Philips and TSNC have agreed to a multi-phased plan to facilitate an orderly exit by Philips from its current shareholding in TSMC as follows. Philips intends to sell in the near future up to USD 1.75 billion worth of TSMC shares to accommodate identified demand from long-term financial investors in Taiwan. To this end, an application has been filed today with the Taiwan Stock Exchange by Philips.

Then Philips intends to offer up to USD 2.5 billion worth of TSMC shares, in the form of American Depositary Shares, through a public offering in the United States without over-allotment option. The ADSs sold in this offering are expected to be listed on the New York Stock Exchange. This offering would follow a TSMC board resolution to approve the conversion of TSMC common shares into American Depository Shares on behalf of Philips. Each ADS represents five TSMC common shares. This transaction is subject to all regulatory approvals, including registration with the U.S. Securities and Exchange Commission, and is, subject to market conditions, expected to be completed in 2007. It is the current intention of TSMC and Philips that no further ADS offerings will be conducted in respect of Philips’ shareholding in TSMC.

The company TSMC plans to conduct a share repurchase via tender offer in 2007 on the Taiwan Stock Exchange to buy back up to approximately USD 1.5 billion worth of shares in TSMC, and cancel the repurchased shares, subject to TSMC board approval. Philips intends to participate in the share repurchase, and Philips’ representative on the TSMC Board of Directors today resigned as a director. Philips will no longer maintain any board position at TSMC.

Then TSMC intends to conduct additional share repurchase programs between 2008 and 2010, subject to maintaining its current annual cash dividend per share and cancel the repurchased shares. Philips intends to participate in these share repurchase programs with its remaining TSMC shares. Philips will also consider other sales to long-term financial investors mutually agreeable to Philips and TSMC. Philips currently owns 16.2% of TSMC share capital, with a current market valuation of approximately USD 8.5 billion.

Philips Chief Financial Officer Pierre-Jean Sivignon said. “For Philips, selling our stake in TSMC is a logical consequence of our decision to exit the semiconductor business, to which end we made a first, significant step in 2006 when we sold a majority stake in our semiconductor division.”