    297,140
    
    
    
    9,116(Forward)(Followed)Net change of deferred income tax
assets (liabilities) for the yearTax credits
    
    
    (70,003
    )
    
    
    76,611
    
    
    
    (206,923
    )
    
    
    (6,348
    )Temporary difference
    
    
    (128,593
    )
    
    
    (234,688
    )
    
    
    97,278
    
    
    
    2,984Valuation allowance
    
    
    (560,053
    )
    
    
    (405,487
    )
    
    
    230,050
    
    
    
    7,058Loss carry forward
    
    
    584,122
    
    
    
    517,738
    
    
    
    133,732
    
    
    
    4,103Adjustment of prior years taxes
and others
    
    
    (4,743
    )
    
    
    497
    
    
    
    (4,673
    )
    
    
    (143
    )Income tax (benefit) expense
    
    
    (132,599
    )
    
    
    44,665
    
    
    
    546,604
    
    
    
    16,770
 ChipMOS Taiwan under Science Park Regulations is entitled to an exemption from ROC
income taxes for a period of four years on income attributable to the expansion of its
production capacity as a result of purchases of equipment funded by capital increases.
Such tax exemption will expire on December 31, 2008.
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c.
    
    Deferred income tax assets and liabilities are summarized as follows:
 December 312005
    
    
    2006NT$
    
    
    NT$
    
    
    US$(In Thousands)Net current deferred income tax assets:Unrealized foreign exchange loss
    
    
    3,496
    
    
    
    3,679
    
    
    
    113Unrealized loss provision on sales allowance
    
    
    9,455
    
    
    
    21,912
    
    
    
    672Loss of market price decline and
obsolete and slow-moving inventories
    
    
    20,616
    
    
    
    19,026
    
    
    
    584Allowance for bad-debts
    
    
    81,424
    
    
    
    77,533
    
    
    
    2,378Tax credits
    
    
    110,103
    
    
    
    491
    
    
    
    15Others
    
    
    14,108
    
    
    
    11,696
    
    
    
    359239,202
    
    
    
    134,337
    
    
    
    4,121Less: valuation allowance
    
    
    
    
    
    
    
    
    
    
    239,202
    
    
    
    134,337
    
    
    
    4,121Net non-current deferred income tax
assets (liabilities):Tax credits for investment in
machinery and equipment and R&D
expenditures
    
    
    801,450
    
    
    
    1,117,985
    
    
    
    34,299Loss carry forwards
    
    
    133,732
    
    
    
    
    
    
    
    Depreciation differences
    
    
    (556,316
    )
    
    
    (650,012
    )
    
    
    (19,942
    )Other
    
    
    266,057
    
    
    
    257,728
    
    
    
    7,907644,923
    
    
    
    725,701
    
    
    
    22,264Less: Valuation allowance
    
    
    (793,874
    )
    
    
    (1,023,924
    )
    
    
    (31,413
    )(148,951
    )
    
    
    (298,223
    )
    
    
    (9,149
    )
 The rate at which deferred income tax components are measured was 25% as of December
31, 2005 and 2006.
 d.
    
    Integrated income tax information
 ChipMOS Taiwan, the balances of the ICA were NT$52,445 thousand and NT$71,486 thousand as
of December 31, 2005 and 2006, respectively.ChipMOS Taiwan, the imputation credit allocated to each shareholder shall be based on the
balance in the ICA on the date of distribution of dividends. Tax creditable ratio was
2.85% and 1.18% for 2005 and 2006, respectively.
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##### Table of Contents



e.
    
    The balance and year of expiry of unused investment tax credits as of December 31,
2006 are as follows:
 Year of Expiry
    
    Machinery & Equipment
    
    
    R&D ExpenditureNT$
    
    
    NT$(In Thousands)2007
    
    
    267,082
    
    
    
    34,1842008
    
    
    254,505
    
    
    
    2009
    
    
    43,416
    
    
    
    42,7322010
    
    
    476,556
    
    
    
    1,041,559
    
    
    
    76,916
 The deferred tax assets related to the investment tax credits on R&D expenditures and
purchases of machinery and equipment will expire from 2007 to 2010. Under ROC tax
regulations, tax credits can be utilized to reduce current income tax obligations only to
the extent of 50% of such income tax obligations except in the year when such tax credit
will expire, in which case, the entire amount of expiring tax credit may be utilized to
reduce the current income tax obligation. The foregoing limitation on the utilization of
tax credits, the expiry dates of the tax credits, the level of tax credits expected to be
generated from future operations and the level of non-taxable income attributable to the
four-year income tax holiday on capacity expansion led management to conclude that it is
unlikely that these investment tax credits will be fully realized. Loss carry forwards can
be used to deduct current income tax obligation up to the extent of taxable income and will
be expired after 5 years if not fully utilized by the Company. Accordingly, a valuation
allowance on deferred tax assets is recognized as of December 31, 2005 and 2006.The tax authorities have examined and assessed the income tax returns of ChipMOS Taiwan and
ThaiLin through 2003 and 2004, respectively.According to ROC tax law, unappropriated earnings generated in 1998 and thereafter are
subject to a tax of 10% in the year when the shareholders resolve that such earnings shall
be retained. The retained earnings (accumulated deficit) of ChipMOS Taiwan as of December
31, 2005 and 2006 were generated during and after 1998.
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19.
    
    RELATED PARTY TRANSACTIONSThe Company engages in business transactions with the following related parties:
 Name
    
    RelationshipChipMOS Bermuda
    
    A major shareholderSPIL
    
    A major shareholderMVI
    
    An indirect major shareholderChipMOS Japan
    
    A 100% owned subsidiaryChipMOS U.S.A.
    
    A 100% owned subsidiaryPlusMOS
    
    A former 25% owned investee.  It merged with CHANTEK in April 2004.ProMOS Technology Inc. (ProMOS)
    
    An investee of MVIDenMOS Technology Inc. (DenMOS)
    
    An investee of MVIMouFu Investment Ltd. (Mou-Fu)
    
    An investee of MVIBest Home
    
    A 19% owned investee; ChipMOS Taiwan is a major shareholder.Sun Fund
    
    A 17% owned investee; ChipMOS Taiwan is a major shareholder.AMCT
    
    A former 100% owned investee. It was liquidated in October 2004.ChipMOS TECHNOLOGIES (H.K.) Ltd. (ChipMOS H.K.)
    
    A subsidiary of ChipMOS Bermuda (Note: It used to be called ChipMOS FAR EAST Ltd., and was renamed as ChipMOS TECHNOLOGIES (H.K.) Ltd. in May 2005.)ChipMOS
TECHNOLOGIES (H.K.) Ltd., Taiwan Branch (ChipMOS
(H.K.) Taiwan Branch)
    
    A subsidiary of ChipMOS Bermuda
  Year Ended December 312004
    
    2005
    
    2006NT$
    
    NT$
    
    NT$
    
    US$(In Thousands)During the yearSalesMVI
    
    
    14,274
    
    
    
    6
    
    
    
    
    
    
    
    PlusMOS
    
    
    16,751
    
    
    
    
    
    
    
    
    
    
    
    ProMOS
    
    
    4,231,658
    
    
    
    4,332,058
    
    
    
    5,529,273
    
    
    
    169,636ChipMOS H.K.
    
    
    17,845
    
    
    
    10,556
    
    
    
    6,172
    
    
    
    189SPIL
    
    
    
    
    
    
    
    
    
    
    83
    
    
    
    3DenMOS
    
    
    567,042
    
    
    
    271,393
    
    
    
    124,870
    
    
    
    3,8314,847,570
    
    
    
    4,614,013
    
    
    
    5,660,398
    
    
    
    173,659(Forward)
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Year Ended December 312004
    
    2005
    
    2006NT$
    
    NT$
    
    NT$
    
    US$(In Thousands)(Followed)Rental revenueMVI
    
    
    4,800
    
    
    
    4,800
    
    
    
    2,160
    
    
    
    66DenMOS
    
    
    455
    
    
    
    30
    
    
    
    
    
    
    
    ProMOS
    
    
    14,057
    
    
    
    9,371
    
    
    
    9,371
    
    
    
    28819,312
    
    
    
    14,201
    
    
    
    11,531
    
    
    
    354Other revenueSPIL
    
    
    
    
    
    
    
    
    
    
    62
    
    
    
    2PlusMOS
    
    
    41
    
    
    
    
    
    
    
    
    
    
    
    ChipMOS H.K.
    
    
    4,455
    
    
    
    1,982
    
    
    
    11,996
    
    
    
    368ChipMOS U.S.A.
    
    
    526
    
    
    
    
    
    
    
    
    
    
    
    ProMOS
    
    
    507
    
    
    
    522
    
    
    
    73
    
    
    
    2AMCT
    
    
    126
    
    
    
    
    
    
    
    
    
    
    
    5,655
    
    
    
    2,504
    
    
    
    12,131
    
    
    
    372PurchasesAMCT
    
    
    10,732
    
    
    
    
    
    
    
    
    
    
    
    ChipMOS H.K.
    
    
    89,599
    
    
    
    3,120
    
    
    
    
    
    
    
    MVI
    
    
    637,089
    
    
    
    11,964
    
    
    
    
    
    
    
    ChipMOS U.S.A.
    
    
    149
    
    
    
    
    
    
    
    
    
    
    
    SPIL
    
    
    
    
    
    
    75
    
    
    
    
    
    
    
    737,569
    
    
    
    15,159
    
    
    
    
    
    
    
    Subcontract expensesChipMOS H.K.
    
    
    214,127
    
    
    
    73,905
    
    
    
    28,326
    
    
    
    869Operating expensesAdministrative expensesMVI
    
    
    1,950
    
    
    
    
    
    
    
    
    
    
    
    Mou-Fu
    
    
    2,275
    
    
    
    3,900
    
    
    
    1,950
    
    
    
    604,225
    
    
    
    3,900
    
    
    
    1,950
    
    
    
    60Service feeChipMOS U.S.A.
    
    
    32,175
    
    
    
    
    
    
    
    
    
    
    
    ChipMOS Japan
    
    
    15,045
    
    
    
    
    
    
    
    
    
    
    
    47,220
    
    
    
    
    
    
    
    
    
    
    
    Rental expenseMVI
    
    
    2,218
    
    
    
    593
    
    
    
    
    
    
    
    ProMOS
    
    
    
    
    
    
    1,245
    
    
    
    
    
    
    
    2,218
    
    
    
    1,838
    
    
    
    
    
    
    
    Fee for stock registry serviceMou-Fu
    
    
    1,977
    
    
    
    493
    
    
    
    
    
    
    
    (Forward)
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Year Ended December 312004
    
    2005
    
    2006NT$
    
    NT$
    
    NT$
    
    US$(In Thousands)(Followed)Consultation feeChipMOS Bermuda
    
    
    25,191
    
    
    
    32,014
    
    
    
    32,695
    
    
    
    1,003Other expensePlusMOS
    
    
    88
    
    
    
    
    
    
    
    
    
    
    
    MVI
    
    
    148
    
    
    
    148
    
    
    
    144
    
    
    
    4ProMOS
    
    
    1,027
    
    
    
    
    
    
    
    
    
    
    
    1,263
    
    
    
    148
    
    
    
    144
    
    
    
    4
 December 312005
    
    2006NT$
    
    NT$
    
    US$(In Thousands)At the end of yearNotes and accounts receivableDenMOS
    
    
    54,901
    
    
    
    10,332
    
    
    
    317ProMOS
    
    
    1,372,950
    
    
    
    1,851,469
    
    
    
    56,802ChipMOS H.K.
    
    
    1,554
    
    
    
    
    
    
    
    1,429,405
    
    
    
    1,861,801
    
    
    
    57,119Other receivableChipMOS Bermuda
    
    
    8,862
    
    
    
    1,526
    
    
    
    47MVI
    
    
    852
    
    
    
    613
    
    
    
    19SPIL
    
    
    
    
    
    
    65
    
    
    
    2DenMOS
    
    
    317
    
    
    
    162
    
    
    
    5ChipMOS H.K.
    
    
    493
    
    
    
    3,003
    
    
    
    92ProMOS
    
    
    3,174
    
    
    
    13,118
    
    
    
    402ChipMOS (H.K.) Taiwan Branch
    
    
    137
    
    
    
    12
    
    
    
    13,835
    
    
    
    18,499
    
    
    
    567Accounts payableChipMOS H.K.
    
    
    2,214
    
    
    
    4,295
    
    
    
    132Other payableMVI
    
    
    28
    
    
    
    25
    
    
    
    1ProMOS
    
    
    781
    
    
    
    
    
    
    
    ChipMOS H.K.
    
    
    3,191
    
    
    
    
    
    
    
    SPIL
    
    
    79
    
    
    
    
    
    
    
    ChipMOS Bermuda
    
    
    41,063
    
    
    
    30,965
    
    
    
    950Mou-Fu
    
    
    348
    
    
    
    
    
    
    
    45,490
    
    
    
    30,990
    
    
    
    951
    F- 105




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##### Table of Contents



agreed to pay a license fee of US$20,000 thousand in installments of US$250 thousand in every
three months over 20 years, starting from March 30, 2005.As of April 7, 2004, ChipMOS Taiwan entered into a technology transfer agreement with ChipMOS
Bermuda for a period of 20 years, starting from effective day. The total price was US$19,700
thousand, recorded as deferred credits. As of December 31, 2005 and 2006, the unamortized
amount was NT$593,666 thousand and NT$561,137.In 2006 ChipMOS Taiwan sold furniture and fixtures to ChipMOS H.K. Taiwan Branch with the
proceeds amounted to NT$132 thousand and recognized gain on disposal of properties amounted to
NT$14 thousand.In 2005, ChipMOS Taiwan acquired 8,085 thousand, 418 thousand and 710 thousand shares of CHANTEK
from MVI, Mou-Fu and Best Home at the cost of NT$49,804 thousand, 2,574 thousand and 4,372
thousand.20.
    
    RESTRICTED CASH AND CASH EQUIVALENTS
 December 312005
    
    2006NT$
    
    NT$
    
    US$(In Thousands)Time deposits (matures
from January 2007 to
October 2007)
    
    
    125,447
    
    
    
    81,283
    
    
    
    2,494
  21.
    
    SIGNIFICANT COMMITMENTS AND CONTINGENCIES AS OF DECEMBER 31, 2006
 a.
    
    As of December 31, 2006, ChipMOS Taiwan leases parcels of land from the Hsinchu and
Tainan Science Based Industrial Park (SBIP) under several agreements expiring on various
dates from 2002 to 2017, with renewal options.
 F- 106




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Year
    
    AmountNT$
    
    US$(In Thousands)2007
    
    
    17,362
    
    
    
    5322008
    
    
    17,362
    
    
    
    5322009
    
    
    17,362
    
    
    
    5322010
    
    
    17,362
    
    
    
    532Thereafter
    
    
    121,536
    
    
    
    3,731Total minimum lease payments
    
    
    190,984
    
    
    
    5,859
 b.
    
    As of December 31, 2006, ChipMOS Taiwan leases a parcel of machinery under an
agreement expiring on 2009.The future minimum lease payments under the above-mentioned leases as of December 31, 2006
are as follows:
 Year
    
    AmountNT$
    
    US$(In Thousands)2007
    
    
    44,376
    
    
    
    1,3612008
    
    
    44,376
    
    
    
    1,3612009
    
    
    33,282
    
    
    
    1,022Total minimum lease payments
    
    
    122,034
    
    
    
    3,744
 c.
    
    Pursuant to the semiconductor packaging technology license agreement (see Note 19),
ChipMOS Taiwan is obligated to make future payments of license fee amounted to US$18,250
thousand to ChipMOS Bermuda as of December 31, 2006.d.
    
    The Company has unused letters of credit aggregating approximately USD$17,690
thousand, JPY 1,553,265 thousand, EUR$182 thousand, and GBP$16 thousand as of December 31,
2006.e.
    
    In 2003, tax authorities have assessed and increase the 2000 income taxes of ChipMOS
Taiwan by NT$30,526 thousand. ChipMOS Taiwan has filed an appealing for the assessment.
In 2006, the 2000 income tax was increased by NT$1,786 thousand based on a ruling given
by the Court.f.
    
    As of December 31, 2006, ChipMOS Taiwan had capital commitments in relation to
purchase of machinery in the amount of US$7,000 thousand (2005: US$110,000 thousand).
 F-107




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g.
    
    On April 20, 1999, ChipMOS Taiwan entered into a semiconductor packaging technology
license agreement with Tessera Technologies, Inc. (Tessera). Under this agreement,
ChipMOS Taiwan agreed to pay a license fee of US$500 thousand and a royalty fee at a
certain percentage of the net sales of certain products. ChipMOS Taiwan paid the total
license fee of approximately US$500 thousand (NT$15,888 thousand) in 1999 and amortized
the amount over 5 years using the straight-line method. ChipMOS Taiwan also paid
approximately US$500 thousand (NT$16,708 thousand) in 2004 as the cumulative production
and sales quantity of products bearing Tessera Compliant Chip packages did not meet the
commitment schedule as set in the agreement. In February 2006, ChipMOS Taiwan and ChipMOS
USA have received notice of a patent infringement lawsuit brought by Tessera, alleging
infringement of several Tessera patents and breach of an existing license agreement with
ChipMOS Taiwan. According to Companys counsel, fact discovery has been ongoing and is
scheduled to close on March 31, 2007, although it may be extended beyond that date by
order of the Court. Therefore, expert discovery will be continued and the trial date
could be moved to April 2008. The Companys counsel has not formed an opinion as to the
outcome of the case.h.
    
    On October 16, 2006, Freescale Semiconductor, Inc. (Freescale) unilaterally
terminated an Immunity Agreement, (the Agreement) ChipMOS Taiwan and Freescale,
formerly part of Motorola, Inc. (Motorola), entered into in 1999 for ChipMOS Taiwans
alleged breach of the Agreement. Under the Agreement, ChipMOS Taiwan promised to pay
royalties and licensee fees to Motorola for using certain patents owned by Motorola.
Freescale replaced Motorola as a party to the Agreement, after Freescale was spun off from
Motorola. Freescale has alleged that ChipMOS Taiwan breached the Agreement by failing to
pay royalties on certain packages assembled by ChipMOS Taiwan. Freescale claims that such
packages are covered by one or more Freescale patents identified in the Agreement while
ChipMOS Taiwan contends that such packages are not covered by any patents in the
Agreement, or, if covered, those patents are invalid. As such, ChipMOS Taiwan argues
Freescales unilateral termination of the Agreement has no legal effect. ChipMOS Taiwan
has continued to make royalty payments for products it believes are covered by the
Agreement. Any payments returned by Freescale have been deposited in a separate escrow
account. If Freescale initiates a lawsuit, ChipMOS Taiwan expect to vigorously defend
itself. The Companys counsel has not formed any opinion as to the outcome of the case.
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22.
    
    NOTES TO THE CASH FLOW STATEMENT
 a.
    
    Acquisition of subsidiaries
 December 31,2005
    
    2006NT$
    
    NT$
    
    US$(In Thousands)Net assets acquired:Cash and bank balances
    
    
    7,261
    
    
    
    
    
    
    
    Current assets
    
    
    27,519
    
    
    
    
    
    
    
    Property, plant and equipment
    
    
    9,197
    
    
    
    
    
    
    
    Other assets
    
    
    1,415
    
    
    
    
    
    
    
    Current liabilities
    
    
    (20,925
    )
    
    
    
    
    
    
    Other liabilities
    
    
    (16
    )
    
    
    
    
    
    
    24,451
    
    
    
    
    
    
    
    Goodwill on acquisition
    
    
    
    
    
    
    
    
    
    
    24,451
    
    
    
    
    
    
    
    Satisfied by:Cash
    
    
    
    
    
    
    
    
    
    
    Reclassification to interest
in subsidiary
    
    
    24,451
    
    
    
    
    
    
    
    24,451
    
    
    
    
    
    
    
    
  December 31,2005
    
    2006NT$
    
    NT$
    
    US$(In Thousands)Cash and bank balances acquired
    
    
    7,261
    
    
    
    
    
    
    
    Less: cash consideration
    
    
    
    
    
    
    
    
    
    
    7,261
    
    
    
    
    
    
    
    
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b.
    
    Disposal of a subsidiary
 Year Ended December 312004
    
    2005
    
    2006NT$
    
    NT$
    
    NT$
    
    US$(In Thousands)Net assets disposed:Cash and bank balances
    
    
    
    
    
    
    35,909
    
    
    
    
    
    
    
    Accounts receivable
    
    
    
    
    
    
    6,708
    
    
    
    
    
    
    
    Inventories
    
    
    
    
    
    
    38
    
    
    
    
    
    
    
    Prepayment and other assets
    
    
    
    
    
    
    619
    
    
    
    
    
    
    
    Property, plant and equipment
    
    
    
    
    
    
    32,969
    
    
    
    
    
    
    
    Intangible assets
    
    
    
    
    
    
    1,954
    
    
    
    
    
    
    
    Bank loans
    
    
    
    
    
    
    (17,791
    )
    
    
    
    
    
    
    Accrued and other liabilities
    
    
    
    
    
    
    (3,799
    )
    
    
    
    
    
    
    Long-term loans
    
    
    
    
    
    
    (5,290
    )
    
    
    
    
    
    
    Minority interest
    
    
    
    
    
    
    (30,303
    )
    
    
    
    
    
    
    
    
    
    
    21,014
    
    
    
    
    
    
    
    Goodwill
    
    
    
    
    
    
    66,786
    
    
    
    
    
    
    
    Loss on disposal of a subsidiary
    
    
    
    
    
    
    (3,856
    )
    
    
    
    
    
    
    
    
    
    
    83,944
    
    
    
    
    
    
    
    Cash consideration
    
    
    
    
    
    
    83,944
    
    
    
    
    
    
    
    
  Cash consideration
    
    
    
    
    
    
    83,944
    
    
    
    
    
    
    
    Less: cash and bank balances disposed
    
    
    
    
    
    
    (35,909
    )
    
    
    
    
    
    
    
    
    
    
    48,035
    
    
    
    
    
    
    
    
 23.
    
    DERIVATIVE FINANCIAL INSTRUMENTSChipMOS Taiwan had entered into forward exchange contracts or foreign currency options for the
years ended December 31, 2006, to hedge its exchange rate risk on foreign-currency assets or
liabilities and anticipated transactions. Information on the derivative transactions is as
follows:
 a.
    
    Forward, exchange contractsAs of December 31, 2005 and 2006, there were no outstanding forward contracts. Net exchange
gains on forward exchange contracts were NT$1,528 thousand and NT$2,257 thousand for the year
ended December 31, 2005 and 2006.
 F-110




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



5)
    
    Long-term liabilities  based on forecasted cash flows discounted at current
interest rates of similar long-term liabilities. Other long-term liabilities are their
carrying values as they use floating interest rates.
 The fair values of non-financial instruments were not included in the fair values disclosed
above. Accordingly, the sum of the fair values of the financial instruments listed above does
not equal the fair value of the Company.
 24.
    
    SEGMENT AND GEOGRAPHIC INFORMATIONThe Company engages mainly in the research and development, manufacturing, assembly, testing
and turnkey of semiconductors. In accordance with Statement of Financial Accounting Standards
(SFAS) No. 131, Disclosure About Segments of an Enterprise and Related Information, the
Companys chief operating decision maker has been identified as the Chief Executive Officer,
who reviews these segment results by Testing, Assembly, Testing and Assembly for LCD and other
Flat-Panel Display Driver Semiconductors and Turnkey when making decisions about allocating
resources and assessing performance of the Company. Financial segment information required by
SFAS No. 131 is as follows:
 a.
    
    The Company provides semiconductor testing, assembly, turnkey services and LCD and
other flat-panel display driver semiconductors services.
 2004Segment
    
    Corporate &
    
    ConsolidatedTesting
    
    Assembly
    
    Turnkey
    
    LCD
    
    Bumping
    
    Totals
    
    Other Assets
    
    TotalsNT$
    
    NT$
    
    NT$
    
    NT$
    
    NT$
    
    NT$
    
    NT$
    
    NT$(In Thousands)Revenues from
customers
    
    
    5,950,174
    
    
    
    5,734,592
    
    
    
    473,588
    
    
    
    2,655,201
    
    
    
    54,322
    
    
    
    14,867,877
    
    
    
    
    
    
    
    14,867,877Cost of revenues
    
    
    3,744,781
    
    
    
    4,795,074
    
    
    
    466,676
    
    
    
    1,615,799
    
    
    
    121,898
    
    
    
    10,744,228
    
    
    
    
    
    
    
    10,744,228Segment gross profit
    
    
    2,205,393
    
    
    
    939,518
    
    
    
    6,912
    
    
    
    1,039,402
    
    
    
    (67,576
    )
    
    
    4,123,649
    
    
    
    
    
    
    
    4,123,649Depreciation and
amortization
    
    
    2,445,481
    
    
    
    410,721
    
    
    
    
    
    
    
    578,835
    
    
    
    22,650
    
    
    
    3,457,687
    
    
    
    
    
    
    
    3,457,687Segment assets
    
    
    12,352,842
    
    
    
    4,634,992
    
    
    
    
    
    
    
    2,961,478
    
    
    
    504,130
    
    
    
    20,453,442
    
    
    
    7,394,399
    
    
    
    27,847,841Expenditure for
segment assets
    
    
    4,698,036
    
    
    
    1,028,155
    
    
    
    
    
    
    
    1,380,372
    
    
    
    526,712
    
    
    
    7,633,275
    
    
    
    
    
    
    
    7,633,275
 2005Segment
    
    Corporate &
    
    ConsolidatedTesting
    
    Assembly
    
    LCD
    
    Bumping
    
    Module
    
    Totals
    
    Other Assets
    
    TotalsNT$
    
    NT$
    
    NT$
    
    NT$
    
    NT$
    
    NT$
    
    NT$
    
    NT$(In Thousands)Revenues from
customers
    
    
    6,371,845
    
    
    
    4,901,030
    
    
    
    2,945,040
    
    
    
    153,129
    
    
    
    385,479
    
    
    
    14,756,523
    
    
    
    
    
    
    
    14,756,523Cost of revenues
    
    
    4,337,442
    
    
    
    3,867,653
    
    
    
    1,885,241
    
    
    
    337,646
    
    
    
    409,705
    
    
    
    10,837,687
    
    
    
    
    
    
    
    10,837,687Segment gross
profit
    
    
    2,034,403
    
    
    
    1,033,377
    
    
    
    1,059,799
    
    
    
    (184,517
    )
    
    
    (24,226
    )
    
    
    3,918,836
    
    
    
    
    
    
    
    3,918,836Depreciation and
amortization
    
    
    2,618,466
    
    
    
    672,053
    
    
    
    836,665
    
    
    
    90,862
    
    
    
    2,143
    
    
    
    4,220,189
    
    
    
    
    
    
    
    4,220,189Segment assets
    
    
    13,453,184
    
    
    
    3,236,351
    
    
    
    3,733,320
    
    
    
    1,683,367
    
    
    
    52,328
    
    
    
    22,158,550
    
    
    
    5,877,885
    
    
    
    28,036,435Expenditure for
segment assets
    
    
    3,412,550
    
    
    
    1,044,114
    
    
    
    1,613,308
    
    
    
    581,599
    
    
    
    28,873
    
    
    
    6,680,444
    
    
    
    
    
    
    
    6,680,444
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2006Segment
    
    Corporate &
    
    ConsolidatedTesting
    
    Assembly
    
    LCD
    
    Bumping
    
    Module
    
    Totals
    
    Other Assets
    
    TotalsNT$
    
    NT$
    
    NT$
    
    NT$
    
    NT$
    
    NT$
    
    NT$
    
    NT$(In Thousands)Revenues from
customers
    
    
    9,210,007
    
    
    
    5,845,164
    
    
    
    3,964,136
    
    
    
    479,988
    
    
    
    325,266
    
    
    
    19,824,561
    
    
    
    
    
    
    
    19,824,361Cost of revenues
    
    
    5,420,636
    
    
    
    4,320,150
    
    
    
    2,702,920
    
    
    
    702,832
    
    
    
    322,435
    
    
    
    13,468,973
    
    
    
    
    
    
    
    13,468,973Segment gross
profit
    
    
    3,789,371
    
    
    
    1,525,014
    
    
    
    1,261,216
    
    
    
    (222,844
    )
    
    
    2,831
    
    
    
    6,355,588
    
    
    
    
    
    
    
    6,355,588Depreciation and
amortization
    
    
    3,148,028
    
    
    
    819,564
    
    
    
    1,014,327
    
    
    
    335,481
    
    
    
    29,078
    
    
    
    5,346,478
    
    
    
    
    
    
    
    5,346,478Segment assets
    
    
    16,443,840
    
    
    
    5,053,814
    
    
    
    4,610,879
    
    
    
    2,495,225
    
    
    
    53,518
    
    
    
    28,657,276
    
    
    
    9,977,751
    
    
    
    38,635,027Expenditure for
segment assets
    
    
    8,516,332
    
    
    
    2,630,769
    
    
    
    1,992,147
    
    
    
    1,175,556
    
    
    
    30,205
    
    
    
    14,345,009
    
    
    
    
    
    
    
    14,345,009
 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.c.
    
    Net revenues:
 Year Ended December 312004
    
    2005
    
    2006NT$
    
    NT$
    
    NT$(In Thousands)AreaROC
    
    
    12,182,691
    
    
    
    11,924,655
    
    
    
    15,455,922USA
    
    
    1,597,962
    
    
    
    1,548,927
    
    
    
    2,563,771JAPAN
    
    
    541,747
    
    
    
    482,587
    
    
    
    541,961OTHERS
    
    
    545,477
    
    
    
    800,354
    
    
    
    1,262,90714,867,877
    
    
    
    14,756,523
    
    
    
    19,824,561
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d.
    
    Net sales to customers representing at least 10% of net total sales:
 Year Ended December 312004
    
    2005
    
    2006Customer
    
    Amount
    
    %
    
    Amount
    
    %
    
    Amount
    
    %NT$
    
    
    
    
    
    NT$
    
    
    
    
    
    NT$(In Thousands)ProMOS
    
    
    4,231,658
    
    
    
    29
    
    
    
    4,332,058
    
    
    
    29
    
    
    
    5,529,273
    
    
    
    28PowerChip
    
    
    1,721,993
    
    
    
    12
    
    
    
    2,233,503
    
    
    
    15
    
    
    
    2,834,956
    
    
    
    14HiMAX
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,244,818
    
    
    
    11
 25.
    
    SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES FOLLOWED BY CHIPMOS
TAIWAN 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 of
America (U.S. GAAP):
 a.
    
    Bonuses to employees, directors and supervisors
 According to ROC regulations and the Articles of Incorporation of ChipMOS Taiwan, a portion
of distributable earnings should be appropriated as bonuses to employees and
remuneration to directors and supervisors. The remuneration to directors and
supervisors is paid in cash, while bonuses to employees may be granted in cash or
stock or both. These appropriations, including stock bonuses, which are valued at par
value of NT$10, are charged against retained earnings under ROC GAAP, after such
appropriations are formally approved by the shareholders in the following year.
 Under U.S. GAAP, such bonuses and remuneration are charged to income currently and
included in operating expenses as compensation expenses. Since the amount and form of
such bonuses and remuneration are not finally determinable until approved by the
shareholders, the total amount of such bonuses and remuneration is initially accrued
based on the amount to be paid as provided by ChipMOS Taiwans Articles of
Incorporation. The percentage to be paid in stock is determined at the next
shareholders meeting in the following year. The number of shares to be issued is
determined by dividing the amount to be paid in stock by the par value of the shares.
Any difference between the initially accrued amount (the cash portion plus the par
value of the shares) and the fair market value of the bonuses settled (the cash
portion plus the fair value of the shares) is recognized in the year of approval by
the shareholders.
 b.
    
    Financial assets
 Prior to January 1, 2006 under ROC GAAP, marketable equity securities are carried at the
lower of aggregate cost or market value, and debt securities at cost, with only unrealized
losses recognized when losses are irrecoverable. Under SFAS No. 115, Accounting for
Certain Investments in Debt and Equity Securities, debt and equity securities that have
readily determinable fair values are to be classified as either trading, available-for-sale
or held-to-maturity securities. Debt securities that the Company has the positive intent
and ability to hold to maturity are classified as held-to-maturity securities and reported
at amortized cost. Debt and equity
 F-115




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c.
    
    Long-term investments
   d.
    
    Technologies transferred in payment of capital stock
  F-116




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##### Table of Contents



e.
    
    Start-up costs
  f.
    
    Depreciation of fixed assets and employee dormitory building
  g.
    
    Transfer of building and facilities from MVI
  h.
    
    Inventory
  i.
    
    Capital surplus
  j.
    
    Impairment of long-lived assets
  F-117




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##### Table of Contents



assets net book value in excess of the related fair value. Prior to January 1, 2005,
there is no requirement provided for impairment of long-lived assets under ROC GAAP.
Therefore, the Company applied US GAAP to evaluate the long-lived assets for impairment
purpose in 2004. In 2005, the adjustment for impairment of long-term investment
represented the additional impairment to be recognized after the reversal of amortization
of goodwill in respect of the long-term investment. In 2006, the adjustment represents the
reversal of impairment loss recognized under ROC GAAP that were already recognized under
U.S. GAAP in 2005.k.
    
    Stock bonus and dividendUnder ROC GAAP, stock bonus and dividends are recorded at par value with a charge to
retained earnings. Under U.S. GAAP, if the ratio of distribution is less than 25 percent of
the same class of shares outstanding, the fair value of the shares issued should be charged
to retained earnings and capital surplus. Accordingly, an adjustment of NT$61,632 thousand
was included in the reconciliation, representing the difference between the fair value and
the par value of ThaiLin stock.l.
    
    Earnings per share (EPS)In calculating the weighted average number of shares outstanding for EPS
purposes under ROC GAAP, employee bonus shares have been treated as outstanding for
all periods in a manner similar to a stock split or stock dividend. Under U.S. GAAP,
employee bonus shares have been considered separately from the stock dividend or split
and have been treated as outstanding from the date of shareholder approval.m.
    
    Interest capitalizationUnder ROC GAAP, interests on borrowings during construction conceptually should be
capitalized in the assets that are constructed or produced for a companys own use.
However, if equity capital is raised during a year, no capitalization interest is
recorded for the amount of property acquired up to the equity capital raised in that
year. 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.n.
    
    Goodwill and negative goodwillPrior to January 1, 2006 under ROC GAAP, goodwill arises as the difference between
acquisition cost and the equity of the subsidiary and is amortized using a systematic
method, whereas under U.S. GAAP such goodwill is not amortized, but is subject to
impairment tests.
 F-118




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Negative goodwill arises when the fair values of the net assets acquired exceed the
purchase price. Under ROC GAAP, negative goodwill is amortized over a five-year period
whereas under U.S. GAAP, that negative goodwill is firstly allocated pro rata reduce
amounts assigned to acquired assets. If negative goodwill still remains, it is
recognized as extraordinary gain in the period in which the business combination is
initially recognized. The negative goodwill of NT$20,275 thousand arising from the
merger of CHANTEK into ChipMOS Taiwan was credited to property, plant and equipment
under U.S. GAAP.There is no difference between ROC GAAP and U.S. GAAP since January 1, 2006.o.
    
    Pension expensesROC SFAS No. 18, which is similar in many respects to SFAS No. 87 and SFAS No. 88, was
effective in 1996. However, the treatment of certain expenses that comply with ROC
SFAS No. 18 is different from SFAS No. 87 and SFAS No. 88.The company adopted SFAS No. 158, Employers Accounting for Defined Benefit
Pension and Other Postretirement Plans (SFAS No. 158) effective December 31, 2006.
SFAS No. 158 requires an employer that sponsors one or more defined benefit pension
plans or other postretirement plans to recognize the funded status of a plan, measured
as the difference between plan assets at fair value and the benefit obligation in the
balance sheet and recognize in shareholders equity as a component of accumulated
other comprehensive loss, net of tax, the gains or losses and prior service costs or
credits that arise during the period but are not yet recognized as components of net
periodic benefit cost as of the balance sheet date.The adoption of SFAS No. 158 resulted in a decrease in total shareholders equity
of NT$63,395 thousand (US$1,945 thousand) as of December 31, 2006.p.
    
    Allowance for loss and scrap loss on inventoriesROC GAAP does not specify the classification of allowance for loss on
inventories, therefore the recovery of allowance for loss on inventories of NT$67,002
thousand and NT$74,581 thousand for 2004 and 2005 has been classified under
non-operating income. Under U.S. GAAP, the allowance for loss on inventories should
be classified in the income statement as a component of cost of revenue.ROC GAAP does not specify the classification of scrap loss on inventories; therefore,
in 2006, NT$75,602 thousand has been classified under non-operating expense. Under
U.S. GAAP, the scrap of inventories should be classified in the income statement as a
component of cost of revenue.
 F-119




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##### Table of Contents



Year Ended December 312004
    
    2005
    
    2006NT$
    
    NT$
    
    NT$
    
    US$(In Thousands)Net incomeNet income based on ROC GAAP
    
    
    2,322,760
    
    
    
    2,108,036
    
    
    
    4,138,270
    
    
    
    126,960Adjustments:Amortization of start-up costs
    
    
    9,916
    
    
    
    2,305
    
    
    
    2,237
    
    
    
    68Depreciation of fixed assets and
employee dormitory building
    
    
    (14,444
    )
    
    
    (14,957
    )
    
    
    (22,200
    )
    
    
    (681
    )Transfer of building and facilities from
MVI
    
    
    1,299
    
    
    
    1,075
    
    
    
    741
    
    
    
    23Financial assets at fair value through
profit and loss
    
    
    10,567
    
    
    
    (3,956
    )
    
    
    (3,035
    )
    
    
    (93
    )Depreciation of interest capitalization
    
    
    (19,793
    )
    
    
    (19,793
    )
    
    
    (19,793
    )
    
    
    (607
    )Long-term investment under equity
methold
    
    
    (3,358
    )
    
    
    (34,105
    )
    
    
    17,001
    
    
    
    522Employee bonus and director
remuneration
    
    
    
    
    
    
    (460,044
    )
    
    
    (537,463
    )
    
    
    (16,489
    )Effect of U.S. GAAP adjustment on
minority interest
    
    
    
    
    
    
    48,767
    
    
    
    49,749
    
    
    
    1,526Effect of U.S. GAAP adjustment on
income taxes
    
    
    5,755
    
    
    
    4,327
    
    
    
    9,753
    
    
    
    299Net decrease in net income
    
    
    (10,058
    )
    
    
    (476,381
    )
    
    
    (503,010
    )
    
    
    (15,432
    )Net income based on U.S. GAAP
    
    
    2,312,702
    
    
    
    1,631,655
    
    
    
    3,635,260
    
    
    
    111,528Earnings per share
    
    
    2.61
    
    
    
    1.84
    
    
    
    4.10
    
    
    
    0.13Number of weighted average shares
outstanding under U.S. GAAP
    
    
    887,227
    
    
    
    885,686
    
    
    
    886,012
    
    
    
    886,012
 December 312005
    
    2006NT$
    
    NT$
    
    US$(In Thousands)Shareholders equityShareholders equity based on ROC GAAP
    
    
    14,455,753
    
    
    
    17,827,308
    
    
    
    546,934Adjustments:Technology transfer in payment of capital stocksOriginal cost
    
    
    (750,000
    )
    
    
    (750,000
    )
    
    
    (23,010
    )Accumulated amortization of technology
transfer in payment of capital stocks
    
    
    750,000
    
    
    
    750,000
    
    
    
    23,010Start-up costsOriginal cost
    
    
    (61,107
    )
    
    
    (60,151
    )
    
    
    (1,846
    )Accumulated depreciation of start-up costs
    
    
    53,400
    
    
    
    54,668
    
    
    
    1,677Net effect on inventories
    
    
    (53
    )
    
    
    (40
    )
    
    
    (1
    )Depreciation of fixed assets and employee
dormitory buildingDepreciation of fixed assets and employee
dormitory building
    
    
    (100,710
    )
    
    
    (122,959
    )
    
    
    (3,772
    )Net effects on inventories
    
    
    322
    
    
    
    371
    
    
    
    11Transfer of building and facilities from MVIOriginal cost
    
    
    (173,174
    )
    
    
    (173,174
    )
    
    
    (5,313
    )Depreciation and gain on disposal of
building and facilities from MVI
    
    
    169,155
    
    
    
    169,883
    
    
    
    5,212
 F-120




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##### Table of Contents



December 312005
    
    2006NT$
    
    NT$
    
    US$(In Thousands)Net effects on inventories
    
    
    (26
    )
    
    
    (13
    )
    
    
    Financial assets at fair value through profit and
loss
    
    
    3,035
    
    
    
    
    
    
    
    Pension expenses
    
    
    (1,898
    )
    
    
    (65,293
    )
    
    
    (2,003
    )Interest capitalization
    
    
    118,757
    
    
    
    118,757
    
    
    
    3,643Depreciation of interest capitalization
    
    
    (51,769
    )
    
    
    (71,562
    )
    
    
    (2,195
    )Long-term investment under equity method
    
    
    (25,470
    )
    
    
    (8,469
    )
    
    
    (260
    )Employee bonus and director remuneration
    
    
    (294,300
    )
    
    
    (523,387
    )
    
    
    (16,057
    )Effect of U.S.GAAP adjustment on minority
interest
    
    
    48,767
    
    
    
    49,749
    
    
    
    1,526Effect of U.S. GAAP adjustment on income taxes
    
    
    7,785
    
    
    
    17,538
    
    
    
    538Net decrease in shareholders equity
    
    
    (307,286
    )
    
    
    (614,082
    )
    
    
    (18,840
    )Shareholders equity based on U.S. GAAP
    
    
    14,148,467
    
    
    
    17,213,226
    
    
    
    528,094
 Year Ended December 312004
    
    2005
    
    2006NT$
    
    NT$
    
    NT$
    
    US$(In Thousands)Changes in shareholders equity based
on U.S. GAAPBalance, beginning of the year
    
    
    10,593,316
    
    
    
    13,093,797
    
    
    
    14,148,467
    
    
    
    434,069Reversal of unrealized loss (gain) on
available-for-sale securities
    
    
    5,618
    
    
    
    805
    
    
    
    1,673
    
    
    
    51Cash dividend
    
    
    
    
    
    
    (532,336
    )
    
    
    (531,791
    )
    
    
    (16,315
    )Purchase of treasury stock
    
    
    
    
    
    
    (115,402
    )
    
    
    (3,191
    )
    
    
    (98
    )Outstanding shares owned by subsidiaries
    
    
    
    
    
    
    (4,750
    )
    
    
    
    
    
    
    Issuance of new stock for merger
    
    
    
    
    
    
    89,912
    
    
    
    
    
    
    
    Unrealized loss on available-for-sale
securities
    
    
    (805
    )
    
    
    (1,673
    )
    
    
    
    
    
    
    Cumulative translation adjustments
    
    
    (7,564
    )
    
    
    6,380
    
    
    
    (359
    )
    
    
    (11
    )Adjustment for long-term investments
    
    
    190,530
    
    
    
    (19,921
    )
    
    
    26,562
    
    
    
    815Unrecognized pension cost
    
    
    
    
    
    
    
    
    
    
    (63,395
    )
    
    
    (1,945
    )Net income for the year
    
    
    2,312,702
    
    
    
    1,631,655
    
    
    
    3,635,260
    
    
    
    111,528Balance, end of the year
    
    
    13,093,797
    
    
    
    14,148,467
    
    
    
    17,213,226
    
    
    
    528,094
 December 312005
    
    2006NT$
    
    NT$
    
    US$(In Thousands)Current assetsAs reported
    
    
    8,330,865
    
    
    
    9,967,812
    
    
    
    305,808U.S. GAAP adjustmentsFinancial assets at fair value through
profit and loss
    
    
    3,035
    
    
    
    
    
    
    
    Effect of inventory adjustments:Start-up costs
    
    
    (53
    )
    
    
    (40
    )
    
    
    (1
    )Depreciation of fixed assets and
employee dormitory building
    
    
    322
    
    
    
    371
    
    
    
    11Transfer of building and facilities
from MVI
    
    
    (26
    )
    
    
    (13
    )
    
    
    As adjusted
    
    
    8,334,143
    
    
    
    9,968,130
    
    
    
    305,818Funds and long-term investmentsAs reported
    
    
    413,125
    
    
    
    366,743
    
    
    
    11,252U.S. GAAP adjustmentsAdjustment for investment income
    
    
    53,893
    
    
    
    
    
    
    
    Impairment loss
    
    
    (79,363
    )
    
    
    (8,469
    )
    
    
    (260
    )As adjusted
    
    
    387,655
    
    
    
    358,274
    
    
    
    10,992(Forward)
 F-121




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##### Table of Contents



December 312005
    
    2006NT$
    
    NT$
    
    US$(In Thousands)Property, plant and equipment  netAs reported
    
    
    18,986,699
    
    
    
    27,854,382
    
    
    
    854,560U.S. GAAP adjustmentsStart-up costs
    
    
    (7,707
    )
    
    
    (5,483
    )
    
    
    (168
    )Depreciation of fixed assets
    
    
    (89,178
    )
    
    
    (109,796
    )
    
    
    (3,369
    )Transfer of building and facilities from MVI
    
    
    (4,019
    )
    
    
    (3,291
    )
    
    
    (101
    )Interest capitalization
    
    
    66,988
    
    
    
    47,195
    
    
    
    1,448Negative goodwill of merging Chantek
    
    
    (20,275
    )
    
    
    (20,275
    )
    
    
    (622
    )As adjusted
    
    
    18,932,508
    
    
    
    27,762,732
    
    
    
    851,748Other assetsAs reported
    
    
    260,499
    
    
    
    301,773
    
    
    
    9,258U.S. GAAP adjustmentsDepreciation of employee dormitory building
    
    
    (11,532
    )
    
    
    (13,163
    )
    
    
    (404
    )Goodwill
    
    
    20,275
    
    
    
    20,275
    
    
    
    622As adjusted
    
    
    269,242
    
    
    
    308,885
    
    
    
    9,476Current liabilitiesAs reported
    
    
    4,885,016
    
    
    
    6,209,920
    
    
    
    190,517U.S, GAAP adjustmentsAccrued employee bonds and director
remuneration
    
    
    294,300
    
    
    
    523,387
    
    
    
    16,058As adjusted
    
    
    5,179,316
    
    
    
    6,733,307
    
    
    
    206,575Other liabilitiesAs reported
    
    
    825,729
    
    
    
    912,765
    
    
    
    28,003U.S. GAAP adjustmentsPension expenses
    
    
    1,898
    
    
    
    65,293
    
    
    
    2,003Effect of U.S. GAAP adjustment on income
taxes
    
    
    (7,785
    )
    
    
    (17,538
    )
    
    
    (538
    )As adjusted
    
    
    819,842
    
    
    
    960,520
    
    
    
    29,468Minority interestAs reported
    
    
    3,494,210
    
    
    
    3,482,966
    
    
    
    106,856U.S. GAAP adjustmentsAccrued employee bonds and director
remuneration
    
    
    (48,767
    )
    
    
    (49,749
    )
    
    
    (1,526
    )As adjusted
    
    
    3,445,443
    
    
    
    3,433,217
    
    
    
    105,330
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##### Table of Contents



Year Ended December 312004
    
    2005
    
    2006NT$
    
    NT$
    
    NT$
    
    US$(In Thousands)Net revenue
    
    
    14,867,877
    
    
    
    14,756,523
    
    
    
    19,824,561
    
    
    
    608,209Cost of revenue
    
    
    (10,746,166
    )
    
    
    (10,848,673
    )
    
    
    (13,486,578
    )
    
    
    (413,762
    )Gross profit
    
    
    4,121,711
    
    
    
    3,907,850
    
    
    
    6,337,983
    
    
    
    194,447Operating expenses
    
    
    (1,095,053
    )
    
    
    (1,540,563
    )
    
    
    (1,489,060
    )
    
    
    (45,684
    )Income from operations
    
    
    3,026,658
    
    
    
    2,367,287
    
    
    
    4,848,923
    
    
    
    148,763Non-operating expenses  net
    
    
    (574,814
    )
    
    
    (423,167
    )
    
    
    (151,257
    )
    
    
    (4,641
    )Income before income tax
    
    
    2,451,844
    
    
    
    1,944,120
    
    
    
    4,697,666
    
    
    
    144,122Net income
    
    
    2,312,702
    
    
    
    1,631,655
    
    
    
    3,635,260
    
    
    
    111,528
 26.
    
    ADDITIONAL DISCLOSURES REQUIRED BY U.S. GAAP
 a.
    
    Recent accounting pronouncementsThe Company is required by SEC Staff Accounting Bulletin No. 74 to make certain disclosures
about the effect that recently issued accounting standards will have on the financial
statements adopted for future periods.On September 29, 2006, the FASB issued SFAS No. 158, Employers Accounting for Defined
Benefit Pension and Other Postretirement Plans (SFAS No. 158). SFAS No. 158 requires an
employer that sponsors one or more defined benefit pension plans or other postretirement
plans to 1) recognize the funded status of a plan, measured as the difference between plan
assets at fair value and the benefit obligation, in the balance sheet; 2) recognize in
shareholders equity as a component of accumulated other comprehensive loss, net of tax,
the gains or losses and prior service costs or credits that arise during the period but are
not yet recognized as components of net periodic benefit cost; 3) measure defined benefit
plan assets and obligations as of the date of the employers fiscal year-end balance sheet;
and 4) disclose in the notes to the financial statements additional information about the
effects on net periodic benefit cost for the next fiscal year that arise from delayed
recognition of the gains or losses, prior service costs or credits, and transition asset or
obligation.The FASB issued SFAS No. 155, Accounting for Certain Hybrid Financial Instruments (SFAS
No. 155) in February 2006. SFAS No. 155 amends SFAS No. 133 Accounting for Derivative
Instruments and Hedging Activities, and
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SFAS No. 140 Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities and addresses the application of SFAS No. 133 to beneficial
interests in securitized financial assets. SFAS No. 155 establishes a requirement to
evaluate interests in securitized financial assets to identify interests that are
freestanding derivatives or that are hybrid financial instruments that contain an embedded
derivative requiring bifurcation. Additionally, SFAS No. 155 permits fair value measurement
for any hybrid financial instrument that contains an embedded derivative that otherwise
would require bifurcation. SFAS No. 155 is effective for fiscal years beginning after
September 15, 2006. The Company is currently assessing the impact SFAS No. 155 will have
on the consolidated financial statements but do not anticipate it will be material.The FASB issued SFAS No. 156, Accounting for Servicing of Financial Assets an amendment of
FASB Statement No. 140 (SFAS No. 156) in March 2006. SFAS No. 156 requires a company to
recognize a servicing asset or servicing liability each time it undertakes an obligation to
service a financial asset. A company would recognize a servicing asset or servicing
liability initially at fair value. A company will then be permitted to choose to
subsequently recognize servicing assets and liabilities using the amortization method or
fair value measurement method. SFAS No. 156 is effective for fiscal years beginning after
September 15, 2006. The Company is currently assessing the impact SFAS No. 156 will have
on the consolidated financial statements but do not anticipate it will be material.On July 13, 2006, the FASB issued FASB Interpretation No. 48, Accounting for Uncertainty
in Income Taxes-an Interpretation of FASB Statement No. 109 (FIN No. 48). FIN No. 48
clarifies what criteria must be met prior to recognition of the financial statement benefit
of a position taken in an income tax return. FIN No. 48 will require companies to include
additional qualitative and quantitative disclosures within their financial statements. The
disclosures will include potential tax benefits from positions taken for tax return
purposes that have not been recognized for financial reporting purposes and a tabular
presentation of significant changes during each period. The disclosures will also include a
discussion of the nature of uncertainties, factors that could cause a change, and an
estimated range of reasonably possible changes in tax uncertainties. FIN No. 48 will also
require a company to recognize a financial statement benefit for a position taken for tax
return purposes when it will be more-likely-than-not that the position will be sustained.
FIN No. 48 will be effective for fiscal years beginning after December 15, 2006. The
Company is currently assessing the impact FIN No. 48 will have on the consolidated
financial statements but do not anticipate it will be material.On September 15, 2006, the FASB issued SFAS No. 157, Fair Value Measurements (SFAS No.
157). SFAS No. 157 addresses how companies should measure fair value when they are
required to use a fair value measure for recognition and disclosure purposes under
generally accepted accounting principles. SFAS No. 157 will require the fair value of an
asset or liability to be based on a market based measure, which will reflect the credit
risk of the company. SFAS No. 157 will also require expanded disclosure requirements, which
will include the methods and assumptions used to measure fair value and the effect of fair
value measures on earnings. SFAS No. 157 will be applied prospectively and will be
effective for fiscal years beginning after November 15, 2007 and to interim periods within
those fiscal years. The Company is currently assessing the impact SFAS No. 157 will have on
the consolidated financial statements.In September 2006, the U.S. SEC staff issued Staff Accounting Bulletin No. 108,
Considering the Effects of Prior Year Misstatements when Quantifying
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Misstatements in Current Year Financial Statements (SAB 108). SAB 108 was issued to
provide interpretive guidance on how the effects of the carryover or reversal of prior year
misstatements should be considered in quantifying a current year misstatement. The Company
adopted the provisions of SAB 108 effective December 31, 2006. The adoption of SAB 108 did
not have an impact on the consolidated financial statements.b.
    
    Financial assets at fair value through profit and loss.On December 31, 2005 and 2006, certain investments carried at cost under ROC GAAP were
revalued for purposes of U.S. GAAP presentation:
 (ROC GAAP)
    
    (U.S. GAAP)Carrying Value
    
    Fair Value2005
    
    2006
    
    2005
    
    2006NT$
    
    NT$
    
    NT$
    
    NT$(In Thousands)
    
    (In Thousands)Available-for-sale securities
    
    
    186,136
    
    
    
    1,929,124
    
    
    
    189,171
    
    
    
    1,929,124
 Prior to January 1, 2006, the Company uses the weighted-average cost method for
available-for-sale securities when determining the cost basis.The following table shows the gross unrealized losses and fair value of short-term
investments with unrealized losses that are not deemed to be other-than-temporarily
impaired, aggregated by investment category that individual securities have been in a
continuous unrealized loss position, at December 31, 2005 and 2006.
 December 31, 2006Less than 12 months
    
    12 months or greaterFair value
    
    Unrealized losses/(gains)
    
    Fair value
    
    Unrealized losses/(gains)NT$
    
    US$
    
    NT$
    
    US$
    
    NT$
    
    US$
    
    NT$
    
    US$(In Thousands)Stock
    
    
    100,820
    
    
    
    3,093
    
    
    
    (6,604
    )
    
    
    (203
    )
    
    
    156,832
    
    
    
    4,812
    
    
    
    (2,006
    )
    
    
    (62
    )Open-ended funds
    
    
    1,641,472
    
    
    
    50,360
    
    
    
    
    
    
    
    
    
    
    
    30,000
    
    
    
    920
    
    
    
    
    
    
    
    1,742,292
    
    
    
    53,453
    
    
    
    (6,604
    )
    
    
    (203
    )
    
    
    186,832
    
    
    
    5,732
    
    
    
    (2,006
    )
    
    
    (62
    )
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c.
    
    Income tax expense (benefit)
 Year Ended December 312004
    
    2005
    
    2006NT$
    
    NT$
    
    NT$
    
    US$(In Thousands)Income tax current payable
    
    
    86
    
    
    
    87,643
    
    
    
    293,835
    
    
    
    9,015Deferred income tax
    
    
    (133,697
    )
    
    
    (47,802
    )
    
    
    247,689
    
    
    
    7,598Adjustment of prior years
income taxes
    
    
    (4,743
    )
    
    
    497
    
    
    
    (4,673
    )
    
    
    (143
    )Income tax expense (benefit)
    
    
    (138,354
    )
    
    
    40,338
    
    
    
    536,851
    
    
    
    16,470
 Reconciliation of the income tax calculated on pre-tax financial statement income
based on statutory tax rate and the income tax expense (benefit), which conforms to U.S.
GAAP as follows:
 Year Ended December 312004
    
    
    2005
    
    
    2006NT$
    
    
    NT$
    
    
    NT$
    
    
    US$(In Thousands)Tax on pretax income at ROC
statutory rate (25%)
    
    
    670,129
    
    
    
    196,559
    
    
    
    684,511
    
    
    
    21,000SBIP tax exemption (5%)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Tax on pretax income at SBIP
statutory rate
    
    
    670,129
    
    
    
    196,559
    
    
    
    684,511
    
    
    
    21,000Other tax and assessed additional
income tax
    
    
    86
    
    
    
    164,584
    
    
    
    111,328
    
    
    
    3,415Tax effect of:Tax-exempt income
    
    
    (426,870
    )
    
    
    (185,377
    )
    
    
    1,752
    
    
    
    54Permanent differences
Non-taxable gain on sales
of investment
    
    
    (12,557
    )
    
    
    (18,630
    )
    
    
    
    
    
    
    Non-deductible
investment (gain) loss
    
    
    (12,246
    )
    
    
    82,152
    
    
    
    (75,151
    )
    
    
    (2,306
    )Others
    
    
    (714
    )
    
    
    
    
    
    
    56,637
    
    
    
    1,738Temporary differences
    
    
    50,418
    
    
    
    (169,637
    )
    
    
    111,873
    
    
    
    3,432Tax credits  utilized
    
    
    (355,923
    )
    
    
    (218,672
    )
    
    
    (506,285
    )
    
    
    (15,533
    ) deferred
    
    
    (70,003
    )
    
    
    76,611
    
    
    
    (206,923
    )
    
    
    (6,348
    )Valuation allowance
    
    
    (560,053
    )
    
    
    (405,487
    )
    
    
    230,050
    
    
    
    7,058Loss carry forward
    
    
    584,122
    
    
    
    517,738
    
    
    
    133,732
    
    
    
    4,103Adjustment of prior years income
tax
    
    
    (4,743
    )
    
    
    497
    
    
    
    (4,673
    )
    
    
    (143
    )Income tax (benefit) expense
    
    
    (138,354
    )
    
    
    40,338
    
    
    
    536,851
    
    
    
    16,470
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December 312005
    
    2006NT$
    
    NT$
    
    US$(In Thousands)Deferred income tax assetsCurrentUnrealized foreign exchange loss
    
    
    3,496
    
    
    
    3,679
    
    
    
    113Loss of market price decline
and obsolescence and
slow-moving inventories
    
    
    20,616
    
    
    
    19,026
    
    
    
    584Sales allowance
    
    
    9,455
    
    
    
    21,912
    
    
    
    672Bad-debt allowance
    
    
    81,424
    
    
    
    77,533
    
    
    
    2,378Tax credits for investment in
machinery and equipment and R&D
expenditures
    
    
    110,103
    
    
    
    491
    
    
    
    15Others
    
    
    14,108
    
    
    
    11,696
    
    
    
    359239,202
    
    
    
    134,337
    
    
    
    4,121Valuation allowance
    
    
    
    
    
    
    
    
    
    
    239,202
    
    
    
    134,337
    
    
    
    4,121Deferred income tax liabilitiesNon-currentTax credits for investment in
machinery and equipment and R &
D expenditures
    
    
    801,450
    
    
    
    1,117,985
    
    
    
    34,299Depreciation differences
    
    
    (531,219
    )
    
    
    (619,365
    )
    
    
    (19,002
    )Interest capitalization
    
    
    (16,747
    )
    
    
    (11,799
    )
    
    
    (362
    )Loss carry forward
    
    
    133,732
    
    
    
    
    
    
    
    Transferred assets from MVI
    
    
    1,011
    
    
    
    826
    
    
    
    26Start-up costs
    
    
    1,940
    
    
    
    1,380
    
    
    
    42Others
    
    
    262,541
    
    
    
    254,212
    
    
    
    7,799652,708
    
    
    
    743,239
    
    
    
    22,802Valuation allowance
    
    
    (793,874
    )
    
    
    (1,023,924
    )
    
    
    (31,413
    )(141,166
    )
    
    
    (280,685
    )
    
    
    (8,611
    )98,036
    
    
    
    (146,348
    )
    
    
    (4,490
    )
 d.
    
    Pension plansOn September 29, 2006, the FASB issued SFAS No. 158 Employers Accounting for
Defined benefit Pension and Other Postretirement Plans. The company adopted SFAS. No.
158 effective December 31, 2006. The impact of the adoption of SFAS No. 158 has been
reflected within the consolidated financial statements as of December 31, 2006. The
incremental effect of applying SFAS No. 158 has been disclosed as par of this
footnote.
 Year Ended December 312004
    
    2005
    
    2006NT$
    
    NT$
    
    NT$
    
    US$(In Thousands)Components of net periodic benefit costService cost
    
    
    51,970
    
    
    
    30,021
    
    
    
    1,688
    
    
    
    52Interest cost
    
    
    7,599
    
    
    
    8,713
    
    
    
    7,781
    
    
    
    239Projected return on plan assets
    
    
    (4,892
    )
    
    
    (4,659
    )
    
    
    (4,732
    )
    
    
    (145
    )Net amortization and deferral:Unrecognized net transition obligation
    
    
    (477
    )
    
    
    (305
    )
    
    
    (319
    )
    
    
    (10
    )Unrecognized net loss
    
    
    809
    
    
    
    1,209
    
    
    
    879
    
    
    
    27Curtailment Loss Recognition
    
    
    
    
    
    
    458
    
    
    
    
    
    
    
    Net periodic benefit cost
    
    
    55,009
    
    
    
    35,437
    
    
    
    5,297
    
    
    
    163Recognized in other comprehensive incomeUnrealized net transition obligation
    
    
    
    
    
    
    
    
    
    
    7
    
    
    
    Unrealized actuarial loss
    
    
    
    
    
    
    
    
    
    
    63,388
    
    
    
    1,945Total recognized in other comprehensive
income
    
    
    
    
    
    
    
    
    
    
    63,395
    
    
    
    1,945Total recognized in total benefit cost
and other comprehensive
    
    
    
    
    
    
    
    
    
    
    68,692
    
    
    
    2,108
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The estimated net transition obligation and actuarial loss for the defined benefit pension
plans tat will be amortized from accumulated other comprehensive income into benefits cost in 2007
is NT$1 thousand (US$0) and NT$3,233 thousand (US $99 thousand), respectively.
 Changes in plan assetsFair value of plan assets at beginning of year
    
    
    135,893
    
    
    
    174,349
    
    
    
    156,172
    
    
    
    4,791Actual return on plan assets
    
    
    1,796
    
    
    
    1,971
    
    
    
    4,163
    
    
    
    128Employer contribution
    
    
    32,160
    
    
    
    29,892
    
    
    
    39,656
    
    
    
    1,217Effect of merger
    
    
    4,500
    
    
    
    (49,223
    )
    
    
    
    
    
    
    174,349
    
    
    
    156,989
    
    
    
    199,991
    
    
    
    6,136Changes in benefit obligationBenefit obligation at beginning of year
    
    
    167,979
    
    
    
    314,124
    
    
    
    283,253
    
    
    
    8,690Service cost
    
    
    51,970
    
    
    
    30,021
    
    
    
    1,688
    
    
    
    52Interest cost
    
    
    7,599
    
    
    
    8,713
    
    
    
    7,781
    
    
    
    239Actuarial loss (gain)
    
    
    20,751
    
    
    
    (2,024
    )
    
    
    24,924
    
    
    
    765Acquisition of subsidiary
    
    
    65,825
    
    
    
    
    
    
    
    
    
    
    
    Effect of merger
    
    
    
    
    
    
    (67,581
    )
    
    
    
    
    
    
    Benefit obligation at end of year
    
    
    314,124
    
    
    
    283,253
    
    
    
    317,646
    
    
    
    9,746Funds status
    
    
    (139,775
    )
    
    
    (126,264
    )
    
    
    (117,655
    )
    
    
    (3,610
    )Unrecognized actuarial loss
    
    
    48,918
    
    
    
    42,708
    
    
    
    68,185
    
    
    
    2,092Net amount recognized (recognized as accrued pension cost)
    
    
    (90,857
    )
    
    
    (83,556
    )
    
    
    (49,470
    )
    
    
    (1,518
    )Actuarial assumptionsDiscount rate
    
    
    3.25
    %
    
    
    2.75
    %
    
    
    2.75
    %
    
    
    2.75
    %Rate of compensation increase
    
    
    3.25
    %
    
    
    3.25
    %
    
    
    3.50
    %
    
    
    3.50
    %Expected return on plan assets
    
    
    3.25
    %
    
    
    2.75
    %
    
    
    2.75
    %
    
    
    2.75
    %
 The following table is required as part of adopting SFAS No. 158.Incremental effect of applying SFAS No. 158 on individual line items in the consolidated
balance sheet as of December 31, 2006:
 Beforeapplication of SFASNo. 158
    
    Adjustments
    
    After application of SFAS No. 158NT$
    
    NT$
    
    NT$
    
    US$(In Thousands)Accured pension cost
    
    
    49,470
    
    
    
    63,395
    
    
    
    112,865
    
    
    
    3,463Total other liabilities
    
    
    897,125
    
    
    
    63,395
    
    
    
    960,520
    
    
    
    29,468Accumulated other
comprehensive income
    
    
    (2,162
    )
    
    
    (63,395
    )
    
    
    (65,557
    )
    
    
    (2,011
    )Total shareholders equity
    
    
    17,276,621
    
    
    
    (63,395
    )
    
    
    17,213,226
    
    
    
    (528,094
    )
 The Company has no other post-retirement or post-employment benefit plans. The
company expects to contribute NT$39,155 thousand to its pension plans during 2007. The
plan assets are all invested in the Central Trust of China.
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e.
    
    Statements of cash flowsROC SFAS No. 17, Statement of Cash Flows has been applied. Its objectives and principles
are similar to those set out in the SFAS No. 95, Statement of Cash Flows. The principle
differences between the standards relate to classification. Cash flows from changes in
short-term investments, refundable deposits, other assets and guarantee deposits and bonus
to directors and supervisors are included as operating activities under SFAS No. 95.
Summarized cash flow data by operating, investing and financing activities in accordance
with SFAS No. 95 are as follows:
 Year Ended December 312004
    
    2005
    
    2006NT$
    
    NT$
    
    NT$
    
    US$(In Thousands)Net cash inflow (outflow) from:Operating activities
    
    
    5,764,200
    
    
    
    8,958,953
    
    
    
    6,961,854
    
    
    
    213,587Investing activities
    
    
    (6,169,297
    )
    
    
    (6,587,533
    )
    
    
    (13,742,203
    )
    
    
    (421,605
    )Financing activities
    
    
    2,067,591
    
    
    
    (2,035,152
    )
    
    
    5,503,716
    
    
    
    168,852Effect of exchange rate changes
    
    
    
    
    
    
    (327
    )
    
    
    37
    
    
    
    1Change in cash and cash equivalents
    
    
    1,662,494
    
    
    
    335,941
    
    
    
    (1,276,596
    )
    
    
    (39,165
    )Cash and cash equivalents at the
beginning of year
    
    
    1,155,662
    
    
    
    2,818,156
    
    
    
    3,154,097
    
    
    
    96,766Cash and cash equivalents at the end
of year
    
    
    2,818,156
    
    
    
    3,154,097
    
    
    
    1,877,501
    
    
    
    57,601
 f.
    
    Statements of comprehensive income (loss)
 Year Ended December 312004
    
    2005
    
    2006NT$
    
    NT$
    
    NT$
    
    US$(In Thousands)Net income based on U.S. GAAP
    
    
    2,312,702
    
    
    
    1,631,655
    
    
    
    3,635,260
    
    
    
    111,528Other comprehensive income (loss):Reversal of unrealized
loss on
available-for-sale
security
    
    
    5,618
    
    
    
    805
    
    
    
    1,673
    
    
    
    51Unrealized loss on
available-for-sale
security
    
    
    (805
    )
    
    
    (1,673
    )
    
    
    
    
    
    
    Unrecognized pension costs
    
    
    
    
    
    
    
    
    
    
    (63,395
    )
    
    
    (1,945
    )Translation adjustment
    
    
    (7,564
    )
    
    
    6,380
    
    
    
    (359
    )
    
    
    (11
    )Comprehensive income
    
    
    2,309,951
    
    
    
    1,637,167
    
    
    
    3,636,574
    
    
    
    111,568
 Components in other comprehensive income (loss) refer to investments in Ultima. Under
ROC laws, those losses and gains are not subject to income tax. Therefore, no tax expense
or benefit is allocated to such investments.
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g.
    
    Statements of accumulated comprehensive income (loss)
 Unrealized
    
    
    
    
    
    AccumulatedGain (Loss) on
    
    
    
    
    
    OtherUnrecognized
    
    Financial
    
    Translation
    
    ComprehensivePension Cost
    
    Instrument
    
    Adjustment
    
    Income (Loss)NT$
    
    NT$
    
    NT$
    
    NT$(In Thousands)January 1, 2004
    
    
    
    
    
    
    (5,618
    )
    
    
    (619
    )
    
    
    (6,237
    )Addition in 2004
    
    
    
    
    
    
    4,813
    
    
    
    (7,564
    )
    
    
    (2,751
    )December 31, 2004
    
    
    
    
    
    
    (805
    )
    
    
    (8,183
    )
    
    
    (8,988
    )Addition in 2005
    
    
    
    
    
    
    (868
    )
    
    
    6,380
    
    
    
    5,512December 31, 2005
    
    
    
    
    
    
    (1,673
    )
    
    
    (1,803
    )
    
    
    (3,476
    )Addition in 2006
    
    
    (63,395
    )
    
    
    1,673
    
    
    
    (359
    )
    
    
    (62,081
    )December 31, 2006
    
    
    (63,395
    )
    
    
    
    
    
    
    (2,162
    )
    
    
    (65,557
    )
 F-130