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SECURITIES AND EXCHANGE COMMISSION
o | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 |
þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
(Jurisdiction of incorporation or organization)
(Address of principal executive offices)
Title of each class | Name of each exchange on which registered | |
Ordinary Shares, par value US$0.0004 American Depositary Shares | The Stock Exchange of Hong Kong Limited* The New York Stock Exchange, Inc. |
(Title of Class)
(Title of Class)
* | Not for trading, but only in connection with the listing of American Depositary Shares on the New York Stock Exchange, Inc. |
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• | “China” or the “PRC” are to the People’s Republic of China, excluding for the purpose of this annual report, Hong Kong, Macau and Taiwan; | |
• | “HK$” are to Hong Kong dollars; | |
• | “Rmb” are to Renminbi, the legal currency of China; | |
• | “US$” are to U.S. dollars; | |
• | “SEHK” or “Hong Kong Stock Exchange” are to The Stock Exchange of Hong Kong Limited; | |
• | “SEC” are to the U.S. Securities and Exchange Commission; | |
• | “NYSE” or “New York Stock Exchange” are to the New York Stock Exchange, Inc.; | |
• | “global offering” are to the initial public offering of our ADSs and our ordinary shares, which offering was completed on March 18, 2004; and | |
• | “IPO registration statement” are to our registration statement on Form F-1 (File No. 333-112720), as filed with the Securities and Exchange Commission on March 11, 2004, sections of which are incorporated by reference into this annual report. |
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For the year ended December 31, | ||||||||||||||||||||
2003 | 2004 | 2005 | 2006 | 2007 | ||||||||||||||||
(in US$ thousands, except for per share, per ADS data, | ||||||||||||||||||||
percentages, and operating data) | ||||||||||||||||||||
Statement of Operations Data: | ||||||||||||||||||||
Sales | $ | 365,824 | $ | 974,664 | $ | 1,171,319 | $ | 1,465,323 | $ | 1,549,765 | ||||||||||
Cost of sales(1) | 359,779 | 716,225 | 1,105,134 | 1,338,155 | 1,397,038 | |||||||||||||||
Gross profit | 6,045 | 258,439 | 66,185 | 127,168 | 152,727 | |||||||||||||||
Operating expenses: | ||||||||||||||||||||
Research and development | 34,913 | 74,113 | 78,865 | 94,171 | 97,034 | |||||||||||||||
General and administrative | 29,705 | 54,038 | 35,701 | 47,365 | 74,490 | |||||||||||||||
Selling and marketing | 10,711 | 10,384 | 17,713 | 18,231 | 18,716 | |||||||||||||||
Litigation settlement | — | 16,695 | — | — | — | |||||||||||||||
Amortization of acquired intangible assets | 3,462 | 14,368 | 20,946 | 24,393 | 27,071 | |||||||||||||||
Income from sale of plant and equipment and other fixed assets | — | — | — | (43,122 | ) | (28,651 | ) | |||||||||||||
Total operating expenses | 78,791 | 169,598 | 153,225 | 141,038 | 188,659 | |||||||||||||||
Income (loss) from operations | (72,746 | ) | 88,841 | (87,040 | ) | (13,870 | ) | (35,932 | ) | |||||||||||
Other income (expenses): | ||||||||||||||||||||
Interest income | 5,616 | 10,587 | 11,356 | 14,916 | 12,349 | |||||||||||||||
Interest expense | (1,425 | ) | (13,698 | ) | (38,784 | ) | (50,926 | ) | (37,936 | ) | ||||||||||
Foreign currency exchange gain (loss) | 1,523 | 8,218 | (3,355 | ) | (21,912 | ) | 11,250 | |||||||||||||
Other, net | 888 | 2,441 | 4,462 | 1,821 | 2,238 | |||||||||||||||
Total other income (expense), net | 6,602 | 7,548 | (26,322 | ) | (56,101 | ) | (12,100 | ) | ||||||||||||
Income (loss) before income tax | (66,144 | ) | 96,389 | (113,362 | ) | (69,971 | ) | (48,032 | ) | |||||||||||
Income tax benefit (expense) | — | (186 | ) | (285 | ) | 24,928 | 29,720 | |||||||||||||
Minority interest | — | — | 251 | (19 | ) | 2,856 | ||||||||||||||
Loss from equity investment | — | — | (1,379 | ) | (4,201 | ) | (4,013 | ) | ||||||||||||
Net (loss) income before cumulative effect of a change in accounting principle | (66,144 | ) | 96,203 | (114,775 | ) | (49,263 | ) | (19,468 | ) |
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For the year ended December 31, | ||||||||||||||||||||
2003 | 2004 | 2005 | 2006 | 2007 | ||||||||||||||||
(in US$ thousands, except for per share, per ADS data, | ||||||||||||||||||||
percentages, and operating data) | ||||||||||||||||||||
Cumulative effect of a change in accounting principle | — | — | — | 5,154 | — | |||||||||||||||
Net (loss) income | (66,144 | ) | 96,203 | (114,775 | ) | (44,109 | ) | (19,468 | ) | |||||||||||
Deemed dividend on preference shares(2) | 37,117 | 18,840 | — | — | — | |||||||||||||||
Income (loss) attributable to holders of ordinary shares | $ | (103,261 | ) | $ | 77,363 | $ | (114,775 | ) | $ | (44,109 | ) | $ | (19,468 | ) | ||||||
Income (loss) per ordinary share, basic | $ | (1.14 | ) | $ | 0.01 | $ | (0.00 | ) | $ | (0.00 | ) | $ | (0.00 | ) | ||||||
Income (loss) per ordinary share, diluted | $ | (1.14 | ) | $ | 0.00 | $ | (0.00 | ) | $ | (0.00 | ) | $ | (0.00 | ) | ||||||
Ordinary shares used in calculating basic income (loss) per ordinary share(3)(4) | 90,983,200 | 14,199,163,517 | 18,184,429,255 | 18,334,498,923 | 18,501,940,489 | |||||||||||||||
Ordinary shares used in calculating diluted income (loss) per ordinary share(3)(4) | 90,983,200 | 17,934,393,066 | 18,184,429,255 | 18,334,498,923 | 18,501,940,489 | |||||||||||||||
Income (loss) per ADS, basic(5) | — | $ | 0.27 | $ | (0.32 | ) | $ | (0.12 | ) | $ | (0.05 | ) | ||||||||
Income (loss) per ADS, diluted(5) | — | $ | 0.22 | $ | (0.32 | ) | $ | (0.12 | ) | $ | (0.05 | ) | ||||||||
ADS used in calculating basic income (loss) per ADS(5) | — | 283,983,270 | 363,688,585 | 366,689,978 | 370,038,810 | |||||||||||||||
ADS used in calculating diluted income (loss) per ADS(5) | — | 358,687,861 | 363,688,585 | 366,689,978 | 370,038,810 |
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For the year ended December 31, | ||||||||||||||||||||
2003 | 2004 | 2005 | 2006 | 2007 | ||||||||||||||||
(in US$ thousands, except for per share, per ADS data, | ||||||||||||||||||||
percentages, and operating data) | ||||||||||||||||||||
Other Financial Data: | ||||||||||||||||||||
Gross margin | 1.7 | % | 26.5 | % | 5.7 | % | 8.7 | % | 9.9 | % | ||||||||||
Operating margin | -19.9 | % | 9.1 | % | -7.4 | % | -0.9 | % | -2.3 | % | ||||||||||
Net margin | -18.1 | % | 9.9 | % | -9.8 | % | -3.0 | % | -1.3 | % | ||||||||||
Operating Data: | ||||||||||||||||||||
Wafers shipped (in 8” equivalents) | ||||||||||||||||||||
Total | 476,451 | 943,463 | 1,347,302 | 1,614,888 | 1,849,957 | |||||||||||||||
ASP(6) | 768 | 1,033 | 869 | 907 | 838 |
(1) | Including amortization of deferred stock compensation for employees directly involved in manufacturing activities. | |
(2) | Deemed dividend represents the difference between the sale and conversion prices of warrants to purchase convertible preference shares we issued and their respective fair market values. | |
(3) | Anti-dilutive preference shares, options and warrants were excluded from the weighted average ordinary shares outstanding for the diluted per share calculation. | |
(4) | All share information have been adjusted retroactively to reflect the 10-for-1 share split effected upon completion of the global offering of its ordinary shares in March 2004 (the “Global Offering”). | |
(5) | Fifty ordinary shares equals one ADS. | |
(6) | Total sales/total wafers shipped. |
As of December 31, | ||||||||||||||||||||
2003 | 2004 | 2005 | 2006 | 2007 | ||||||||||||||||
(in US$ thousands) | ||||||||||||||||||||
Balance Sheet Data: | ||||||||||||||||||||
Cash and cash equivalents | $ | 445,276 | $ | 607,173 | $ | 585,797 | $ | 363,620 | $ | 469,284 | ||||||||||
Short-term investments | 27,165 | 20,364 | 13,796 | 57,951 | 7,638 | |||||||||||||||
Accounts receivable, net of allowances | 90,539 | 169,188 | 241,334 | 252,185 | 298,388 | |||||||||||||||
Inventories | 69,924 | 144,018 | 191,238 | 275,179 | 248,310 | |||||||||||||||
Total current assets | 680,882 | 955,418 | 1,047,465 | 1,049,666 | 1,075,302 | |||||||||||||||
Land use rights, net | 41,935 | 39,198 | 34,768 | 38,323 | 57,552 | |||||||||||||||
Plant and equipment, net | 1,523,564 | 3,311,925 | 3,285,631 | 3,244,401 | 3,202,958 | |||||||||||||||
Total assets | 2,290,506 | 4,384,276 | 4,586,633 | 4,541,292 | 4,708,444 | |||||||||||||||
Total current liabilities | 325,430 | 723,871 | 896,038 | 677,362 | 930,190 | |||||||||||||||
Total long-term liabilities | 479,961 | 544,462 | 622,497 | 817,710 | 730,790 | |||||||||||||||
Total liabilities | 805,391 | 1,268,333 | 1,518,535 | 1,495,072 | 1,660,980 | |||||||||||||||
Minority interest | — | — | 38,782 | 38,800 | 34,944 | |||||||||||||||
Stockholders’ equity | $ | 1,485,115 | $ | 3,115,942 | $ | 3,029,316 | $ | 3,007,420 | $ | 3,012,519 |
For the year ended December 31, | ||||||||||||||||||||
2003 | 2004 | 2005 | 2006 | 2007 | ||||||||||||||||
(in US$ thousands, except percentages and operating data) | ||||||||||||||||||||
Cash Flow Data: | ||||||||||||||||||||
Net income (loss) | $ | (66,145 | ) | $ | 96,203 | $ | (114,775 | ) | $ | (49,263 | ) | $ | (19,468 | ) | ||||||
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||||||||||||||||||||
Depreciation and amortization | 233,905 | 456,961 | 769,472 | 919,616 | 706,277 |
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For the year ended December 31, | ||||||||||||||||||||
2003 | 2004 | 2005 | 2006 | 2007 | ||||||||||||||||
(in US$ thousands, except percentages and operating data) | ||||||||||||||||||||
Net cash provided by (used in) operating activities | 114,270 | 518,662 | 648,105 | 769,649 | 672,465 | |||||||||||||||
Purchases of plant and equipment | (453,097 | ) | (1,838,773 | ) | (872,519 | ) | (882,580 | ) | (717,171 | ) | ||||||||||
Net cash used in investing activities | (454,498 | ) | (1,826,787 | ) | (859,652 | ) | (917,369 | ) | (643,344 | ) | ||||||||||
Net cash provided by financing activities | 693,497 | 1,469,764 | 190,364 | (74,440 | ) | 76,637 | ||||||||||||||
Net increase (decrease) in cash and cash equivalents | $ | 353,412 | $ | 161,896 | $ | (21,376 | ) | $ | (222,177 | ) | $ | 105,664 | ||||||||
Other Financial Data: | ||||||||||||||||||||
Gross margin | 1.7 | % | 26.5 | % | 5.7 | % | 8.7 | % | 9.9 | % | ||||||||||
Operating margin | -19.9 | % | 9.1 | % | -7.4 | % | -0.9 | % | -2.3 | % | ||||||||||
Net margin | -18.1 | % | 9.9 | % | -9.8 | % | -3.0 | % | -1.3 | % | ||||||||||
Operating Data: | ||||||||||||||||||||
Wafers shipped (in units): | ||||||||||||||||||||
Total(1) | 476,451 | 943,463 | 1,347,302 | 1,614,888 | 1,849,957 |
(1) | Including logic, DRAM, copper interconnects and all other wafers. |
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• | our customers’ sales outlook, purchasing patterns and inventory adjustments based on general economic conditions or other factors; | ||
• | the loss of one or more key customers or the significant reduction or postponement of orders from such customers; | ||
• | timing of new technology development and the qualification of this technology by our customers; | ||
• | timing of our expansion and development of our facilities; | ||
• | our ability to obtain equipment and raw materials; and | ||
• | our ability to obtain financing in a timely manner. |
• | maintain high capacity utilization, which is the actual number of wafers we produce in relation to our capacity; | ||
• | optimize our technology and product mix, which is the relative number of wafers fabricated utilizing higher margin technologies as compared to commodity and lower margin technologies; and | ||
• | continuously maintain and improve our yield, which is the percentage of usable fabricated devices on a wafer. |
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• | our future financial condition, results of operations and cash flows; | ||
• | general market conditions for financing activities of semiconductor companies; | ||
• | our future stock price; and | ||
• | our future credit rating. |
• | shortages and late delivery of building materials and facility equipment; | ||
• | delays in the delivery, installation, commissioning and qualification of our manufacturing equipment; | ||
• | seasonal factors, such as a long and intensive wet season that limits construction; | ||
• | labor disputes; | ||
• | design or construction changes with respect to building spaces or equipment layout; | ||
• | delays in securing the necessary governmental approvals and land use rights; and | ||
• | technological, capacity and other changes to our plans for new fabs necessitated by changes in market conditions. |
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• | logic technologies, including standard logic, mixed-signal, RF and high voltage circuits; | ||
• | memory technologies, including DRAM, SRAM, Flash, and EEPROM; and | ||
• | specialty technologies, including LCoS, and CIS. |
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Shanghai Mega-Fab | Beijing Mega-Fab | Tianjin | ||||
Number and Type of fab | 8-inch fabs: three in production 12-inch fab: being equipped | 12-inch fabs: two in production, one additional fab being equipped | 8-inch fab: one in production | |||
Pilot production commencement | September 2001 | July 2004 | February 2004 |
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Shanghai Mega-Fab | Beijing Mega-Fab | Tianjin | ||||
Commercial production commencement | January 2002 | March 2005 | May 2004 | |||
Wafer size | 8-inch 12-inch (being equipped) | 12-inch | 8-inch | |||
Production clean room size | 34,610 m2 | 23,876 m2 | 8,463 m2 |
• | logic technologies, including standard logic, mixed-signal, RF and high voltage circuits; | ||
• | memory technologies, including DRAM, SRAM, Flash, EEPROM and Mask ROM; and | ||
• | specialty technologies, including LCoS, and CIS. |
• | Logic Semiconductors. Logic semiconductors process digital data to control the operation of electronic systems. The largest segment of the logic market, standard logic devices, includes microprocessors, microcontrollers, DSPs and graphic chips. Logic semiconductors are used in communications devices, computers and consumer products, with the most advanced logic semiconductors dedicated primarily to computing applications. | ||
• | Mixed-Signal and RF. Analog/digital semiconductors combine analog and digital devices on a single semiconductor to process both analog signals and digital data. We make 0.35 micron to 0.13 micron mixed-signal and RF semiconductors using the CMOS process. The primary uses of mixed-signal semiconductors are in hard disk drives, wireless communications equipment and network communications equipment, while RF semiconductors are primarily used in communications devices, such as cell phones. |
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• | High Voltage. High voltage semiconductors are semiconductor devices that can drive high voltage electricity to systems that require voltage of between five volts to several hundred volts. Our high voltage technologies provide solutions for display driver integrated circuits, power supplies, power management, telecommunications, automotive electronics and industrial controls. | ||
• | Memory Semiconductors. Memory semiconductors, which are used in electronic systems to store data and program instructions, are generally classified as either volatile memory, which lose their data content when power supplies are switched off, or non-volatile memory, which retain their data content without the need for a constant power supply. Examples of volatile memory include SRAM and DRAM, and examples of non-volatile memory include electrically erasable programmable read-only memory, or EEPROM, NAND Flash and OTP. Memory semiconductors are used in communications devices, computers and many consumer products. | ||
• | Specialty Semiconductors. |
• | LCoS. LCoS microdisplays are tiny, high resolution, low power displays designed for high definition televisions, projectors and other products that use or rely on displays. Compared with other display technologies, such as liquid crystal and plasma, LCoS displays have higher resolution and higher fill factor, resulting in superior images, colors and performance. LCoS process technology represents an enhancement of mixed-signal CMOS process technology with the addition of a highly reflective mirror layer. | ||
• | CIS. CIS devices are sensors that are used in a wide range of camera-related systems, such as digital cameras, digital video cameras, handset cameras, personal computer cameras and surveillance cameras, which integrate image-capturing capabilities onto a chip. CIS is rapidly becoming a cost-effective and low power replacement for competing charged-coupled devices, or CCDs. Since CIS devices are fabricated with CMOS technology, they are easier to produce and more cost-effective than CCDs. By combining camera functions on a chip, from the capture of photos to the output of digital bits, CMOS image sensors reduce the parts required for a digital camera system, which in turn enhances reliability, facilitates miniaturization, and enables on-chip programming. Our CIS process is based on our CIS array technology. |
Month and | ||||||||||
year of | ||||||||||
commencement | ||||||||||
of commercial | Process technology | |||||||||
production of | (in microns) | |||||||||
Fab | initial fab | 2005 | 2006 | 2007 | 2008 | |||||
Wafer fabrication: | ||||||||||
Shanghai Mega-fab (8”) | January | 0.35/0.25/ | 0.35/0.25/ | 0.35/0.25/ | 0.35/0.25/ | |||||
2002 | 0.18/0.15/ | 0.18/0.15/ | 0.18/0.15/ | 0.18/0.15/ | ||||||
0.13/0.11/0.09 | 0.13/0.11/0.09 | 0.13/0.11/0.09 | 0.13/0.11/0.09 | |||||||
Shanghai fab (12”) | — | — | — | — | 0.09/0.065 | |||||
Beijing Mega-fab (12”) | March 2005 | 0.15/0.13/0.11/ | 0.15/0.13/0.11/ | 0.13/0.11/ | 0.18/0.13/0.09 | |||||
0.10/0.09 | 0.10/0.09 | 0.10/0.09 |
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Month and | ||||||||||
year of | ||||||||||
commencement | ||||||||||
of commercial | Process technology | |||||||||
production of | (in microns) | |||||||||
Fab | initial fab | 2005 | 2006 | 2007 | 2008 | |||||
Tianjin fab (8”) | May | 0.35/0.18 | 0.35/0.25/ | 0.35/0.25/ | 0.35/0.25/ | |||||
2004 | 0.18/0.15 | 0.18/0.15 | 0.18/0.15 |
For the | For the | |||||||||||||||||||||||||||
year ended December 31, | For the three months ended | year ended | ||||||||||||||||||||||||||
Process | March 31, | June 30, | September 30, | December 31, | December 31, | |||||||||||||||||||||||
Technologies | 2005 | 2006 | 2007 | 2007 | 2007 | 2007 | 2007 | |||||||||||||||||||||
(based on sales in US$) | ||||||||||||||||||||||||||||
0.13 micron and below | 40.6 | % | 49.6 | % | 52.5 | % | 55.0 | % | 55.3 | % | 49.7 | % | 53.1 | % | ||||||||||||||
0.15 micron | 5.4 | % | 5.7 | % | 2.9 | % | 1.2 | % | 2.0 | % | 5.5 | % | 2.9 | % | ||||||||||||||
0.18 micron | 42.3 | % | 35.7 | % | 34.1 | % | 30.8 | % | 28.8 | % | 28.3 | % | 30.5 | % | ||||||||||||||
0.25 micron | 3.7 | % | 2.0 | % | 0.7 | % | 0.7 | % | 1.0 | % | 0.5 | % | 0.7 | % | ||||||||||||||
0.35 micron | 8.0 | % | 7.0 | % | 9.8 | % | 12.3 | % | 12.9 | % | 16.0 | % | 12.8 | % | ||||||||||||||
Total | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % |
Fab | 2005 | 2006 | 2007 | |||||||||
Wafer Fabrication: | ||||||||||||
Wafer fabrication capacity as of year-end(1): | ||||||||||||
Shanghai mega-fab | 89,892 | 106,000 | 98,000 | |||||||||
Beijing mega-fab | 27,368 | 56,250 | 65,250 | |||||||||
Tianjin fab | 15,000 | 20,000 | 22,000 | |||||||||
Total monthly wafer fabrication capacity as of year-end(1) | 132,260 | 182,250 | (3) | 185,250 | (3) | |||||||
Wafer fabrication capacity utilization | 89 | % | 90 | % | 94 | % |
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(1) | All output and capacity data is provided as 8-inch wafers or 8-inch wafer equivalents per month. Conversion of 12-inch wafers to 8-inch wafer equivalents is achieved by multiplying the number of 12-inch wafers by 2.25. | |
(2) | Reflects wafers fabricated using the copper interconnects line and does not include wafers fabricated using the aluminum interconnects line. As a small number of wafers produced by our aluminum interconnects lines also utilize the copper interconnects capabilities, our reported capacity and output data for our copper interconnects line overlaps to a limited extent with such data for our aluminum interconnects line. | |
(3) | Megafab structure includes copper interconnects in the total monthly capacity. |
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(1) | A portion of this work is outsourced to our service partners. | |
(2) | A portion of these services are outsourced to our service partners. |
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For the year ended December 31, | ||||||||||||||||||||||||
2005 | 2006 | 2007 | ||||||||||||||||||||||
Customer Type | Sales | Percentage | Sales | Percentage | Sales | Percentage | ||||||||||||||||||
(in US$ thousands, except percentages) | ||||||||||||||||||||||||
Fabless semiconductor companies | $ | 515,437 | 44.0 | % | 601,200 | 41.0 | % | 720,416 | 46.5 | % | ||||||||||||||
Integrated device manufacturers | 613,869 | 52.4 | % | 737,275 | 50.3 | % | 634,607 | 40.9 | % | |||||||||||||||
Systems companies and others | 42,013 | 3.6 | % | 126,848 | 8.7 | % | 194,742 | 12.6 | % | |||||||||||||||
Total | $ | 1,171,319 | 100.0 | % | 1,465,323 | 100.0 | % | 1,549,765 | 100.0 | % | ||||||||||||||
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For the year ended December 31, | ||||||||||||||||||||||||
2005 | 2006 | 2007 | ||||||||||||||||||||||
Region | Sales | Percentage | Sales | Percentage | Sales | Percentage | ||||||||||||||||||
(in US$ thousands, except percentages) | ||||||||||||||||||||||||
United States | $ | 478,162 | 40.8 | % | 602,506 | 41.1 | % | 657,603 | 42.4 | % | ||||||||||||||
Europe | 316,576 | 27.0 | % | 440,328 | 30.0 | % | 328,710 | 21.2 | % | |||||||||||||||
Asia Pacific (excluding Japan and Taiwan)(1) | 175,846 | 15.0 | % | 168,608 | 11.5 | % | 227,973 | 14.7 | % | |||||||||||||||
Taiwan | 138,154 | 11.8 | % | 153,058 | 10.5 | % | 183,114 | 11.8 | % | |||||||||||||||
Japan | 62,581 | 5.4 | % | 100,823 | 6.9 | % | 152,365 | 9.9 | % | |||||||||||||||
Total | $ | 1,171,319 | 100.0 | % | $ | 1,465,323 | 100.0 | % | $ | 1,549,765 | 100.0 | % | ||||||||||||
For the year ended December 31, | ||||||||||||||||||||||||
2005 | 2006 | 2007 | ||||||||||||||||||||||
Application Type(1) | Sales | Percentage | Sales | Percentage | Sales | Percentage | ||||||||||||||||||
(in US$ thousands, except percentages) | ||||||||||||||||||||||||
Computing | $ | 423,163 | 36.1 | % | 498,135 | 34.0 | % | 402,262 | 26.0 | % | ||||||||||||||
Communications | 492,791 | 42.1 | % | 618,911 | 42.2 | % | 695,645 | 44.9 | % | |||||||||||||||
Consumer | 202,153 | 17.3 | % | 280,873 | 19.2 | % | 323,230 | 20.9 | % | |||||||||||||||
Others | 53,212 | 4.5 | % | 67,404 | 4.6 | % | 128,628 | 8.2 | % | |||||||||||||||
Total | $ | 1,171,319 | 100.0 | % | $ | 1,465,323 | 100.0 | % | $ | 1,549,765 | 100.0 | % | ||||||||||||
(1) | “Computing” consists of integrated circuits such as hard disk drive controllers, DVD-ROM/CD-ROM driver integrated circuits, graphic processors and other components that are commonly used in personal digital assistants and desktop and notebook computers and peripherals. “Communications” |
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consists of integrated circuits used in digital subscriber lines, digital signal processors, wireless LAN, LAN controllers, LCD drivers, handset components and caller ID devices. “Consumer” consists of integrated circuits used for DVD players, game consoles, digital cameras, smart cards and toys. |
For the year ended December 31, | ||||||||||||||||||||||||
2005 | 2006 | 2007 | ||||||||||||||||||||||
Service Type | Sales | Percentage | Sales | Percentage | Sales | Percentage | ||||||||||||||||||
(in US$ thousands, except percentages) | ||||||||||||||||||||||||
Fabrication of DRAM wafers | 384,587 | 32.8 | % | 476,970 | 32.6 | % | 428,355 | 27.6 | % | |||||||||||||||
Fabrication of logic wafers(1) | 739,296 | 63.1 | % | 923,411 | 63.0 | % | 985,776 | 63.6 | % | |||||||||||||||
Other(2) | 47,436 | 4.1 | % | 64,942 | 4.4 | % | 135,634 | 8.8 | % | |||||||||||||||
Total | $ | 1,171,319 | 100.0 | % | $ | 1,465,323 | 100.0 | % | $ | 1,549,765 | 100.0 | % | ||||||||||||
(1) | Includes copper interconnects and memory devices whose manufacturing process is similar to that for a logic device. | |
(2) | Includes mask-making and probing, etc. |
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• | theNotice of the Ministry of Finance, the State Administration of Taxation and the General Administration of Customs on Relevant Taxation Policy Encouraging the Further Development of the Software Industry and the Integrated Circuit Industry,or the Integrated Circuit Notice, jointly issued by the Ministry of Finance, the State Administration of Taxation and the General Administration of Customs on September 22, 2000, as amended by theNotice of the Ministry of Finance and the State Administration of Taxation on Approval Procedure Concerning Foreign Invested Enterprises’ Implementing Enterprise Income Tax Policies of the Software and Integrated Circuit Industry, or the Approval Notice, jointly issued by the Ministry of Finance and the State Administration of Taxation on July 1, 2005; | ||
• | theNotice of the Ministry of Finance, the State Administration of Taxation on Taxation Policies Concerning the Tax Policies for Further Encouraging the Development of the Software and the Integrated Circuit Industry, or the Further Development Taxation Notice, jointly issued by the Ministry of Finance and the State Administration of Taxation on October 10, 2002, as amended byNotice of the Ministry of Finance, the State Administration of Taxation on Termination of Value-added Tax Refund Policies for Integrated Circuits, or the Termination Notice, jointly issued by the Ministry of Finance and the State Administration of Taxation on October 25, 2004; | ||
• | theNotice of the Ministry of Finance on Taxation Policies Concerning the Import of Self-used Raw Materials and Consumables by Part of Integrated Circuit Production Enterprises, or the Raw Materials Taxation Notice, issued by the Ministry of Finance on August 24, 2002; |
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• | theNotice on Taxation Policies Concerning the Import of Construction Materials Specially used for Clean Rooms by Part of the Integrated Circuit Production Enterprises, or the Construction Materials Taxation Notice, issued by the Ministry of Finance on September 26, 2002; | ||
• | theNotice by the Ministry of Finance and the State Administration of Taxation on Increasing Tax Refund Rate for Export of Certain Information Technology(IT) Products, or the Export Notice, issued by the Ministry of Finance and the State Administration of Taxation on December 10, 2004; | ||
• | theMeasures for the Accreditation of the Integrated Circuit Enterprise Encouraged by the State (For Trial Implementation), or the Accreditation Measures, jointly issued by the National Development and Reform Commission, the Ministry of Information Industry, the State Administration of Taxation and the General Administration of Customs on October 21, 2005; and | ||
• | theInterim Measures for the Management of the Special Fund for the Research and Development of the Integrated Circuit Industry,or the Fund Measures, jointly issued by the Ministry of Finance, the Ministry of Information Industry and the National Development and Reform Commission on March 23, 2005. |
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• | design of integrated circuits; | ||
• | fabrication of large scale integrated circuits with a line width of less than 0.18 micron (including 0.18 micron); | ||
• | fabrication of analog and analog digital integrated circuits with a line width of less than 0.8 micron (including 0.8 micron); | ||
• | advanced packaging and testing of BGA, PGA, CSP, MCM; | ||
• | fabrication of mixed integrated circuits. |
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• | thePatent Law of the People’s Republic of China, adopted at the fourth meeting of the Standing Committee of the Sixth National People’s Congress on March 12, 1984, effective April 1, 1985 and amended by the Ninth National People’s Congress on August 25, 2000; | ||
• | theParis Convention for the Protection of Industrial Propertyof the World Intellectual Property Organization, in which China became a member state as of March 19, 1985; | ||
• | theGeneral Principles of the Civil Law of the People’s Republic of Chinaadopted at the fourth session of the Sixth National People’s Congress on April 12, 1986, effective January 1, 1987. In |
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this legislation, intellectual property rights were defined in China’s basic civil law for the first time as the civil rights of citizens and legal persons; |
• | theCopyright Law of the People’s Republic of China, adopted by the 15th meeting of the Seventh National People’s Congress Standing Committee on September 7, 1990, effective June 1, 1991 and amended by the Ninth National People’s Congress on October 27, 2000; | ||
• | theRegulations for the Protection of the Layout Design of Integrated Circuits, or the Layout Design Regulations, adopted April 2, 2001 at the thirty-sixth session of the executive meeting of the State Council, effective October 1, 2001; and | ||
• | the World Intellectual Property Organization’sWashington Treaty on Intellectual Property in Respect of Integrated Circuits, for which China was among the first signatory states in 1990. |
• | to duplicate the whole protected layout design or any part of the design that is original; and | ||
• | to make commercial use of the protected layout design, the integrated circuit containing the layout design, or commodities containing the integrated circuit. |
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• | political and economic stability; | ||
• | an effective judicial system; | ||
• | a favorable tax system; | ||
• | the absence of exchange control or currency restrictions; and | ||
• | the availability of professional and support services. |
• | recognize or enforce judgments of United States courts obtained against us or our directors or officers predicated upon the civil liability provisions of the securities laws of the United States or any state thereof, or | ||
• | be competent to hear original actions brought in each respective jurisdiction, against us or our directors or officers predicated upon the securities laws of the United States or any state thereof. |
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Attributable | ||||||||
Place and date of | equity interest | |||||||
Name of company | incorporation/establishment | held | Principal Activity | |||||
Garrison Consultants Limited (“Garrison”) | Samoa April 5, 2000 | 100 | % | Provision of consultancy services | ||||
Betterway Enterprises Limited (“Better Way”) | Samoa April 5, 2000 | 100 | % | Provision of marketing related services | ||||
Semiconductor Manufacturing International (Shanghai) Corporation* | The People’s Republic of China (the “PRC”) December 21, 2000 | 100 | % | Manufacturing and trading of semiconductor products | ||||
Semiconductor Manufacturing International (Beijing) Corporation* | The PRC July 25, 2002 | 100 | % | Manufacturing and trading of semiconductor products | ||||
Semiconductor Manufacturing International (Tianjin) Corporation* | The PRC November 3, 2003 | 100 | % | Manufacturing and trading of semiconductor products | ||||
SMIC Japan Corporation # | Japan October 8, 2002 | 100 | % | Provision of marketing related activities | ||||
SMIC Europe S.R.L. | Italy July 3, 2003 | 100 | % | Provision of marketing related activities | ||||
SMIC, Americas | United States of America June 22, 2001 | 100 | % | Provision of marketing related activities | ||||
Semiconductor Manufacturing International (AT) Corporation | Cayman Islands July 26, 2004 | 57.3 | % | Investment holding | ||||
Semiconductor Manufacturing International (Chengdu) Corporation (“SMICD”) * | The PRC August 16, 2004 | 57.3 | % | Manufacturing and trading of semiconductor products | ||||
SMIC Commercial (Shanghai) Limited Company (formerly SMIC Consulting Corporation) * | The PRC September 30, 2003 | 100 | % | Operation of a convenience store |
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Attributable | ||||||||
Place and date of | equity interest | |||||||
Name of company | incorporation/establishment | held | Principal Activity | |||||
Semiconductor Manufacturing International (Solar Cell) Corporation | Cayman Islands June 30, 2005 | 100 | % | Investment holding | ||||
SMIC Energy Technology (Shanghai) Corporation#* | The PRC September 9, 2005 | 100 | % | Manufacturing and trading of Solar cell related semiconductor products | ||||
SMIC Development (Chengdu) Corporation* | The PRC December 29, 2005 | 100 | % | Construction, operation, management of SMICD’s living quarter, schools and supermarket | ||||
Magnificent Tower Limited | British Virgin Islands January 5, 2006 | 100 | % | Investment Holding | ||||
Semiconductor Manufacturing International (BVI) Corporation (“SMIC (BVI)”) | British Virgin Islands April 26, 2007 | 100 | % | Investment Holding | ||||
SMIC Solar Cell (HK) Company Limited (“SMIC Solar Cell (HK)”) | Hong Kong October 23, 2007 | 100 | % | Investment Holding | ||||
SMIC AT (HK) Company Limited (“SMIC AT (HK)”) | Hong Kong October 22, 2007 | 57.3 | % | Investment Holding | ||||
SMIC Shanghai (HK) Company Limited (“SMIC SH (HK)”) | Hong Kong November 1, 2007 | 100 | % | Investment Holding | ||||
SMIC Beijing (HK) Company Limited (“SMIC BJ (HK)”) | Hong Kong November 2, 2007 | 100 | % | Investment Holding | ||||
SMIC Tianjin (HK) Company Limited (“SMIC TJ (HK)”) | Hong Kong November 2, 2007 | 100 | % | Investment Holding | ||||
SMIC Shanghai (Cayman) Corporation (“SMIC SH (Cayman)”) | Cayman Islands November 8, 2007 | 100 | % | Investment Holding | ||||
SMIC Beijing (Cayman) Corporation (“SMIC BJ (Cayman)”) | Cayman Islands November 8, 2007 | 100 | % | Investment Holding | ||||
SMIC Tianjin (Cayman) Corporation (“SMIC TJ (Cayman)”) | Cayman Islands November 8, 2007 | 100 | % | Investment Holding |
* | Companies registered as wholly-owned foreign enterprises in the PRC. | |
# | For identification purposes only |
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Owned(1) or | ||||||
Size | Leased | |||||
Location | (Land/Building) | Primary Use | (Land/Building) | |||
(in square meters) | ||||||
Zhangjiang High-Tech Park, Pudong New Area, Shanghai | 367,895/164,795 | Wafer fabrication | owned/owned | |||
Beijing Economic and Technological Development Area | 240,140/143,017 | Wafer fabrication | owned/owned | |||
Xiqing Economic Development Area, Tianjin | 215,733/61,990 | Wafer fabrication | owned/owned | |||
Japan | na/55 | Marketing activities | na/leased | |||
USA | na/743 | Marketing activities | na/leased | |||
Italy | na/280 | Marketing activities | na/leased | |||
Hong Kong(2) | Representative | |||||
na/300 | Office | na/owned |
(1) | With respect to land located in China, “ownership” refers to holding a valid land use rights certificate. All land within municipal zones in China is owned by the Chinese government. Limited liability companies, joint stock companies, foreign-invested enterprises, privately held companies and individual natural persons must pay fees to be granted rights to use land within municipal zones. Legal |
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use of land is evidenced and sanctioned by land use certificates issued by the local municipal administration of land resources. Land use rights granted for industrial purposes are limited to a term of no more than 50 years. | ||
(2) | In February 2006, we purchased approximately 300 square meter of property in Hong Kong through our indirect wholly-owned subsidiary, Magnificent Tower Limited, a company incorporated in the British Virgin Islands. |
• | mandatory staff and vendor safety training; | ||
• | compliance of equipment and facilities to safety criteria, including the Semiconductor Equipment and Materials International and Chinese National Fire Protection Association standards; and | ||
• | standard management procedures established by our environmental, health and safety committee. |
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For the | For the | |||||||||||||||||||||||||||
year ended December 31, | For the three months ended | year ended | ||||||||||||||||||||||||||
Process | March 31, | June 30, | September 30, | December 31, | December 31, | |||||||||||||||||||||||
Technologies | 2005 | 2006 | 2007 | 2007 | 2007 | 2007 | 2007 | |||||||||||||||||||||
(based on sales in US$) | ||||||||||||||||||||||||||||
0.13 micron and below | 40.6 | % | 49.6 | % | 52.5 | % | 55.0 | % | 55.3 | % | 49.7 | % | 53.1 | % | ||||||||||||||
0.15 micron | 5.4 | % | 5.7 | % | 2.9 | % | 1.2 | % | 2.0 | % | 5.5 | % | 2.9 | % | ||||||||||||||
0.18 micron | 42.3 | % | 35.7 | % | 34.1 | % | 30.8 | % | 28.8 | % | 28.3 | % | 30.5 | % | ||||||||||||||
0.25 micron | 3.7 | % | 2.0 | % | 0.7 | % | 0.7 | % | 1.0 | % | 0.5 | % | 0.7 | % | ||||||||||||||
0.35 micron | 8.0 | % | 7.0 | % | 9.8 | % | 12.3 | % | 12.9 | % | 16.0 | % | 12.8 | % | ||||||||||||||
Total | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % |
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For the year ended December 31 | ||||||||||||||||||||||||
2005 | 2006 | 2007 | ||||||||||||||||||||||
Service Type | Sales | Percentage | Sales | Percentage | Sales | Percentage | ||||||||||||||||||
(in US$ thousands, except percentages) | ||||||||||||||||||||||||
Fabrication of DRAM wafers | $ | 384,587 | 32.8 | % | $ | 476,970 | 32.6 | % | 428,355 | 27.6 | % | |||||||||||||
Fabrication of logic wafers(1) | 739,296 | 63.1 | % | 923,411 | 63.0 | % | 985,776 | 63.6 | % | |||||||||||||||
Other(2) | 47,436 | 4.1 | % | 64,942 | 4.4 | % | 135,634 | 8.8 | % | |||||||||||||||
Total | $ | 1,171,319 | 100.0 | % | $ | 1,465,323 | 100.0 | % | $ | 1,549,765 | 100.0 | % | ||||||||||||
(1) | Includes copper interconnects and memory devices whose manufacturing process is similar to that for a logic device. | |
(2) | Includes mask-making and probing, etc. |
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Incentive | SMIC Shanghai | SMIC Beijing | SMIC Tianjin | |||
Preferential Value-added Tax Policies | - 17% VAT rate | - 17% VAT rate | - 17% VAT rate | |||
- 17% tax refund rate for exports reduced to 13% as of January 1, 2004 | - 17% tax refund rate for exports reduced to 13% as of January 1, 2004 | - 17% tax refund rate for exports reduced to 13% as of January 1, 2004 | ||||
- 13% tax refund rate for exports increased to 17% as of November 1, 2004 | - 13% tax refund rate for exports increased to 17% as of November 1, 2004 | - 13% tax refund rate for exports increased to 17% as of November 1, 2004 | ||||
Preferential Enterprise Income Tax Policies | Five-year full exemption and five-year 50% reduction upon approval from the local tax bureau | Five-year full exemption and five-year 50% reduction upon approval from the local tax bureau | Five-year full exemption and five-year 50% reduction upon approval from the local tax bureau | |||
Preferential Customs Duties and Import-related VAT Policies | Exemption from customs duties and import-related VAT with respect to its imported equipment, spare parts and raw materials | Exemption from customs duties and import-related VAT with respect to its imported equipment, spare parts and raw materials | Exemption from customs duties and import-related VAT with respect to its imported equipment, spare parts and raw materials |
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• | depreciation and amortization; | ||
• | overhead, including maintenance of production equipment, indirect materials, including chemicals, gases and various types of precious and other metals, utilities and royalties; | ||
• | direct materials, which consist of raw wafer costs; | ||
• | labor, including amortization of deferred stock compensation for employees directly involved in manufacturing activities; and | ||
• | production support, including facilities, utilities, quality control, automated systems and management functions. |
• | Research and development expenses. Research and development expenses consist primarily of salaries and benefits of research and development personnel, materials costs, depreciation and maintenance on the equipment used in our research and development efforts, and contracted technology development costs. | ||
• | General and administrative expenses. General and administrative expenses consist primarily of salaries and benefits for our administrative, finance and human resource personnel, commercial insurance, fees for professional services, foreign exchange gains and losses from operating activities and costs incurred in connection with developing production capabilities at new fabs, including facility costs and employee costs. Foreign exchange gains and losses relate primarily to period-end translation adjustments due to exchange rate fluctuations that affect payables and receivables directly related to our operations. | ||
• | Selling and marketing expenses. Selling and marketing expenses consist primarily of salaries and benefits of personnel engaged in sales and marketing activities, costs of customer wafer samples, other marketing incentives and related marketing expenses. | ||
• | Amortization of acquired intangible assets.Amortization of acquired intangible assets consist primarily of the cost associated with the purchase of technology, licenses, and patent licenses. |
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• | Income from sale of plant and equipment and other fixed assets.In 2007, the Company sold plant, equipment and other fixed assets with a carrying value of US$35,323,389 for US$63,974,835, which resulted in a gain on disposal of US$28,651,446. The plant and equipment was sold to a government-owned foundry based in Chengdu, Sichuan province, to which SMIC is also contracted to provide management services. |
Our other income (expenses) consists of: | |||
• | interest income, which has been primarily derived from cash equivalents and short-term investments and interest on share purchase receivables; | ||
• | interest expenses, net of capitalized portions and government interest subsidies, which have been primarily attributable to our bank loans and the imputed interest rate on an outstanding interest-free promissory note; and | ||
• | other income and expense items, such as those relating to the employee living quarters and school; and | ||
• | foreign exchange gains and losses relating to financing and investing activities, including forward contracts. |
For the year ended December 31, | ||||||||||||||||||||
2003 | 2004 | 2005 | 2006 | 2007 | ||||||||||||||||
(in US$ thousands, except for per share, per ADS data, | ||||||||||||||||||||
percentages, and operating data) | ||||||||||||||||||||
Statement of Operations Data: | ||||||||||||||||||||
Sales | $ | 365,824 | $ | 974,664 | $ | 1,171,319 | $ | 1,465,323 | $ | 1,549,765 | ||||||||||
Cost of sales(1) | 359,779 | 716,225 | 1,105,134 | 1,338,155 | 1,397,038 | |||||||||||||||
Gross profit (loss) | 6,045 | 258,439 | 66,185 | 127,168 | 152,727 | |||||||||||||||
Operating expenses: | ||||||||||||||||||||
Research and development | 34,913 | 74,113 | 78,865 | 94,171 | 97,034 | |||||||||||||||
General and administrative | 29,705 | 54,038 | 35,701 | 47,365 | 74,490 | |||||||||||||||
Selling and marketing | 10,711 | 10,384 | 17,713 | 18,231 | 18,716 |
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For the year ended December 31, | ||||||||||||||||||||
2003 | 2004 | 2005 | 2006 | 2007 | ||||||||||||||||
(in US$ thousands, except for per share, per ADS data, | ||||||||||||||||||||
percentages, and operating data) | ||||||||||||||||||||
Litigation settlement | — | 16,695 | — | — | — | |||||||||||||||
Amortization of acquired intangible assets | 3,462 | 14,368 | 20,946 | 24,393 | 27,071 | |||||||||||||||
Income from sale of plant and equipment and other fixed assets | — | — | — | (43,122 | ) | (28,651 | ) | |||||||||||||
Total operating expenses | 78,791 | 169,598 | 153,225 | 141,038 | 188,659 | |||||||||||||||
Income (loss) from operations | (72,746 | ) | 88,841 | (87,040 | ) | (13,870 | ) | (35,932 | ) | |||||||||||
Other income (expenses): | ||||||||||||||||||||
Interest income | 5,616 | 10,587 | 11,356 | 14,916 | 12,349 | |||||||||||||||
Interest expense | (1,425 | ) | (13,698 | ) | (38,784 | ) | (50,926 | ) | (37,936 | ) | ||||||||||
Foreign currency exchange gain (loss) | 1,523 | 8,218 | (3,355 | ) | (21,912 | ) | 11,250 | |||||||||||||
Other, net | 888 | 2,441 | 4,462 | 1,821 | 2,238 | |||||||||||||||
Total other income (expense), net | 6,602 | 7,548 | (26,322 | ) | (56,101 | ) | (12,100 | ) | ||||||||||||
Income (loss) before income tax | (66,144 | ) | 96,389 | (113,362 | ) | (69,971 | ) | (48,032 | ) | |||||||||||
Income tax — current | — | (186 | ) | (285 | ) | 24,928 | 29,720 | |||||||||||||
Minority interest | — | — | 251 | (19 | ) | 2,856 | ||||||||||||||
Loss from equity investment | — | — | (1,379 | ) | (4,201 | ) | (4,013 | ) | ||||||||||||
Net (loss) income before cumulative effect of a change in accounting principle | (66,144 | ) | 96,203 | (114,775 | ) | (49,263 | ) | (19,468 | ) | |||||||||||
Cumulative effect of a change in accounting principle | — | — | — | 5,154 | — | |||||||||||||||
Net (loss) income | (66,144 | ) | 96,203 | (114,775 | ) | (44,109 | ) | (19,468 | ) |
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For the year ended December 31, | ||||||||||||||||||||
2003 | 2004 | 2005 | 2006 | 2007 | ||||||||||||||||
(in US$ thousands, except for per share, per ADS data, | ||||||||||||||||||||
percentages, and operating data) | ||||||||||||||||||||
Deemed dividend on preference shares(2) | 37,117 | 18,840 | — | — | — | |||||||||||||||
Income (loss) attributable to holders of ordinary shares | $ | (103,261 | ) | $ | 77,363 | $ | (114,775 | ) | $ | (44,109 | ) | $ | (19,468 | ) | ||||||
Income (loss) per ordinary share, basic | $ | (1.14 | ) | $ | 0.01 | $ | (0.00 | ) | $ | (0.00 | ) | $ | (0.00 | ) | ||||||
Income (loss) per ordinary share, diluted | $ | (1.14 | ) | $ | 0.00 | $ | (0.00 | ) | $ | (0.00 | ) | $ | (0.00 | ) | ||||||
Ordinary shares used in calculating basic income (loss) per ordinary share (3)(4) | 90,983,200 | 14,199,163,517 | 18,184,429,255 | 18,334,498,923 | 18,501,940,489 | |||||||||||||||
Ordinary shares used in calculating diluted income (loss) per ordinary share (3)(4) | 90,983,200 | 17,934,393,066 | 18,184,429,255 | 18,334,498,923 | 18,501,940,489 | |||||||||||||||
Income (loss) per ADS, basic(5) | — | $ | 0.27 | $ | (0.32 | ) | $ | (0.12 | ) | $ | (0.05 | ) | ||||||||
Income (loss) per ADS, diluted (5) | — | $ | 0.22 | $ | (0.32 | ) | $ | (0.12 | ) | $ | (0.05 | ) | ||||||||
ADS used in calculating basic income (loss) per ADS(5) | — | 283,983,270 | 363,688,585 | 366,689,978 | 370,038,810 | |||||||||||||||
ADS used in calculating diluted income (loss) per ADS(5) | — | 358,687,861 | 363,688,585 | 366,689,978 | 370,038,810 | |||||||||||||||
Other Financial Data: |
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For the year ended December 31, | ||||||||||||||||||||
2003 | 2004 | 2005 | 2006 | 2007 | ||||||||||||||||
(in US$ thousands, except for per share, per ADS data, | ||||||||||||||||||||
percentages, and operating data) | ||||||||||||||||||||
Gross margin | 1.7 | % | 26.5 | % | 5.7 | % | 8.7 | % | 9.9 | % | ||||||||||
Operating margin | -19.9 | % | 9.1 | % | -7.4 | % | -0.9 | % | -2.3 | % | ||||||||||
Net margin | -18.1 | % | 9.9 | % | -9.8 | % | -3.0 | % | -1.3 | % | ||||||||||
Operating Data: | ||||||||||||||||||||
Wafers shipped (in 8” equivalents) | ||||||||||||||||||||
Total | 476,451 | 943,463 | 1,347,302 | 1,614,888 | 1,849,957 | |||||||||||||||
ASP(6) | 768 | 1,033 | 869 | 907 | 838 |
(1) | Including amortization of deferred stock compensation for employees directly involved in manufacturing activities. | |
(2) | Deemed dividend represents the difference between the sale and conversion prices of warrants to purchase convertible preference shares we issued and their respective fair market values. | |
(3) | Anti-dilutive preference shares, options and warrants were excluded from the weighted average ordinary shares outstanding for the diluted per share calculation. For 2002, 2003, 2005, 2006, and 2007 basic income (loss) per share did not differ from diluted loss per share. | |
(4) | All share information has been adjusted retroactively to reflect the 10-for-1 share split effected upon completion of the global offering of our ordinary shares in March 2004 (the “Global Offering”). | |
(5) | Fifty ordinary shares equals one ADS. | |
(6) | Total sales/total wafers shipped. |
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Net loss.Due to the factors described above, the Company had a net loss of US$44.1 million in 2006 compared to a net loss of US$114.8 million for 2005.
For the year ended | ||||||||||||
December 31, | ||||||||||||
2005 | 2006 | 2007 | ||||||||||
(in US$ thousands) | ||||||||||||
Net cash provided by operating activities: | ||||||||||||
Net (loss) before cumulative effect of change in accounting principle | $ | (114,775 | ) | $ | (49,263 | ) | $ | (19,468 | ) | |||
Depreciation and amortization | 769,472 | 919,616 | 706,277 | |||||||||
Total | 648,105 | 769,649 | 672,465 | |||||||||
Net cash used in investing activities: | ||||||||||||
Purchase of property, plant and equipment | (872,519 | ) | (882,581 | ) | (717,171 | ) | ||||||
Total | (859,652 | ) | (917,369 | ) | (643,344 | ) | ||||||
Net cash provided by (used in) financing activities: | ||||||||||||
Proceeds from short-term borrowings | 394,159 | 255,004 | 201,658 | |||||||||
Proceeds from long-term debt | 253,433 | 785,345 | 262,248 | |||||||||
Total | 190,364 | (74,440 | ) | 76,637 | ||||||||
Net increase (decrease) in cash and cash equivalents | $ | (21,376 | ) | $ | (222,177 | ) | $ | 105,664 |
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Contractual | Payments due by period | |||||||||||||||||||
obligations | Total | Less than 1 year | 1 — 3 years | 3 — 5 years | After 5 years | |||||||||||||||
(consolidated) | ||||||||||||||||||||
(in US$ thousands) | ||||||||||||||||||||
Secured Long-Term Debt(1) | 1,047,619 | 391,947 | 379,468 | 276,204 | — | |||||||||||||||
Operating Lease Obligations(2) | 4,561 | 581 | 267 | 674 | 3,039 | |||||||||||||||
Purchase Obligations(3) | 296,635 | 296,635 | — | — | — | |||||||||||||||
Other Long-Term Obligations(4) | 227,638 | 104,138 | 78,900 | 44,600 | — | |||||||||||||||
Total Contractual Obligations | $ | 1,576,453 | $ | 793,301 | $ | 458,635 | $ | 321,478 | $ | 3,039 | ||||||||||
(1) | Interest was computed using rates in effect on December 31, 2007 within the range of 4.77% to 5.82%. | |
(2) | Represents our obligations to make lease payments to use the land on which our fabs are located in Shanghai and other office equipment we have leased. | |
(3) | Represents commitments for construction or purchase of semiconductor equipment, and other property or services. | |
(4) | Includes the settlement with TSMC and the other long-term liabilities relating to certain license agreements. |
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Name | Age | Position | ||||
Directors | ||||||
Yang Yuan Wang | 73 | Chairman, Independent Non-executive Director | ||||
Richard Ru Gin Chang | 60 | Founder, President, Chief Executive Officer and Executive Director | ||||
Wang Zheng Gang | 56 | Non-executive Director | ||||
Ta-Lin Hsu | 65 | Independent Non-executive Director | ||||
Tsuyoshi Kawanishi | 79 | Independent Non-executive Director | ||||
Henry Shaw | 54 | Independent Non-executive Director | ||||
Lip-Bu Tan | 49 | Independent Non-executive Director | ||||
Jiang Shang Zhou | 61 | Independent Non-executive Director | ||||
Senior Managers | ||||||
Morning Wu | 51 | Acting Chief Financial Officer, Chief Accounting Officer and Qualified Accountant | ||||
Marco Mora | 49 | Chief Operating Officer | ||||
James Sung | 50 | Senior Vice President of Corporate Marketing & Sales Office | ||||
Anne Wai Yui Chen | 45 | Company Secretary, Hong Kong Representative and Compliance Officer |
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Class I | Class II | Class III | ||
Richard Ru Gin Chang | Ta-Lin Hsu | Tsuyoshi Kawanishi | ||
Henry Shaw | Lip-Bu Tan | Yang Yuan Wang | ||
Jiang Shang Zhou | Wang Zheng Gang |
• | making recommendations to the board of directors concerning the appointment, reappointment, retention, evaluation, oversight and termination of compensating and overseeing the work of our independent auditor, including reviewing the experience, qualifications and performance of the |
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senior members of the independent auditor team, and pre-approving all non-audit services to be provided by our independent auditor; | |||
• | approving the remuneration and terms of engagement of our independent auditor; | ||
• | reviewing reports from our independent auditor regarding its internal quality-control procedures and any material issues raised in the most recent review or investigation of such procedures and regarding all relationships between us and the independent auditor; | ||
• | pre-approving the hiring of any employee or former employee of our independent auditor who was a member of the audit team during the preceding two years; | ||
• | reviewing our annual and interim financial statements, earnings releases, critical accounting policies and practices used to prepare financial statements, alternative treatments of financial information, the effectiveness of our disclosure controls and procedures and important trends and developments in financial reporting practices and requirements; | ||
• | reviewing the planning and staffing of internal audits, the organization, responsibilities, plans, results, budget and staffing of our internal audit department and the quality and effectiveness of our internal controls; | ||
• | reviewing our risk assessment and management policies; | ||
• | reviewing any legal matters that may have a material impact and the adequacy and effectiveness of our legal and regulatory compliance procedures; | ||
• | establishing procedures for the treatment of complaints received by us regarding accounting, internal accounting controls, auditing matters, potential violations of law and questionable accounting or auditing matters; and | ||
• | obtaining and reviewing reports from management, our internal auditor and our independent auditor regarding compliance with applicable legal and regulatory requirements. |
• | the financial reports for the year ended December 31, 2006 and the six month period ended June 30, 2007; | ||
• | the quarterly earnings releases and any updates thereto; | ||
• | the report and management letter submitted by our outside auditors summarizing the findings of and recommendations from their audit of our financial reports; | ||
• | our budget for 2007; | ||
• | the findings and recommendations of our outside consultants regarding our compliance with the requirements of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”); | ||
• | the effectiveness of our internal control structure in operations and financial reporting integrity and compliance with applicable laws and regulations in collaboration with the Internal Audit Department and reported to the Board; | ||
• | the findings of our risk management committee which assesses risks relating to the company and those of the compliance office, which monitors our compliance with the corporate governance code and insider trading policy; | ||
• | the audit fees and other non-audit fees such as fees relating to transfer pricing, Sarbanes-Oxley Section 404 compliance testing, for our outside auditors; and | ||
• | our outside auditors’ engagement letters |
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• | approving and overseeing the total compensation package for our executive officers and any other officer, evaluating the performance of and determining and approving the compensation to be paid to our chief executive officer and reviewing the results of our chief executive officer’s evaluation of the performance of our other executive officers; | ||
• | reviewing and making recommendations to our board of directors with respect to director compensation, including equity-based compensation; | ||
• | administering and periodically reviewing and making recommendations to the board of directors regarding the long-term incentive compensation or equity plans made available to the directors, employees and consultants; | ||
• | reviewing and making recommendations to the board of directors regarding executive compensation philosophy, strategy and principles and reviewing new and existing employment, consulting, retirement and severance agreements proposed for the company’s executive officers; and | ||
• | ensuring appropriate oversight of our human resources policies and reviewing strategies established to fulfill our ethical, legal and human resources responsibilities. |
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As of December 31, | ||||||||||||
Function | 2005 | 2006 | 2007 | |||||||||
Managers | 679 | 871 | 916 | |||||||||
Professionals(1) | 3,648 | 3,790 | 4,096 | |||||||||
Technicians | 4,127 | 4,804 | 5,188 | |||||||||
Clerical staff | 642 | 583 | 309 | |||||||||
Total(2) | 9,096 | 10,048 | 10,509 |
(1) | Professionals include engineers, lawyers, accountants and other personnel with specialized qualifications, excluding managers. | |
(2) | Includes 283, 275, and 276 temporary and part-time employees in 2005, 2006 and 2007, respectively. |
As of December 31, | ||||||||||||
Location of Facility | 2005 | 2006 | 2007 | |||||||||
Shanghai | 6,232 | 6,400 | 6,300 | |||||||||
Beijing | 1,534 | 1,827 | 1,942 | |||||||||
Tianjin | 1,034 | 1,073 | 1,205 | |||||||||
Chengdu | 261 | 715 | 1,023 | |||||||||
United States | 18 | 16 | 18 | |||||||||
Europe | 7 | 7 | 8 | |||||||||
Japan | 6 | 7 | 9 | |||||||||
Hong Kong | 4 | 3 | 4 | |||||||||
Total | 9,096 | 10,048 | 10,509 | |||||||||
Awards of | ||||||||||||||||
Current | Options to Purchase Ordinary Shares | Restricted Share | ||||||||||||||
Name of Director | Shareholding | Number of Options | Exercise Price | Units | ||||||||||||
Richard Ru Gin Chang | 78,069,550 | (1)(2) | 15,600,000 | US$ | 0.132-US$0.31 | 500,000 | ||||||||||
Ta-Lin Hsu | 15,300,010 | 3) | 1,000,000 | US$ | 0.132-US$0.22 | — | ||||||||||
Tsuyoshi Kawanishi | 0 | 2,500,000 | US$ | 0.05 –US$0.22 | — | |||||||||||
Henry Shaw | 0 | 1,000,000 | US$ | 0.132-US$0.22 | — | |||||||||||
Lip-Bu Tan | 0 | 1,000,000 | US$ | 0.132-US$0.22 | — | |||||||||||
Yang Yuan Wang | 0 | 1,000,000 | US$ | 0.132-US$0.22 | — | |||||||||||
Jiang Shang Zhou | 0 | 0 | — | — | ||||||||||||
Albert Y. C. Yu | 1,350,000 | 500,000 | US$ | 0.132 | 500,000 | |||||||||||
Wang Zheng Gang | 0 | 0 | — | — |
Notes: | ||
1. | Pursuant to a Charitable Pledge Agreement dated December 1, 2003, Richard Ru Gin Chang and his spouse, Scarlett K. Chang (collectively, the “Donors”) have pledged to transfer 10,000,000 of such ordinary shares as a charitable gift to The Richard and Scarlett Chang Family Foundation, a Delaware nonprofit nonstock corporation organized exclusively for religious, charitable, scientific, literary and education purposes within the meaning of Section 501(c)(3) of the US Internal Revenue Code of 1986, as amended, such transfer to be |
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made in full at or prior to the death of the surviving Donor. In addition, 2,639,550 of such ordinary shares are jointly held by Richard Ru Gin Chang and his spouse, Scarlett K. Chang. | ||
2. | 20,000,000 of the ordinary shares held as a corporate interest. These ordinary shares are held by Jade Capital Company, LLC, a Delaware limited liability company (the “LLC”), of which Richard Ru Gin Chang and his spouse, Scarlett K. Chang (collectively, the “Members”), are the sole members. It is the current intent of the Members that all or a portion of the net income of the LLC be used for philanthropic purposes, including but not limited to contributions to charitable organizations that are tax-exempt under Section 501(c)(3) of the US Internal Revenue Code of 1986, as amended. | |
3. | Ta-Lin Hsu has a controlling interest in AP3 Co-Investment Partners, LDC, which holds 15,300,010 ordinary shares. |
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Number of | Percentage | |||
Name of Shareholder | Shares Held | Held | ||
Shanghai Industrial Investment (Holdings) Company Limited (“SIIC”) | 208,002,000 (long position)(1) | 1.12% (long position) | ||
1,814,991,340 (long position)(2) | 9.78% (long position) | |||
7,272,563 (long position)(3) | 0.04% (long position) | |||
Total: | 2,030,265,903 (long position) | 10.94% (long position) |
Notes: | ||
(1) | All such ordinary shares are held by SIIC Treasury (B.V.I.) Limited which is a wholly-owned subsidiary of SIIC. | |
(2) | All such ordinary shares are held by S.I. Technology Production Holdings Limited (“SITPHL”) which is a wholly-owned subsidiary of Shanghai Industrial Holdings Limited (“SIHL”). SIHL is an indirect non-wholly owned subsidiary of SIIC which are holding SIHL’s shares through its wholly-owned subsidiaries namely, SIIC CM Development Limited, SIIC Capital (B.V.I.) Limited and Shanghai Investment Holdings Limited, which together are entitled to exercise or control the exercise of more than one-third of the voting power at the general meetings of SIHL. By virtue of the SFO, SIIC and its subsidiaries namely, Shanghai Investment Holdings Limited and Shanghai Industrial Investment Treasury Company Limited are deemed to be interested in the 1,814,991,340 Shares held by SITPHL. The Company’s Director as of December 31, 2007, Wang Zheng Gang, is the Chief Representative of the Shanghai Representative Office of SIHL and chairman and managing director of SIIC Management (Shanghai) Limited. It is the Company’s understanding that voting and investment control over the ordinary shares beneficially owned by SIHL are maintained by the board of directors of SIHL. | |
(3) | All such ordinary shares are held by SIHL Treasury Limited which is a wholly-owned subsidiary of SIHL. |
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• | our results of operations and cash flow; | ||
• | our future prospects; | ||
• | our capital requirements and surplus; | ||
• | our financial condition; | ||
• | general business conditions; | ||
• | contractual restrictions on the payment of dividends by us to our shareholders or by our subsidiaries to us; and | ||
• | other factors deemed relevant by our board of directors. |
• | recovery of losses, if any; | ||
• | allocation to the statutory common reserve funds; | ||
• | allocation to staff and workers’ bonus and welfare funds; and | ||
• | allocation to a discretionary common reserve fund if approved by our shareholders. |
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Stock Exchange of Hong Kong | New York Stock Exchange(1) | |||||||
Closing price per ordinary share | Closing price per ADS | |||||||
High Price | Low Price | High Price | Low Price | |||||
2004 | ||||||||
March 17 — March 31 | HK$2.47* | HK$2.12 | US$15.50 | US$13.59 | ||||
Second Quarter | HK$2.45 | HK$1.60 | US$15.60* | US$10.47 | ||||
Third Quarter | HK$1.68 | HK$1.48* | US$10.84 | US$9.42* | ||||
Fourth Quarter | HK$1.94 | HK$1.59 | US$12.40 | US$10.14 | ||||
2005 | ||||||||
First Quarter | HK$1.75* | HK$1.48 | US$11.14 | US$9.35 | ||||
Second Quarter | HK$1.71 | HK$1.48 | US$10.93 | US$9.52 | ||||
Third Quarter | HK$1.75* | HK$1.21 | US$11.33* | US$7.83 | ||||
Fourth Quarter | HK$1.33 | HK$1.00* | US$8.46 | US$6.68* | ||||
2006 | ||||||||
First Quarter | HK$1.29* | HK$1.02 | US$8.38* | US$6.73 | ||||
Second Quarter | HK$1.21 | HK$1.00 | US$7.82 | US$6.36 | ||||
Third Quarter | HK$1.07 | HK$0.97 | US$6.88 | US$6.30 | ||||
Fourth Quarter | HK$1.03 | HK$0.87* | US$6.46 | US$5.48* | ||||
2007 | ||||||||
First Quarter | HK$1.24* | HK$0.87 | US$8.30* | US$5.87 | ||||
Second Quarter | HK$1.24 | HK$1.04 | US$7.68 | US$6.69 | ||||
Third Quarter | HK$1.18 | HK$0.81 | US$7.50 | US$5.30 | ||||
Fourth Quarter | HK$1.11 | HK$0.71* | US$6.72 | US$4.57* | ||||
2008 | ||||||||
January | HK$0.82 | HK$0.61 | US$5.15 | US$3.95 | ||||
February | HK$0.68 | HK$0.61 | US$4.30 | US$3.97 | ||||
March | HK$0.63 | HK$0.41 | US$4.13 | US$2.75 | ||||
April | HK$0.73 | HK$0.48 | US$4.24 | US$3.07 | ||||
May | HK$0.69 | HK$0.48 | US$4.36 | US$3.31 | ||||
June (through June 15) | HK$0.55 | HK$0.48 | US$3.53 | US$3.09 |
(1) | Each ADS represents 50 ordinary shares. | |
* | Indicates high and low prices for the fiscal year. | |
** | Indicates high and low prices for the fiscal quarter. |
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• | banks; | ||
• | dealers in securities or currencies; | ||
• | financial institutions; | ||
• | real estate investment trusts; | ||
• | insurance companies; | ||
• | tax-exempt organizations; | ||
• | persons holding ADSs or ordinary shares as part of a hedging, integrated or conversion transaction, constructive sale or straddle; | ||
• | traders in securities that have elected the mark-to-market method of accounting; | ||
• | persons liable for the alternative minimum tax; | ||
• | persons who have ceased to be U.S. citizens or to be taxed as resident aliens; | ||
• | persons who own or are deemed to own more than 10% of our voting shares; or | ||
• | U.S. persons whose “functional currency” is not the U.S. dollar. |
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• | a citizen or resident of the United States; | ||
• | a corporation or other entity taxable 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; or | ||
• | a trust if it 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 has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person. |
• | a foreign corporation that is eligible for the benefits of a comprehensive income tax treaty with the United States that includes an exchange of information program; and | ||
• | a foreign corporation if its stock with respect to which a dividend is paid or its ADSs backed by such stock are readily tradable on an established securities market within the United States, |
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As of December 31, 2007 | ||||||||
Expected maturity date | ||||||||
(in US$ thousands) | ||||||||
2007 | Fair Value | |||||||
Forward Exchange Agreement (Receive JPY/Pay US$) | ||||||||
Contract Amount | 404.1 | 530.4 | ||||||
Total Contract Amount | 404.1 | 530.4 |
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As of December 31, | ||||||||||||||||||||
2008 | 2009 | 2010 | 2011 | 2012 | ||||||||||||||||
(Forecast) | ||||||||||||||||||||
(in US$ thousands, except percentages) | ||||||||||||||||||||
US$ denominated | ||||||||||||||||||||
Average balance | 578,070 | 239,860 | 39,050 | 4,000 | — | |||||||||||||||
Average interest rate | 5.82 | % | 5.30 | % | 5.08 | % | 5.05 | % | — | |||||||||||
Weighted average forward interest rate | 5.82 | % | 5.30 | % | 5.08 | % | 5.05 | % | — | |||||||||||
EUR denominated | 38,225 | 25,392 | 12,559 | 4,186 | — | |||||||||||||||
Average balance | ||||||||||||||||||||
Average interest rate | 5.08 | % | 4.09 | % | 4.74 | % | 4.73 | % | — | |||||||||||
Weighted average forward interest rate | 5.78 | % | 5.27 | % | 5.03 | % | 4.95 | % | — |
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2006 | 2007 | |||||||
Audit Fees | US$ | 1,460,000 | US$ | 1,533,000 | ||||
Audit-Related Fees | US$ | — | US$ | 152,358 | ||||
Tax Fees | US$ | 33,789 | US$ | 12,935 | ||||
Total | US$ | 1,493,789 | US$ | 1,698,293 |
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Average | ||||||||
Total Number of | Price Paid | |||||||
Period | Shares Repurchased | per Share | ||||||
December | 292,500 | US $0.13 | ||||||
TOTAL | 292,500 |
Exhibit 1.1 | Eleventh Amended and Restated Articles of Association, as adopted at the Registrant’s annual general meeting of shareholders on June 2, 2008***** | |
Exhibit 4.1 | Asset Purchase Agreement dated September 23, 2003 among Semiconductor Manufacturing International Corporation, Motorola, Inc. and Motorola (China) Electronics Limited** | |
Exhibit 4.2 | Sixth Amended and Restated Registration Rights Agreement dated February 23, 2003 among Semiconductor Manufacturing International Corporation and the shareholders listed therein*** |
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Exhibit 4.3 | Settlement Agreement dated January 31, 2005 by and between Semiconductor Manufacturing International Corporation and Taiwan Semiconductor Manufacturing Corporation, Ltd., including Patent License Agreement * | |
Exhibit 4.4 | English language summary of Chinese language Syndicate Loan Agreement dated May 26, 2005, between Semiconductor Manufacturing International (Beijing) Corporation, Semiconductor Manufacturing International Corporation, as guarantor, and China Development Bank, China Construction Bank, Bank of China, Agricultural Bank of China, China Merchants Bank, HuaXia Bank, China Mingsheng Bank, Bank of Communications, Bank of Beijing, Industrial and Commercial Bank of China (Asia) and CITIC Ka Wah Bank* | |
Exhibit 4.5 | Form of Indemnification Agreement, as adopted at the Registrant’s annual general meeting of shareholders on May 6, 2005* | |
Exhibit 4.6 | English language summary of Chinese language Syndicate Loan Agreement dated May 31, 2006, between Semiconductor Manufacturing International (Tianjin) Corporation, Semiconductor Manufacturing International Corporation, as guarantor, and China Construction Bank, China Minsheng Bank, China Development Bank, Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of China, China Merchants Bank, China Bo Hai Bank, Bank of Communications and Bangkok Bank**** | |
Exhibit 4.7 | English language summary of Chinese language Syndicate Loan Agreement dated June 8, 2006, between Semiconductor Manufacturing International (Shanghai) Corporation, Semiconductor Manufacturing International Corporation, as guarantor, and ABN AMRO Bank N.V., Bank of China (Hong Kong) Limited, Bank of Communications, The Bank of Tokyo-Mitsubishi UFJ, Ltd., China Construction Bank, DBS Bank Ltd., Fubon Bank (Hong Kong) Limited, Industrial and Commercial Bank of China and Shanghai Pudong Development Bank.**** | |
Exhibit 8.1 | List of Subsidiaries ***** | |
Exhibit 12.1 | Certification of CEO under Section 302 of the U.S. Sarbanes-Oxley Act of 2002 | |
Exhibit 12.2 | Certification of Acting CFO under Section 302 of the U.S. Sarbanes-Oxley Act of 2002 | |
Exhibit 13.1 | Certification of CEO and Acting CFO under Section 906 of the U.S. Sarbanes-Oxley Act of 2002 | |
Exhibit 99.1 | Consent of Deloitte Touche Tohmatsu |
* | Previously filed as an exhibit to the Registrant’s Annual Report on Form 20F for the fiscal year ended December 31, 2004, filed June 28, 2005. | |
** | Previously filed as an exhibit to the Registrant’s Form F-1dated February 11, 2004. | |
*** | Previously filed as an exhibit to the Registrant’s Form F-1/A dated February 25, 2004. | |
**** | Previously filed as an exhibit to the Registrant’s Annual Report on Form 20F for the fiscal year ended December 31, 2005, filed June 28, 2006. | |
***** | Previously filed as an exhibit to the Registrant’s Annual Report on Form 20-F for the fiscal year ended December 31, 2007, filed June 27, 2008. |
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SEMICONDUCTOR MANUFACTURING INTERNATIONAL CORPORATION | ||||
Date: November 28, 2008 | By: | /s/ Richard Ru Gin Chang | ||
Name: | Richard Ru Gin Chang | |||
Title: | President and Chief Executive Officer |
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ASIC | Application Specific Integrated Circuit. A proprietary integrated circuit designed and manufactured to meet a customer’s specific functional requirements. | |
Cell | A primary unit that normally repeats many times in an integrated circuit. Cells represent individual functional design units or circuits that may be reused as blocks in designs. For example, a memory cell represents a storage unit in a memory array. | |
CIS | CMOS Image Sensor. CIS can be used in applications such as still and video cameras and embedded cameras in mobile telephones. It is a fast growing imaging sensor technology. The fabrication of CIS is fully compatible with the mainstream CMOS process, which enables system-on-chip capability, low power consumption and low cost of fabrication. | |
Clean room | Area within a fab in which the wafer fabrication takes place. The classification of a clean room relates to the maximum number of particles of contaminants per cubic foot within that room. For example, a class 100 clean room contains less than 100 particles of contaminants per cubic foot. | |
CMOS | Complementary Metal Oxide Silicon. A fabrication process that incorporates n-channel and p-channel CMOS transistors within the same silicon substrate. Currently, this is the most commonly used integrated circuit fabrication process technology and is one of the latest fabrication techniques to use metal oxide semiconductor transistors. | |
CVD | Chemical Vapor Deposition. A process in which gaseous chemicals react on a heated wafer surface to form solid film. | |
Die | One individual chip cut from a wafer before being packaged. | |
Dielectric material | A type of non-conducting material used for isolation purposes between conductors, such as metals. | |
DRAM | Dynamic Random Access Memory. A device that temporarily stores digital information but requires regular refreshing to ensure data is not lost. | |
DSP | Digital Signal Processor. A type of integrated circuit that processes and manipulates digital information after it has been converted from an analog source. | |
EEPROM | Electrically Erasable Programmable Read-Only Memory. An integrated circuit that can be electrically erased and electrically programmed with user-defined information. | |
EPROM | Erasable Programmable Read-Only Memory. A form of PROM that is programmable electrically yet erasable using ultraviolet light. | |
FCRAM™ | Fast Cycle Random Access Memory. A proprietary form of RAM developed by Fujitsu Limited. | |
Fill factor | The percentage of LCOS metal surface area used for light reflection as compared to the total surface area. The higher the fill factor, the more light will be reflected from a given surface area. | |
Flash memory | A type of non-volatile memory where data is erased in blocks. The name “flash” is derived from the rapid block erase operation. Flash memory requires only one transistor per memory cell versus two transistors per memory cell for EEPROMs, making flash memory less expensive to produce. Flash memory is the most popular form of non-volatile semiconductor memory currently available. | |
Gold Bumping | The fabrication process of forming gold bump termination electrodes on a finished wafer. |
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High voltage semiconductor | High voltage semiconductors are semiconductor devices that can drive relatively high voltage potential to systems that require higher voltage of between five volts to several hundred volts. | |
IDM | Integrated Device Manufacturer. | |
Integrated circuit | An electronic circuit where all the elements of the circuit are integrated together on a single semiconductor substrate. |
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Interconnect | Conductive materials such as aluminum, doped polysilicon or copper that form the wiring circuitry to carry electrical signals to different parts of the chip. | |
I/O | Inputs/Outputs. | |
LCOS | Liquid Crystal On Silicon. A type of micro-display technology. | |
Logic device | A device that contains digital integrated circuits that perform a function rather than store information. | |
Low leakage | Characteristic of a transistor that has a low amount of current leakage. Low leakage allows for power-saving. Low leakage semiconductors are primarily used in applications such as cellular telephones, calculators and automotive applications. | |
Mask | A glass plate with a pattern of transparent and opaque areas used to create patterns on wafers. “Mask” is commonly used to refer to a plate that has a pattern large enough to pattern a whole wafer at one time, as compared to a reticle, where a glass plate can contain the pattern for one or more dies but is not large enough to transfer a wafer-sized pattern all at once. | |
Mask ROM | A type of non-volatile memory that is programmed during fabrication (mask-defined) and the data can be read but not erased. | |
Memory | A device that can store information for later retrieval. | |
Micro-display | A small display that is of such high resolution that it is only practically viewed or projected with lenses or mirrors. A micro-display is typically magnified by optics to enlarge the image viewed by the user. For example, a miniature display smaller than one inch in size may be magnified to provide a 12-inch to 60-inch viewing area. | |
Micron | A term for micrometer, which is a unit of linear measure that equals one one-millionth (1/1,000,000) of a meter. There are 25.4 microns in one one-thousandth of an inch. | |
Mixed-signal | The combination of analog and digital circuitry in a single semiconductor. | |
MOS | Metal Oxide Semiconductor. A type of semiconductor device fabricated with a conducting layer and a semiconducting layer separated by an insulating layer. | |
NAND Flash | A type of flash memory commonly used for mass storage applications such as MP3 players and digital cameras. | |
Nanometer | A term for micrometer, which is a unit of linear measure that equals one thousandth (1/1,000) of a micron. | |
Non-volatile memory | Memory products that maintain their content when the power supply is switched off. | |
OTP | One-time programmable memory used for program and data storage, usually used in applications that require only a one-time data change. | |
PROM | Programmable Read-Only Memory. Memory that can be reprogrammed once after manufacturing. | |
RAM | Random Access Memory. Memory devices where any memory cell in a large memory array may be accessed in any order at random. | |
Redistribution Layer Manufacturing | The manufacturing process of fabricating additional dielectric and copper interconnect layers to redistribute the pads to new locations on a finished wafer. | |
Reticle | See “Mask” above. | |
RF | Radio Frequency. Radio frequency semiconductors are primarily used in communications devices such as cell phones. |
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ROM | Read-Only Memory. See “Mask ROM” above. | |
Scanner | An aligner that scans light through a slit across a mask to produce an image on a wafer. | |
Semiconductor | An element with an electrical resistivity within the range of an insulator and a conductor. A semiconductor can conduct or block the flow of electric current depending on the direction and magnitude of applied electrical biases. | |
Solder bumping | The fabrication processes of forming solder bump termination electrodes, which are elevated metal structures, or lead free bump termination electrodes. | |
SRAM | Static Random Access Memory. A type of volatile memory product that is used in electronic systems to store data and program instructions. Unlike the more common DRAM, it does not need to be refreshed. | |
Stepper | A machine used in the photolithography process in making wafers. With a stepper, a small portion of the wafer is aligned with the mask upon which the circuitry design is laid out and is then exposed to strong light. The machine then “steps” to the next area, repeating the process until the entire wafer has been done. Exposing only a small area of a wafer at a time allows the light to be focused more strongly, which gives better resolution of the circuitry design. | |
System-on-chip | A chip that incorporates functions usually performed by several different devices and therefore generally offers better performance and lower cost. | |
Systems companies | Companies that design and manufacture complete end market products or systems for sale to the market. | |
Transistor | An individual circuit that can amplify or switch electric current. This is the building block of all integrated circuits. | |
Volatile memory | Memory products that lose their content when the power supply is switched off. | |
Wafer | A thin, round, flat piece of silicon that is the base of most integrated circuits. |
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F-77 |
Table of Contents
Certified Public Accountants
Hong Kong
April 25, 2008, except for Schedule I, as to which the date is June 18, 2008
F-2
Table of Contents
(In US dollars except shares data)
NOTES | December 31, | |||||||||||||||
2007 | 2006 | 2005 | ||||||||||||||
ASSETS | ||||||||||||||||
Current assets: | ||||||||||||||||
Cash and cash equivalents | $ | 469,284,013 | $ | 363,619,731 | $ | 585,796,887 | ||||||||||
Short-term investments | 5 | 7,637,870 | 57,950,603 | 13,795,859 | ||||||||||||
Accounts receivable, net of allowances of 4,492,090 ,, $4,048,845 and $1,091,340 at December 31, 2007, 2006 and 2005 respectively | 4 | 298,387,652 | 252,184,975 | 241,333,914 | ||||||||||||
Inventories | 7 | 248,309,765 | 275,178,952 | 191,237,636 | ||||||||||||
Prepaid expense and other current assets | 31,237,755 | 20,766,945 | 9,810,591 | |||||||||||||
Receivable for sale of manufacturing equipment | 17,321,000 | 70,544,560 | 5,490,000 | |||||||||||||
Assets held for sale | 8 | 3,123,567 | 9,420,729 | — | ||||||||||||
Total current assets | 1,075,301,622 | 1,049,666,495 | 1,047,464,887 | |||||||||||||
Land use rights, net | 9 | 57,551,991 | 38,323,333 | 34,767,518 | ||||||||||||
Plant and equipment, net | 10 | 3,202,957,665 | 3,244,400,822 | 3,285,631,131 | ||||||||||||
Acquired intangible assets, net | 11 | 232,195,132 | 71,692,498 | 80,667,737 | ||||||||||||
Deferred cost, net | 24 | 70,637,275 | 94,183,034 | 117,728,792 | ||||||||||||
Equity investment | 12 | 9,896,398 | 13,619,643 | 17,820,890 | ||||||||||||
Other long-term prepayments | 2,988,404 | 4,119,433 | 2,552,407 | |||||||||||||
Deferred tax assets | 17 | 56,915,172 | 25,286,900 | — | ||||||||||||
TOTAL ASSETS | $ | 4,708,443,659 | $ | 4,541,292,158 | $ | 4,586,633,362 | ||||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||||
Current liabilities: | ||||||||||||||||
Accounts payable | 13 | $ | 301,992,739 | $ | 309,129,199 | $ | 262,318,432 | |||||||||
Accrued expenses and other current liabilities | 150,109,963 | 97,121,231 | 92,916,030 | |||||||||||||
Short-term borrowings | 15 | 107,000,000 | 71,000,000 | 265,481,082 | ||||||||||||
Current portion of promissory note | 14 | 29,242,000 | 29,242,001 | 29,242,001 | ||||||||||||
Current portion of long-term debt | 15 | 340,692,788 | 170,796,968 | 246,080,580 | ||||||||||||
Income tax payable | 1,152,630 | 72,417 | — | |||||||||||||
Total current liabilities | 930,190,120 | 677,361,816 | 896,038,125 | |||||||||||||
Long-term liabilities: | ||||||||||||||||
Promissory notes | 14 | 51,057,163 | 77,601,657 | 103,254,436 | ||||||||||||
Long-term debt | 15 | 616,294,743 | 719,570,905 | 494,556,385 | ||||||||||||
Long-term payables relating to license agreements | 16 | 62,833,433 | 16,992,950 | 24,686,398 | ||||||||||||
Other long term liabilities | — | 3,333,333 | — | |||||||||||||
Deferred tax liabilities | 17 | 604,770 | 210,913 | — | ||||||||||||
Total long-term liabilities | 730,790,109 | 817,709,758 | 622,497,219 | |||||||||||||
Total liabilities | 1,660,980,229 | 1,495,071,574 | 1,518,535,344 | |||||||||||||
Commitments | 21 | |||||||||||||||
Minority interest | 34,944,408 | 38,800,666 | 38,781,863 | |||||||||||||
Stockholders’ equity: | ||||||||||||||||
Ordinary shares, $0.0004 par value, 50,000,000,000 shares authorized ;18,558,919,712, 18,432,756,463 and 18,301,680,867 shares issued and outstanding at December 31, 2007, 2006 and 2005, respectively | 7,423,568 | 7,373,103 | 7,320,673 | |||||||||||||
Additional paid-in capital | 3,313,375,972 | 3,288,765,465 | 3,291,439,835 | |||||||||||||
Accumulated other comprehensive (loss) income | (1,881 | ) | 91,840 | 138,978 | ||||||||||||
Deferred share-based compensation | — | — | (24,881,919 | ) | ||||||||||||
Accumulated deficit | (308,278,637 | ) | (288,810,490 | ) | (244,701,412 | ) | ||||||||||
Total stockholders’ equity | 3,012,519,022 | 3,007,419,918 | 3,029,316,155 | |||||||||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 4,708,443,659 | $ | 4,541,292,158 | $ | 4,586,633,362 | ||||||||||
F-3
Table of Contents
(In US dollars, except share data)
NOTES | Year ended December 31, | |||||||||||||||
2007 | 2006 | 2005 | ||||||||||||||
Sales | 23 | $ | 1,549,765,288 | $ | 1,465,322,867 | $ | 1,171,318,735 | |||||||||
Cost of sales | 1,397,037,881 | 1,338,155,004 | 1,105,133,544 | |||||||||||||
Gross profit | 152,727,407 | 127,167,863 | 66,185,191 | |||||||||||||
Operating expenses (income): | ||||||||||||||||
Research and development | 97,034,208 | 94,170,750 | 78,865,306 | |||||||||||||
General and administrative | 74,489,877 | 47,364,533 | 35,700,768 | |||||||||||||
Selling and marketing | 18,715,961 | 18,231,048 | 17,713,228 | |||||||||||||
Amortization of acquired intangible assets | 27,070,617 | 24,393,561 | 20,946,051 | |||||||||||||
Income from sale of plant and equipment and other fixed assets | 10 | (28,651,446 | ) | (43,121,929 | ) | — | ||||||||||
Total operating expenses (income), net | 188,659,217 | 141,037,963 | 153,225,353 | |||||||||||||
Loss from operations | 27 | (35,931,810 | ) | (13,870,100 | ) | (87,040,162 | ) | |||||||||
Other income (expense): | ||||||||||||||||
Interest income | 12,348,630 | 14,916,323 | 11,355,972 | |||||||||||||
Interest expense | (37,936,126 | ) | (50,926,084 | ) | (38,784,323 | ) | ||||||||||
Foreign currency exchange gain (loss) | 11,249,889 | (21,912,234 | ) | (3,355,279 | ) | |||||||||||
Others, net | 2,237,902 | 1,821,337 | 4,461,925 | |||||||||||||
Total other expense, net | (12,099,705 | ) | (56,100,658 | ) | (26,321,705 | ) | ||||||||||
Loss before income tax | (48,031,515 | ) | (69,970,758 | ) | (113,361,867 | ) | ||||||||||
Income tax benefit (expense) | 17 | 29,719,775 | 24,927,744 | (284,867 | ) | |||||||||||
Minority interest | 2,856,258 | (18,803 | ) | 251,017 | ||||||||||||
Loss from equity investment | 12 | (4,012,665 | ) | (4,201,247 | ) | (1,379,110 | ) | |||||||||
Net loss before cumulative effect of a change in accounting principle | (19,468,147 | ) | (49,263,064 | ) | (114,774,827 | ) | ||||||||||
Cumulative effect of a change in accounting principle | 2 | — | 5,153,986 | — | ||||||||||||
Net loss | (19,468,147 | ) | (44,109,078 | ) | (114,774,827 | ) | ||||||||||
On the basis of net loss before accounting change per share, basic and diluted | 19 | $ | (0.00 | ) | $ | (0.00 | ) | $ | (0.01 | ) | ||||||
Cumulative effect of an accounting change per share, basic and diluted | 19 | $ | — | $ | 0.00 | $ | — | |||||||||
Loss per share, basic and diluted | 19 | $ | (0.00 | ) | $ | (0.00 | ) | $ | (0.01 | ) | ||||||
Shares used in calculating basic and diluted loss per share | 19 | 18,501,940,489 | 18,334,498,923 | 18,184,429,255 | ||||||||||||
F-4
Table of Contents
(In US dollars, except share data)
Notes | Accumulated | |||||||||||||||||||||||||||||||||||
Additional | receivable | other | Deferred | Total | ||||||||||||||||||||||||||||||||
Ordinary | paid-in | from | comprehensive | stock | Accumulated | stockholders | Comprehensive | |||||||||||||||||||||||||||||
Share | Amount | capital | stockholder | income (loss) | compensation, net | deficit | equity | income(loss) | ||||||||||||||||||||||||||||
Balance at December 31, 2004 | 18,232,179,139 | 7,292,872 | 3,289,757,272 | (391,375 | ) | 387,776 | (51,177,675 | ) | (129,926,585 | ) | 3,115,942,285 | $ | 96,391,145 | |||||||||||||||||||||||
Net profit of a subsidiary attributable to minority interest upon injection | — | — | (32,880 | ) | — | — | — | — | (32,880 | ) | ||||||||||||||||||||||||||
Exercise of stock options | 75,617,262 | 30,247 | 2,371,933 | — | — | — | — | 2,402,180 | ||||||||||||||||||||||||||||
Repurchase of restricted ordinary shares | (6,115,534 | ) | (2,446 | ) | (96,583 | ) | — | — | — | — | (99,029 | ) | ||||||||||||||||||||||||
Collection of note receivables from employees | — | — | — | 391,375 | — | — | — | 391,375 | ||||||||||||||||||||||||||||
Deferred stock compensation, net | — | — | (559,907 | ) | — | — | 26,295,756 | — | 25,735,849 | |||||||||||||||||||||||||||
Net loss | — | — | — | — | — | — | (114,774,827 | ) | (114,774,827 | ) | $ | (114,774,827 | ) | |||||||||||||||||||||||
Foreign currency translation adjustments | — | — | — | — | (192,246 | ) | — | — | (192,246 | ) | (192,246 | ) | ||||||||||||||||||||||||
Unrealized loss on investments | — | — | — | — | (56,552 | ) | — | — | (56,552 | ) | (56,552 | ) | ||||||||||||||||||||||||
Balance at December 31, 2005 | 18,301,680,867 | $ | 7,320,673 | $ | 3,291,439,835 | $ | — | $ | 138,978 | $ | (24,881,919 | ) | $ | (244,701,412 | ) | $ | 3,029,316,155 | $ | (115,023,625 | ) | ||||||||||||||||
Exercise of stock options | 132,744,596 | 53,098 | 3,912,210 | — | — | — | — | 3,965,308 | ||||||||||||||||||||||||||||
Repurchase of restricted ordinary shares | (1,669,000 | ) | (668 | ) | (57,522 | ) | — | — | — | — | (58,190 | ) | ||||||||||||||||||||||||
Deferred stock compensation adjustment | — | — | (24,881,919 | ) | — | — | 24,881,919 | — | — | |||||||||||||||||||||||||||
Share-based compensation | — | — | 23,506,847 | — | — | — | — | 23,506,847 | ||||||||||||||||||||||||||||
Cumulative effect of a change in accounting principle | — | — | (5,153,986 | ) | — | — | — | — | (5,153,986 | ) | ||||||||||||||||||||||||||
Net loss | — | — | — | — | — | — | (44,109,078 | ) | (44,109,078 | ) | (44,109,078 | ) | ||||||||||||||||||||||||
Foreign currency translation adjustments | — | — | — | — | (16,885 | ) | — | — | (16,885 | ) | (16,885 | ) | ||||||||||||||||||||||||
Realized gain on investments | — | — | — | — | (30,253 | ) | — | — | (30,253 | ) | (30,253 | ) | ||||||||||||||||||||||||
Balance at December 31, 2006 | 18,432,756,463 | $ | 7,373,103 | $ | 3,288,765,465 | $ | — | $ | 91,840 | $ | — | $ | (288,810,490 | ) | $ | 3,007,419,918 | $ | (44,156,216 | ) | |||||||||||||||||
Exercise of stock options | 126,455,749 | 50,582 | 3,988,549 | — | — | — | — | 4,039,131 | ||||||||||||||||||||||||||||
Repurchase of restricted ordinary shares | (292,500 | ) | (117 | ) | (21,383 | ) | — | — | — | — | (21,500 | ) | ||||||||||||||||||||||||
Share-based compensation | — | — | 20,643,341 | — | — | — | — | 20,643,341 | ||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | — | (19,468,147 | ) | (19,468,147 | ) | (19,468,147 | ) | ||||||||||||||||||||||||
Foreign currency translation adjustments | — | — | — | — | (93,721 | ) | — | — | (93,721 | ) | (93,721 | ) | ||||||||||||||||||||||||
Balance at December 31, 2007 | 18,558,919,712 | $ | 7,423,568 | $ | 3,313,375,972 | $ | — | $ | (1,881 | ) | $ | — | $ | (308,278,637 | ) | $ | 3,012,519,022 | $ | (19,561,868 | ) | ||||||||||||||||
F-5
Table of Contents
(In US dollars)
Year ended December 31, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
Operating activities: | ||||||||||||
Loss attributable to holders of ordinary shares | $ | (19,468,147 | ) | $ | (44,109,078 | ) | $ | (114,774,827 | ) | |||
Less: Cumulative effect of a change in accounting principle | — | (5,153,986 | ) | — | ||||||||
Net loss | (19,468,147 | ) | (49,263,064 | ) | (114,774,827 | ) | ||||||
Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||||||
Minority interest | (2,856,258 | ) | 18,803 | (251,017 | ) | |||||||
Deferred taxes | (31,234,415 | ) | (25,075,987 | ) | — | |||||||
Gain on sale of plant and equipment and assets held for sale | (28,651,446 | ) | (43,121,929 | ) | (3,001,881 | ) | ||||||
Depreciation and amortization | 706,277,464 | 919,616,493 | 769,471,853 | |||||||||
Non-cash interest expense on promissory note and long-term payable relating to license agreements | 4,762,343 | 5,702,607 | 5,395,177 | |||||||||
Amortization of acquired intangible assets | 27,070,616 | 24,393,561 | 20,946,051 | |||||||||
Share-based compensation | 20,643,341 | 23,506,847 | 25,735,849 | |||||||||
Loss from equity investment | 4,012,665 | 4,201,247 | 1,379,110 | |||||||||
Changes in operating assets and liabilities: | ||||||||||||
Accounts receivable, net | (46,202,677 | ) | (10,851,061 | ) | (72,145,627 | ) | ||||||
Inventories | 26,869,187 | (83,941,316 | ) | (47,219,784 | ) | |||||||
Prepaid expense and other current assets | (9,339,779 | ) | (8,926,442 | ) | (5,172,942 | ) | ||||||
Accounts payable | 19,852,824 | 24,705,615 | 26,425,817 | |||||||||
Accrued expenses and other current liabilities | 2,982,369 | (14,722,249 | ) | 41,469,028 | ||||||||
Income tax payable | 1,080,213 | 72,417 | (152,000 | ) | ||||||||
Other long term liabilities | (3,333,333 | ) | 3,333,333 | — | ||||||||
Net cash provided by operating activities | 672,464,967 | 769,648,875 | 648,104,807 | |||||||||
Investing activities: | ||||||||||||
Purchase of plant and equipment | (717,170,957 | ) | (882,580,833 | ) | (872,519,397 | ) | ||||||
Proceeds from government grant to purchase plant and equipment | — | 2,208,758 | 18,538,886 | |||||||||
Proceeds from sale of plant and equipment | 98,128,041 | 4,044,702 | 11,750,109 | |||||||||
Proceeds received from sale of assets held for sale | 16,476,045 | 12,716,742 | 6,434,115 | |||||||||
Purchase of acquired intangible assets | (90,090,114 | ) | (9,573,524 | ) | (11,167,883 | ) | ||||||
Acquisition of minority interest | (1,000,000 | ) | — | — | ||||||||
Purchase of short-term investments | (135,241,799 | ) | (135,058,817 | ) | (19,817,525 | ) | ||||||
Purchase of equity investment | — | — | (19,200,000 | ) | ||||||||
Sale of short-term investments | 185,554,532 | 90,873,820 | 26,329,298 | |||||||||
Net cash used in investing activities | (643,344,252 | ) | (917,369,152 | ) | (859,652,397 | ) | ||||||
F-6
Table of Contents
(In US dollars)
Year ended December 31, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
Financing activities: | ||||||||||||
Proceeds from short-term borrowings | 201,658,000 | 255,003,999 | 394,158,994 | |||||||||
Repayment of short-term borrowings | (165,658,000 | ) | (449,485,081 | ) | (219,677,912 | ) | ||||||
Proceeds from long-term debt | 262,247,672 | 785,344,546 | 253,432,612 | |||||||||
Repayment of long-term debt | (195,628,015 | ) | (635,613,638 | ) | (249,244,093 | ) | ||||||
Repayment of promissory note | (30,000,000 | ) | (30,000,000 | ) | (30,000,000 | ) | ||||||
Payment of loan initiation fee | — | (3,596,938 | ) | — | ||||||||
Proceeds from exercise of employee stock options | 4,039,131 | 3,965,308 | 2,402,180 | |||||||||
Collection of notes receivables from employees | — | — | 391,376 | |||||||||
Proceeds from minority investor (note 1) | — | — | 39,000,025 | |||||||||
Repurchase of restricted ordinary shares | (21,500 | ) | (58,190 | ) | (99,029 | ) | ||||||
Net cash provided by (used in) financing activities | 76,637,288 | (74,439,994 | ) | 190,364,153 | ||||||||
Effect of exchange rate changes | (93,721 | ) | (16,885 | ) | (192,246 | ) | ||||||
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | 105,664,282 | (222,177,156 | ) | (21,375,683 | ) | |||||||
CASH AND CASH EQUIVALENTS, beginning of year | 363,619,731 | 585,796,887 | 607,172,570 | |||||||||
CASH AND CASH EQUIVALENTS, end of year | $ | 469,284,013 | $ | 363,619,731 | $ | 585,796,887 | ||||||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||||||||||
Income taxes paid | $ | 435,109 | $ | 164,409 | $ | 436,867 | ||||||
Interest paid | $ | 45,322,891 | $ | 46,808,533 | $ | 47,113,456 | ||||||
F-7
Table of Contents
(In US dollars)
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES | ||||||||||||
Inception of accounts payable for plant and equipment | $ | (138,839,513 | ) | $ | (165,828,795 | ) | $ | (143,723,643 | ) | |||
Issuance of promissory note for acquired intangible assets | $ | — | $ | — | $ | (132,496,437 | ) | |||||
Inception of long-term payable for acquired intangible assets | $ | (62,833,433 | ) | $ | (16,992,950 | ) | $ | (24,686,398 | ) | |||
Inception of receivable for sales of manufacturing equipment and other fixed assets | $ | 17,321,000 | $ | 70,544,560 | $ | 5,490,000 | ||||||
F-8
Table of Contents
FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
(In US dollars, except where otherwise stated)
Place and date | Attributable | |||||||
of incorporation/ | equity | |||||||
Name of company | establishment | interest held | Principal activity | |||||
Garrison Consultants Limited (“Garrison”) | Samoa April 5, 2000 | 100 | % | Provision of consultancy services | ||||
Better Way Enterprises Limited (“Better Way”) | Samoa April 5, 2000 | 100 | % | Provision of marketing related activities | ||||
Semiconductor Manufacturing International (Shanghai) Corporation (“SMIS”)*# | The People’s Republic of China (the “PRC”) December 21, 2000 | 100 | % | Manufacturing and trading of semiconductor products | ||||
SMIC, Americas | United States of America June 22, 2001 | 100 | % | Provision of marketing related activities | ||||
Semiconductor Manufacturing International (Beijing) Corporation (“SMIB”)* | The PRC July 25, 2002 | 100 | % | Manufacturing and trading of semiconductor products | ||||
SMIC Japan Corporation# | Japan October 8, 2002 | 100 | % | Provision of marketing related activities | ||||
SMIC Europe S.R.L | Italy July 3, 2003 | 100 | % | Provision of marketing related activities | ||||
SMIC Commercial (Shanghai) Limited Company (formerly SMIC Consulting Corporation)* | The PRC September 30, 2003 | 100 | % | Operation of a convenience store | ||||
Semiconductor Manufacturing International (Tianjin) Corporation (“SMIT”)*# | The PRC November 3, 2003 | 100 | % | Manufacturing and trading of semiconductor products | ||||
Semiconductor Manufacturing International (AT) Corporation (“AT”) | Cayman Islands July 26, 2004 | 57.3 | % | Investment holding | ||||
Semiconductor Manufacturing International (Chengdu) Corporation (“SMICD”)* | The PRC August 16, 2004 | 57.3 | % | Manufacturing and trading of semiconductor products | ||||
Semiconductor Manufacturing International (Solar Cell) Corporation (“Solar Cell”) | Cayman Islands June 30, 2005 | 100 | % | Investment holding | ||||
SMIC Energy Technology (Shanghai) Corporation (“Energy Science”)*# | The PRC September 9, 2005 | 100 | % | Manufacturing and trading of solar cell related semiconductor products | ||||
SMIC Development (Chengdu) Corporation*# | The PRC December 29, 2005 | 100 | % | Construction, operation, and management of SMICD’s living quarter, schools, and supermarket | ||||
Magnificent Tower Limited | British Virgin Islands | 100 | % | Investment holding |
F-9
Table of Contents
FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
(In US dollars, except where otherwise stated)
Place and date | Attributable | |||||||
of incorporation/ | equity | |||||||
Name of company | establishment | interest held | Principal activity | |||||
January 5, 2006 | ||||||||
Semiconductor Manufacturing International (BVI) Corporation (“SMIC (BVI)”) | British Virgin Islands April 26, 2007 | 100 | % | Investment holding | ||||
SMIC Solar Cell (HK) Company Limited (formerly known as “Regent Century Limited”) (“SMIC Solar Cell (HK)”) | Hong Kong October 23, 2007 | 100 | % | Investment holding | ||||
SMIC AT (HK) Company Limited (formerly known as “Brilliant Ford Limited”) (“SMIC AT (HK)”) | Hong Kong October 22, 2007 | 57.3 | % | Investment holding | ||||
SMIC Shanghai (HK) Company Limited (formerly known as “Hill Wealth Limited”) (“SMIC SH (HK)”) | Hong Kong November 1, 2007 | 100 | % | Investment holding | ||||
SMIC Beijing (HK) Company Limited (formerly known as “Best Harvest Holdings Limited”) (“SMIC BJ (HK)”) | Hong Kong November 2, 2007 | 100 | % | Investment holding | ||||
SMIC Tianjin (HK) Company Limited (formerly known as “Wisdom Faith Limited”) (“SMIC TJ (HK)”) | Hong Kong November 2, 2007 | 100 | % | Investment holding | ||||
SMIC Shanghai (Cayman) Corporation (“SMIC SH (Cayman)”) | Cayman Islands November 8, 2007 | 100 | % | Investment holding | ||||
SMIC Beijing (Cayman) Corporation (“SMIC BJ (Cayman)”) | Cayman Islands November 8, 2007 | 100 | % | Investment holding | ||||
SMIC Tianjin (Cayman) Corporation (“SMIC TJ (Cayman)”) | Cayman Islands November 8, 2007 | 100 | % | Investment holding |
* | Companies registered as wholly foreign-owned enterprises in the PRC. | |
# | For identification purposes only |
F-10
Table of Contents
FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
(In US dollars, except where otherwise stated)
F-11
Table of Contents
FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
(In US dollars, except where otherwise stated)
Buildings | 25 years | |
Facility, machinery and equipment | 10 years | |
Manufacturing machinery and equipment | 5-7 years |
F-12
Table of Contents
FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
(In US dollars, except where otherwise stated)
Furniture and office equipment | 3-5 years | |
Transportation equipment | 5 years |
F-13
Table of Contents
FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
(In US dollars, except where otherwise stated)
For the year ended December 31 | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
Total actual interest expense | $ | 72,686,950 | $ | 78,120,699 | $ | 50,392,052 | ||||||
Less: Government subsidy | 27,083,604 | 22,396,613 | 3,990,606 | |||||||||
Less: Capitalized interest | 7,667,220 | 4,798,002 | 7,617,123 | |||||||||
Net interest expense | $ | 37,936,126 | $ | 50,926,084 | $ | 38,784,323 | ||||||
F-14
Table of Contents
FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
(In US dollars, except where otherwise stated)
F-15
Table of Contents
FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
(In US dollars, except where otherwise stated)
F-16
Table of Contents
FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
(In US dollars, except where otherwise stated)
F-17
Table of Contents
FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
(In US dollars, except where otherwise stated)
Year ended | ||||
December 31, | ||||
2005 | ||||
Loss attributable to holders of ordinary shares | $ | (114,774,827 | ) | |
Add: Stock compensation as reported under APB 25 | 25,735,849 | |||
Less: Stock compensation determined using the fair value method under SFAS 123 | (32,997,627 | ) | ||
Pro forma loss attributable to holders of ordinary shares | $ | (122,036,605 | ) | |
Loss per share: | ||||
Basic-pro forma | $ | (0.01 | ) | |
Diluted-pro forma | $ | (0.01 | ) | |
Basic-as reported | $ | (0.01 | ) | |
Diluted-as reported | $ | (0.01 | ) |
F-18
Table of Contents
FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
(In US dollars, except where otherwise stated)
F-19
Table of Contents
FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
(In US dollars, except where otherwise stated)
F-20
Table of Contents
FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
(In US dollars, except where otherwise stated)
2007 | 2006 | 2005 | ||||||||||
Current | $ | 249,489,644 | $ | 213,539,198 | $ | 192,303,054 | ||||||
Overdue: | ||||||||||||
Within 30 days | 39,131,577 | 31,611,729 | 38,017,540 | |||||||||
Between 31 to 60 days | 6,107,866 | 5,879,705 | 2,528,249 | |||||||||
Over 60 days | 3,658,565 | 1,154,343 | 8,485,071 | |||||||||
$ | 298,387,652 | $ | 252,184,975 | $ | 241,333,914 | |||||||
Allowance for doubtful accounts | $ | (4,492,090 | ) | $ | (4,048,845 | ) | $ | (1,091,340 | ) | |||
2007 | 2006 | 2005 | ||||||||||
Balance, beginning of year | $ | 4,048,845 | $ | 1,091,340 | $ | 1,105,165 | ||||||
Provision of the year | 486,920 | 2,957,505 | (13,825 | ) | ||||||||
Write-offs in the year | (43,675 | ) | — | — | ||||||||
Balance, end of year | $ | 4,492,090 | $ | 4,048,845 | $ | 1,091,340 | ||||||
F-21
Table of Contents
FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
(In US dollars, except where otherwise stated)
December 31, 2007 | ||||||||||||||||
Gross | Gross | |||||||||||||||
unrealized | unrealized | |||||||||||||||
Amortized Cost | gains | losses | Fair value | |||||||||||||
Debt instruments | $ | 7,637,870 | $ | — | $ | — | $ | 7,637,870 | ||||||||
December 31, 2006 | ||||||||||||||||
Gross | Gross | |||||||||||||||
unrealized | unrealized | |||||||||||||||
Cost | gains | losses | Fair value | |||||||||||||
Mutual fund | $ | 52,866,825 | $ | — | $ | — | $ | 52,866,825 | ||||||||
December 31, 2005 | ||||||||||||||||
Gross | Gross | |||||||||||||||
unrealized | unrealized | |||||||||||||||
Cost | gains | losses | Fair value | |||||||||||||
Commercial paper | $ | 3,482,033 | $ | 9,450 | $ | — | $ | 3,491,483 | ||||||||
Mutual fund | 10,283,573 | 20,803 | — | 10,304,376 | ||||||||||||
$ | 13,765,606 | $ | 30,253 | $ | — | $ | 13,795,859 | |||||||||
F-22
Table of Contents
FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
(In US dollars, except where otherwise stated)
2007 | 2006 | 2005 | ||||||||||
Unrealized gain (loss), beginning of year | $ | — | $ | 30,253 | $ | 86,805 | ||||||
Gain realized in the year | — | (30,253 | ) | — | ||||||||
Unrealized gain (loss) in the year | — | — | (56,552 | ) | ||||||||
Unrealized gain (loss), end of year | $ | — | $ | — | $ | 30,253 | ||||||
F-23
Table of Contents
FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
(In US dollars, except where otherwise stated)
December 31 | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
Forward foreign exchange contracts | $ | 404,103 | $ | 35,660,177 | $ | 245,622,512 | ||||||
Interest rate swap contracts | 51,057,531 | 265,947,874 | 340,000,000 | |||||||||
$ | 51,461,634 | $ | 301,608,051 | $ | 585,622,512 | |||||||
Notional | US dollar | |||||||
Settlement currency | amount | equivalents | ||||||
As of December 31, 2007 | ||||||||
Renminbi | 2,950,400 | $ | 404,103 | |||||
As of December 31, 2006 | ||||||||
Japanese Yen | 4,235,537,500 | $ | 35,660,177 | |||||
As of December 31, 2005 | ||||||||
Japanese Yen | 22,097,665,000 | $ | 188,659,310 | |||||
European Euro | 47,900,000 | 56,881,250 | ||||||
Renminbi | 661,400 | 81,952 | ||||||
$ | 245,622,512 | |||||||
F-24
Table of Contents
FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
(In US dollars, except where otherwise stated)
December 31 | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
Forward foreign exchange contracts | $ | 530,354 | $ | (2,694,415 | ) | $ | (2,607,714 | ) | ||||
Interest rate swap contracts | 1,003,275 | (5,317,837 | ) | (1,270,811 | ) | |||||||
$ | 1,533,629 | $ | (8,012,252 | ) | $ | (3,878,525 | ) | |||||
F-25
Table of Contents
FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
(In US dollars, except where otherwise stated)
7. | Inventories |
2007 | 2006 | 2005 | ||||||||||
Raw materials | $ | 83,645,656 | $ | 89,431,781 | $ | 55,697,982 | ||||||
Work in progress | 139,959,481 | 150,506,509 | 115,210,052 | |||||||||
Finished goods | 24,704,628 | 35,240,662 | 20,329,602 | |||||||||
$ | 248,309,765 | $ | 275,178,952 | $ | 191,237,636 | |||||||
F-26
Table of Contents
FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
(In US dollars, except where otherwise stated)
8. | Assets Held For Sale |
F-27
Table of Contents
FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
(In US dollars, except where otherwise stated)
9. | Land Use Rights, Net |
2007 | 2006 | 2005 | ||||||||||
Land use rights (50-70 years) | $ | 62,410,846 | $ | 42,485,856 | $ | 38,504,311 | ||||||
Less: accumulated amortization | (4,858,855 | ) | (4,162,523 | ) | (3,736,793 | ) | ||||||
$ | 57,551,991 | $ | 38,323,333 | $ | 34,767,518 | |||||||
F-28
Table of Contents
FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
(In US dollars, except where otherwise stated)
2007 | 2006 | 2005 | ||||||||||
Buildings | $ | 283,153,927 | $ | 269,721,109 | $ | 212,205,753 | ||||||
Facility, machinery and equipment | 470,434,074 | 435,112,058 | 382,928,570 | |||||||||
Manufacturing machinery and equipment | 5,035,366,468 | 4,539,566,491 | 3,810,671,778 | |||||||||
Furniture and office equipment | 67,835,774 | 61,979,029 | 75,696,024 | |||||||||
Transportation equipment | 1,750,734 | 1,666,185 | 1,581,493 | |||||||||
5,858,540,977 | 5,308,044,872 | 4,483,083,618 | ||||||||||
Less: accumulated depreciation | (2,930,088,762 | ) | (2,314,667,455 | ) | (1,515,923,860 | ) | ||||||
Construction in progress | 274,505,450 | 251,023,405 | 318,471,373 | |||||||||
$ | 3,202,957,665 | $ | 3,244,400,822 | $ | 3,285,631,131 | |||||||
F-29
Table of Contents
FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
(In US dollars, except where otherwise stated)
11. | Acquired Intangible Assets, Net |
2007 | 2006 | 2005 | ||||||||||
Technology, Licenses and Patents | ||||||||||||
Cost: | $ | 322,435,363 | $ | 134,862,112 | $ | 119,443,790 | ||||||
Accumulated Amortization: | (90,240,231 | ) | (63,169,614 | ) | (38,776,053 | ) | ||||||
Acquired intangible assets, net | $ | 232,195,132 | $ | 71,692,498 | $ | 80,667,737 | ||||||
F-30
Table of Contents
FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
(In US dollars, except where otherwise stated)
December 31, 2007 | ||||||||
Carrying | % of | |||||||
Amount | Ownership | |||||||
Toppan SMIC Electronics (Shanghai) Co., Ltd. | $ | 9,606,978 | 30.0 | |||||
Others | $ | 289,420 | 10.8 | |||||
9,896,398 | ||||||||
F-31
Table of Contents
FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
(In US dollars, except where otherwise stated)
2007 | 2006 | 2005 | ||||||||||
Current | $ | 223,527,856 | $ | 238,864,239 | $ | 209,142,167 | ||||||
Overdue: | ||||||||||||
Within 30 days | 46,571,502 | 43,364,820 | 22,479,945 | |||||||||
Between 31 to 60 days | 10,226,533 | 9,594,873 | 4,593,542 | |||||||||
Over 60 days | 21,666,848 | 17,305,267 | 26,102,778 | |||||||||
$ | 301,992,739 | $ | 309,129,199 | $ | 262,318,432 | |||||||
F-32
Table of Contents
FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
(In US dollars, except where otherwise stated)
December 31, 2007 | ||||||||
Maturity | Face value | Discounted value | ||||||
2008 | $ | 30,000,000 | $ | 29,242,001 | ||||
2009 | 30,000,000 | 28,259,668 | ||||||
2010 | 25,000,000 | 22,797,495 | ||||||
85,000,000 | 80,299,164 | |||||||
Less: Current portion of promissory notes | 30,000,000 | 29,242,001 | ||||||
Long-term portion of promissory notes | $ | 55,000,000 | $ | 51,057,163 | ||||
F-33
Table of Contents
FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
(In US dollars, except where otherwise stated)
2007 | 2006 | 2005 | ||||||||||
Short-term borrowings from commercial banks (a) | $ | 107,000,000 | $ | 71,000,000 | $ | 265,481,082 | ||||||
Long-term debt by contracts (b): | ||||||||||||
Shanghai phase I USD syndicate loan | $ | — | $ | — | $ | 259,200,000 | ||||||
Shanghai phase II USD syndicate loan | — | — | 256,481,965 | |||||||||
Shanghai new USD syndicate loan | 393,910,000 | 274,420,000 | — | |||||||||
Beijing USD syndicate loan | 500,020,000 | 600,000,000 | 224,955,000 | |||||||||
EUR syndicate loan | 51,057,531 | 15,947,873 | — | |||||||||
Tianjin USD syndicate loan | 12,000,000 | — | — | |||||||||
$ | 956,987,531 | $ | 890,367,873 | $ | 740,636,965 | |||||||
Long-term debt by repayment schedule: | ||||||||||||
2008 | $ | 340,692,788 | ||||||||||
2009 | 351,042,788 | |||||||||||
2010 | 213,642,788 | |||||||||||
2011 | 43,422,779 | |||||||||||
2012 | 8,186,388 | |||||||||||
956,987,531 | ||||||||||||
Less: current maturities of long-term debt | 340,692,788 | |||||||||||
Non-current maturities of long-term debt | $ | 616,294,743 | ||||||||||
(a) | Short-term borrowings from commercial banks | |
As of December 31, 2005, the Company had fifteen short-term credit agreements that provided total credit facilities of up to $431 million on a revolving credit basis. As of December 31, 2005, the Company had drawn down approximately $265 million under these credit agreements and approximately $166 million was available for future borrowings. The outstanding borrowings under the credit agreements were unsecured. The interest expense incurred in 2005 was $8,987,676. The interest rate on the loans ranged from 2.99% to 5.73% in 2005. |
F-34
Table of Contents
FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
(In US dollars, except where otherwise stated)
As of December 31, 2006, the Company had fifteen short-term credit agreements that provided total credit facilities of up to $474 million on a revolving credit basis. As of December 31, 2006, the Company had drawn down $71 million under these credit agreements and $403 million was available for future borrowings. The outstanding borrowings under the credit agreements were unsecured. The interest expense incurred in 2006 was $8,471,823. The interest rate on the loans ranged from 3.62% to 6.52% in 2006. | |||
As of December 31, 2007, the Company had fifteen short-term credit agreements that provided total credit facilities of up to $484 million on a revolving credit basis. As of December 31, 2007, the Company had drawn down $107 million under these credit agreements and $377 million is available for future borrowings. The outstanding borrowings under the credit agreements are unsecured. The interest expense incurred in 2007 was $4,537,200. The interest rate on the loan ranged from 5.37% to 6.44% in 2007. | |||
(b) | Long-term debt | ||
Shanghai Phase I USD syndicate loan: | |||
In December 2001, SMIS entered into the Shanghai Phase I USD syndicate loan with a syndicate of financial institutions based in the P.R.C. for $432,000,000. The withdrawal period of the facility was 18 months starting from the loan agreement date. As of December 31, 2004, SMIS had fully utilized the loan amount. The interest payment was due on a semi-annual basis in June and December. The principal amount was repayable starting from March 2005 in five semi-annual installments of $86,400,000. In 2006, the interest rate on the loan ranged from 6.16% to 7.05%. As of December 31, 2006, the borrowing was fully repaid through the Shanghai new USD syndicate loan. The interest expense incurred in 2006 and 2005 was $6,587,140 and $16,499,858, respectively, of which $783,538 and $3,631,872 were capitalized as additions to assets under construction in 2006 and 2005, respectively. | |||
Shanghai Phase II USD syndicate loan | |||
In January 2004, SMIS entered into the Shanghai Phase II USD syndicate loan for $256,481,965 with the same financial institutions as the Shanghai Phase I USD syndicate loan. As of December 31, 2005 and 2004, SMIS had fully utilized the loan. The interest payment was due on a semi-annual basis in March and September. The principal amount was repayable starting from |
F-35
Table of Contents
FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
(In US dollars, except where otherwise stated)
March 2006 in seven semi-annual installments of $36,640,286. In 2006, the interest rate on the loan ranged from 6.16% to 7.05%. The interest expense incurred in 2006 and 2005 was $7,185,813 and $12,470,302 of which $854,749 and $2,743,173 were capitalized as additions to assets under construction in 2006 and 2005, respectively. As of December 31, 2006, the borrowing was fully repaid through the Shanghai new USD syndicate loan. | |||
In connection with Shanghai Phase II USD syndicate loan, SMIS obtained a RMB denominated line of credit of RMB 235,678,000 ($28,476,030). In 2005, SMIS fully utilized the facility and then repaid in full prior to December 31, 2005. The interest expense incurred in 2005 was $25,625. | |||
Shanghai new USD syndicate loan | |||
In June, 2006, SMIS entered into the Shanghai new USD syndicate loan with the aggregate principal amount of $600,000,000, with a consortium of international and PRC banks. Of this principal amount, $393,000,000 was used to repay the principal amount outstanding under SMIS’s Phase I and Phase II USD syndicate loans. The remaining principal amount was available to be used to finance future expansion and general corporate requirements of SMIS. The remaining facility balance was available for drawdown until December 2007. As of December 31, 2007 and 2006, SMIS had drawn down $600,000,000 and $393,000,000 from this facility respectively. The principal amount is repayable starting from December 2006 in ten semi-annual installments. In December 2006, SMIS had paid the first installment of $23,580,000 according to the repayment schedule and had repaid an additional $95,000,000. In 2007, the Company repaid $87,510,000 according to the repayment schedule. As of December 31, 2007 and 2006, the outstanding balance of this borrowing was $393,910,000 and $274,420,000, respectively. In 2007, the interest rate on the loan ranged from 5.74% to 6.46%. The interest expense incurred in 2007 and 2006 was $17,260,814 and $13,522,886, of which $3,308,444 and $1,624,224 were capitalized as additions to assets under construction in 2007 and 2006, respectively. | |||
The total outstanding balance of SMIS’s long-term debt is collateralized by certain plant and equipment with an original cost of $1,883 million as of December 31, 2007. | |||
Beijing USD syndicate loan | |||
In May 2005, SMIB entered into the Beijing USD syndicate loan, a five-year loan facility in the aggregate principal amount of $600,000,000, with a |
F-36
Table of Contents
FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
(In US dollars, except where otherwise stated)
syndicate of financial institutions based in the PRC. This five-year bank loan was used to expand the capacity of SMIB’s fabs. The withdrawal period of the facility was twelve months from date of signing the agreement. As of December 31, 2007, 2006 and 2005, the outstanding balance was $500,020,000, $600,000,000 and $224,955,000, respectively, on this loan facility. The principal amount is repayable starting from December 2007 in six equal semi-annual installments. In December 2007, SMIB had repaid the first installment of $99,980,000 according to the repayment schedule. In 2007, the interest rate range on the loan ranged from 6.38% to 7.00%. The interest expense incurred in 2007, 2006 and 2005 was $42,183,106, $28,525,628 and $3,991,080, of which $2,342,794, $450,516 and $879,906 were capitalized as additions to assets under construction in 2007, 2006 and 2005, respectively. | |||
The total outstanding balance of the Beijing USD syndicate loan is collateralized by certain plant and equipment with an original cost of $1,058 million as of December 31, 2007. | |||
EUR syndicate loan | |||
On December 15, 2005, the Company entered into the EUR syndicate loan, a long-term loan facility agreement in the aggregate principal amount of EUR 85 million with a syndicate of banks and ABN Amro Bank N.V. Commerz Bank (Nederland) N.V. as the leading bank. The proceeds from the facility were used to purchase lithography equipment to support the expansion of the Company’s manufacturing facilities. The drawdown period of the facility ends on the earlier of (i) the date on which the loans have been fully drawn down; or (ii) 26 months after the effective date of the agreement. Each drawdown made under the facility shall be repaid in full by the Company in ten equal semi-annual installments starting from May 6, 2006. | |||
In 2007 and 2006, SMIS and SMIT had drawn down EUR 28,390,000 ($41,863,894), and EUR 15,122,775 ($19,934,841), respectively. SMIS and SMIT repaid an aggregated amount of EUR 5,863,555 ($8,173,357), and EUR 3,024,555 ($3,986,968) in 2007 and 2006, respectively. As of December 31, 2007 and 2006, the outstanding balance was EUR 34,624,665 ($51,057,531) and EUR 12,098,220 ($15,947,873). In 2007, the interest rate loan ranged from 3.95% to 5.87%. The interest expense incurred in 2007 and 2006 was $996,706 and $279,908, of which $82,036 and $65,072 were capitalized as additions to assets under construction in 2007 and 2006, respectively. | |||
The total outstanding balance of the facility is collateralized by certain plant |
F-37
Table of Contents
FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
(In US dollars, except where otherwise stated)
and equipment at the original cost of EUR 17.8 million for SMIT and EUR 33.4 million for SMIS as of December 31, 2007. | |||
Tianjin USD syndicate loan | |||
In May 2006, SMIT entered into the Tianjin USD syndicate loan, a five-year loan facility in the aggregate principal amount of $300,000,000, with a syndicate of financial institutions based in the PRC. This five-year bank loan was used to expand the capacity of SMIT’s fabs. In 2007, SMIT had drawn down $12,000,000 from this loan facility. The principal amount is repayable starting from starting from 2010 in six semi-annual installments. In 2007, the interest rate range on the loan ranged from 6.03% to 6.58%. The interest expense incurred in 2007 was $285,253, of which $24,344 was capitalized as additions to assets under construction in 2007. | |||
The total outstanding balance of the facility is collateralized by certain plant and equipment with an original cost of $207.0 million as of December 31, 2007. | |||
The long-term debt arrangements contain financial covenants as defined in the loan agreements. The Company has complied with these covenants (unless otherwise waived by the lenders to such agreement). |
F-38
Table of Contents
FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
(In US dollars, except where otherwise stated)
December 31, 2007 | ||||||||
Maturity | Face value | Discounted value | ||||||
2008 | $ | 74,137,877 | $ | 72,702,119 | ||||
2009 | 48,900,000 | 45,826,940 | ||||||
2010 | 14,400,000 | 12,666,331 | ||||||
2011 | 5,200,000 | 4,340,162 | ||||||
142,637,877 | 135,535,552 | |||||||
Less: Current portion of long-term payables | 74,137,877 | 72,702,119 | ||||||
Long-term portion of long-term payables | $ | 68,500,000 | $ | 62,833,433 | ||||
F-39
Table of Contents
FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
(In US dollars, except where otherwise stated)
F-40
Table of Contents
FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
(In US dollars, except where otherwise stated)
F-41
Table of Contents
FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
(In US dollars, except where otherwise stated)
December 31 | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
PRC | ||||||||||||
—Current | $ | 19,602 | $ | 4,542 | $ | 14,040 | ||||||
—Deferred | (31,234,415 | ) | (25,075,987 | ) | — | |||||||
Other jurisdictions | ||||||||||||
—Current | $ | 1,495,038 | $ | 143,701 | $ | 270,827 | ||||||
—Deferred | — | — | — | |||||||||
$ | (29,719,775 | ) | $ | (24,927,744 | ) | $ | 284,867 | |||||
December 31 | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
PRC | $ | 51,906,337 | $ | 46,806,662 | $ | 1,415,172 | ||||||
Other jurisdictions | (99,937,852 | ) | (116,777,420 | ) | (114,777,039 | ) | ||||||
$ | (48,031,515 | ) | $ | (69,970,758 | ) | $ | (113,361,867 | ) | ||||
F-42
Table of Contents
FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
(In US dollars, except where otherwise stated)
2007 | 2006 | 2005 | ||||||||||
Deferred tax assets: | ||||||||||||
Allowances and reserves | $ | — | $ | 1,962,410 | $ | 1,682,244 | ||||||
Start-up costs | 53,698 | 958,105 | 1,844,170 | |||||||||
Net operating loss carry forwards | — | 5,201,545 | 5,172,687 | |||||||||
Unrealized exchange loss | — | 47,860 | 295,646 | |||||||||
Depreciation of fixed assets | 75,886,896 | 33,715,867 | — | |||||||||
Subsidy on long lived assets | 479,817 | 295,654 | — | |||||||||
Accrued sales return | — | 137,719 | 23,764 | |||||||||
Total deferred tax assets | 76,420,411 | 42,319,160 | 9,018,511 | |||||||||
Valuation allowance | (19,505,239 | ) | (17,032,260 | ) | (8,905,021 | ) | ||||||
Net deferred tax assets — non-current | $ | 56,915,172 | $ | 25,286,900 | $ | 113,490 | ||||||
Deferred tax liability: | ||||||||||||
Capitalized interest | (604,770 | ) | (210,913 | ) | (113,490 | ) | ||||||
F-43
Table of Contents
FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
(In US dollars, except where otherwise stated)
2007 | 2006 | 2005 | ||||||||||
Applicable enterprise income tax rate | 15.0 | % | 15.0 | % | 15.0 | % | ||||||
Expenses not deductible for tax purpose | (0.9 | %) | 3.1 | % | (1.4 | %) | ||||||
Effect of tax holiday and tax concession | 48.7 | % | 25.0 | % | 12.0 | % | ||||||
Expense (credit) to be recognized in future periods | (19.2 | %) | 29.3 | % | (5.2 | %) | ||||||
Changes in valuation allowances | 9.3 | % | (11.9 | %) | (4.9 | %) | ||||||
Effect of different tax rate of subsidiaries operating in other jurisdictions | (33.8 | %) | (24.9 | %) | (15.8 | %) | ||||||
Change of tax rate | 42.8 | % | — | — | ||||||||
Effective tax rate | 61.9 | % | 35.6 | % | (0.3 | %) | ||||||
2007 | 2006 | 2005 | ||||||||||
The aggregate dollar effect | $ | 23,415,370 | $ | 17,472,283 | $ | 13,683,409 | ||||||
Per share effect- basic and diluted | $ | 0.00 | $ | 0.00 | $ | 0.00 |
F-44
Table of Contents
FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
(In US dollars, except where otherwise stated)
Weighted | ||||||||||||||||
Ordinary shares | Average | |||||||||||||||
Weighted | Remaining | Aggregated | ||||||||||||||
Number | average | Contractual | Intrinsic | |||||||||||||
of options | exercise price | Term | Value | |||||||||||||
Options outstanding at December 31, 2006 | 998,025,093 | $ | 0.14 | |||||||||||||
Granted | 223,112,000 | $ | 0.13 | |||||||||||||
Exercised | (82,947,298 | ) | $ | 0.05 | ||||||||||||
Cancelled | (95,791,313 | ) | $ | 0.17 | ||||||||||||
Options outstanding at December 31, 2007 | 1,042,398,482 | $ | 0.14 | 5.17 | 38,481,747 | |||||||||||
Vested or expected to vest at December 31, 2007 | 836,646,879 | $ | 0.14 | 5.42 | 31,863,984 | |||||||||||
Exercisable at December 31, 2007 | 514,657,338 | $ | 0.13 | 5.75 | 35,801,843 | |||||||||||
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Table of Contents
FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
(In US dollars, except where otherwise stated)
2007 | 2006 | 2005 | ||||||||||
Average risk-free rate of return | 3.98 | % | 4.72 | % | 4.16 | % | ||||||
Expected term | 1-4years | 2-4years | 1-4years | |||||||||
Volatility rate | 35.28 | % | 32.69 | % | 30.39 | % | ||||||
Expected dividend yield | — | — | — |
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Table of Contents
FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
(In US dollars, except where otherwise stated)
Weighted | ||||||||||||||||
Restricted share units | Average | |||||||||||||||
Weighted | Remaining | Aggregated | ||||||||||||||
Number of | average | Contractual | Fair | |||||||||||||
share units | fair value | Term | Value | |||||||||||||
Outstanding at December 31, 2006 | 140,295,146 | $ | 0.14 | |||||||||||||
Granted | 40,519,720 | $ | 0.14 | |||||||||||||
Exercised | (43,253,907 | ) | $ | 0.13 | ||||||||||||
Cancelled | (18,118,151 | ) | $ | 0.14 | ||||||||||||
Outstanding at December 31, 2007 | 119,442,808 | $ | 0.14 | 8.17 | 17,173,866 | |||||||||||
Vested or expected to vest at December 31, 2007 | 47,186,067 | $ | 0.13 | 9.05 | 6,309,199 | |||||||||||
Exercisable at December 31, 2007 | 1,649,800 | $ | 0.13 | 8.04 | 220,738 | |||||||||||
2007 | 2006 | 2005 | ||||||||||
Ordinary shares | 90,000 | 16,498,871 | 35,964,021 |
F-47
Table of Contents
FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
(In US dollars, except where otherwise stated)
2007 | 2006 | 2005 | ||||||||||
Loss attributable to holders of ordinary shares | $ | (19,468,147 | ) | $ | (44,109,078 | ) | $ | (114,774,827 | ) | |||
Less: Cumulative effect of a change in accounting principle | — | (5,153,986 | ) | — | ||||||||
Loss before cumulative effect of a change in accounting principle | (19,468,147 | ) | (49,263,064 | ) | (114,774,827 | ) | ||||||
Basic and diluted: | ||||||||||||
Weighted average ordinary shares outstanding | 18,505,650,171 | 18,361,910,033 | 18,264,791,383 | |||||||||
Less: Weighted average ordinary shares outstanding subject to repurchase | (3,709,682 | ) | (27,411,110 | ) | (80,362,128 | ) | ||||||
Weighted average shares used in computing basic and diluted income per share | 18,501,940,489 | 18,334,498,923 | 18,184,429,255 | |||||||||
On the basis of loss per share before cumulative effect of a change in accounting principle, basic and diluted | $ | (0.00 | ) | $ | (0.00 | ) | $ | (0.01 | ) | |||
Cumulative effect of a change in accounting principle per share, basic and diluted | $ | — | $ | 0.00 | $ | — | ||||||
Basic and diluted loss per share | $ | (0.00 | ) | $ | (0.00 | ) | $ | (0.01 | ) | |||
F-48
Table of Contents
FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
(In US dollars, except where otherwise stated)
December 31, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
Outstanding options to purchase ordinary shares | 72,685,282 | 62,339,207 | 177,325,981 | |||||||||
Outstanding unvested restricted share units to purchase ordinary shares | 75,302,939 | 161,479,670 | 129,093,152 | |||||||||
147,988,221 | 223,818,877 | 306,419,133 | ||||||||||
F-49
Table of Contents
FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
(In US dollars, except where otherwise stated)
F-50
Table of Contents
(a) | Purchase commitments | ||
As of December 31, 2007 the Company had the following commitments to purchase machinery, equipment and construction obligations. The machinery and equipment is scheduled to be delivered at the Company’s facility by December 31, 2008. |
Facility construction | $ | 57,080,000 | ||
Machinery and equipment | 239,555,000 | |||
$ | 296,635,000 | |||
(b) | Royalties | ||
The Company has entered into several license and technology agreements with third parties. The terms of the contracts range from three to ten years. The Company is subject to royalty payments based on a certain percentage of product sales, using the third parties’ technology or license. In 2007, 2006 and 2005, the Company incurred royalty expense of $13,118,570, $7,724,704 and $8,710,935, respectively, which is included as part of cost of sales in the statement of operations. | |||
The Company has entered into several license agreements with third parties where the Company provides access to certain licensed technology. The Company will receive royalty payments based on a certain percentage of product sales using the Company’s licensed technology. In 2007, 2006 and 2005, the Company earned royalty income of $1,428,603, $1,384,137 and $705,217, respectively, which was included as part of other income in the statement of operations. | |||
(c) | Operating leases | ||
The Company owns apartment facilities that are leased to the Company’s employees at negotiated prices. The apartment rental agreement is renewed on an annual basis. The Company also leases office space to non-related third parties. Office lease agreements are renewed on an annual basis as well. The total amount of rental income recorded in 2007, 2006, and 2005 was $6,937,107, $6,142,692, and $6,952,946, respectively, and is recorded in other income in the statement of operations. |
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Table of Contents
FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
(In US dollars, except where otherwise stated)
The Company has various operating leases including land use rights, under non-cancellable leases expiring at various times through 2053. Future minimum lease payments under these leases as of December 31, 2007 are as follows: |
Year ending | ||||
2008 | $ | 581,186 | ||
2009 | 267,041 | |||
2010 | 236,461 | |||
2011 | 220,436 | |||
Thereafter | 3,255,608 | |||
$ | 4,560,732 | |||
F-52
Table of Contents
FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
(In US dollars, except where otherwise stated)
2007 | 2006 | 2005 | ||||||||||
Total sales: | ||||||||||||
United States | $ | 657,603,189 | $ | 602,506,213 | $ | 478,162,160 | ||||||
Europe | 328,710,235 | 440,327,872 | 316,576,024 | |||||||||
Asia Pacific (Excluding Japan and Taiwan) | 227,973,648 | 168,607,598 | 175,846,284 | |||||||||
Taiwan | 183,113,880 | 153,057,616 | 138,153,755 | |||||||||
Japan | 152,364,336 | 100,823,568 | 62,580,512 | |||||||||
$ | 1,549,765,288 | $ | 1,465,322,867 | $ | 1,171,318,735 | |||||||
F-53
Table of Contents
FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
(In US dollars, except where otherwise stated)
Net revenue | Accounts receivable | |||||||||||||||||||||||
Year ended December 31, | December 31, | |||||||||||||||||||||||
2007 | 2006 | 2005 | 2007 | 2006 | 2005 | |||||||||||||||||||
A | 18 | % | 28 | % | 26 | % | 15 | % | 29 | % | 32 | % | ||||||||||||
B | 16 | % | 17 | % | 15 | % | 14 | % | 14 | % | 17 | % | ||||||||||||
C | 8 | % | 2 | % | 0 | % | 13 | % | 7 | % | 0 | % |
F-54
Table of Contents
FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
(In US dollars, except where otherwise stated)
F-55
Table of Contents
FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
(In US dollars, except where otherwise stated)
1) | The settlement agreement reached between TSMC and SMIC clearly stated that there was no admission of liability by either party; | ||
2) | The settlement agreement required all parties to bear their own legal costs; | ||
3) | There were no other damages associated with the Settlement Agreement; | ||
4) | There was a provision in the Settlement Agreement for a grace period to resolve any misappropriation issues had they existed; | ||
5) | Albeit a complaint had been filed by TSMC on trade secret infringement, TSMC has never identified which trade secrets it claimed were being infringed upon by the Company; | ||
6) | The Settlement Agreement was concluded when the litigation process was still at a relatively early stage and the outcome of the litigation was therefore highly uncertain. |
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FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
(In US dollars, except where otherwise stated)
a) | Existing third-party license agreements with SMIC; | ||
b) | The analysis of comparable industry royalty rates related to semiconductor chip/integrated circuit (“IC”) related technology; and | ||
c) | The analysis of comparable industry royalty rates related to semiconductor fabrication. |
F-57
Table of Contents
FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
(In US dollars, except where otherwise stated)
F-58
Table of Contents
FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
(In US dollars, except where otherwise stated)
F-59
Table of Contents
FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
(In US dollars, except where otherwise stated)
F-60
Table of Contents
FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
(In US dollars, except where otherwise stated)
F-61
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FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
(In US dollars, except where otherwise stated)
2007 | 2006 | 2005 | ||||||||||
Loss (income) from operations is arrived at after charging (crediting): | ||||||||||||
Auditors’ remuneration | $ | 1,698,293 | $ | 1,577,928 | $ | 1,121,131 | ||||||
Depreciation and amortization | 705,391,171 | 919,038,915 | 768,586,770 | |||||||||
Amortization of land use rights | 886,293 | 577,578 | 885,083 | |||||||||
Foreign currency exchange loss (gain) | 3,117,962 | 3,939,745 | (5,198,253 | ) | ||||||||
(Income) loss on sale of plant and equipment | (28,651,446 | ) | (43,121,929 | ) | — | |||||||
(Reversal of) bad debt expense | 486,920 | 2,957,505 | (13,825 | ) | ||||||||
Inventory write-down | 6,570,137 | 2,297,773 | 3,088,238 | |||||||||
Staff costs inclusive of directors’ remuneration | $ | 151,447,470 | $ | 108,742,094 | $ | 102,163,244 |
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FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
(In US dollars, except where otherwise stated)
Richard | Kawanishi | Wang | Hsu | Lip-Bu | Henry | Fang | Wang | Jou | Albert | Cai | Jiang | |||||||||||||||||||||||||||||||||||||||||
Chang | Tsuyoshi | Yang Yuan | Ta-Lin | Tan | Shaw | Yao | Zheng Gang | Yen-Pong | Y.C. Yu | Lai Xing | Shang Zhou | Total | ||||||||||||||||||||||||||||||||||||||||
2007 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Salaries and other benefits | 195,395 | — | — | — | — | — | — | — | — | — | — | — | 195,395 | |||||||||||||||||||||||||||||||||||||||
Stock option benefits | 172,203 | 17,189 | 17,189 | 17,189 | 17,189 | 17,189 | — | — | — | 50,094 | — | — | 308,242 | |||||||||||||||||||||||||||||||||||||||
Total emoluments | 367,598 | 17,189 | 17,189 | 17,189 | 17,189 | 17,189 | — | — | — | 50,094 | — | — | 503,637 | |||||||||||||||||||||||||||||||||||||||
2006 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Salaries and other benefits | 192,727 | — | — | — | — | — | — | — | — | — | — | — | 192,727 | |||||||||||||||||||||||||||||||||||||||
Stock option benefits | 156,241 | 12,951 | 12,951 | 12,951 | 12,951 | 12,951 | — | — | — | 37,742 | — | — | 258,738 | |||||||||||||||||||||||||||||||||||||||
Total emoluments | 348,968 | 12,951 | 12,951 | 12,951 | 12,951 | 12,951 | — | — | — | 37,742 | — | — | 451,465 | |||||||||||||||||||||||||||||||||||||||
2005 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Salaries and other benefits | 190,724 | — | — | — | — | — | — | — | — | — | — | — | 190,724 | |||||||||||||||||||||||||||||||||||||||
Stock option benefits | 97,664 | 49,026 | 8,608 | 8,608 | 8,608 | 8,608 | — | — | 8,608 | — | — | — | 189,730 | |||||||||||||||||||||||||||||||||||||||
Total emoluments | 288,388 | 49,026 | 8,608 | 8,608 | 8,608 | 8,608 | — | — | 8,608 | — | — | — | 380,454 |
2007 | 2006 | 2005 | ||||||||||
Number of | Number of | Number of | ||||||||||
directors | directors | directors | ||||||||||
HK$nil to HK$1,000,000 ($128,620) | 9 | 10 | 7 | |||||||||
HK$1,000,001 ($128,620) to HK$1,500,000 ($192,930) | — | — | — | |||||||||
HK$1,500,001 ($192,930) to HK$2,000,000 ($257,240) | — | — | — | |||||||||
HK$2,000,001 ($257,240) to HK$2,500,000 ($321,550) | — | — | 1 | |||||||||
HK$2,500,001 ($321,550) to HK$3,000,000 ($385,860) | 1 | 1 | — |
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FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
(In US dollars, except where otherwise stated)
2007 | 2006 | 2005 | ||||||||||
Salaries and other benefits | $ | 586,065 | $ | 518,198 | $ | 513,570 | ||||||
Bonus | 237,969 | 233,662 | 92,455 | |||||||||
Stock option benefits | 283,125 | 268,528 | 325,880 | |||||||||
Total emoluments | $ | 1,107,159 | $ | 1,020,388 | $ | 931,905 | ||||||
2007 | 2006 | 2005 | ||||||||||
Number of | Number of | Number of | ||||||||||
individuals | individuals | individuals | ||||||||||
HK$nil to HK$1,000,000 ($128,620) | — | — | — | |||||||||
HK$1,000,001 ($128,620) to HK$1,500,000 ($192,930) | — | — | — | |||||||||
HK$1,500,001 ($192,930) to HK$2,000,000 ($257,240) | — | 3 | 3 | |||||||||
HK$2,000,001 ($257,240) to HK$2,500,000 ($321,550) | 4 | 1 | 1 | |||||||||
HK$2,500,001 ($321,550) to HK$4,500,000($578,790) | 1 | 1 | 1 | |||||||||
HK$4,500,001 ($578,790) to HK$5,000,000 (643,100) | — | — | — | |||||||||
F-64
Table of Contents
FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
(In US dollars, except where otherwise stated)
F-65
Table of Contents
FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
(In US dollars, except where otherwise stated)
F-66
Table of Contents
(In US dollars, except where otherwise stated)
(i) | In regard to accounting treatment for share-based payments, IFRS 2, “Share Based Payment”, was issued to specify recognition, measurement and disclosure for equity compensation. IFRS 2 requires all share-based payment to be recognized in the financial statements using a fair value measurement basis. An expense should be recognized when goods or services received are consumed. IFRS 2 was effective for periods beginning on or after January 1, 2005. | ||
Under US GAAP, prior to the adoption of the SFAS 123(R), the Company was able to account for stock-based compensation issued to employees using one of the two following methods, |
(a) | Intrinsic value based method | ||
Under the intrinsic value based method, compensation expense is the excess, if any, of the fair value of the stock at the grant date or other measurement date over the amount an employee must pay to acquire the stock. | |||
(b) | Fair value based method | ||
For stock options, fair value is determined using an option pricing model that takes into account the stock price at the grant date, the exercise price, the expected life of the option and the annual rate of quarterly dividends. |
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Table of Contents
FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
(In US dollars, except where otherwise stated)
Effective January 1, 2006, the Company adopted the provision of SFAS 123(R), “Share-Based Payment”. Under the provisions of SFAS 123(R), share-based compensation is measured at the grant date, based on the fair value of the award similar to IFRS 2. In addition, under SFAS 123( R) the Company was no longer required to record deferred share-based compensation related to unvested share options in stockholder’s equity, consistent with IFRS 2. |
(ii) | Under IFRS, minority interest is presented in the equity section while under US GAAP minority interest is presented outside of equity, between liabilities and equity. | ||
Under IFRS, the portion of profit and loss attributable to the minority interest and to the parent entity is separately disclosed on the face of the income statement. Under US GAAP, amounts attributable to the minority interest are presented as a component of net income or loss. | |||
(iii) | Under US GAAP, a beneficial conversion feature refers to the preferential price of certain convertible equity instruments an investor receives when the effective conversion price of the equity instruments in lower than the fair market value of the common stock to which the convertible equity instrument is convertible into at the date of issuance. US GAAP requires the recognition of the difference between the effective conversion price of the convertible equity instrument and the fair market value of the common stock as a deemed dividend. | ||
Under IFRS, this deemed dividend is not required to be recorded. | |||
(iv) | Under IFRS, leases of land and buildings are classified as operating or finance leases in the same way as leases of other assets. However, a characteristic of land is that it normally has an indefinite economic life and, if title is not expected to pass to the leasee by the end of the lease term, the leasee normally does not receive substantially all of the risks and rewards incidental to ownership, in which case the lease of land will be an operating lease. A payment made on entering into or acquiring a leasehold that is accounted for as an operating lease represents lease prepayments that are amortized over the lease term in accordance with the pattern of benefits provided. For balance sheet presentation, the prepayment of land use rights should be disclosed as current and non-current. |
(v) | IFRS requires an enterprise to evaluate at each balance sheet date whether there is any indication that a long-lived asset may be impaired. If any such indication exists, an enterprise should |
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FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
(In US dollars, except where otherwise stated)
2007 | 2006 | 2005 | ||||||||||
Net loss under US GAAP | $ | (19,468,147 | ) | $ | (44,109,078 | ) | $ | (114,774,827 | ) | |||
IFRS adjustments: | ||||||||||||
i) Recognizing an expense for share-based payment | — | — | (7,261,778 | ) | ||||||||
i) Reverse of cumulative effect of a change in accounting principle | — | (5,153,986 | ) | — | ||||||||
ii) Presentation of minority interest | (2,856,258 | ) | 18,803 | (251,017 | ) | |||||||
v) Impairment of long-lived assets | (105,774,000 | ) | — | — | ||||||||
Net loss under IFRS | $ | (128,098,405 | ) | $ | (49,244,261 | ) | $ | (122,287,622 | ) | |||
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FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
(In US dollars, except where otherwise stated)
2007 | 2006 | 2005 | ||||||||||
Net loss per share under IFRS | $ | (0.01 | ) | $ | (0.00 | ) | $ | (0.01 | ) | |||
Stockholders’ equity as reported under US GAAP | $ | 3,012,519,022 | $ | 3,007,419,918 | $ | 3,029,316,155 | ||||||
ii) Presentation of minority interest | 34,944,408 | 38,800,666 | 38,781,863 | |||||||||
v) Impairment of long-lived assets | (105,774,000 | ) | ||||||||||
Stockholders’ equity under IFRS | $ | 2,941,689,430 | $ | 3,046,220,584 | $ | 3,068,098,018 | ||||||
Land use rights, net — current portion as reported under US GAAP | $ | — | — | — | ||||||||
IFRS adjustments | ||||||||||||
iv) Current portion adjustment for land use right | 1,054,777 | 712,521 | 650,581 | |||||||||
Under IFRS | $ | 1,054,777 | $ | 712,521 | $ | 650,581 | ||||||
Plant and equipment as reported under US GAAP | $ | 3,202,957,665 | $ | 3,244,400,822 | $ | 3,285,631,131 | ||||||
IFRS adjustments | ||||||||||||
iv) Impairment of long-lived assets | (105,774,000 | ) | ||||||||||
Under IFRS | $ | 3,097,183,665 | $ | 3,244,400,822 | $ | 3,285,631,131 | ||||||
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FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
(In US dollars, except where otherwise stated)
2007 | 2006 | 2005 | ||||||||||
Additional paid-in capital as reported under US GAAP | 3,313,375,972 | 3,288,733,078 | 3,291,407,448 | |||||||||
IFRS adjustments | ||||||||||||
i) Reverse the deferred stock compensation, net under APB 25 | — | — | (24,881,919 | ) | ||||||||
i) Retrospective adjustment on adoption of IFRS 2 | 30,388,316 | 30,388,316 | 23,126,538 | |||||||||
i) Additional share-based compensation under IFRS 2 | — | — | 7,261,778 | |||||||||
i) Reverse of cumulative effect of a change in accounting principle | 5,153,986 | 5,153,986 | — | |||||||||
iii) Carry forward prior year’s adjustment on deemed dividend | (55,956,051 | ) | (55,956,051 | ) | (55,956,051 | ) | ||||||
Under IFRS | $ | 3,292,962,223 | $ | 3,268,319,329 | $ | 3,240,957,794 | ||||||
Deferred stock compensation, net as reported under US GAAP | — | — | (24,881,919 | ) | ||||||||
IFRS adjustments | ||||||||||||
i) Deferred stock compensation, net under APB 25 | — | — | 24,881,919 | |||||||||
Under IFRS | $ | — | $ | — | $ | — | ||||||
Accumulated deficit as reported under US GAAP | (308,278,637 | ) | (288,810,490 | ) | (244,701,412 | ) | ||||||
IFRS adjustments | ||||||||||||
i) Additional share-based compensation under IFRS 2 | — | — | (7,261,778 | ) | ||||||||
i) Carried over impact under IFRS 2 | (30,388,316 | ) | (30,388,316 | ) | (23,126,538 | ) | ||||||
i) Reverse of cumulative effect of a change in accounting principle | (5,153,986 | ) | (5,153,986 | ) | — | |||||||
iv) Carry forward prior year’s adjustment on deemed dividend | 55,956,051 | 55,956,051 | 55,956,051 | |||||||||
v) Impairment of long-lived assets | (105,774,000 | ) | ||||||||||
Under IFRS | $ | (393,638,888 | ) | $ | (268,396,741 | ) | $ | (219,133,677 | ) | |||
Cost of sales as reported under US GAAP | 1,397,037,881 | 1,338,155,004 | 1,105,133,544 | |||||||||
IFRS adjustments | ||||||||||||
i) Recognizing an expense for share-based payment | — | — | 3,366,722 | |||||||||
Under IFRS | $ | 1,397,037,881 | $ | 1,338,155,004 | $ | 1,108,500,266 | ||||||
Operating expenses as reported under US GAAP | 188,659,217 | 141,037,963 | 153,225,353 | |||||||||
IFRS adjustments | ||||||||||||
i) Recognizing an expense for share-based payment | — | — | 3,895,056 | |||||||||
v) Impairment of long-lived assets | 105,774,000 | — | — | |||||||||
Under IFRS | $ | 294,433,217 | $ | 141,037,963 | $ | 157,120,409 | ||||||
Income (Loss) before tax as reported under US GAAP | (48,031,515 | ) | (69,970,758 | ) | (113,361,867 | ) |
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2007 | 2006 | 2005 | ||||||||||
IFRS adjustments | ||||||||||||
vi) Presentation of income (loss) from equity investment | (4,012,665 | ) | (4,201,247 | ) | (1,379,110 | ) | ||||||
Under IFRS | $ | (52,044,180 | ) | $ | (74,172,005 | ) | $ | (114,740,977 | ) | |||
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FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
(In US dollars, except where otherwise stated)
(a) | Inventory valuation | ||
Inventories are carried at cost under both US GAAP and IFRS. However, if there is evidence that the net realisable value of goods, in their disposal in the ordinary course of business, will be less than cost, whether due to physical obsolescence, changes in price levels, or other causes, the difference should be recognized as a loss of the current period. This is generally accomplished by stating such goods at a lower level commonly known as “market”. | |||
Under US GAAP, a write-down of inventories to the lower of cost or market at the close of a fiscal period creates a new cost basis that subsequently cannot be reversed based on changes in underlying facts and circumstances. Market under US GAAP is the lower of the replacement cost and net realizable value minus normal profit margin. |
(b) | Deferred income taxes | ||
Deferred tax liabilities and assets are recognized for the estimated future tax effects of all temporary differences between the financial statement carrying amount of assets and liabilities and their respective tax bases under both US GAAP and IFRS. | |||
Under IFRS, a deferred tax asset is recognized to the extent that it is probable that future profits will be available to offset the deductible temporary differences or carry forward of unused tax losses and unused tax credits. Under US GAAP, all deferred tax assets are recognized, subject to a valuation allowance, to the extent that it is ''more likely than not’’ that some portion or all of the deferred tax assets will be realized. “More likely than not’’ is defined as a likelihood of more than 50%. | |||
With regard to the measurement of the deferred tax, IFRS requires recognition of the effects of a change in tax laws or rates when the change is “substantively enacted”. US GAAP requires measurement using tax laws and rates enacted at the balance sheet date. |
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FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
(In US dollars, except where otherwise stated)
(c) | Segment reporting | ||
Under IFRS, a listed enterprise is required to determine its primary and secondary segments on the basis of lines of business and geographical areas, and to disclose results, assets and liabilities and certain other prescribed information for each segment. The determination of primary and secondary segment is based on the dominant source of the enterprise’s business risks and returns. Accounting policies adopted for preparing and presenting the financial statements of the Company should also be adopted in reporting the segmental results and assets. The business segment is considered as the primary segment for the Company. Meanwhile, the Management believes the risk and return shall be similar among its different geographical segments. | |||
Under US GAAP, a public business enterprise is required to report financial and descriptive information about its reportable operating segments. Operating segments are components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. US GAAP also permits the use of the accounting polices used for internal reporting purposes that are not necessarily consistent with the accounting policies used in consolidated financial statements. | |||
(d) | Borrowing costs | ||
IFRS and US GAAP require capitalization of borrowing costs for those borrowings that are directly attributable to acquisition, construction or production of assets that necessarily take a substantial period of time to get ready for their intended use or sale. The amount to be capitalized is the borrowing cost which could theoretically have been avoided if the expenditure on the qualifying asset was not made. Under IFRS, borrowing costs are defined as interest and any other costs incurred by an enterprise in connection with the borrowing of funds, while under the US GAAP, borrowing costs are defined as interest only. | |||
Under IFRS, to the extent that funds are borrowed specifically for the purpose of obtaining a qualified asset, the amount of borrowing costs eligible for capitalization is determined as the actual borrowing costs incurred on the borrowing during the period less any investment income on the temporary investment of those borrowing. The amount of borrowing costs to be capitalized under US GAAP is based solely on actual interest incurred related to the actual expenditure incurred. | |||
(e) | Research and development costs |
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FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
(In US dollars, except where otherwise stated)
• | the technical feasibility of completing the intangible asset so that it will be available for use or sale; | ||
• | its intention to complete the intangible asset and use or sell it; | ||
• | its ability to use or sell the intangible asset; | ||
• | how the intangible asset will generate probable future economic benefits. Among other things, the enterprise should demonstrate the existence of a market for the output of the intangible asset or the intangible asset itself or, if it is to be used internally, the usefulness of the intangible asset; | ||
• | the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and | ||
• | its ability to measure the expenditure attributable to the intangible asset during the development phase. |
• | those incurred on behalf of other parties under contractual arrangements; | ||
• | those that are unique for enterprises in the extractive industries; | ||
• | certain costs incurred internally in creating a computer software product to be sold, leased or otherwise marketed, whose technological feasibility is established, i.e. upon completion of a detailed program design or, in its absence, upon completion of a working model; and | ||
• | certain costs related to the computer software developed or obtained for internal use. |
(f) | Statements of cash flows |
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FOR THE YEARS ENDED DECEMBER 31, 2007, 2006, AND 2005
(In US dollars, except where otherwise stated)
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SEMICONDUCTOR MANUFACTURING INTERNATIONAL CORPORATION
FINANCIAL INFORMATION OF PARENT COMPANY
BALANCE SHEETS
(In US dollars, except share data)
December 31, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
ASSETS | ||||||||||||
Current assets: | ||||||||||||
Cash and cash equivalents | $ | 6,042,030 | $ | 33,450,295 | $ | 79,909,636 | ||||||
Short term investments | — | — | 6,352,678 | |||||||||
Accounts receivable ,net | 10,970,690 | — | — | |||||||||
Amount due from subsidiaries | 21,586,283 | 138,701,627 | 690,956,604 | |||||||||
Prepaid expense and other current assets | 12,278,199 | 8,490,138 | 9,641,954 | |||||||||
Total current assets | 50,877,202 | 180,642,060 | 786,860,872 | |||||||||
Plant and equipment, net | 6,723,900 | 5,321,319 | 334,532 | |||||||||
Acquired intangible assets, net | 216,281,235 | 71,115,222 | 79,224,546 | |||||||||
Deferred cost, net | 70,637,275 | 94,183,034 | 117,728,792 | |||||||||
Investment in subsidiaries | 2,995,391,546 | 2,962,930,960 | 2,460,102,251 | |||||||||
Investment in equity affiliate | 9,896,398 | 13,619,643 | 17,820,890 | |||||||||
TOTAL ASSETS | $ | 3,349,807,556 | $ | 3,327,812,238 | $ | 3,462,071,883 | ||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||
Current liabilities: | ||||||||||||
Accounts payable | $ | 4,811,093 | $ | — | $ | — | ||||||
Accrued expenses and other current liabilities | 34,021,253 | 46,191,765 | 48,426,265 | |||||||||
Amount due to subsidiaries | 76,762,892 | 84,080,142 | 12,873,555 | |||||||||
Short-term borrowings | 20,000,000 | 31,000,000 | 175,481,082 | |||||||||
Current portion of promissory note | 29,242,000 | 29,242,001 | 29,242,001 | |||||||||
Current portion of long-term payables relating to license agreements | 69,189,413 | 12,690,472 | 6,791,991 | |||||||||
Income tax payable | 1,149,983 | — | — | |||||||||
Total current liabilities | 235,176,634 | 203,204,380 | 272,814,894 | |||||||||
Long-term liabilities: | ||||||||||||
Promissory notes | 51,057,163 | 96,861,657 | 135,254,436 | |||||||||
Long-term payables relating to license agreements | 51,054,737 | 16,992,950 | 24,686,398 | |||||||||
Other long term liabilities | — | 3,333,333 | — | |||||||||
Total long-term liabilities | 102,111,900 | 117,187,940 | 159,940,834 | |||||||||
Total liabilities | $ | 337,288,534 | $ | 320,392,320 | $ | 432,755,728 | ||||||
Stockholders’ equity: | ||||||||||||
Ordinary shares, $0.0004 par value, 50,000,000,000 shares authorized, shares issued and outstanding 18,558,919,712, 18,432,756,463, and 18,301,680,867, respectively | 7,423,568 | 7,373,103 | 7,320,673 | |||||||||
Additional paid-in capital | 3,313,375,972 | 3,288,765,465 | 3,291,439,835 | |||||||||
Accumulated other comprehensive (loss) income | (1,881 | ) | 91,840 | 138,978 | ||||||||
Deferred stock compensation | — | — | (24,881,919 | ) | ||||||||
Accumulated deficit | (308,278,637 | ) | (288,810,490 | ) | (244,701,412 | ) | ||||||
Total stockholders’ equity | 3,012,519,022 | 3,007,419,918 | 3,029,316,155 | |||||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ QUITY | $ | 3,349,807,556 | $ | 3,327,812,238 | $ | 3,462,071,883 | ||||||
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FINANCIAL INFORMATION OF PARENT COMPANY
STATEMENTS OF OPERATIONS
(In US dollars)
Year ended December 31, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
Revenue | $ | 12,363,023 | $ | 81,000 | $ | — | ||||||
Operating expenses: | ||||||||||||
General and administrative expenses | 61,970,384 | 42,208,145 | 67,475,432 | |||||||||
Amortization of deferred cost and acquired intangible assets | 48,049,863 | 47,073,403 | 44,203,172 | |||||||||
Total operating expenses | 110,020,247 | 89,281,548 | 111,678,604 | |||||||||
Loss from operations | (97,657,224 | ) | (89,200,548 | ) | (111,678,604 | ) | ||||||
Other income (expense): | ||||||||||||
Interest income | 1,267,478 | 1,290,279 | 3,066,745 | |||||||||
Interest expense | (6,029,720 | ) | (12,880,250 | ) | (11,026,113 | ) | ||||||
Other expense, net | (2,610,379 | ) | (20,125,363 | ) | (158,527 | ) | ||||||
Total other expense, net | (7,372,621 | ) | (31,715,334 | ) | (8,117,895 | ) | ||||||
Net loss before income tax | (105,029,845 | ) | (120,915,882 | ) | (119,796,499 | ) | ||||||
Income tax expense | (1,149,983 | ) | — | — | ||||||||
Loss from equity investment | (4,012,665 | ) | (4,201,247 | ) | (1,379,110 | ) | ||||||
Profit from investment in subsidiaries | 90,724,346 | 75,854,065 | 6,400,782 | |||||||||
Net loss before cumulative effect of a change in accounting principle | (19,468,147 | ) | (49,263,064 | ) | (114,774,827 | ) | ||||||
Cumulative effect of a change in accounting principle | — | 5,153,986 | — | |||||||||
Net loss | $ | (19,468,147 | ) | $ | (44,109,078 | ) | $ | (114,774,827 | ) | |||
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FINANCIAL INFORMATION OF PARENT COMPANY
STATEMENTS OF CASH FLOWS
(In US dollars)
Year ended December 31, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
Operating activities | ||||||||||||
Loss attributable to holders of ordinary shares | $ | (19,468,147 | ) | $ | (44,109,078 | ) | $ | (114,774,827 | ) | |||
Less: Cumulative effect of a change in accounting principle | — | (5,153,986 | ) | — | ||||||||
Net loss | (19,468,147 | ) | (49,263,064 | ) | (114,774,827 | ) | ||||||
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||||||||||||
Profit from investment in subsidiaries | (90,724,346 | ) | (75,854,065 | ) | (6,400,782 | ) | ||||||
Loss from equity investment | 4,012,665 | 4,201,247 | 1,379,110 | |||||||||
Depreciation and amortization | 48,381,796 | 47,322,544 | 44,218,590 | |||||||||
Share-based compensation | 20,643,341 | 23,506,847 | 25,735,849 | |||||||||
Non cash interest expense on promissory note | 4,579,116 | 5,702,607 | 5,395,178 | |||||||||
Changes in operating assets and liabilities: | ||||||||||||
Accounts receivable, net | (10,970,690 | ) | — | — | ||||||||
Amount due from subsidiaries | 117,115,344 | 552,254,977 | 177,755,529 | |||||||||
Prepaid expense and other current assets | (3,788,061 | ) | 1,151,816 | (5,007,109 | ) | |||||||
Accounts payable | 4,811,093 | — | — | |||||||||
Amount due to subsidiaries | (7,317,250 | ) | 71,206,587 | 8,841,001 | ||||||||
Accrued expenses and other current liabilities | (5,397,776 | ) | (11,229,650 | ) | 25,069,141 | |||||||
Other long term liabilities | (3,333,333 | ) | 3,333,333 | — | ||||||||
Income tax payable | 1,149,983 | — | — | |||||||||
Dividend received from a subsidiary | 315,000,000 | — | — | |||||||||
Net cash provided by operating activities | 374,693,735 | 572,333,179 | 162,211,680 | |||||||||
Investing activities: | ||||||||||||
Purchase of plant and equipment | (1,734,514 | ) | (5,235,928 | ) | (483,998 | ) | ||||||
Purchases of acquired intangible assets | (87,295,157 | ) | (9,573,524 | ) | (9,275,256 | ) | ||||||
Sale of short-term investments | — | 6,352,678 | 14,011,506 | |||||||||
Purchase of equity investment | — | — | (19,200,000 | ) | ||||||||
Investment in subsidiaries | (256,736,240 | ) | (426,974,644 | ) | (466,876,468 | ) | ||||||
Net cash used in investing activities | (345,765,911 | ) | (435,431,418 | ) | (481,824,216 | ) | ||||||
Financing activities: | ||||||||||||
Proceeds from short-term borrowing | 154,383,000 | 225,003,998 | 201,158,995 | |||||||||
Repayment of short-term debt | (165,383,000 | ) | (369,485,080 | ) | (25,677,913 | ) | ||||||
Repayment of promissory notes | (49,260,000 | ) | (42,740,000 | ) | (30,000,000 | ) | ||||||
Proceeds from exercise of employee stock options | 4,039,131 | 3,965,308 | 2,402,180 |
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Year ended December 31, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
Collection of notes receivables from employees | — | — | 391,375 | |||||||||
Repurchase of restricted ordinary shares | (21,500 | ) | (58,190 | ) | (99,029 | ) | ||||||
Net cash provided by (used in) financing activities | (56,242,369 | ) | (183,313,964 | ) | 148,175,608 | |||||||
Effect of exchange rate changes | (93,720 | ) | (47,138 | ) | (35,397 | ) | ||||||
NET DECREASE IN CASH AND CASH EQUIVALENTS | (27,408,265 | ) | (46,459,341 | ) | (171,472,325 | ) | ||||||
CASH AND CASH EQUIVALENTS, beginning of period | 33,450,295 | 79,909,636 | 251,381,961 | |||||||||
CASH AND CASH EQUIVALENTS, end of period | $ | 6,042,030 | $ | 33,450,295 | $ | 79,909,636 | ||||||
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCIAL ACTIVITIES | ||||||||||||
Inception of accounts payable for plant and equipment | $ | (4,811,094 | ) | $ | — | $ | — | |||||
Issuance of promissory note for acquired intangible assets | $ | — | $ | — | $ | (132,496,437 | ) | |||||
Inception of long-term payable for acquired intangible assets | $ | (51,054,737) | $ | (16,992,950 | ) | $ | (24,686,398 | ) |
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FINANCIAL INFORMATION OF PARENT COMPANY
1. | The financial statements of Semiconductor Manufacturing International Corporation (the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) except for accounting of the Company’s subsidiaries and certain footnote disclosures as described below. | |
Certain information and footnote disclosures normally included in financial statements prepared in accordance with US GAAP have been condensed or omitted. The footnote disclosures contain supplemental information relating to the operations of the Company and, as such, these statements should be read in conjunction with the notes to the Consolidated Financial Statements of the Company. | ||
2. | As of December 31, 2007, 2006 and 2005, there were no material contingencies, significant provisions of long-term obligations, mandatory dividend or redemption requirements of redeemable stocks or guarantees of the Company, except for those which have been separately disclosed in the Consolidated Financial Statement, if any. | |
3. | For the year ended December 31, 2007, $315,000,000 cash dividend was paid to the Company by SMIS. For the years ended December 31, 2006 and 2005, there were no cash dividends paid to the Company by its consolidated subsidiaries. |
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Exhibit 1.1 | Eleventh Amended and Restated Articles of Association, as adopted at the Registrant’s annual general meeting of shareholders on June 2, 2008***** | |
Exhibit 4.1 | Asset Purchase Agreement dated September 23, 2003 among Semiconductor Manufacturing International Corporation, Motorola, Inc. and Motorola (China) Electronics Limited** | |
Exhibit 4.2 | Sixth Amended and Restated Registration Rights Agreement dated February 23, 2003 among Semiconductor Manufacturing International Corporation and the shareholders listed therein*** | |
Exhibit 4.3 | Settlement Agreement dated January 31, 2005 by and between Semiconductor Manufacturing International Corporation and Taiwan Semiconductor Manufacturing Corporation, Ltd., including Patent License Agreement * | |
Exhibit 4.4 | English language summary of Chinese language Syndicate Loan Agreement dated May 26, 2005, between Semiconductor Manufacturing International (Beijing) Corporation, Semiconductor Manufacturing International Corporation, as guarantor, and China Development Bank, China Construction Bank, Bank of China, Agricultural Bank of China, China Merchants Bank, HuaXia Bank, China Mingsheng Bank, Bank of Communications, Bank of Beijing, Industrial and Commercial Bank of China (Asia) and CITIC Ka Wah Bank* | |
Exhibit 4.5 | Form of Indemnification Agreement, as adopted at the Registrant’s annual general meeting of shareholders on May 6, 2005* | |
Exhibit 4.6 | English language summary of Chinese language Syndicate Loan Agreement dated May 31, 2006, between Semiconductor Manufacturing International (Tianjin) Corporation, Semiconductor Manufacturing International Corporation, as guarantor, and China Construction Bank, China Minsheng Bank, China Development Bank, Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of China, China Merchants Bank, China Bo Hai Bank, Bank of Communications and Bangkok Bank**** | |
Exhibit 4.7 | English language summary of Chinese language Syndicate Loan Agreement dated June 8, 2006, between Semiconductor Manufacturing International (Shanghai) Corporation, Semiconductor Manufacturing International Corporation, as guarantor, and ABN AMRO Bank N.V., Bank of China (Hong Kong) Limited, Bank of Communications, The Bank of Tokyo-Mitsubishi UFJ, Ltd., China Construction Bank, DBS Bank Ltd., Fubon Bank (Hong Kong) Limited, Industrial and Commercial Bank of China and Shanghai Pudong Development Bank.**** | |
Exhibit 8.1 | List of Subsidiaries ***** | |
Exhibit 12.1 | Certification of CEO under Section 302 of the U.S. Sarbanes-Oxley Act of 2002 | |
Exhibit 12.2 | Certification of Acting CFO under Section 302 of the U.S. Sarbanes-Oxley Act of 2002 | |
Exhibit 13.1 | Certification of CEO and Acting CFO under Section 906 of the U.S. Sarbanes-Oxley Act of 2002 | |
Exhibit 99.1 | Consent of Deloitte Touche Tohmatsu |
* | Previously filed as an exhibit to the Registrant’s Annual Report on Form 20F for the fiscal year ended December 31, 2004, filed June 28, 2005. | |
** | Previously filed as an exhibit to the Registrant’s Form F-1dated February 11, 2004. | |
*** | Previously filed as an exhibit to the Registrant’s Form F-1/A dated February 25, 2004. | |
**** | Previously filed as an exhibit to the Registrant’s Annual Report on Form 20F for the fiscal year ended December 31, 2005, filed June 28, 2006. | |
***** | Previously filed as an exhibit to the Registrant’s Annual Report on Form 20F for the fiscal year ended December 31,2007, filed June 27, 2008. |