dcf valuation model

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Taiwan Semiconductor Manufacturing Company (In $NT Millions)

PRO FORMA FREE CASH FLOWS

2000 2001 2002 2003 2004 2005 2006 2007

Revenues 166,198 125,885 158,645 192,817 248,116 259,777 271,987 284,770 -24.3% 26.0% 21.5% 28.7% 4.7% 4.7% 4.7%

Cost Of Goods Sold (89,682) (92,228) (116,229) (141,265) (181,779) (187,299) (193,111) (197,915)Cost Of Goods Sold Margin 54.0% 73.3% 73.3% 73.3% 73.3% 72.1% 71.0% 69.5%

Operating Expenses:Research and development (5,132) (10,649) (13,420) (16,311) (20,989) (21,975) (23,008) (24,090)General and administrative (7,408) (7,940) (8,599) (9,313) (10,086) (10,923) (11,829) (12,811)Marketing (2,682) (2,290) (2,886) (3,508) (4,514) (4,726) (4,948) (5,181)Total Operating Expenses (15,221) (20,879) (24,905) (29,131) (35,588) (37,624) (39,785) (42,081)

EBIT 61,295 12,778 17,510 22,421 30,748 34,854 39,091 44,774 Depreciation & Amortization (41,446) (55,323) (66,941) (76,045) (86,387) (98,135) (111,138) (122,586)EBITDA 102,741 68,101 84,451 98,465 117,135 132,989 150,229 167,359 Tax Benefit (Provision) 1,168 3,741 4,714 5,730 7,373 7,719 8,082 8,462 Tax Shield On Facility Loan - - - - 2 2 2 2

Operating Cash Flow 103,909 71,841 89,165 104,195 124,510 140,711 158,313 175,823 NetWorking Capital (12,502) 8,297 (4,149) (5,601) (19,004) (7,537) (8,072) (8,758)Capital Expenditures (2,107) (5,121) (6,196) (7,039) (39,210) (9,083) (10,287) (11,346)

Free Cash Flow 89,299 75,018 78,821 91,556 66,296 124,090 139,954 155,719

Note: Chinese Manufacturing Facility Assumed To Be Fully Operational By 2005.

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DISCOUNTED CASH FLOWS - CASE 1 - PRECEDENT TRANSACTIONS

2002 2003 2004 2005 2006 2007

Free Cash Flow 78,821 91,556 66,296 124,090 139,954 155,719 Terminal Value 2,040,111 Discounted Free Cash Flows 78,821 86,960 59,807 106,326 113,899 1,697,340

Entity Value 2,143,153 Less: Debt (56,343)Equity Value 2,086,810 Shares Outstanding 18,623 Equity Value Per Share 112.06

PRECEDENT TRANSACTIONS COMPS: SENSITIVITY - DISCOUNT RATE VS. TERMINAL VALUE:

TARGET: ACQUIRER: PP / EBITDA: 112.06 3.28% 4.28% 5.28% 6.28% 7.28%Dallas Semiconductor Maxim Integrated Products 12.19x 6.19x 76.41 73.32 70.39 67.62 64.98 Telcom Semiconductor Microchip Technology 17.94x 9.19x 99.35 95.18 91.24 87.50 83.96 Jumptec Industrielle Computer Kontron AG 34.96x 12.19x 122.30 117.05 112.08 107.38 102.93

15.19x 145.24 138.91 132.92 127.26 121.90 Max 34.96x 18.19x 168.18 160.77 153.77 147.14 140.88 Mean 21.70x 21.19x 191.13 182.64 174.61 167.03 159.85 Median 17.94x 24.19x 214.07 204.50 195.46 186.91 178.82 Min 12.19x

* All transactions completed after Yr. 2001 .

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DISCOUNTED CASH FLOWS - CASE 2 - TECHNOLOGY INDUSTRY MULTIPLE

2002 2003 2004 2005 2006 2007



TECHNOLOGY INDUSTRY TERMINAL VALUE MULTIPLE: 7.00x SENSITIVITY - DISCOUNT RATE VS. TERMINAL VALUE:

76.00 3.28% 4.28% 5.28% 6.28% 7.28%6.00x 74.96 71.93 69.07 66.36 63.78 6.50x 78.78 75.58 72.54 69.67 66.95 7.00x 82.61 79.22 76.02 72.98 70.11 7.50x 86.43 82.87 79.49 76.30 73.27 8.00x 90.25 86.51 82.97 79.61 76.43 8.50x 94.08 90.15 86.44 82.92 79.59

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DISCOUNTED CASH FLOWS - CASE 3 - GORDON GROWTH MODEL

2002 2003 2004 2005 2006 2007



LT GROWTH ASSUMPTION: 2.00% SENSITIVITY - DISCOUNT RATE VS. LT GROWTH:

224.14 3.28% 4.28% 5.28% 6.28% 7.28%0.50% 285.03 207.60 162.63 133.28 112.63 1.00% 341.16 234.94 178.43 143.38 119.54 1.50% 428.83 272.13 198.41 155.60 127.64 2.00% 584.98 325.62 224.48 170.67 137.28 2.50% 941.33 409.16 259.93 189.73 148.94

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WEIGHTED AVERAGE COST OF CAPITAL

COST OF EQUITY - GOLDMAN INTEGRATED MODEL: WEIGHTED AVERAGE COST OF CAPITAL:

US Treasury 10-Yr Bond 3.96% Cost of Equity 5.80%Taiwan Government 10-Yr Bond 2.16% Cost of Debt 3.06%Beta (TSMC VS S&P 500) 0.9 Debt 56,343 S&P Historical Returns 8.00% Equity 295,853 Cost of Equity (Taiwan) 5.80% WACC 5.28%

COST OF DEBT: 2002 DEBT / EQUITY PROJECTION:

Taiwan Government 10-Yr Bond 2.16% Yr. 2001: Bridge Ratings Spread For AA+ 0.90% Debt (Incl. Minority Interest) 52,789 Cost Of Debt 3.06% Equity 277,190

Debt / Equity Ratio 0.19 Altman Z-Score: 4.52 Working Capital / Total Assets (X1) 0.10 Yr. 2002: Re / Total Assets (X2) 0.10 Debt (Incl. Minority Interest) 56,343 EBIT / Total Assets (X3) 0.03 Equity - From Press Release 295,853 BV / Total Liabilities (X4) 3.11 Comparable Bond Rating AA+ * Year Over Year Debt / Equity Ratio Constant

CHINESE MANUFACTURING FACILITY COST STRUCTURE

USD NTD Cost of Factory (898) (31,214) Exchange Ratio - NTD/USD 34.8 Sources of Funds:

Headquarters (Cash) (371) (12,896) Tax Shield Assumptions:Loans (418) (14,530) Interest Rate on Loans = Cost of Debt 3.06%Retained Earnings (109) (3,789) Tax Rate 15.00%

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GROWTH ASSUMPTIONS

2002 2003 2004 2005 2006 2007Revenue NM NM NM 4.70% 4.70% 4.70%COGS 26.0% 21.5% 28.7% 3.04% 3.10% 2.49%R&D Projected Expense (% of Sales) 26.0% 21.5% 28.7% 4.70% 4.70% 4.70%SG&A Projected Expense (% of Sales) 8.30% 8.30% 8.30% 8.30% 8.30% 8.30%Marketing Projected Expense (% of Sales) 26.02% 21.54% 28.68% 4.70% 4.70% 4.70%D&A Projected Expense (% of Sales) 21.00% 13.60% 13.60% 13.60% 13.25% 10.30%Working Capital Projected -150.00% 35.00% 17.00% -58.00% 13.00% 14.00%CAPEX Projected 21.0% 13.60% 13.60% 13.60% 13.25% 10.30%

* Yr. 2002 - 2004 Revenue Projections Taken From Bloomberg. Yr. 2005 - 2007 Growth Rates Are Slight Modifications Of Prof. Damodaran's Industry Growth Rate.** Yr. 2004 Working Capital Includes Cash Used For Manufacturing Facility Construction. Yrs. 2004 - 2007 Includes Interest Payments On Debt Financing For Facility.*** Yr. 2004 CAPEX Includes Manufacturing Facility Investment.

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Taiwan Semiconductor Manufacturing CompanyComparable Companies Analysis

Price/Earnings Price/Book Price/Sales EV/EBITDA

Taiwan Semiconductor Manufacturing 60.43x 3.16x 6.95x 13.06xWinbond Electronics NM 0.94x 2.59x NMUnited Microelectronics NM 0.05x 0.15x 0.46xAdvanced Micro Devices NM 0.63x 0.57x 3.01xTower Seminconductor NM 0.48x 2.31x NMASE Test NM 0.49x 0.98x 3.78xChartered Semiconductor NM 0.59x 2.03x 16.56xON Semiconductor NM NM 0.20x 19.07xAdvanced Semiconductor Engineering NM 0.21x 0.23x 4.25x

Max NM 3.16x 6.95x 19.07xMean NM 0.73x 1.78x 6.69xMedian NM 0.54x 0.98x 4.25xMin NM 0.05x 0.15x 0.46x

Industry Sales Growth Analysis (In $US Millions)

1999 2000 2001 CAGR

Taiwan Semiconductor Manufacturing 2,195.2 4,781.3 3,621.5 18.16%Winbond Electronics 930.6 1,414.2 694.2 -9.30%United Microelectronics 970.5 3,325.9 2,008.5 27.44%Advanced Micro Devices 2,857.6 4,644.2 3,891.8 10.84%Tower Seminconductor 69.8 104.8 52.4 -9.14%ASE Test 270.3 440.3 298.5 3.37%Chartered Semiconductor 694.3 1,134.1 462.7 -12.65%ON Semiconductor 798.7 2,073.9 1,214.6 15.00%Advanced Semiconductor Engineering 938.1 1,464.1 1,103.8 5.57%

Average 5.48%

* Sales Normalized By Conversion to US Dollars.

Taiwan Semiconductor Manufacturing CompanyBlack-Scholes Options Valuation Analysis

Assumptions: Intinsic Value of Call:Current Stock Price (S) $ 7.75 Call Price $ 0.35 Exercise Price (E) 7.50

Yrs. Till Exp. (t) 0.33 1.81

1.78

10-Yr Treasury 3.96% 0.965

Variance 0.20% 0.963

Prevailing Market Call Price $ 0.95

Formulas:

d1

d2

NormDist(d1)

NormDist(d2)

a. Call Price = [S * NormDist(d1)] - [E * e(-rt) * NormDist(d2)]

b. d1 = [ln(S/E) + t * (r + .5(Var))] / (Var * t).5

c. d2 = d1 - (Var * t).5

Taiwan Semiconductor Manufacturing CompanyVariance Analysis

Date Closing Price Daily Returns Date Closing Price Daily Returns Date Closing Price Daily Returns

4/8/02 17.80 NM 8/15/02 9.61 3.33% 12/12/02 8.08 -3.81%4/9/02 17.42 -2.13% 8/16/02 9.95 3.54% 12/13/02 7.70 -4.70%4/10/02 17.05 -2.12% 8/19/02 10.01 0.60% 12/16/02 7.94 3.12%4/11/02 16.72 -1.94% 8/20/02 9.33 -6.79% 12/30/02 6.99 -3.59%4/12/02 17.27 3.29% 8/21/02 9.45 1.29% 12/31/02 7.05 0.86%4/15/02 17.45 1.04% 8/22/02 9.18 -2.86% 1/2/03 7.28 3.26%4/16/02 18.36 5.21% 8/23/02 8.75 -4.68% 1/3/03 7.45 2.34%4/17/02 18.73 2.02% 8/26/02 8.85 1.14% 1/6/03 7.65 2.68%4/18/02 18.23 -2.67% 8/27/02 8.48 -4.18% 1/7/03 7.68 0.39%4/19/02 17.85 -2.08% 8/28/02 8.25 -2.71% 1/8/03 7.35 -4.30%4/22/02 17.58 -1.51% 8/29/02 8.35 1.21% 1/9/03 7.75 5.44%4/23/02 17.61 0.17% 8/30/02 8.17 -2.16% 1/10/03 8.00 3.23%4/24/02 17.36 -1.42% 9/3/02 7.71 -5.63% 1/13/03 8.30 3.75%4/25/02 16.82 -3.11% 9/4/02 7.97 3.37% 1/14/03 8.27 -0.36%4/26/02 16.32 -2.97% 9/5/02 7.51 -5.77% 1/15/03 8.56 3.51%4/29/02 16.11 -1.29% 9/6/02 7.72 2.80% 1/16/03 8.10 -5.37%4/30/02 16.09 -0.12% 9/9/02 7.89 2.20% 1/17/03 7.59 -6.30%5/1/02 16.55 2.86% 9/10/02 8.48 7.48% 1/21/03 7.55 -0.53%5/2/02 15.70 -5.14% 9/11/02 8.15 -3.89% 1/22/03 7.60 0.66%5/3/02 14.95 -4.78% 9/12/02 7.72 -5.28% 1/23/03 8.20 7.89%5/6/02 14.68 -1.81% 9/13/02 7.55 -2.20% 1/24/03 7.74 -5.61%5/7/02 15.16 3.27% 9/16/02 7.32 -3.05% 1/27/03 7.49 -3.23%5/8/02 16.67 9.96% 9/17/02 7.22 -1.37% 1/28/03 7.15 -4.54%5/9/02 16.01 -3.96% 9/18/02 7.10 -1.66% 1/29/03 7.20 0.70%5/10/02 16.24 1.44% 9/19/02 6.95 -2.11% 1/30/03 6.85 -4.86%5/13/02 16.36 0.74% 9/20/02 6.65 -4.32% 1/31/03 6.70 -2.19%5/14/02 17.14 4.77% 9/23/02 6.45 -3.01% 2/3/03 6.88 2.69%5/15/02 16.68 -2.68% 9/24/02 6.62 2.64% 2/4/03 6.80 -1.16%5/16/02 16.68 0.00% 9/25/02 6.88 3.93% 2/5/03 7.12 4.71%5/17/02 17.14 2.76% 9/26/02 6.59 -4.22% 2/6/03 6.79 -4.63%5/20/02 16.54 -3.50% 9/27/02 6.36 -3.49% 2/7/03 6.68 -1.62%5/21/02 16.09 -2.72% 9/30/02 6.35 -0.16% 2/10/03 6.47 -3.14%5/22/02 16.00 -0.56% 10/1/02 6.52 2.68% 2/11/03 6.47 0.00%5/23/02 15.87 -0.81% 10/2/02 6.23 -4.45% 2/12/03 6.51 0.62%5/24/02 15.81 -0.38% 10/3/02 5.89 -5.46% 2/13/03 6.40 -1.69%5/28/02 15.71 -0.63% 10/4/02 5.78 -1.87% 2/14/03 6.85 7.03%5/29/02 15.32 -2.48% 10/7/02 5.40 -6.57% 2/18/03 7.07 3.21%



5/30/02 15.18 -0.91% 10/8/02 5.50 1.85% 2/19/03 6.98 -1.27%5/31/02 15.07 -0.72% 10/9/02 5.35 -2.73% 2/20/03 7.41 6.16%6/3/02 14.09 -6.50% 10/10/02 5.70 6.54% 2/21/03 7.47 0.81%6/4/02 13.92 -1.21% 10/11/02 6.01 5.44% 2/24/03 7.27 -2.68%6/5/02 13.95 0.22% 10/14/02 6.06 0.83% 2/25/03 7.20 -0.96%6/6/02 13.10 -6.09% 10/15/02 7.24 19.47% 2/26/03 7.06 -1.94%6/7/02 13.05 -0.38% 10/16/02 6.89 -4.83% 2/27/03 6.99 -0.99%6/10/02 13.05 0.00% 10/17/02 7.35 6.68% 2/28/03 7.09 1.43%6/11/02 12.86 -1.46% 10/18/02 7.35 0.00% 3/3/03 7.27 2.54%6/12/02 13.27 3.19% 10/21/02 7.48 1.77% 3/4/03 6.98 -3.99%6/13/02 13.55 2.11% 10/22/02 6.95 -7.09% 3/5/03 6.77 -3.01%6/14/02 13.36 -1.40% 10/23/02 7.76 11.65% 3/6/03 6.84 1.03%6/17/02 13.50 1.05% 10/24/02 7.67 -1.16% 3/7/03 6.96 1.75%6/18/02 13.35 -1.11% 10/25/02 8.02 4.56% 3/10/03 6.86 -1.44%6/19/02 12.59 -5.69% 10/28/02 8.06 0.50% 3/11/03 7.01 2.19%6/20/02 12.56 -0.24% 10/29/02 7.67 -4.84% 3/12/03 7.17 2.28%6/21/02 12.36 -1.59% 10/30/02 7.95 3.65% 3/13/03 7.72 7.67%6/24/02 12.70 2.75% 12/17/02 7.78 -2.02% 3/14/03 7.70 -0.26%6/25/02 12.99 2.28% 12/18/02 7.35 -5.53% 3/17/03 7.87 2.21%6/26/02 12.90 -0.69% 12/19/02 7.34 -0.14% 3/18/03 8.21 4.32%6/27/02 12.90 0.00% 12/20/02 7.44 1.36% 3/19/03 8.19 -0.24%6/28/02 13.00 0.78% 12/23/02 7.45 0.13% 3/20/03 8.31 1.47%7/1/02 12.05 -7.31% 12/24/02 7.38 -0.94% 3/21/03 8.49 2.17%7/2/02 11.11 -7.80% 12/26/02 7.42 0.54% 3/24/03 7.95 -6.36%7/3/02 12.15 9.36% 12/27/02 7.25 -2.29% 3/25/03 8.09 1.76%7/5/02 13.65 12.35% 10/31/02 7.82 -1.64% 3/26/03 7.58 -6.30%7/8/02 13.50 -1.10% 11/1/02 8.09 3.45% 3/27/03 7.65 0.92%7/9/02 12.91 -4.37% 11/4/02 8.85 9.39% 3/28/03 7.40 -3.27%7/10/02 12.71 -1.55% 11/5/02 8.44 -4.63% 3/31/03 6.84 -7.57%7/11/02 13.52 6.37% 11/6/02 9.31 10.31% 4/1/03 6.90 0.88%7/12/02 13.45 -0.52% 11/7/02 8.85 -4.94% 4/2/03 7.46 8.12%7/15/02 13.69 1.78% 11/8/02 8.68 -1.92% 4/3/03 7.50 0.54%7/16/02 13.54 -1.10% 11/11/02 7.83 -9.79% 4/4/03 7.49 -0.13%7/17/02 13.30 -1.77% 11/12/02 8.20 4.73% 4/7/03 7.75 3.47%7/18/02 12.30 -7.52% 11/13/02 7.85 -4.27%7/19/02 11.25 -8.54% 11/14/02 8.40 7.01%7/22/02 11.20 -0.44% 11/15/02 8.54 1.67%



7/23/02 10.71 -4.37% 11/18/02 8.38 -1.87%7/24/02 11.14 4.01% 11/19/02 8.00 -4.53% Std. Dev. 4.44%7/25/02 9.08 -18.49% 11/20/02 8.32 4.00% Variance 0.20%7/26/02 8.85 -2.53% 11/21/02 8.80 5.77%7/29/02 9.15 3.39% 11/22/02 8.98 2.05%7/30/02 9.10 -0.55% 11/25/02 8.86 -1.34%7/31/02 9.12 0.22% 11/26/02 8.50 -4.06%8/1/02 8.86 -2.85% 11/27/02 9.09 6.94%8/2/02 8.35 -5.76% 11/29/02 9.25 1.76%8/5/02 7.10 -14.97% 12/2/02 9.44 2.05%8/6/02 8.21 15.63% 12/3/02 9.14 -3.18%8/7/02 8.45 2.92% 12/4/02 8.98 -1.75%8/8/02 8.80 4.14% 12/5/02 8.67 -3.45%8/9/02 9.12 3.64% 12/6/02 8.80 1.50%8/12/02 8.83 -3.18% 12/9/02 8.45 -3.98%8/13/02 8.89 0.68% 12/10/02 8.55 1.18%8/14/02 9.30 4.61% 12/11/02 8.40 -1.75%

Taiwan Semiconductor Manufacturing CompanyEarnings Per Share Analysis

(In $NT Millions)

1998 1999 2000 2001 2002 (E) 2003 (E)EARNINGS PER SHARE 1.35 2.21 5.71 0.86 1.25 1.72 PRICE/EARNINGS 21.68 38.37 8.93 92.45 33.97 26.86 PRICE 29.28 84.72 50.97 79.55 42.60 46.20

1998 1999 2000 2001 2002 (E) 2003 (E) 2004 (E)

$0.00

$1.00

$2.00

$3.00

$4.00

$5.00

$6.00

Earnings Per Share Analysis

1999 2000 2001

0.00x

5.00x

10.00x

15.00x

20.00x

25.00x

Enterprise Value/EBITDA

1998 1999 2000 2001 2002 (E) 2003 (E) 2004 (E)

0.00x

10.00x

20.00x

30.00x

40.00x

50.00x

60.00x

70.00x

80.00x

90.00x

100.00x

Price/Earnings Analysis

Enterprise Value 674783 611110 1352864EBITDA 47467.9 102740.8 68100.8Enterprise Value/EBITDA 14.21557 5.948075 19.86561Shares Outstanding 7670.882 11689.36 16832.55

1999 2000 2001

0.00x

5.00x

10.00x

15.00x

20.00x

25.00x

Enterprise Value/EBITDA

Taiwan Semiconductor Manufacturing CompanyEarnings Per Share Analysis

(In $NT Millions)

2004 (E) 3.15 14.66

1998 1999 2000 2001 2002 (E) 2003 (E) 2004 (E)

0.00x

10.00x

20.00x

30.00x

40.00x

50.00x

60.00x

70.00x

80.00x

90.00x

100.00x

Price/Earnings Analysis

Taiwan Semiconductor Manufacturing CompanyComparable Ratio Analyses

TSMC UMC1999 2000 2001 1999 2000 2001

RISK RATIOS:Current Ratio 2.261 1.965 2.124 0.893 2.298 2.919Quick Ratio 1.623 1.389 1.620 0.734 1.955 2.522Operating Cash Flow to Current Liabilities Ratio 1.810 2.531 1.878 0.655 1.572 1.038Accounts Receivable Turnover 7.603 8.232 5.787 8.135 9.147 4.857Days Receiveable Outstanding 48.007 44.338 63.075 44.869 39.902 75.149Inventory Turnover 9.342 9.018 8.157 8.037 8.291 7.338Days Inventory Outstanding 39.070 40.475 44.748 45.415 21.862 49.740Accounts Payable Turnover 18.818 16.188 18.024 N/A 3.177 3.015Days Payable Outstanding 19.396 22.547 20.251 N/A 114.890 121.052Debt/Equity Ratio 0.363 0.216 0.190 0.301 0.183 0.259Liabilities Assets Ratio 0.320 0.293 0.243 0.459 0.260 0.286Interest Coverage Ratio 9.535 24.519 4.431 0.599 21.757 -0.104Operating Cash Flow to Total Liabilities Ratio 0.758 1.015 0.766 0.344 1.168 0.984Operating Cash Flow to Capital Expenditures Ratio 0.736 0.882 1.007 0.383 0.770 0.919

PROFITABILITY RATIOS:Profit Margin 0.339 0.404 0.133 0.659 0.469 -0.023Total Asset Turnover 0.470 0.548 0.341 0.272 0.505 0.221Return On Assets 0.159 0.222 0.046 0.179 0.237 -0.005Capital Structure Leverage Ratio 1.584 1.463 1.368 1.423 1.096 1.112Return On Common Equity 0.230 0.314 0.054 0.120 0.243 -0.011Selling and Administrative Expenses 0.037 0.045 0.063 0.500 0.038 0.096Accounts Receivable Turnover 7.603 8.232 5.787 8.135 9.147 4.857Inventory Turnover 9.342 9.018 8.157 8.037 8.291 7.338Fixed Asset Turnover 0.696 0.842 0.508 0.976 1.116 0.420

Taiwan Semiconductor Manufacturing CompanyConsolidated Balance Sheet

(In $NT Millions)

Year Ended December 31,1999 2000 2001

CURRENT ASSETS:Cash and Cash Equivalents 29,517.7 38,840.2 37,556.3 Pledged time deposits 3,161.0 - - Short-term investments 965.4 2,351.6 1,398.1 Receivables - net 13,322.0 27,055.5 16,452.2 Receivable from related parties 340.9 948.7 494.7 Inventories - net 7,104.0 12,785.7 9,828.3 Deferred income tax assets - net 2,616.6 8,178.0 2,350.1 Prepaid expenses and other current assets 2,630.0 3,034.6 2,721.4 Total Current Assets 59,657.6 93,194.3 70,801.1

Long-term investments 16,164.7 9,814.3 11,599.2 Property, plant and equipment - net 150,059.9 244,747.9 251,287.6 Goodwill - 11,531.0 11,437.6

OTHER ASSETS:Rental Assets - 625.6 - Deferred income tax assets - net 7,006.7 6,629.8 16,245.8 Deferred charges - net 2,380.8 3,335.7 3,769.8 Refundable deposits 59.4 979.1 784.1 Assests leased to others - - 555.1 Miscellaneous 106.4 28.3 37.4 Total Other Assets 9,553.3 11,598.5 21,392.2

TOTAL ASSETS 235,435.5 370,886.0 366,517.7


(In $NT Millions)CURRENT LIABILITIES:

Short-term bank loans 5,026.6 3,833.8 6,269.2 Commercial paper payable 94.8 - - Accounts payable 3,273.9 8,507.8 1,397.9 Payable to related parties 1,036.4 2,606.3 1,048.3 Income tax payable 155.1 3.3 - Payables to contractors and equipment suppliers 12,593.7 25,550.3 12,867.2 Current portion of long-term liabilities 1.0 51.1 5,000.0 Accrued expenses and other current liabilities 4,208.9 6,872.4 6,746.4 Total Current Liabilities 26,390.4 47,425.0 33,329.0

LONG-TERM LIABILITIES:Long-term bank loans 22,743.5 23,339.4 22,399.3 Long-term bonds payable 20,000.0 29,000.0 24,000.0 Total Long-term liabilities 42,743.5 52,339.4 46,399.3

OTHER LIABILITIES:Accrued pension cost 1,013.8 1,511.3 1,856.6 Deferred gain on sale - leaseback - 434.2 268.2 Lease obligation payable 4.4 3.3 Guarantee deposits 5,188.7 7,097.4 7,212.7 Others - - 141.5 Total Other Liabilities 6,206.9 9,046.2 9,479.0

TOTAL LIABILITIES 75,340.8 108,810.6 89,207.3


(In $NT Millions)MINORITY INTEREST IN SUBSIDIARIES 7,524.2 321.7 120.2

SHAREHOLDERS' EQUITY:Capital Stock - $10 par value

Issued Preferred - 13,000.0 13,000.0 Issued Common 85,208.8 116,893.7 168,325.6

Suscribed Capital 13,118.0 - - Capital Surplus 23,951.4 57,089.0 57,128.4 Retained Earnings 31,382.4 75,121.0 37,507.5 Unrealized loss on long-term investments - (71.6) - Cumulative translation adjustments (1,090.1) (278.4) 1,228.7 Total Shareholders' Equity 152,570.5 261,753.7 277,190.2

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 235,435.5 370,886.0 366,517.7

Taiwan Semiconductor Manufacturing CompanyConsolidated Statements of Income

(In $NT Millions)

Year Ended December 31,1998 1999 2000 2001

NET SALES 50,524.5 76,305.1 166,197.6 125,884.9 COST OF SALES 33,009.3 46,237.4 89,681.7 92,228.1 GROSS PROFIT 17,515.2 ### 30,067.7 ### 76,515.9 ### 33,656.8

OPERATING EXPENSESResearch and development 2,314.0 3,090.8 5,131.5 10,649.0 General and administrative 2,128.2 2,845.3 7,408.1 7,939.9 Marketing 767.5 1,861.6 2,681.6 2,290.1 Total Operating Expenses 5,209.7 ### 7,797.7 ### 15,221.2 ### 20,879.0

INCOME FROM OPERATIONS 12,305.5 ### 22,270.0 ### 61,294.7 ### 12,777.8

NON-OPERATING INCOMEGain on sales of short-term investments - net 11.9 48.6 1,060.9 1,619.1 Interest 1,111.9 1,114.5 1,679.7 1,486.7 Royalty Income - - - 1,301.6 Insurance compensation - net - 184.6 1,623.8 860.8 Premium income-net 8.3 63.8 640.5 234.7 Gain on sales of long-term investments - net 781.6 67.8 15.1 105.4 Technical service income - - 138.5 55.1 Gain on sales of property, plant, and equipment 3.3 4.0 62.9 52.4 Reversal of allowance for losses on shoter-term investment - net - 140.1 0.7 - Foreign exchange gain - net - - 828.0 - Other 59.6 58.9 177.8 759.8 Total Non-Operating Income 1,976.6 ### 1,682.3 ### 6,227.9 ### 6,475.6

Taiwan Semiconductor Manufacturing CompanyConsolidated Statements of Income

(In $NT Millions)

NON-OPERATING EXPENSESInvestments loss recognized by equity method - net 1,400.0 288.5 187.2 3,959.0 Interest 1,191.7 2,417.0 2,717.0 3,144.1 Foreign exchange loss - net 259.5 119.1 - 695.6 Loss on sales of property, plant, and equipment 4.4 164.4 114.7 235.6 Amortization of issuance costs of bonds 143.7 114.8 32.7 12.5 Premium expenses - net - 86.8 108.1 - Permanent loss on long-term investments 5.8 31.6 - - Provision for loss in short-term investments 121.9 - - - Other 99.9 101.8 461.4 420.1 Total Non-Operating Expenses 3,226.9 ### 3,324.0 ### 3,621.1 ### 8,466.9

INCOME BEFORE INCOME TAX 11,055.2 ### 20,628.3 ### 63,901.5 ### 10,786.5 INCOME TAX BENEFIT 2,318.4 2,382.8 1,167.9 3,740.7 INCOME BEFORE MINORITY INTEREST 13,373.6 23,011.1 65,069.4 14,527.2

MINORITY INTEREST IN LOSS (INCOME) OF SUBSIDIARIES 1,015.6 515.9 36.8 (44.0)

NET INCOME 14,389.2 ### 23,527.0 ### 65,106.2 ### 14,483.2

EARNINGS PER SHARE 1.35 2.21 5.71 0.86 EARNINGS PER EQUIVALENT ADS 6.75 11.04 28.55 4.17

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 10,656.0 10,656.0 11,400.9 16,832.6 WEIGHTED AVERAGE NUMBER OF EQUIVALENT ADS OUTSTANDING 2,131.2 2,131.2 2,280.2 3,473.2

Taiwan Semiconductor Manufacturing CompanyConsolidated Statement Of Cash Flows

(In $NT Millions)

Year Ended December 31,1998 1999 2000 2001

CASH FLOWS FROM OPERATING ACTIVITIES:Net Income 14,389.2 23,527.0 65,106.2 14,483.2 Adjustments To Reconcile Net Income To Cash:

Depreciation and amortization 15,522.0 25,197.9 41,446.1 55,323.0 Deferred income tax (3,007.9) (2,481.8) (956.1) (3,788.1)Investment loss recognized by equity method - net 1,400.0 288.5 187.2 3,959.0 Gain on sale of long term investments (781.6) (67.8) (15.1) (105.4)Loss on sale of properties - net 1.1 160.4 51.8 183.2 Reversal of provision for losses on short-term investments - net - - - (13.2)Permanent loss on long term investments 5.8 31.6 - - Accretion in redemption value of bonds 875.8 585.6 - - Accrued pension cost 264.3 260.4 370.3 345.3 Allowance for doubtful receivables (10.0) 148.6 524.5 153.8 Allowance for sales returns and others (93.2) 402.1 1,679.3 123.3 Transfer property into expenses - 39.1 - - Minority interest in loss of subsidiaries (1,015.6) (515.9) (36.8) 44.0

Changes In Operating Assets and Liabilities:Short-term investments (124.8) 5,049.7 (1,373.6) - Forward exchange contract receivable - - (113.7) 49.5 Receivables 1,640.5 (6,391.8) (15,428.2) 10,326.2 Receivables from related parties 215.6 (273.2) (737.1) 454.0 Inventories 537.5 (2,765.2) (4,033.8) 2,957.4 Prepaid expenses and other current liabilities 221.8 (1,278.1) 352.0 202.3 Accounts payables (929.0) 985.9 3,170.7 (7,109.9)Payables to related parties (46.8) 878.4 2,334.2 (1,558.0)Income tax payable 746.8 (622.3) (151.8) - Forward exchange contract payable - 6.1 (987.6) 218.1 Accrued expenses and other current liabilities 318.4 2,137.2 2,024.1 (430.0)

Net Cash Provided By Operating Activities 30,129.9 45,302.4 93,412.6 75,817.7


(In $NT Millions)

CASH FLOWS FROM INVESTING ACTIVITIES:Decrease (Increase) in short-term investments - - - 117.1 Acquisitions Of:

Long-term investments (1,555.8) (10,057.9) (2,107.3) (5,120.6)Properties (55,780.5) (51,459.1) (103,761.9) (70,201.2)

Proceeds From Sales Of:Long-term investments 1,523.5 150.0 49.4 559.1 Properties 3.5 413.1 364.9 301.4

Decrease (Increase) in restricted cash (7.3) 7.2 - - Decrease (Increase) in pledge time deposits (209.6) (2,290.0) 3,161.7 - Increase in deferred charges (1,187.5) (1,179.3) (1,793.2) (1,805.2)Decrease (Increase) In refundable deposits (9.7) 61.4 (915.6) 195.0 Decrease (Increase) in other assets - miscellaneous (0.8) 13.5 77.4 (9.1)Decrease in minority interest in subsidiaries (86.6) (1,660.8) (15,386.9) (249.2)Increase in goodwill (1,019.2)Cash of TASMC as of July 1, 2000 - - 736.6 - Net Cash Used In Investing Activites (57,310.8) (66,001.9) (119,574.9) (77,231.9)

CASH FLOWS FROM FINANCING ACTIVITIESProceeds From Issuance Of:

Short-term bank borrowings 2,109.2 2,917.4 - 2,435.4 Commercial paper 98.2 - - - Long-term bonds 9,772.5 9,450.6 9,000.0 - Long-term bank borrowings 6,903.8 7,997.6 - - Capital Stock 530.0 20,618.0 39,204.5 -

Payments On:Short-term bank borrowings - - (8,592.8) - Commercial paper - - (4,241.0) - Short-term notes - (253.4) - - Long-term bank borrowings - - (2,648.9) (940.1)

Increase (Decrease) in guarantee deposits and other liabilities (2,318.9) (1,010.4) 2,977.9 75.0 Issuance costs of financing (78.3) (63.3) (118.3) (47.7)Cash dividends paid on preferred shares - - - (41.1)Bonus to directors and supervisors (161.6) (138.1) (215.1) (584.3)Net Cash Provided By Financing Activites 16,854.9 39,518.4 35,366.3 897.2

Effects Of Changes In Foreign Exchange Rate (657.6) (173.1) 118.5 (766.9)


(In $NT Millions)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (10,983.6) 18,645.8 9,322.5 (1,283.9)BEGINNING BALANCE - CASH AND CASH EQUIVALENTS 21,855.5 10,871.9 29,517.7 38,840.2 ENDING BALANCE - CASH AND CASH EQUIVALENTS 10,871.9 29,517.7 38,840.2 37,556.3

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dcf valuation model

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