6-K 1 d772983d6k.htm FORM 6-K Form 6-K

1934 Act Registration No. 1-14700

 

 

 

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

 

FORM 6-K

 

 

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16

OF THE SECURITIES EXCHANGE ACT OF 1934

For the month of August 2014

 

 

Taiwan Semiconductor Manufacturing Company Ltd.

(Translation of Registrant’s Name Into English)

 

 

No. 8, Li-Hsin Rd. 6,

Hsinchu Science Park,

Taiwan

(Address of Principal Executive Offices)

 

 

(Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.)

Form 20-F  x            Form 40-F  ¨

(Indicate by check mark whether the registrant by furnishing the information contained in this form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.)

Yes  ¨            No   x

(If “Yes” is marked, indicated below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82:            .)

 

 

 


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

    Taiwan Semiconductor Manufacturing Company Ltd.
Date: August 19, 2014     By   

/s/ Lora Ho

      Lora Ho
      Senior Vice President & Chief Financial Officer


  

Taiwan Semiconductor Manufacturing

Company Limited and Subsidiaries

 

Consolidated Financial Statements for the

Six Months Ended June 30, 2014 and 2013 and

Independent Accountants’ Review Report

  


INDEPENDENT ACCOUNTANTS’ REVIEW REPORT

The Board of Directors and Shareholders

Taiwan Semiconductor Manufacturing Company Limited

We have reviewed the accompanying consolidated balance sheets of Taiwan Semiconductor Manufacturing Company Limited and subsidiaries as of June 30, 2014 and 2013 and the related consolidated statements of comprehensive income for the three months ended June 30, 2014 and 2013 and for the six months ended June 30, 2014 and 2013, as well as the consolidated statements of changes in equity and cash flows for the six months ended June 30, 2014 and 2013. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to issue a report on these consolidated financial statements based on our reviews.

We conducted our reviews in accordance with Statement on Auditing Standards No. 36, “Review of Financial Statements,” issued by the Auditing Standards Committee of the Accounting Research and Development Foundation of the Republic of China. A review consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the Republic of China, the objective of which is the expression of an opinion regarding the consolidated financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our reviews, we are not aware of any material modifications that should be made to the consolidated financial statements referred to above for them to be in conformity with the Guidelines Governing the Preparation of Financial Reports by Securities Issuers and International Accounting Standard 34, “Interim Financial Reporting,” endorsed by the Financial Supervisory Commission of the Republic of China.

 

 

August 12, 2014

Notice to Readers

The accompanying consolidated financial statements are intended only to present the consolidated financial position, results of operations and cash flows in accordance with accounting principles and practices generally accepted in the Republic of China and not those of any other jurisdictions. The standards, procedures and practices to review such consolidated financial statements are those generally accepted and applied in the Republic of China.

For the convenience of readers, the accountants’ review report and the accompanying consolidated financial statements have been translated into English from the original Chinese version prepared and used in the Republic of China. If there is any conflict between the English version and the original Chinese version or any difference in the interpretation of the two versions, the Chinese-language accountants’ review report and consolidated financial statements shall prevail.

 

- 1 -


Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED BALANCE SHEETS

(In Thousands of New Taiwan Dollars)

 

 

    June 30, 2014
(Reviewed)
  December 31, 2013
(Audited)
  June 30, 2013
(Reviewed)
ASSETS         Amount             %            Amount             %            Amount             %   

CURRENT ASSETS

                       

Cash and cash equivalents (Note 6)

    $ 255,053,573         19       $ 242,695,447         19       $ 225,832,646         20  

Financial assets at fair value through profit or loss (Note 7)

      158,265         -         90,353         -         20,010         -  

Available-for-sale financial assets (Note 8)

      59,082,482         4         760,793         -         1,070,537         -  

Held-to-maturity financial assets (Note 9)

      299,230         -         1,795,949         -         700,576         -  

Notes and accounts receivable, net (Note 11)

      86,424,428         7         71,649,926         6         79,742,708         7  

Receivables from related parties (Note 32)

      462,732         -         291,708         -         597,623         -  

Other receivables from related parties (Note 32)

      2,875,842         -         221,576         -         2,433,325         -  

Inventories (Note 12)

      50,954,265         4         37,494,893         3         38,614,928         3  

Other financial assets (Note 33)

      957,366         -         501,785         -         710,741         -  

Other current assets (Note 17)

      2,931,372         -         2,984,224         -         2,739,259         -  
   

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

Total current assets

      459,199,555         34         358,486,654         28         352,462,353         30  
   

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

NONCURRENT ASSETS

                       

Available-for-sale financial assets (Note 8)

      -         -         58,721,959         5         49,581,219         4  

Financial assets carried at cost (Note 13)

      2,017,528         -         2,145,591         -         3,667,697         1  

Investments accounted for using equity method (Note 14)

      26,355,811         2         28,316,260         2         25,012,840         2  

Property, plant and equipment (Note 15)

      837,167,426         63         792,665,913         63         715,595,036         61  

Intangible assets (Note 16)

      11,433,307         1         11,490,383         1         11,142,323         1  

Deferred income tax assets (Notes 4 and 27)

      5,009,457         -         7,239,609         1         8,667,948         1  

Refundable deposits (Note 32)

      2,476,534         -         2,519,031         -         2,412,290         -  

Other noncurrent assets (Note 17)

      1,385,149         -         1,469,577         -         1,343,748         -  
   

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

Total noncurrent assets

      885,845,212         66         904,568,323         72         817,423,101         70  
   

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

TOTAL

    $ 1,345,044,767         100       $ 1,263,054,977         100       $ 1,169,885,454         100  
   

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

LIABILITIES AND EQUITY

                       

CURRENT LIABILITIES

                       

Short-term loans (Note 18)

    $ 34,705,206         3       $ 15,645,000         1       $ 31,466,400         3  

Financial liabilities at fair value through profit or loss (Note 7)

      19,418         -         33,750         -         136,515         -  

Hedging derivative financial liabilities (Note 10)

      4,282,501         -         -         -         -         -  

Accounts payable

      20,015,515         1         14,670,260         1         14,391,539         1  

Payables to related parties (Note 32)

      1,681,781         -         1,688,456         -         811,195         -  

Salary and bonus payable

      7,806,935         1         8,330,956         1         7,135,399         1  

Accrued profit sharing to employees and bonus to directors and supervisors (Note 22)

      20,100,855         1         12,738,801         1         17,366,804         1  

Payables to contractors and equipment suppliers

      34,657,746         3         89,810,160         7         60,883,767         5  

Cash dividends payable (Note 22)

      77,785,851         6         -         -         77,773,307         7  

Income tax payable (Notes 4 and 27)

      17,585,111         1         22,563,286         2         11,125,990         1  

Provisions (Note 19)

      7,709,195         1         7,603,781         1         6,289,117         1  

Accrued expenses and other current liabilities (Note 21)

      20,284,963         1         16,693,484         1         16,251,434         1  
   

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

Total current liabilities

      246,635,077         18         189,777,934         15         243,631,467         21  
   

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

NONCURRENT LIABILITIES

                       

Hedging derivative financial liabilities (Note 10)

      1,277,058         -         5,481,616         -         1,813,291         -  

Bonds payable (Note 20)

      210,869,059         16         210,767,625         17         169,801,262         14  

Long-term bank loans

      40,000         -         40,000         -         -         -  

Other long-term payables (Note 21)

      18,000         -         36,000         -         36,000         -  

Obligations under finance leases

      745,391         -         776,230         -         760,186         -  

Accrued pension cost (Note 4)

      7,589,543         1         7,589,926         1         6,917,104         1  

Others (Note 19)

      910,345         -         810,561         -         689,873         -  
   

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

Total noncurrent liabilities

      221,449,396         17         225,501,958         18         180,017,716         15  
   

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

Total liabilities

      468,084,473         35         415,279,892         33         423,649,183         36  
   

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

EQUITY ATTRIBUTABLE TO SHAREHOLDERS OF THE PARENT

                       

Capital stock (Note 22)

      259,293,750         19         259,286,171         21         259,283,058         22  
   

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

Capital surplus (Note 22)

      56,026,837         4         55,858,626         4         55,828,587         5  
   

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

Retained earnings (Note 22)

                       

Appropriated as legal capital reserve

      151,250,682         11         132,436,003         11         132,436,003         11  

Appropriated as special capital reserve

      -         -         2,785,741         -         2,785,741         -  

Unappropriated earnings

      396,729,648         30         382,971,408         30         286,801,018         25  
   

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 
      547,980,330         41         518,193,152         41         422,022,762         36  
   

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

Others (Note 22)

      13,485,597         1         14,170,306         1         8,777,348         1  
   

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

Equity attributable to shareholders of the parent

      876,786,514         65         847,508,255         67         745,911,755         64  

NONCONTROLLING INTERESTS (Note 22)

      173,780         -         266,830         -         324,516         -  
   

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

Total equity

      876,960,294         65         847,775,085         67         746,236,271         64  
   

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

TOTAL

    $  1,345,044,767           100       $  1,263,054,977           100       $  1,169,885,454           100  
   

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

The accompanying notes are an integral part of the consolidated financial statements.

 

- 2 -


Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In Thousands of New Taiwan Dollars, Except Earnings Per Share)

(Reviewed, Not Audited)

 

 

            For the Three Months Ended June 30                    For the Six Months Ended June 30         
    2014   2013   2014   2013
            Amount             %               Amount             %               Amount             %               Amount             %    

NET REVENUE (Notes 24, 32 and 37)

    $   183,020,484           100       $   155,886,320           100       $   331,235,656           100       $   288,641,316           100  

COST OF REVENUE (Notes 12, 29 and 32)

      91,823,190         50         79,467,520         51         169,659,283         51         151,456,246         52  
   

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

GROSS PROFIT BEFORE REALIZED (UNREALIZED) GROSS PROFIT ON SALES TO ASSOCIATES

      91,197,294         50         76,418,800         49         161,576,373         49         137,185,070         48  

REALIZED (UNREALIZED) GROSS PROFIT ON SALES TO ASSOCIATES

      (4,369 )       -         3,386         -         16,648         -         6,926         -  
   

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

GROSS PROFIT

      91,192,925         50         76,422,186         49         161,593,021         49         137,191,996         48  
   

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

OPERATING EXPENSES (Notes 29 and 32)

                               

Research and development

      13,609,070         7         11,941,871         8         25,675,692         8         22,592,856         8  

General and administrative

      5,407,864         3         5,685,570         3         10,063,535         3         10,381,090         4  

Marketing

      1,234,821         1         1,164,693         1         2,387,523         1         2,194,492         1  
   

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

Total operating expenses

      20,251,755         11         18,792,134         12         38,126,750         12         35,168,438         13  
   

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

OTHER OPERATING INCOME AND EXPENSES, NET (Notes 15 and 29)

      (227,251 )       -         (970 )       -         (229,992 )       -         33,533         -  
   

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

INCOME FROM OPERATIONS (Note 37)

      70,713,919         39         57,629,082         37         123,236,279         37         102,057,091         35  
   

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

NON-OPERATING INCOME AND EXPENSES

                               

Share of profits of associates and joint venture

      1,047,626         -         1,059,504         1         2,003,006         -         1,713,657         1  

Other income

      1,316,583         1         1,009,064         1         1,930,282         -         1,355,385         1  

Foreign exchange gain (loss), net

      (355,207 )       -         640,998         -         (391,608 )       -         448,084         -  

Finance costs (Note 25)

      (801,450 )       -         (635,340 )       (1 )       (1,598,030 )       -         (1,129,338 )       -  

Other gains and losses (Note 26)

      2,176,649         1         313,371         -         2,220,033         1         1,319,714         -  
   

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

Total non-operating income and expenses

      3,384,201         2         2,387,597         1         4,163,683         1         3,707,502         2  
   

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

INCOME BEFORE INCOME TAX

      74,098,120         41         60,016,679         38         127,399,962         38         105,764,593         37  

INCOME TAX EXPENSE (Notes 4 and 27)

      14,438,263         8         8,255,176         5         19,894,327         6         14,467,547         5  
   

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

NET INCOME

      59,659,857         33         51,761,503         33         107,505,635         32         91,297,046         32  
   

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

OTHER COMPREHENSIVE INCOME (LOSS) (Notes 22 and 27)

                               

Exchange differences arising on translation of foreign operations

      (3,052,142 )       (2 )       1,172,141         1         (220,761 )       -         4,075,894         1  

Changes in fair value of available-for-sale financial assets

      (31,156 )       -         4,669,793         3         (446,601 )       -         7,495,485         3  

Share of other comprehensive income (loss) of associates and joint venture

      (1,274 )       -         (191,994 )       -         (6,021 )       -         (56,871 )       -  

Income tax benefit (expense) related to components of other comprehensive income

      (14,079 )       -         (29 )       -         (11,123 )       -         43,210         -  
   

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

Other comprehensive income (loss) for the period, net of income tax

      (3,098,651 )       (2 )       5,649,911         4         (684,506 )       -         11,557,718         4  
   

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

TOTAL COMPREHENSIVE INCOME FOR THE PERIOD

    $ 56,561,206         31       $ 57,411,414         37       $ 106,821,129         32       $ 102,854,764         36  
   

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

NET INCOME (LOSS) ATTRIBUTABLE TO:

                               

Shareholders of the parent

    $ 59,702,284         33       $ 51,807,725         33       $ 107,573,029         32       $ 91,384,601         32  

Noncontrolling interests

      (42,427 )       -         (46,222 )       -         (67,394 )       -         (87,555 )       -  
   

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 
    $ 59,659,857         33       $ 51,761,503         33       $ 107,505,635         32       $ 91,297,046         32  
   

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

TOTAL COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO:

                               

Shareholders of the parent

    $ 56,604,654         31       $ 57,487,048         37       $ 106,888,320         32       $ 102,942,434         36  

Noncontrolling interests

      (43,448 )       -         (75,634 )       -         (67,191 )       -         (87,670 )       -  
   

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 
    $ 56,561,206         31       $ 57,411,414         37       $ 106,821,129         32       $ 102,854,764         36  
   

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

 

    For the Three Months Ended June 30   For the Six Months Ended June 30
    2014   2013   2014   2013
   

    Income Attributable to    
Shareholders of

the Parent

 

    Income Attributable to    
Shareholders of

the Parent

 

    Income Attributable to    
Shareholders of

the Parent

 

    Income Attributable to    

Shareholders of

the Parent

EARNINGS PER SHARE (NT$, Note 28)

               

Basic earnings per share

    $       2.30       $       2.00       $       4.15       $       3.52  
   

 

 

     

 

 

     

 

 

     

 

 

 

Diluted earnings per share

    $       2.30       $       2.00       $       4.15       $       3.52  
   

 

 

     

 

 

     

 

 

     

 

 

 

The accompanying notes are an integral part of the consolidated financial statements.

 

- 3 -


Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(In Thousands of New Taiwan Dollars, Except Dividends Per Share)

(Reviewed, Not Audited)

 

 

    Equity Attributable to Shareholders of the Parent        
                                Others            
    Capital Stock - Common
Stock
     

 

Retained Earnings

 

Foreign

Currency

Translation
Reserve

 

Unrealized
Gain/Loss

from
Available-

for-sale
Financial
Assets

 

Cash
Flow
Hedges
Reserve

               
   

Shares

(In
Thousands)

  Amount   Capital
Surplus
 

Legal

Capital
Reserve

  Special
Capital
Reserve
  Unappropriated
Earnings
  Total         Total   Total   Noncontrolling
Interests
 

Total

Equity

BALANCE, JANUARY 1, 2014

      25,928,617       $ 259,286,171       $ 55,858,626       $ 132,436,003       $ 2,785,741       $ 382,971,408       $ 518,193,152       $ (7,140,362 )     $ 21,310,781       $  (113 )     $  14,170,306       $ 847,508,255       $ 266,830       $ 847,775,085  

Appropriations of prior year’s earnings

                                                       

Legal capital reserve

      -         -         -         18,814,679         -         (18,814,679 )       -         -         -         -         -         -         -         -  

Reversal of special capital reserve

      -         -         -         -         (2,785,741 )       2,785,741         -         -         -         -         -         -         -         -  

Cash dividends to shareholders - NT$3.00 per share

      -         -         -         -         -         (77,785,851 )       (77,785,851 )       -         -         -         -         (77,785,851 )       -         (77,785,851 )
   

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

Total

      -         -         -         18,814,679         (2,785,741 )       (93,814,789 )       (77,785,851 )       -         -         -         -         (77,785,851 )       -         (77,785,851 )
   

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

Net income for the six months ended June 30, 2014

      -         -         -         -         -         107,573,029         107,573,029         -         -         -         -         107,573,029         (67,394 )       107,505,635  

Other comprehensive income for the six months ended June 30, 2014, net of income tax

      -         -         -         -         -         -         -         (223,663 )       (461,136 )       90         (684,709 )       (684,709 )       203         (684,506 )
   

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

Total comprehensive income for the six months ended June 30, 2014

      -         -         -         -         -         107,573,029         107,573,029         (223,663 )       (461,136 )       90         (684,709 )       106,888,320         (67,191 )       106,821,129  
   

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

Issuance of stock from exercise of employee stock options

      758         7,579         25,908         -         -         -         -         -         -         -         -         33,487         -         33,487  

Disposal of investments accounted for using equity method

      -         -         (2,273 )       -         -         -         -         -         -         -         -         (2,273 )       -         (2,273 )

Adjustments to share of changes in equity of associates and joint venture

      -         -         164,310         -         -         -         -         -         -         -         -         164,310         (66 )       164,244  

From share of changes in equities of subsidiaries

      -         -         (19,734 )       -         -         -         -         -         -         -         -         (19,734 )       19,734         -  

Decrease in noncontrolling interests

      -         -         -         -         -         -         -         -         -         -         -         -         (45,527 )       (45,527 )
   

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

BALANCE, JUNE 30, 2014

      25,929,375       $ 259,293,750       $ 56,026,837       $ 151,250,682       $ -       $ 396,729,648       $ 547,980,330       $ (7,364,025 )     $ 20,849,645       $ (23 )     $  13,485,597       $ 876,786,514       $ 173,780       $ 876,960,294  
   

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

BALANCE, JANUARY 1, 2013

      25,924,435       $ 259,244,357       $ 55,675,340       $ 115,820,123       $ 7,606,224       $ 284,985,121       $ 408,411,468       $  (10,753,806 )     $ 7,973,321       $ -       $ (2,780,485 )     $ 720,550,680       $ 2,543,226       $ 723,093,906  

Appropriations of prior year’s earnings

                                                       

Legal capital reserve

      -         -         -         16,615,880         -         (16,615,880 )       -         -         -         -         -         -         -         -  

Reversal of special capital reserve

      -         -         -         -         (4,820,483 )       4,820,483         -         -         -         -         -         -         -         -  

Cash dividends to shareholders - NT$3.00 per share

      -         -         -         -         -         (77,773,307 )       (77,773,307 )       -         -         -         -         (77,773,307 )       -         (77,773,307 )
   

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

Total

      -         -         -         16,615,880         (4,820,483 )       (89,568,704 )       (77,773,307 )       -         -         -         -         (77,773,307 )       -         (77,773,307 )
   

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

Net income for the six months ended June 30, 2013

      -         -         -         -         -         91,384,601         91,384,601         -         -         -         -         91,384,601         (87,555 )       91,297,046  

Other comprehensive income for the six months ended June 30, 2013, net of income tax

      -         -         -         -         -         -         -         4,017,456         7,540,377         -         11,557,833         11,557,833         (115 )       11,557,718  
   

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

Total comprehensive income for the six months ended June 30, 2013

      -         -         -         -         -         91,384,601         91,384,601         4,017,456         7,540,377         -         11,557,833         102,942,434         (87,670 )       102,854,764  
   

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

Issuance of stock from exercise of employee stock options

      3,870         38,701         71,474         -         -         -         -         -         -         -         -         110,175         -         110,175  

Stock option compensation cost of subsidiary

      -         -         -         -         -         -         -         -         -         -         -         -         5,312         5,312  

Adjustments to share of changes in equity of associates and joint venture

      -         -         14,845         -         -         -         -         -         -         -         -         14,845         -         14,845  

Adjustments arising from changes in percentage of ownership in subsidiaries

      -         -         66,928         -         -         -         -         -         -         -         -         66,928         (66,928 )       -  

Increase in noncontrolling interests

      -         -         -         -         -         -         -         -         -         -         -         -         203,729         203,729  

Effect of deconsolidation of subsidiary

      -         -         -         -         -         -         -         -         -         -         -         -         (2,273,153 )       (2,273,153 )
   

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

BALANCE, JUNE 30, 2013

      25,928,305       $  259,283,058       $  55,828,587       $  132,436,003       $  2,785,741       $  286,801,018       $  422,022,762       $  (6,736,350 )     $  15,513,698       $ -       $  8,777,348       $  745,911,755       $ 324,516       $  746,236,271  
   

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

The accompanying notes are an integral part of the consolidated financial statements.

 

- 4 -


Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands of New Taiwan Dollars)

(Reviewed, Not Audited)

 

 

     Six Months Ended June 30   
    2014     2013  

CASH FLOWS FROM OPERATING ACTIVITIES

   

Income before income tax

  $   127,399,962      $   105,764,593   

Adjustments for:

   

Depreciation expense

    86,338,443        73,519,241   

Amortization expense

    1,263,048        1,071,590   

Stock option compensation cost of subsidiary

    -        5,312   

Finance costs

    1,598,030        1,129,338   

Share of profits of associates and joint venture

    (2,003,006     (1,713,657

Interest income

    (1,292,325     (852,693

Gain on disposal of property, plant and equipment and intangible assets, net

    (15,325     (29,365

Impairment loss of property, plant and equipment

    239,864        -   

Impairment loss of financial assets

    -        45,716   

Gain on disposal of available-for-sale financial assets, net

    (134,020     (990,713

Gain on disposal of financial assets carried at cost, net

    (52,694     (4,573

Loss (gain) on disposal of investments accounted for using equity method

    (2,028,643     731   

Gain on deconsolidation of subsidiary

    -        (293,578

Realized gross profit on sales to associates

    (16,648     (6,926

Loss on foreign exchange, net

    1,646,248        446,110   

Dividend income

    (637,957     (502,692

Income from receipt of equity securities in settlement of trade receivables

    (1,211     (9,590

Loss from hedging instruments

    589,243        1,937,366   

Gain arising from changes in fair value of available-for-sale financial assets in hedge effective portion

    (78,109     (1,657,824

Changes in operating assets and liabilities:

   

Derivative financial instruments

    (82,244     140,919   

Notes and accounts receivable, net

    (14,774,504     (22,223,842

Receivables from related parties

    (171,024     (510,193

Other receivables from related parties

    13,258        (19,275

Inventories

    (13,459,372     (997,563

Other financial assets

    (389,931     (64,259

Other current assets

    70,323        (90,235

Accounts payable

    5,331,172        281,081   

Payables to related parties

    (6,675     (27,167

Salary and bonus payable

    (524,021     (311,632

Accrued profit sharing to employees and bonus to directors and supervisors

    7,362,054        6,180,213   

Accrued expenses and other current liabilities

    2,915,319        2,647,510   

Provisions

    113,564        280,544   

Accrued pension cost

    (383     (1,194
 

 

 

   

 

 

 

 

(Continued)

 

- 5 -


Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands of New Taiwan Dollars)

(Reviewed, Not Audited)

 

 

    Six Months Ended June 30  
    2014     2013  

Cash generated from operations

  $ 199,212,436      $ 163,143,293   

Income taxes paid

    (22,602,632     (14,334,965
 

 

 

   

 

 

 

Net cash generated by operating activities

    176,609,804        148,808,328   
 

 

 

   

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES

   

Acquisitions of:

   

Available-for-sale financial assets

    (91,592     (10,102

Financial assets carried at cost

    (3,773     (16,616

Held-to-maturity financial assets

    (1,396,723     -   

Property, plant and equipment

    (188,233,322     (158,818,884

Intangible assets

    (1,204,154     (1,477,481

Other assets

    -        (30,721

Proceeds from disposal or redemption of:

   

Available-for-sale financial assets

    473,520        2,032,100   

Held-to-maturity financial assets

    2,900,000        4,445,850   

Financial assets carried at cost

    62,445        11,696   

Investments accounted for using equity method

    3,471,883        -   

Property, plant and equipment

    114,987        111,008   

Cash refund from other long-term receivables

    161,900        -   

Costs from entering into hedging transactions

    (520,856     (143,982

Interest received

    1,248,110        689,878   

Other dividends received

    629,843        493,557   

Refundable deposits paid

    (25,460     (23,124

Refundable deposits refunded

    59,041        52,333   

Net cash outflow from deconsolidation of subsidiary (Note 30)

    -        (979,910
 

 

 

   

 

 

 

Net cash used in investing activities

    (182,354,151     (153,664,398
 

 

 

   

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

   

Increase (decrease) in short-term loans

    19,220,278        (4,087,493

Proceeds from issuance of bonds

    -        89,644,821   

Increase in long-term bank loans

    -        650,000   

Repayment of long-term bank loans

    -        (62,500

Interest paid

    (889,467     (374,202

Guarantee deposits received

    10,374        12,114   

Guarantee deposits refunded

    (3,742     (53,881

Decrease in obligations under finance leases

    (28,426     (27,796

Proceeds from exercise of employee stock options

    33,487        110,175   

Increase (decrease) in noncontrolling interests

    (45,527     217,860   
 

 

 

   

 

 

 

Net cash generated by financing activities

    18,296,977        86,029,098   
 

 

 

   

 

 

 

 

(Continued)

 

- 6 -


Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands of New Taiwan Dollars)

(Reviewed, Not Audited)

 

 

    Six Months Ended June 30  
    2014     2013  

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS

  $ (194,504   $ 1,249,030   
 

 

 

   

 

 

 

NET INCREASE IN CASH AND CASH EQUIVALENTS

    12,358,126        82,422,058   

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

    242,695,447        143,410,588   
 

 

 

   

 

 

 

CASH AND CASH EQUIVALENTS, END OF PERIOD

  $   255,053,573      $   225,832,646   
 

 

 

   

 

 

 

 

The accompanying notes are an integral part of the consolidated financial statements.

   (Concluded)

 

- 7 -


Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED June 30, 2014 and 2013

(Amounts in Thousands of New Taiwan Dollars, Unless Specified Otherwise)

(Reviewed, Not Audited)

 

 

  1. GENERAL

Taiwan Semiconductor Manufacturing Company Limited (TSMC), a Republic of China (R.O.C.) corporation, was incorporated on February 21, 1987. TSMC is a dedicated foundry in the semiconductor industry which engages mainly in the manufacturing, selling, packaging, testing and computer-aided design of integrated circuits and other semiconductor devices and the manufacturing of masks.

On September 5, 1994, TSMC’s shares were listed on the Taiwan Stock Exchange (TWSE). On October 8, 1997, TSMC listed some of its shares of stock on the New York Stock Exchange (NYSE) in the form of American Depositary Shares (ADSs).

The address of its registered office and principal place of business is No. 8, Li-Hsin Rd. 6, Hsinchu Science Park, Taiwan. The principal operating activities and operating segments information of TSMC and its subsidiaries (collectively as the “Company”) are described in Notes 4 and 37.

 

  2. THE AUTHORIZATION OF FINANCIAL STATEMENTS

The accompanying consolidated financial statements were reported to the Board of Directors and issued on August 12, 2014.

 

  3. APPLICATION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS

As of the date that the accompanying consolidated financial statements were issued, the Company has not applied the following International Financial Reporting Standards, International Accounting Standards (IASs), Interpretations of International Financial Reporting Standards (IFRIC), and Interpretations of IAS (SIC) issued by the International Accounting Standards Board (IASB) (collectively, “IFRSs”).

 

  a.

The 2013 IFRSs version in issue but not yet effective

On April 3, 2014, according to Rule No. 1030010325 issued by the Financial Supervisory Commission (FSC), the following 2013 IFRSs version endorsed by the FSC (collectively, “2013 Taiwan-IFRSs version”) should be adopted by the Company starting 2015.

 

New, Revised or Amended Standards and Interpretations

 

     Effective Date Issued     

by IASB (Note)

Amendments to IFRSs Improvements to IFRSs 2009 - Amendment to IAS 39

 

January 1, 2009 or January 1, 2010

Amendment to IAS 39 Embedded Derivatives

 

Effective in fiscal year ended on or after June 30, 2009

 

(Continued)

 

- 8 -


New, Revised or Amended Standards and Interpretations

 

     Effective Date Issued     

by IASB (Note)

Improvements to IFRSs 2010

 

July 1, 2010 or January 1, 2011

Annual Improvements to IFRSs 2009 - 2011 Cycle

 

January 1, 2013

Amendments to IFRS 1 Limited Exemption from Comparative IFRS 7 Disclosures for First - time Adopters

 

July 1, 2010

Amendment to IFRS 7 Disclosures - offsetting Financial Assets and Financial Liabilities

 

January 1, 2013

Amendment to IFRS 7 Disclosures - Transfers of Financial Assets

 

July 1, 2011

IFRS 10 Consolidated Financial Statements

 

January 1, 2013

IFRS 11 Joint Arrangements

 

January 1, 2013

IFRS 12 Disclosure of Interests in Other Entities

 

January 1, 2013

Amendments to IFRS 10, IFRS 11 and IFRS 12 Consolidated financial Statements, Joint Arrangements, and Disclosure of Interests in Other Entities: Transition Guidance

 

January 1, 2013

Amendments to IFRS 10, IFRS 12 and IAS 27 Investment Entities

 

January 1, 2014

IFRS 13 Fair Value Measurement

 

January 1, 2013

Amendment to IAS 1 Presentation of Items of Other Comprehensive Income

 

July 1, 2012

Amendment to IAS 12 Deferred Tax: Recovery of Underlying Assets

 

January 1, 2012

Amendment to IAS 19 Employee Benefits

 

January 1, 2013

Amendment to IAS 27 Separate Financial Statements

 

January 1, 2013

Amendment to IAS 28 Investments in Associates and Joint Ventures

 

January 1, 2013

Amendment to IAS 32 Offsetting of Financial Assets and Financial Liabilities

 

January 1, 2014

(Concluded)

 

  Note:

The aforementioned new, revised or amended standards or interpretations are effective after fiscal year beginning on or after the effective dates, unless specified otherwise.

Except for the following items, the Company believes that the adoption of aforementioned 2013 Taiwan-IFRSs version will not have a significant effect on the Company’s consolidated financial statements.

 

  1)

IFRS 12, “Disclosure of Interests in Other Entities”

IFRS 12 is a standard that requires a broader disclosure in an entity’s interests in subsidiaries, joint arrangements, associates and unconsolidated entities. The objective of IFRS 12 is to specify the disclosure information provided by the entity that enables the users of financial statements in evaluating the nature of, and risks associated with, its interests in other entities and the effects of those interests on the entity’s financial assets and liabilities, as well as the involvement of the owners of noncontrolling interests towards the entity. The Company expects the application of IFRS 12 will result in more extensive disclosures of interests in other entities in the financial statements.

 

  2)

IFRS 13, “Fair Value Measurement”

IFRS 13 establishes a single source of guidance for fair value measurements and disclosures about fair value measurements. It defines fair value, establishes a framework for measuring fair value, and requires disclosures about fair value measurements. The disclosure requirements in IFRS 13 are more extensive than those required in the current standards. For example, quantitative and qualitative disclosures based on the three-level fair value hierarchy currently required for financial instruments only will be extended by IFRS 13 to cover all assets and liabilities within its scope.

The measurement requirements of IFRS 13 shall be applied prospectively starting 2015.

 

- 9 -


  3)

Amendments to IAS 1, “Presentation of Items of Other Comprehensive Income”

According to the amendments to IAS 1, the items of other comprehensive income will be grouped into two categories: (a) items that will not be reclassified subsequently to profit or loss; and (b) items that will be reclassified subsequently to profit or loss when specific conditions are met. In addition, income tax on items of other comprehensive income is also required to be allocated on the same basis. The aforementioned allocation basis will not be strictly enforced prior to the adoption of amendments.

Starting 2015, the Company will adopt the aforementioned amendments to prepare the consolidated statements of comprehensive income. The items that will not be reclassified subsequently to profit or loss are expected to include actuarial gains or losses from defined benefit plans, the share of actuarial gains or losses from defined benefit plans of associates and joint venture as well as the related income tax on such items. Items that will be reclassified subsequently to profit or loss are expected to include exchange differences arising on translation of foreign operations, changes in fair value of available-for-sale financial assets, cash flow hedges, the share of other comprehensive income of associates and joint venture as well as the related income tax on items of other comprehensive income (except for the share of actuarial gains or losses from defined benefit plans).

 

  4)

Amendments to IAS 19, “Employee Benefits”

The amendments to IAS 19 require the Company to calculate a “net interest” amount by applying the discount rate to the net defined benefit liability or asset to replace the interest cost and expected return on planned assets used in current IAS 19. In addition, the amendments eliminate the accounting treatment of either corridor approach or the immediate recognition of actuarial gains and losses to profit or loss when it incurs, and instead, required to recognize all actuarial gains and losses immediately through other comprehensive income. The past service cost, on the other hand, will be expensed immediately when it incurs and no longer be amortized over the average period before vested on a straight-line basis. In addition, the amendments also require a broader disclosure in defined benefit plans.

According to the retrospective application of aforementioned amendments, as of June 30, 2014 and January 1, 2014, the primary impacts on the Company include the adjustment in accrued pension cost for a decrease of NT$779,136 thousand and NT$788,263 thousand, respectively, and the adjustment in retained earnings for an increase of NT$691,572 thousand and NT$698,762 thousand, respectively.

 

  b.

The IFRSs issued by IASB but not endorsed by FSC

The Company has not applied the following IFRSs issued by the IASB but not endorsed by the FSC. As of the date that the consolidated financial statements were issued, the initial adoption to the following standards and interpretations is still subject to the effective date to be published by the FSC.

 

New, Revised or Amended Standards and Interpretations

 

     Effective Date Issued     

by IASB (Note)

Annual Improvements to IFRSs 2010 - 2012 Cycle

 

July 1, 2014 or transactions on or after July 1, 2014

Annual Improvements to IFRSs 2011 - 2013 Cycle

 

July 1, 2014

IFRS 9 Financial Instruments

 

January 1, 2018

Amendments to IFRS 9 and IFRS 7 Mandatory Effective Date of IFRS 9 and Transition Disclosure

 

January 1, 2018

Amendment to IFRS 11 Accounting for Acquisitions of Interests in Joint Operations

 

January 1, 2016

IFRS 15 Revenue from Contracts with Customers

 

January 1, 2017

 

(Continued)

 

- 10 -


New, Revised or Amended Standards and Interpretations

 

     Effective Date Issued     

by IASB (Note)

Amendments to IAS 16 and IAS 38: Clarification of Acceptable Methods of Depreciation and Amortization

 

January 1, 2016

Amendment to IAS 19 Defined Benefit Plans: Employee Contributions

 

July 1, 2014

Amendment to IAS 36: Recoverable Amount Disclosures for Non-Financial Assets

 

January 1, 2014

Amendment to IAS 39 Novation of Derivatives and Continuation of Hedge Accounting

 

January 1, 2014

(Concluded)

 

  Note:

The aforementioned new, revised or amended standards or interpretations are effective after fiscal year beginning on or after the effective dates, unless specified otherwise.

Except for the following, the initial application of the above new standards and interpretations has not had any material impact on the Company’s accounting policies:

 

  1)

IFRS 9, “Financial Instruments”

All recognized financial assets currently in the scope of IAS 39, “Financial Instruments: Recognition and Measurement,” will be subsequently measured at either the amortized cost or the fair value. The classification and measurement requirements in IFRS 9 are stated as follows:

For the debt instruments invested by the Company, if the contractual cash flows that are solely for payments of principal and interest on the principal amount outstanding, the classification and measurement requirements are stated as follows:

 

  a)

If the objective of the Company’s business model is to hold the financial asset to collect the contractual cash flows, such assets are measured at the amortized cost. Interest revenue should be recognized in profit or loss by using the effective interest method, continuously assessed for impairment and the impairment loss should be recognized in profit and loss.

 

  b)

If the objective of the Company’s business model is to hold the financial asset both to collect the contractual cash flows and to sell the financial assets, such assets are measured at fair value through other comprehensive income. Interest revenue should be recognized in profit or loss by using the effective interest method, continuously assessed for impairment. A gain or loss on a financial asset measured at fair value through other comprehensive income should be recognized in other comprehensive income, except for impairment gains or losses and foreign exchange gains and losses.

The other financial assets which do not meet the aforementioned criteria should be measured at the fair value through profit or loss. However, the Company may irrevocably designate an investment in equity instruments that is not held for trading as measured at fair value through other comprehensive income. All relevant gains and losses shall be recognized in other comprehensive income, except for dividends which are recognized in profit or loss. No subsequent impairment assessment is required.

IFRS 9 adds a new expected loss impairment model to measure the impairment of financial assets. A loss allowance for expected credit losses should be recognized on financial assets measured at amortized cost and financial assets mandatorily measured at fair value through other comprehensive income. If the credit risk on a financial instrument has not increased significantly since initial recognition, the Company should measure the loss allowance for that financial instrument at an amount equal to 12-month expected credit losses. If the credit risk on a financial instrument has increased significantly since initial recognition, the Company should measure the loss allowance for that financial instrument at an amount equal to the lifetime expected credit losses. The Company should always measure the loss allowance at an amount equal to lifetime expected credit losses for trade receivables.

 

- 11 -


The main change in IFRS 9 is the increase of the eligibility of hedge accounting. It allows reporters to reflect risk management activities in the financial statements more closely as it provides more opportunities to apply hedge accounting. A fundamental difference to IAS 39 is that IFRS 9 (a) increases the scope of hedged items eligible for hedge accounting. For example, the risk components of non-financial items may be designated as hedging accounting; (b) revises a new way to account for the gain or loss recognition arising from hedging derivative financial instruments, which results in a less volatility in profit or loss; and (c) is necessary for there to be an economic relationship between the hedged item and hedging instrument instead of performing the retrospective hedge effectiveness testing.

 

  2)

IFRS 15, “Revenue from Contracts with Customers”

IFRS 15 establishes principles for recognizing revenue that apply to all contracts with customers, and will supersedes IAS 18, “Revenue,” IAS 11, “Construction Contracts,” and a number of revenue-related interpretations.

When applying IFRS 15, the Company shall recognize revenue by applying the following steps:

 

   

Identify the contract with the customer;

   

Identify the performance obligations in the contract;

   

Determine the transaction price;

   

Allocate the transaction price to the performance obligations in the contracts; and

   

Recognize revenue when the entity satisfies a performance obligation.

When IFRS 15 is effective, the Company may elect to apply this Standard either retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying this Standard recognized at the date of initial application.

 

  3)

Amendments to IAS 36, “Recoverable Amount Disclosures for Non-Financial Assets”

The amendments to IAS 36 clarify that the Company is only required to disclose the recoverable amount in the period of impairment accrual or reversal. Moreover, if the recoverable amount of impaired assets is based on fair value less costs of disposal, the Company should also disclose the discount rate used. The Company expects the aforementioned amendments will result in a broader disclosure of recoverable amount for non-financial assets.

Except for the aforementioned impact, as of the date that the accompanying consolidated financial statements were reported for issue, the Company continues in evaluating the impact on its financial position and financial performance as a result of the initial adoption of the other standards or interpretations. The related impact will be disclosed when the Company completes the evaluation.

 

  4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Except for the following, the accounting policies applied in these consolidated financial statements are consistent with those applied in the consolidated financial statements for the year ended December 31, 2013.

 

- 12 -


For the convenience of readers, the accompanying consolidated financial statements have been translated into English from the original Chinese version prepared and used in the R.O.C. If there is any conflict between the English version and the original Chinese version or any difference in the interpretation of the two versions, the Chinese-language consolidated financial statements shall prevail.

Statement of Compliance

The accompanying consolidated financial statements have been prepared in conformity with the Guidelines Governing the Preparation of Financial Reports by Securities Issuers and IAS 34, “Interim Financial Reporting,” endorsed by the FSC. The consolidated financial statements do not present all the disclosures required for a complete set of annual consolidated financial statements prepared under Taiwan-IFRSs.

Basis of Consolidation

The basis for the consolidated financial statements

The basis for the consolidated financial statements applied in these consolidated financial statements is consistent with those applied in the consolidated financial statements for the year ended December 31, 2013.

The subsidiaries in the consolidated financial statements

The detail information of the subsidiaries at the end of reporting period was as follows:

 

            Establishment   Percentage of Ownership      
Name of Investor   Name of Investee       Main Businesses and Products  

and Operating

Location

 

    June 30,

2014

    December 31,
2013
   

June 30,    

2013    

    Note

TSMC

 

TSMC North America

 

Selling and marketing of integrated circuits and semiconductor devices

 

San Jose, California, U.S.A.

    100%            100%               100%            -
 

TSMC Japan Limited (TSMC Japan)

 

Marketing activities

 

Yokohama, Japan

    100%            100%               100%            a)
 

TSMC Partners, Ltd. (TSMC Partners)

 

Investing in companies involved in the design, manufacture, and other related business in the semiconductor industry

 

Tortola, British Virgin Islands

    100%            100%               100%            -
 

TSMC Korea Limited (TSMC Korea)

 

Customer service and technical supporting activities

 

Seoul, Korea

    100%            100%               100%            a)
 

TSMC Europe B.V. (TSMC Europe)

 

Marketing and engineering supporting activities

 

Amsterdam, the Netherlands

    100%            100%               100%            a)
 

TSMC Global, Ltd. (TSMC Global)

 

Investment activities

 

Tortola, British Virgin Islands

    100%            100%               100%            -
 

TSMC China Company Limited (TSMC China)

 

Manufacturing and selling of integrated circuits at the order of and pursuant to product design specifications provided by customers

 

Shanghai, China

    100%            100%               100%            -
 

VentureTech Alliance Fund III, L.P. (VTAF III)

 

Investing in new start-up technology companies

 

Cayman Islands

    98%            50%               50%            b)
 

VentureTech Alliance Fund II, L.P. (VTAF II)

 

Investing in new start-up technology companies

 

Cayman Islands

    98%            98%               98%            -
 

Emerging Alliance Fund, L.P. (Emerging Alliance)

 

Investing in new start-up technology companies

 

Cayman Islands

    99.5%            99.5%               99.5%            a)
 

TSMC Solid State Lighting Ltd. (TSMC SSL)

 

Engaged in researching, developing, designing, manufacturing and selling solid state lighting devices and related applications products and systems

 

Hsin-Chu, Taiwan

    92%            92%               92%           

TSMC and TSMC GN aggregately have a controlling interest of 94% in TSMC SSL.

 

TSMC Solar Ltd. (TSMC Solar)

 

Engaged in researching, developing, designing, manufacturing and selling renewable energy and saving related technologies and products

 

Tai-Chung, Taiwan

    99%            99%               99%           

TSMC and TSMC GN aggregately have a controlling interest of 99% in TSMC Solar.

 

TSMC Guang Neng Investment, Ltd. (TSMC GN)

 

Investment activities

 

Taipei, Taiwan

    100%            100%               100%            a)

TSMC Partners

 

TSMC Design Technology Canada Inc. (TSMC Canada)

 

Engineering support activities

 

Ontario, Canada

    100%            100%               100%            a)
 

TSMC Technology, Inc. (TSMC Technology)

 

Engineering support activities

 

Delaware, U.S.A.

    100%            100%               100%            a)
 

TSMC Development, Inc. (TSMC Development)

 

Investment activities

 

Delaware, U.S.A.

    100%            100%               100%            -

 

(Continued)

 

- 13 -


            Establishment   Percentage of Ownership      
Name of Investor   Name of Investee       Main Businesses and Products  

and Operating

Location

 

    June 30,

2014

    December 31,
2013
   

June 30,    

2013    

    Note

TSMC Partners

 

InveStar Semiconductor Development Fund, Inc. (ISDF)

 

Investing in new start-up technology companies

 

Cayman Islands

    97%            97%              97%            a)
 

InveStar Semiconductor Development Fund, Inc. (II) LDC. (ISDF II)

 

Investing in new start-up technology companies

 

Cayman Islands

    97%            97%              97%            a)

TSMC Development

 

WaferTech, LLC (WaferTech)

 

Manufacturing, selling, testing and computer-aided designing of integrated circuits and other semiconductor devices

 

Washington, U.S.A.

    100%            100%              100%            -

VTAF III

 

Mutual-Pak Technology Co., Ltd. (Mutual-Pak)

 

Manufacturing and selling of electronic parts and researching, developing, and testing of RFID

 

Taipei, Taiwan

    58%            58%              58%            a)
 

Growth Fund Limited (Growth Fund)

 

Investing in new start-up technology companies

 

Cayman Islands

    100%            100%              100%            a)

VTAF III, VTAF II and Emerging Alliance

 

VentureTech Alliance Holdings, LLC (VTA Holdings)

 

Investing in new start-up technology companies

 

Delaware, U.S.A.

    100%            100%              100%            a)

TSMC SSL

 

TSMC Lighting North America, Inc. (TSMC Lighting NA)

 

Selling and marketing of solid state lighting related products

 

Delaware, U.S.A.

    100%            100%              100%            a), c)

TSMC Solar

 

TSMC Solar North America, Inc. (TSMC Solar NA)

 

Selling and marketing of solar related products

 

Delaware, U.S.A.

    100%            100%              100%            a)
 

TSMC Solar Europe B.V. (TSMC Solar Europe)

 

Investing in solar related business

 

Amsterdam, the Netherlands

    100%            100%              100%            a), d)
 

VentureTech Alliance Fund III, L.P. (VTAF III)

 

Investing in new start-up technology companies

 

Cayman Islands

    -            49%              49%            b)

TSMC Solar Europe

 

TSMC Solar Europe GmbH

 

Selling of solar related products and providing customer service

 

Hamburg, Germany

    100%            100%              100%            a), d)

(Concluded)

 

  Note a:

This is an immaterial subsidiary for which the consolidated financial statements are not reviewed by the Company’s independent accountants.

 

  Note b:

According to the agreement among TSMC, TSMC Solar and VTAF III, each of the investment held by VTAF III is separately owned by TSMC and TSMC Solar. As the investment owned by VTAF III, which is indirectly owned by TSMC Solar, has entered into liquidation process due to bankruptcy and the bankruptcy trustee confirmed that no residual assets could be reimbursed to the shareholders, in the second quarter of 2014, TSMC Solar’s percentage of ownership over VTAF III has decreased to nil. Consequently, TSMC’s percentage of ownership over VTAF III has been adjusted to 98%.

 

  Note c:

To simplify overseas investment structure, in the second quarter of 2014, the Board of Directors of TSMC SSL approved to file for the liquidation of TSMC Lighting NA. The liquidation procedure is expected to be processed in the third quarter of 2014.

 

  Note d:

To simplify overseas investments structure, in the second quarter of 2014, the Board of Directors of TSMC Solar approved to file for the liquidation of TSMC Solar Europe. After the liquidation, TSMC Solar Europe GmbH, the 100% owned subsidiary of TSMC Solar Europe, will be held directly by TSMC Solar. The liquidation procedure is expected to be processed in third quarter of 2014.

Retirement Benefits

Pension cost for an interim period is calculated on a year-to-date basis by using the actuarially determined pension cost rate at the end of the prior financial year.

Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax. The interim period income tax expense is accrued using the tax rate that would be applicable to expected total annual earnings, that is, the estimated average annual effective income tax rate applied to the pre-tax income of the interim period.

 

  5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION AND UNCERTAINTY

The same critical accounting judgments and key sources of estimates and uncertainty have been followed in these consolidated financial statements as were applied in the preparation of the Company’s consolidated financial statements for the year ended December 31, 2013.

 

- 14 -


  6. CASH AND CASH EQUIVALENTS

 

   

June 30,

2014

        December 31,
2013
       

June 30,

2013

 

Cash and deposits in banks

  $ 243,638,487        $ 238,014,580        $ 223,809,009   

Commercial paper

    5,036,633          -          -   

Repurchase agreements collateralized by corporate bonds

    3,613,365          1,809,344          1,635,358   

Repurchase agreements collateralized by short-term commercial paper

    1,708,393          2,395,644          199,899   

Repurchase agreements collateralized by government bonds

    1,056,695          475,879          188,380   
 

 

 

     

 

 

     

 

 

 
  $   255,053,573        $   242,695,447        $   225,832,646   
 

 

 

     

 

 

     

 

 

 

Deposits in banks consisted of highly liquid time deposits that were readily convertible to known amounts of cash and which were subject to an insignificant risk of changes in value.

 

  7. FINANCIAL ASSETS AND LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS

 

   

June 30,

2014

 

       

December 31,
2013

 

     

June 30,

2013

 

      

Derivative financial assets

                

 

Cross currency swap contracts

  $ 94,358          $ -          $ 2,758      

Forward exchange contracts

    63,907            90,353            17,252      
 

 

 

       

 

 

       

 

 

    
  $     158,265         

 

$

 

90,353

 

  

      $ 20,010      
 

 

 

       

 

 

       

 

 

    

 

Derivative financial liabilities

                

 

Cross currency swap contracts

  $ 10,751          $ 4,177          $ 1,331      

Forward exchange contracts

    8,667            29,573            135,184      
 

 

 

       

 

 

       

 

 

    
  $ 19,418         

 

$

 

     33,750

 

  

      $    136,515      
 

 

 

       

 

 

       

 

 

    

The Company entered into derivative contracts to manage exposures due to fluctuations of foreign exchange rates. The derivative contracts entered into by the Company did not meet the criteria for hedge accounting. Therefore, the Company did not apply hedge accounting treatment for derivative contracts.

Outstanding forward exchange contracts consisted of the following:

     Maturity Date   

Contract Amount

(In Thousands)

June 30, 2014

     

Sell EUR/Buy US$

   July 2014    EUR2,130/ US$2,900

Sell NT$/Buy JPY

   July 2014    NT$190,637/JPY650,000

Sell NT$/Buy US$

   July 2014    NT$1,291,583/ US$43,100

Sell US$/Buy EUR

   July 2014    US$81,794/EUR60,000

Sell US$/Buy JPY

   July 2014    US$407,388/JPY41,429,419

Sell US$/Buy NT$

   July 2014    US$60,000/NT$1,801,440

Sell US$/Buy RMB

   July 2014 to August 2014    US$132,000/RMB823,267

 

(Continued)

 

- 15 -


     Maturity Date   

Contract Amount

(In Thousands)

December 31, 2013

     

Sell NT$/Buy EUR

   January 2014    NT$4,514,314/EUR110,000

Sell NT$/Buy US$

   January 2014    NT$683,749/US$22,800

Sell US$/Buy EUR

   January 2014    US$340,134/EUR248,000

Sell US$/Buy JPY

   January 2014    US$341,023/JPY35,754,801

Sell US$/Buy RMB

   January 2014 to February 2014    US$138,000/RMB841,492

June 30, 2013

     

Sell NT$/Buy US$

   July 2013    NT$534,830/US$17,800

Sell US$/Buy EUR

   July 2013    US$386,201/EUR296,000

Sell US$/Buy JPY

   July 2013    US$308,877/JPY30,237,970

Sell US$/Buy NT$

   July 2013    US$75,000/NT$2,252,825

Sell US$/Buy RMB

   July 2013 to August 2013    US$99,000/RMB610,816

(Concluded)

Outstanding cross currency swap contracts consisted of the following:

 

Maturity Date   

Contract Amount

(In Thousands)

  

Range of

Interest Rates
Paid

  

Range of

Interest Rates
Received

June 30, 2014

        

July 2014

   NT$2,461,848/US$82,080    -    0.20%-0.48%

July 2014 to August 2014

   US$870,000/NT$26,093,255    0.25%-1.92%    -

December 31, 2013

        

January 2014

   NT$1,639,215/US$55,080    -    1.03%-2.00%

June 30, 2013

        

July 2013

   NT$1,200,176/US$40,080    -    0.24%-0.35%

 

  8. AVAILABLE-FOR-SALE FINANCIAL ASSETS

 

    

June 30,

2014

     December 31,
2013
    

June 30,

2013

 

Publicly traded stocks

   $ 59,082,115       $ 59,481,569       $ 50,643,339   

Money market funds

     367         1,183         8,417   
  

 

 

    

 

 

    

 

 

 
   $ 59,082,482       $ 59,482,752       $ 50,651,756   
  

 

 

    

 

 

    

 

 

 

Current portion

   $ 59,082,482       $ 760,793       $ 1,070,537   

Noncurrent portion

     -         58,721,959         49,581,219   
  

 

 

    

 

 

    

 

 

 
   $    59,082,482       $    59,482,752       $    50,651,756   
  

 

 

    

 

 

    

 

 

 

 

- 16 -


In the second quarter of 2014, the Company reclassified some publicly traded stocks from non-current asset to current asset since the lock-up period will end within a year.

 

  9. HELD-TO-MATURITY FINANCIAL ASSETS

 

    

June 30,

2014

          December 31,
2013
         

June 30,

2013

 

Current portion

                 

Commercial paper

   $ 299,230             $ 1,795,949          $ -   

Corporate bonds

     -               -            700,576   
  

 

 

          

 

 

       

 

 

 
   $       299,230             $    1,795,949          $       700,576   
  

 

 

          

 

 

       

 

 

 

 

10. HEDGING DERIVATIVE FINANCIAL INSTRUMENTS

 

    

June 30,

2014

          December 31,
2013
         

June 30,

2013

 

Financial liabilities- current

                 

Fair value hedges

                 

Stock forward contracts

   $ 4,282,501             $ -          $ -   
  

 

 

          

 

 

       

 

 

 

Financial liabilities- noncurrent

                 

Fair value hedges

                 

Stock forward contracts

   $    1,277,058             $    5,481,616          $    1,813,291   
  

 

 

          

 

 

       

 

 

 

The Company’s investments in publicly traded stocks are exposed to the risk of market price fluctuations. Accordingly, the Company entered into stock forward contracts to sell shares at a contracted price determined by specific percentage of the spot price on the trade date in a specific future period in order to hedge the fair value risk caused by changes in equity prices.

The outstanding stock forward contracts consisted of the following:

 

    

June 30,

2014

     December 31,
2013
    

June 30,

2013

 

Contract amount (US$ in thousands)

     $   52,874,969         $   37,431,626         $ 14,753,429   
     (US$1,771,000)         ( US$1,256,095)         (US$492,306)   

 

11. NOTES AND ACCOUNTS RECEIVABLE, NET

 

    

June 30,

2014

     December 31,
2013
    

June 30,

2013

 

Notes and accounts receivable

   $    86,911,018       $    72,136,514       $    80,229,317   

Allowance for doubtful receivables

     (486,590)         (486,588)         (486,609)   
  

 

 

    

 

 

    

 

 

 

Notes and accounts receivable, net

   $ 86,424,428       $ 71,649,926       $ 79,742,708   
  

 

 

    

 

 

    

 

 

 

 

- 17 -


In principle, the payment term granted to customers is due 30 days from the invoice date or 30 days from the end of the month of when the invoice is issued. The allowance for doubtful receivables is assessed by reference to the collectability of receivables by performing the account aging analysis, historical experience and current financial condition of customers.

Except for those impaired, for the rest of the notes and accounts receivable, the account aging analysis at the end of the reporting period is summarized in the following table. Notes and accounts receivable include amounts that are past due but for which the Company has not recognized a specific allowance for doubtful receivables after the assessment since there has not been a significant change in the credit quality of its customers and the amounts are still considered recoverable.

Aging analysis of notes and accounts receivable, net

 

         

June 30,

2014

                December 31,
2013
           

June 30,

2013

 

Neither past due nor impaired

      $    78,140,966            $    64,112,564          $    71,025,800   

Past due but not impaired

                   

Past due within 30 days

        8,283,462              7,537,362            8,716,908   
     

 

 

         

 

 

       

 

 

 
      $ 86,424,428            $ 71,649,926          $ 79,742,708   
     

 

 

         

 

 

       

 

 

 

 

Movements of the allowance for doubtful receivables

 

  

     Individually
Assessed for
Impairment
      Collectively
Assessed for
Impairment
      Total  

Balance at January 1, 2014

      $     8,058            $ 478,530          $    486,588   

Provision

        17,220              4,495            21,715   

Reversal

        -              (21,715         (21,715

Effect of exchange rate changes

        -              2            2   
     

 

 

         

 

 

       

 

 

 

Balance at June 30, 2014

      $    25,278            $ 461,312          $    486,590   
     

 

 

         

 

 

       

 

 

 

Balance at January 1, 2013

        $ 137,336            $ 342,876          $    480,212   

Provision

        -              117,018            117,018   

Reversal

        (107,433           (121         (107,554

Effect of deconsolidation of subsidiary

        (3,157           -            (3,157

Effect of exchange rate changes

        1,660              (1,570         90   
     

 

 

         

 

 

       

 

 

 

Balance at June 30, 2013

      $    28,406            $    458,203          $    486,609   
     

 

 

         

 

 

       

 

 

 

 

Aging analysis of accounts receivable that is individually determined as impaired

 

  

    

June 30,

2014

      December 31,
2013
     

June 30,

2013

 

Not past due

      $             -            $          38          $ 30,724   

Past due 1-30 days

        17,326              276            3,780   

Past due 31-60 days

        334              80            -   

Past due 61-120 days

        -              158            -   

Past due over 121 days

        7,618              7,824            -   
     

 

 

         

 

 

       

 

 

 
      $    25,278            $     8,376          $ 34,504   
     

 

 

         

 

 

       

 

 

 

 

- 18 -


The Company held bank guarantees and other credit enhancements as collateral for certain impaired accounts receivables. As of June 30, 2014, December 31, 2013 and June 30, 2013, the amount of the bank guarantee and other credit enhancements were nil, NT$318 thousand (US$11 thousand) and NT$6,098 thousand (US$203 thousand), respectively.

 

12. INVENTORIES

 

                                                                 
    

June 30,

2014

       December 31,
2013
      

June 30,

2013

 

Finished goods

   $ 5,379,673         $ 7,245,209         $ 4,603,940   

Work in process

     40,510,250           26,033,625           28,701,406   

Raw materials

     3,152,079           2,435,269           3,474,178   

Supplies and spare parts

     1,912,263           1,780,790           1,835,404   
  

 

 

      

 

 

      

 

 

 
   $    50,954,265         $    37,494,893         $    38,614,928   
  

 

 

      

 

 

      

 

 

 

Write-down of inventories to net realizable value was included in the cost of revenue, which was as follows:

 

       Three Months Ended June 30           Six Months Ended June 30  
  

 

 

 

          2014        2013                2014        2013      

Inventory losses

      $       933,574         $       332,110             $ 1,523,608         $ 237,169     
     

 

 

      

 

 

          

 

 

      

 

 

   

 

13. FINANCIAL ASSETS CARRIED AT COST

 

                                                                 
    

June 30,

2014

       December 31,
2013
      

June 30,

2013

 

Non-publicly traded stocks

   $ 1,736,734         $ 1,865,078         $ 3,372,556   

Mutual funds

     280,794           280,513           295,141   
  

 

 

      

 

 

      

 

 

 
   $    2,017,528         $    2,145,591         $    3,667,697   
  

 

 

      

 

 

      

 

 

 

Since there is a wide range of estimated fair values of the Company’s investments in non-publicly traded stocks, the Company concludes that the fair value cannot be reliably measured and therefore should be measured at the cost less any impairment.

 

14. INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD

Investments accounted for using the equity method consisted of the following:

 

                                                                 
    

June 30,

2014

       December 31,
2013
      

June 30,

2013

 

Associates

   $ 22,785,296         $ 24,823,807         $ 21,706,316   

Jointly controlled entities

     3,570,515           3,492,453           3,306,524   
  

 

 

      

 

 

      

 

 

 
   $  26,355,811         $  28,316,260         $  25,012,840   
  

 

 

      

 

 

      

 

 

 

 

- 19 -


  a.

Investments in associates

Associates consisted of the following:

 

        

Place of

Incorporation
and Operation

   Carrying Amount                  % of Ownership and Voting Rights        
Held by the Company
 
       

 

 

  

 

 

 
Name of Associate   Principal Activities      

June 30,

2014

     December 31,
2013
    

June 30,

2013

        

June 30,

2014

     December 31,
2013
    

June 30,

2013

 

Vanguard International Semiconductor Corporation (VIS)

 

Research, design, development, manufacture, packaging, testing and sale of memory integrated circuits, LSI, VLSI and related parts

  

Hsinchu, Taiwan

       $     9,205,352         $  10,556,348         $   9,619,243           33%               39%                 39%         

Systems on Silicon Manufacturing Company Pte Ltd. (SSMC)

 

Fabrication and supply of integrated circuits

  

Singapore

     6,940,820         7,457,733         6,441,982           39%               39%                 39%         

Motech Industries, Inc. (Motech)

 

Manufacturing and sales of solar cells, crystalline silicon solar cell, and test and measurement instruments and design and construction of solar power systems

  

New Taipei, Taiwan

     3,741,837         3,887,462         2,714,439           20%               20%                 20%         

Xintec Inc. (Xintec)

 

Wafer level chip size packaging service

  

Taoyuan, Taiwan

     1,875,195         1,866,123         1,816,848           40%               40%                 40%         

Global Unichip Corporation (GUC)

 

Researching, developing, manufacturing, testing and marketing of integrated circuits

  

Hsinchu, Taiwan

     1,022,092         1,056,141         1,113,804           35%               35%                 35%         

Mcube Inc. (Mcube)

 

Research, development, and sale of micro- semiconductor device

  

Delaware, U.S.A.

                         -                            -                            -           -               -                 25%         
                                                                                                              
          $  22,785,296         $  24,823,807         $  21,706,316              

In the second quarter of 2014, the Company sold 82,000 thousand common shares of VIS and recognized a disposal gain of NT$2,028,643 thousand. After the sale, the Company owned approximately 33.7% of the equity interest in VIS.

In the fourth quarter of 2012, the Company recognized an impairment loss in the amount of NT$1,186,674 thousand, due to the lower estimated recoverable amount compared with the carrying amount of its investments in stocks traded on the Taiwan GreTai Securities Market. Subsequently, as the recoverable amount of the aforementioned investments was higher than its carrying amount, the impairment loss of NT$1,186,674 thousand recognized in prior year was reversed in the fourth quarter of 2013.

Since TSMC did not participate in Mcube’s issuance of new shares in the third quarter of 2013, the Company’s percentage of ownership in Mcube decreased to 18%. As a result, the Company evaluated and concluded that the Company no longer exercises significant influence over Mcube. Therefore Mcube is no longer accounted for using the equity method. Further, such investment was reclassified to financial assets carried at cost. The Company also measured the fair value of retained interest in Mcube when the significant influence was lost, which has no difference with the carrying amount; accordingly, the Company did not recognize any gain or loss.

TSMC no longer has power to govern the financial and operating policies of Xintec starting June 2013 due to the loss of power to cast the majority of votes at meetings of the Board of Directors. As a result, Xintec is no longer consolidated and is accounted for using the equity method. Please refer to Note 30.

 

- 20 -


  b.

Investments in jointly controlled entities

Jointly controlled entities consisted of the following:

 

        

Place of

Incorporation

and Operation

   Carrying Amount         

    % of Ownership and Voting Rights    

Held by the Company

 
       

 

 

  

 

 

 

Name of Jointly

Controlled Entity

  Principal Activities      

June 30,

2014

     December 31,
2013
    

June 30,

2013

        

June 30,

2014

     December 31,
2013
    

June 30,

2013

 

VisEra Holding Company (VisEra Holding)

 

Investing in companies involved in the design, manufacturing and other related businesses in the semiconductor industry

  

Cayman Islands

     $  3,570,515         $  3,492,453         $  3,306,524           49%               49%                 49%         

 

15. PROPERTY, PLANT AND EQUIPMENT

 

     Land and Land
Improvements
    Buildings     Machinery and
Equipment
    Office Equipment     Assets under
Finance Leases
    Equipment under
Installation and
Construction in
Progress
    Total  

Cost

              

Balance at January 1, 2014

   $ 3,986,909      $ 229,182,736      $    1,413,919,794      $ 22,062,032      $ 804,430      $ 272,173,793      $ 1,942,129,694   

Additions

     -        21,992,818        243,696,287        4,269,496        -        (138,669,929  )      131,288,672   

Disposals or retirements

     -        -        (739,238  )      (426,337  )      -        -        (1,165,575  ) 

Reclassification

     -        (1,996  )      1,996        -        -        -        -   

Effect of exchange rate changes

     1,457        (224,902  )      (395,235  )      (8,766  )      (12,782  )      (2,013  )      (642,241  ) 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at June 30, 2014

   $ 3,988,366      $ 250,948,656      $ 1,656,483,604      $ 25,896,425      $ 791,648      $ 133,501,851      $ 2,071,610,550   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Accumulated depreciation and impairment

              

Balance at January 1, 2014

   $ 404,192      $ 125,234,166      $ 1,009,213,689      $ 14,225,771      $ 385,963      $ -      $ 1,149,463,781   

Additions

     13,767        7,328,768        77,587,232        1,387,716        20,960        -        86,338,443   

Disposals or retirements

     -        -        (680,321  )      (426,259  )      -        -        (1,106,580  ) 

Impairment

     -        -        239,864        -        -        -        239,864   

Reclassification

     -        (532  )      532        -        -        -        -   

Effect of exchange rate changes

     610        (135,642  )      (343,389  )      (7,518  )      (6,445  )      -        (492,384  ) 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at June 30, 2014

   $ 418,569      $ 132,426,760      $ 1,086,017,607      $ 15,179,710      $ 400,478      $ -      $ 1,234,443,124   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Carrying amounts at January 1, 2014

   $ 3,582,717      $ 103,948,570      $ 404,706,105      $ 7,836,261      $ 418,467      $ 272,173,793      $ 792,665,913   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Carrying amounts at June 30, 2014

   $ 3,569,797      $ 118,521,896      $ 570,465,997      $ 10,716,715      $ 391,170      $ 133,501,851      $ 837,167,426   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cost

              

Balance at January 1, 2013

   $ 1,527,124      $ 197,411,851      $ 1,279,893,177      $ 20,067,943      $ 766,732      $ 119,063,976      $ 1,618,730,803   

Additions

     3,212,000        23,769,868        86,321,847        2,151,385        -        60,904,636        176,359,736   

Disposals or retirements

     -        -        (1,652,721  )      (364,434  )      -        -        (2,017,155  ) 

Reclassification

     -        3,797        -        -        -        -        3,797   

Effect of deconsolidation of subsidiary

     (772,029  )      (986,205  )      (5,630,854  )      (1,055,809  )      -        (1,632,860  )      (10,077,757  ) 

Effect of exchange rate changes

     24,183        797,936        2,409,161        50,718        31,207        7,890        3,321,095   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at June 30, 2013

   $ 3,991,278      $ 220,997,247      $ 1,361,340,610      $ 20,849,803      $ 797,939      $ 178,343,642      $ 1,786,320,519   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Accumulated depreciation and impairment

              

Balance at January 1, 2013

   $ 367,369      $ 111,801,731      $ 875,510,879      $ 13,160,567      $ 328,069      $ -      $ 1,001,168,615   

Additions

     13,518        6,168,796        66,150,063        1,166,369        20,495        -        73,519,241   

Disposals or retirements

     -        -        (1,572,265  )      (364,197  )      -        -        (1,936,462  ) 

Effect of deconsolidation of subsidiary

     -        (226,908  )      (3,656,326  )      (599,483  )      -        -        (4,482,717  ) 

Effect of exchange rate changes

     11,915        439,710        1,951,384        40,219        13,578        -        2,456,806   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at June 30, 2013

   $ 392,802      $ 118,183,329      $ 938,383,735      $ 13,403,475      $ 362,142      $ -      $    1,070,725,483   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Carrying amounts at June 30, 2013

   $       3,598,476      $    102,813,918      $ 422,956,875      $ 7,446,328      $        435,797      $ 178,343,642      $ 715,595,036   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

- 21 -


The significant part of the Company’s buildings includes main plants, mechanical and electrical power equipment and clean rooms, and the related depreciation is calculated using the estimated useful lives of 20 years, 10 years and 10 years, respectively.

In the second quarter of 2014, the Company recognized impairment losses of NT$239,864 thousand under other operating segments since the carrying amount of some of machinery and equipment is expected to be unrecoverable. Such impairment losses were included in other operating income and expenses for the six months ended June 30, 2014.

There was no capitalization of borrowing costs for the six months ended June 30, 2014 and 2013.

 

16. INTANGIBLE ASSETS

 

     Goodwill      Technology
License Fees
    Software and
System Design
Costs
    Patent and
Others
    Total  

Cost

           

Balance at January 1, 2014

   $       5,627,517       $ 4,444,828      $ 17,086,805      $ 3,729,396      $ 30,888,546   

Additions

     -         501,134        74,638        624,465        1,200,237   

Retirements

     -         -        (23,315     -        (23,315

Effect of exchange rate changes

     7,629         -        (2,070     (2,153     3,406   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Balance at June 30, 2014

   $ 5,635,146       $ 4,945,962      $ 17,136,058      $ 4,351,708      $ 32,068,874   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Accumulated amortization

           

Balance at January 1, 2014

   $ -       $ 3,341,667      $ 13,439,135      $ 2,617,361      $ 19,398,163   

Additions

     -         207,843        731,718        323,487        1,263,048   

Retirements

     -         -        (23,315     -        (23,315

Effect of exchange rate changes

     -         -        (1,922     (407     (2,329
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Balance at June 30, 2014

   $ -       $ 3,549,510      $ 14,145,616      $ 2,940,441      $ 20,635,567   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Carrying amounts at January 1, 2014

   $ 5,627,517       $ 1,103,161      $ 3,647,670      $ 1,112,035      $ 11,490,383   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Carrying amounts at June 30, 2014

   $ 5,635,146       $ 1,396,452      $ 2,990,442      $ 1,411,267      $ 11,433,307   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Cost

           

Balance at January 1, 2013

   $ 5,523,707       $ 4,590,548      $ 15,095,421      $ 3,094,664      $ 28,304,340   

Additions

     -         -        1,029,276        204,019        1,233,295   

Retirements

     -         -        (16,573     (23,549     (40,122

Reclassification

     -         (29,565     (3,797     -        (33,362

Effect of deconsolidation of subsidiary

     -         (113,340     (25,335     (42,089     (180,764

Effect of exchange rate changes

     126,697         (1,281     4,628        4,642        134,686   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Balance at June 30, 2013

   $ 5,650,404       $ 4,446,362      $ 16,083,620      $ 3,237,687      $ 29,418,073   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Accumulated amortization

           

Balance at January 1, 2013

   $ -       $ 3,128,655      $ 12,126,479      $ 2,089,637      $ 17,344,771   

Additions

     -         140,160        646,735        284,695        1,071,590   

Retirements

     -         -        (16,301     (23,549     (39,850

Effect of deconsolidation of subsidiary

     -         (66,587     (12,661     (25,195     (104,443

Effect of exchange rate changes

     -         (1,281     4,189        774        3,682   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Balance at June 30, 2013

   $ -       $ 3,200,947      $     12,748,441      $       2,326,362      $ 18,275,750   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Carrying amounts at June 30, 2013

   $ 5,650,404       $       1,245,415      $ 3,335,179      $ 911,325      $     11,142,323   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

 

- 22 -


The Company’s goodwill has been tested for impairment at the end of the annual reporting period and the recoverable amount is determined based on the value in use. The value in use was calculated based on the cash flow forecast from the financial budgets covering the future five-year period, and the Company used annual discount rate of 8.50% and 9.00% in its test of impairment as of December 31, 2013 and 2012, respectively, to reflect the relevant specific risk in the cash-generating unit.

For the six months ended June 30, 2014 and 2013, the Company did not recognize any impairment loss on goodwill.

 

17. OTHER ASSETS

 

         

June 30,

2014

               December 31,
2013
              

June 30,

2013

      

Tax receivable

      $ 1,835,877             $ 1,781,376             $ 1,411,504      

Prepaid expenses

        1,120,915               1,081,957               1,340,388      

Long-term receivable

        652,000               820,000               781,600      

Others

        707,729               770,468               549,515      
     

 

 

          

 

 

          

 

 

    
      $   4,316,521             $   4,453,801             $   4,083,007      
     

 

 

          

 

 

          

 

 

    

Current portion

      $ 2,931,372             $ 2,984,224             $ 2,739,259      

Noncurrent portion

        1,385,149               1,469,577               1,343,748      
     

 

 

          

 

 

          

 

 

    
      $ 4,316,521             $ 4,453,801             $ 4,083,007      
     

 

 

          

 

 

          

 

 

    

 

18. SHORT-TERM LOANS

 

         

June 30,

2014

               December 31,
2013
              

June 30,

2013

      

Unsecured loans

                          

Amount

      $ 34,705,206             $ 15,645,000             $ 31,466,400      
     

 

 

          

 

 

          

 

 

    

Original loan content

                          

US$ (in thousands)

      $ 1,101,000             $ 525,000             $ 1,050,000      

EUR (in thousands)

        45,000               -               -      

Annual interest rate

        0.38%-0.51%               0.38%-0.42%               0.39%-0.42%      

Maturity date

   Due by August   2014          
 
Due in January  
2014  
       

 

Due in July  

2013  

 

19. PROVISIONS

 

         

June 30,

2014

               December 31,
2013
              

June 30,

2013

      

Sales returns and allowances

      $ 7,709,195             $ 7,603,781             $ 6,289,117      

Warranties

        14,741               10,452               6,623      
     

 

 

          

 

 

          

 

 

    
      $ 7,723,936             $ 7,614,233             $ 6,295,740      
     

 

 

          

 

 

          

 

 

    

Current portion

      $   7,709,195             $   7,603,781             $   6,289,117      

Noncurrent portion (classified under other noncurrent liabilities)

        14,741               10,452               6,623      
     

 

 

          

 

 

          

 

 

    
      $ 7,723,936             $ 7,614,233             $ 6,295,740      
     

 

 

          

 

 

          

 

 

    

 

- 23 -


    Sales Returns
and Allowances
       Warranties     Total      
             

Six months ended June 30, 2014

             

    

             

Balance, beginning of period

     $ 7,603,781         $ 10,452      $ 7,614,233     

Provision

       3,504,209           5,549        3,509,758     

Payment

       (3,395,000        (1,194     (3,396,194  

Effect of exchange rate changes

       (3,795        (66     (3,861  
    

 

 

      

 

 

   

 

 

   

    

             

Balance, end of period

     $ 7,709,195         $ 14,741      $ 7,723,936     
    

 

 

      

 

 

   

 

 

   

    

             

Six months ended June 30, 2013

             

    

             

Balance, beginning of period

     $ 6,038,003         $ 4,891      $ 6,042,894     

Provision

       2,421,262           1,678        2,422,940     

Payment

       (2,142,396        -        (2,142,396  

Effect of deconsolidation of subsidiary

       (37,748        -        (37,748  

Effect of exchange rate changes

       9,996           54        10,050     
    

 

 

      

 

 

   

 

 

   

    

             

Balance, end of period

     $ 6,289,117         $ 6,623      $ 6,295,740     
    

 

 

      

 

 

   

 

 

   

Provisions for sales returns and allowances are estimated based on historical experience, management judgment, and any known factors that would significantly affect the returns and allowances, and are recognized as a reduction of revenue in the same period of the related product sales.

The provision for warranties represents the present value of the Company’s best estimate of the future outflow of the economic benefits that will be required under the Company’s obligations for warranties. The estimate has been made on the basis of historical warranty trends of business and may vary as a result of new materials, altered manufacturing processes or other events affecting product quality.

 

20. BONDS PAYABLE

 

    

June 30,

2014

  December 31,
2013
 

June 30,

2013

Noncurrent portion

            

Domestic unsecured bonds

     $   166,200,000       $   166,200,000       $   125,000,000  

Overseas unsecured bonds

       44,784,000         44,700,000         44,952,000  
    

 

 

     

 

 

     

 

 

 
       210,984,000         210,900,000         169,952,000  

Less: Discounts on bonds payable

       (114,941 )       (132,375 )       (150,738 )
    

 

 

     

 

 

     

 

 

 
     $ 210,869,059       $ 210,767,625       $ 169,801,262  
    

 

 

     

 

 

     

 

 

 

The major terms of overseas unsecured bonds are as follows:

 

Issuance Period             

Total Amount
(US$

in Thousands)

     Coupon Rate  

Repayment and Interest

Payment

April 2013 to April 2016

    $ 350,000         0.95%  

Bullet repayment; interest payable semi-annually

April 2013 to April 2018

     1,150,000         1.625%  

The same as above

 

- 24 -


21. OTHER LONG-TERM PAYABLES

 

    

June 30,

2014

   December 31,
2013
  

June 30,

2013

   

    

                

Payables for software and system design costs

     $ 54,000        $ 54,000        $ 54,000    

Payables for acquisition of property, plant and equipment

       -          -          859,102    
    

 

 

      

 

 

      

 

 

   

    

                
     $ 54,000        $ 54,000        $ 913,102    
    

 

 

      

 

 

      

 

 

   

    

                

Current portion (classified under accrued expenses and other current liabilities)

     $     36,000        $     18,000        $   877,102    

Noncurrent portion

       18,000          36,000          36,000    
    

 

 

      

 

 

      

 

 

   

    

                
     $ 54,000        $ 54,000        $ 913,102    
    

 

 

      

 

 

      

 

 

   

TSMC entered into an agreement with a counterparty in 2003 whereby TSMC China purchased in 2004 certain property, plant and equipment. The obligations under the aforementioned agreement were fully paid in July 2013.

 

22. EQUITY

 

  a.

Capital stock

 

    

June 30,

2014

   December 31,
2013
  

June 30,

2013

   
                

Authorized shares (in thousands)

       28,050,000          28,050,000          28,050,000    
    

 

 

      

 

 

      

 

 

   

Authorized capital

     $  280,500,000        $  280,500,000        $  280,500,000    
    

 

 

      

 

 

      

 

 

   

Issued and paid shares (in thousands)

       25,929,375          25,928,617          25,928,305    
    

 

 

      

 

 

      

 

 

   

Issued capital

     $ 259,293,750        $ 259,286,171        $ 259,283,058    
    

 

 

      

 

 

      

 

 

   

A holder of issued common shares with par value of NT$10 per share is entitled to vote and to receive dividends.

The authorized shares include 500,000 thousand shares allocated for the exercise of employee stock options.

As of June 30, 2014, 1,077,411 thousand ADSs of TSMC were traded on the NYSE. The number of common shares represented by the ADSs was 5,387,057 thousand shares (one ADS represents five common shares).

 

  b.

Capital surplus

 

    

June 30,

2014

   December 31,
2013
  

June 30,

2013

   
                

Additional paid-in capital

     $   24,043,271        $   24,017,363        $   24,006,081    

From merger

       22,804,510          22,804,510          22,804,510    

From convertible bonds

       8,892,847          8,892,847          8,892,847    

(Continued)

 

- 25 -


    

June 30,

2014

     December 31,
2013
    

June 30,

2013

 

From differences between equity purchase price and carrying amount arising from actual acquisition or disposal of subsidiaries

   $ -       $ 100,827       $ 107,661   

From share of changes in equities of subsidiaries

     81,093         -         -   

From share of changes in equities of associates and joint venture

     205,061         43,024         17,433   

Donations

     55         55         55   
  

 

 

    

 

 

    

 

 

 
   $   56,026,837       $ 55,858,626       $   55,828,587   
  

 

 

    

 

 

    

 

 

 

(Concluded)

Under the Company Law, the capital surplus generated from donations and the excess of the issuance price over the par value of capital stock (including the stock issued for new capital, mergers, convertible bonds, the surplus from treasury stock transactions and the differences between equity purchase price and carrying amount arising from actual acquisition or disposal of subsidiaries) may be used to offset a deficit; in addition, when the Company has no deficit, such capital surplus may be distributed as cash dividends or stock dividends up to a certain percentage of TSMC’s paid-in capital. The capital surplus from share of changes in equities of subsidiaries may be used to offset a deficit.

 

  c.

Retained earnings and dividend policy

TSMC’s Articles of Incorporation provide that, when allocating the net profits for each fiscal year, TSMC shall first offset its losses in previous years and then set aside the following items accordingly:

 

  1)

Legal capital reserve at 10% of the profits left over, until the accumulated legal capital reserve equals TSMC’s paid-in capital;

 

  2)

Special capital reserve in accordance with relevant laws or regulations or as requested by the authorities in charge;

 

  3)

Bonus to directors and profit sharing to employees of TSMC of not more than 0.3% and not less than 1% of the remainder, respectively. Directors who also serve as executive officers of TSMC are not entitled to receive the bonus to directors. TSMC may issue profit sharing to employees in stock of an affiliated company meeting the conditions set by the Board of Directors or, by the person duly authorized by the Board of Directors;

 

  4)

Any balance left over shall be allocated according to the resolution of the shareholders’ meeting.

TSMC’s Articles of Incorporation also provide that profits of TSMC may be distributed by way of cash dividend and/or stock dividend. However, distribution of profits shall be made preferably by way of cash dividend. Distribution of profits may also be made by way of stock dividend; provided that the ratio for stock dividend shall not exceed 50% of the total distribution.

Any appropriations of the profits are subject to shareholders’ approval in the following year.

 

- 26 -


TSMC accrued profit sharing to employees based on certain percentage of net income during the period, which amounted to NT$3,992,231 thousand and NT$3,483,909 thousand for the three months ended June 30, 2014 and 2013, respectively; and NT$7,192,947 thousand and NT$6,144,391 thousand for the six months ended June 30, 2014 and 2013, respectively. Bonuses to directors were expensed based on estimated amount of payment. If the actual amounts subsequently approved by the shareholders differ from the estimated amounts, the differences are recorded in the year of shareholders’ resolution as a change in accounting estimate. If profit sharing approved for distribution to employees is in the form of common shares, the number of shares is determined by dividing the amount of profit sharing by the closing price (after considering the effect of dividends) of the shares on the day preceding the shareholders’ meeting.

The appropriation for legal capital reserve shall be made until the reserve equals the Company’s paid-in capital. The reserve may be used to offset a deficit, or be distributed as dividends in cash or stocks for the portion in excess of 25% of the paid-in capital if the Company incurs no loss.

Pursuant to existing regulations, the Company is required to set aside additional special capital reserve equivalent to the net debit balance of the other components of stockholders’ equity, such as the accumulated balance of foreign currency translation reserve, unrealized valuation gain/loss from available-for-sale financial assets, gain/loss from changes in fair value of hedging instruments in cash flow hedges, etc. For the subsequent decrease in the deduction amount to stockholders’ equity, any special reserve appropriated may be reversed to the extent that the net debit balance reverses.

The appropriations of 2013 and 2012 earnings have been approved by TSMC’s shareholders in its meeting held on June 24, 2014 and on June 11, 2013, respectively. The appropriations and dividends per share were as follows:

 

    Appropriation of Earnings           

Dividends Per Share    

(NT$)

   

For Fiscal

Year 2013

   

For Fiscal

Year 2012

        

For Fiscal

Year 2013

  

For Fiscal

Year 2012

Legal capital reserve

  $ 18,814,679      $ 16,615,880           

Special capital reserve

    (2,785,741     (4,820,483        

Cash dividends to shareholders

    77,785,851        77,773,307         $3.00    $3.00
 

 

 

   

 

 

         
  $   93,814,789      $   89,568,704           
 

 

 

   

 

 

         

TSMC’s profit sharing to employees and bonus to directors in the amounts of NT$12,634,665 thousand and NT$104,136 thousand in cash for 2013, respectively, and profit sharing to employees and bonus to directors in the amounts of NT$11,115,240 thousand and NT$71,351 thousand in cash for 2012, respectively, had been approved by the shareholders in its meeting held on June 24, 2014 and June 11, 2013, respectively. The aforementioned approved amount has no difference with the one approved by the Board of Directors in its meetings held on February 18, 2014 and February 5, 2013 and the same amount had been charged against earnings of 2013 and 2012, respectively.

The information about the appropriations of TSMC’s profit sharing to employees and bonus to members of the Board of Directors is available at the Market Observation Post System website.

Under the Integrated Income Tax System that became effective on January 1, 1998, the R.O.C. resident shareholders are allowed a tax credit for their proportionate share of the income tax paid by TSMC on earnings generated since January 1, 1998.

 

- 27 -


  d.

Others

Changes in others were as follows:

 

     Six Months Ended June 30, 2014
     Foreign
Currency
Translation
Reserve
  Unrealized
Gain/Loss from
Available-for-
sale Financial
Assets
  Cash Flow
Hedges Reserve
  Total    

Balance, beginning of period

     $ (7,140,362 )     $ 21,310,781       $               (113 )     $   14,170,306    

Exchange differences arising on translation of foreign operations

       (220,808 )       -         -         (220,808 )  

Changes in fair value of available-for-sale financial assets

       -         (313,697 )       -         (313,697 )  

Cumulative (gain)/loss reclassified to profit or loss upon disposal of available-for-sale financial assets

       -         (133,160 )       -         (133,160 )  

Share of other comprehensive income of associates and joint venture

       (5,872 )       (236 )       90         (6,018 )  

The proportionate share of other comprehensive income/losses reclassified to profit or loss upon partial disposal of associates

       3,017         (2,920 )       -         97    

Income tax effect

       -         (11,123 )       -         (11,123 )  
    

 

 

     

 

 

     

 

 

     

 

 

   

Balance, end of period

     $ (7,364,025 )     $   20,849,645       $ (23 )     $ 13,485,597    
    

 

 

     

 

 

     

 

 

     

 

 

   
     Six Months Ended June 30, 2013
     Foreign
Currency
Translation
Reserve
  Unrealized
Gain/Loss from
Available-for-
sale Financial
Assets
  Cash Flow
Hedges Reserve
  Total    

Balance, beginning of period

     $ (10,753,806 )     $ 7,973,321       $ -       $ (2,780,485 )  

Exchange differences arising on translation of foreign operations

       4,074,732         -         -         4,074,732    

Changes in fair value of available-for-sale financial assets

       -         8,484,679         -         8,484,679    

Cumulative (gain)/loss reclassified to profit or loss upon disposal of available-for-sale financial assets

       -         (987,693 )       -         (987,693 )  

Share of other comprehensive income of associates and joint venture

       (58,050 )       225         -         (57,825 )  

The proportionate share of other comprehensive income/losses reclassified to profit or loss upon partial disposal of associates

       774         (44 )       -         730    

Income tax effect

       -         43,210         -         43,210    
    

 

 

     

 

 

     

 

 

     

 

 

   

Balance, end of period

     $ (6,736,350 )     $ 15,513,698       $ -       $ 8,777,348    
    

 

 

     

 

 

     

 

 

     

 

 

   

 

- 28 -


The exchange differences arising on translation of foreign operation’s net assets from its functional currency to TSMC’s presentation currency are recognized directly in other comprehensive income and also accumulated in the foreign currency translation reserve.

Unrealized gain/loss on available-for-sale financial assets represents the cumulative gains or losses arising from the fair value measurement on available-for-sale financial assets that are recognized in other comprehensive income, excluding the amounts recognized in profit or loss for the effective portion from changes in fair value of the hedging instruments. When those available-for-sale financial assets have been disposed of or are determined to be impaired subsequently, the related cumulative gains or losses in other comprehensive income are reclassified to profit or loss.

The cash flow hedges reserve represents the cumulative effective portion of gains or losses arising on changes in fair value of the hedging instruments entered into as cash flow hedges. The cumulative gains or losses arising on changes in fair value of the hedging instruments that are recognized and accumulated in cash flow hedges reserve will be reclassified to profit or loss only when the hedge transaction affects profit or loss.

 

  e.

Noncontrolling interests

 

     Six Months Ended June 30  
     2014     2013  

Balance, beginning of period

   $ 266,830      $ 2,543,226   

Share of noncontrolling interests

    

Net loss

     (67,394     (87,555 )  

Exchange differences arising on translation of foreign operations

     47        1,162   

Changes in fair value of available-for-sale financial assets

     1,116        1,519   

Cumulative (gain)/loss reclassified to profit or loss upon disposal of available-for-sale financial assets

     (860     (3,020 )  

Stock option compensation cost of subsidiary

     -        5,312   

Share of other comprehensive income of associates and joint venture

     (100     223   

The proportionate share of other comprehensive income/losses reclassified to profit or loss upon partial disposal of associates

     -        1   

Adjustments to share of changes in capital surplus of associations and joint venture

     (66     -   

From share of changes in equities of subsidiaries

     19,734        -   

Adjustments arising from changes in percentage of ownership in subsidiaries

     -        (66,928 )  

Increase (Decrease) in noncontrolling interests

     (45,527     203,729   

Effect of deconsolidation of subsidiary

     -        (2,273,153 )  
  

 

 

   

 

 

 

Balance, end of period

   $ 173,780      $ 324,516   
  

 

 

   

 

 

 

 

- 29 -


23. SHARE-BASED PAYMENT

The Company did not issue employee stock option plans for the six months ended June 30, 2014 and 2013. Information about TSMC’s outstanding employee stock options is described as follows:

 

  a.

Optional exemption from applying IFRS 2 “Share-based Payment” (IFRS 2)

 

   TSMC  

Number of
Stock

Options
(In Thousands)

  Weighted-
average
Exercise Price
(NT$)

Six months ended June 30, 2014

       

Balance, beginning of period

      1,763       $ 45.9  

Options exercised

      (758 )       44.2  
   

 

 

     

Balance, end of period

      1,005         47.2  
   

 

 

     

Balance exercisable, end of period

      1,005         47.2  
   

 

 

     

Six months ended June 30, 2013

       

Balance, beginning of period

      5,945       $ 34.6  

Options exercised

      (3,870 )       28.5  
   

 

 

     

Balance, end of period

      2,075         46.0  
   

 

 

     

Balance exercisable, end of period

            2,075         46.0  
   

 

 

     

The numbers of outstanding stock options and exercise prices have been adjusted to reflect the distribution of earnings by TSMC in accordance with the plans.

Information about TSMC’s outstanding stock options was as follows:

 

June 30, 2014        December 31, 2013        June 30, 2013

Range of            

Exercise Price            

(NT$)            

   Weighted-average
Remaining
Contractual Life
(Years)
      

Range of            
Exercise Price             

(NT$)            

   Weighted-average
Remaining
Contractual Life
(Years)
      

Range of            
Exercise Price             

(NT$)            

   Weighted-average
Remaining
Contractual Life
(Years)

$47.2            

   0.9      $43.2-$47.2                1.0      $38.0-$50.1                1.6

 

  b.

Application of IFRS 2

   TSMC SSL    Number of
Options
(In Thousands)
  Weighted-
average
Exercise
Price (NT$)

Six months ended June 30, 2013

        

Balance, beginning of period

       -       $ -  

Options granted

       17,000           10.0  

Options exercised

         (17,000 )       10.0  
    

 

 

     

Balance, end of period

       -         -  
    

 

 

     

Balance exercisable, end of period

       -         -  
    

 

 

     

Weighted-average fair value of options granted (NT$/share)

     $ -      
    

 

 

     

 

- 30 -


The grant date of aforementioned stock options was April 10, 2013. TSMC SSL used the Black-Scholes model to determine the fair value of the options. The valuation assumptions were as follows:

 

     2013 Stock
Option Plan

Valuation assumptions:

    

Stock price on grant date (NT$/share)

       $     4.6   

Exercise price (NT$/share)

       $   10.0   

Expected volatility

       51.68%   

Expected life

       31 days   

Risk free interest rate

       0.60%   

The stock price on grant date was determined based on the cost approach. The expected volatility was calculated using the historical rate of return based on the TWSE Optoelectronic Index.

The fair value of the aforementioned stock option was close to nil, and accordingly, no compensation cost was recognized.

 

24. NET REVENUE

The analysis of the Company’s net revenue was as follows:

 

     Three Months Ended June 30          Six Months Ended June 30  
     2014    2013        2014    2013

Net revenue from sale of goods

     $ 182,882,159        $ 155,758,012          $ 330,879,781        $ 288,390,575  

Net revenue from royalties

       138,325          128,308            355,875          250,741  
    

 

 

      

 

 

        

 

 

      

 

 

 
     $  183,020,484        $  155,886,320          $  331,235,656        $  288,641,316  
    

 

 

      

 

 

        

 

 

      

 

 

 
                     

 

25. FINANCE COSTS

 

     Three Months Ended June 30          Six Months Ended June 30  
     2014    2013        2014    2013

Interest expense

                     

Corporate bonds

     $ 770,126        $ 593,187          $ 1,540,103        $ 1,034,881  

Bank loans

       26,379          29,682            48,007          72,120  

Finance leases

       4,841          4,909            9,810          9,697  

Others

       104          7,562            110          12,640  
    

 

 

      

 

 

        

 

 

      

 

 

 
     $ 801,450        $ 635,340          $ 1,598,030        $ 1,129,338  
    

 

 

      

 

 

        

 

 

      

 

 

 

 

- 31 -


26. OTHER GAINS AND LOSSES

 

     Three Months Ended June 30          Six Months Ended June 30  
     2014   2013        2014   2013

Gain on disposal of financial assets, net

                   

Available-for-sale financial assets

     $ 113,033       $ 172,398          $ 134,020       $ 990,713  

Financial assets carried at cost

       28,936         2,468            52,694         4,573  

Gain/(loss) on disposal of investments accounted for using equity method

       2,028,643         (248 )          2,028,643         (731 )

Gain on deconsolidation of subsidiary

       -         293,578            -         293,578  

Settlement income

       -         451,050            -         451,050  

Other gains

       66,911         94,023            114,524         186,610  

Net gain/(loss) on financial instruments at FVTPL

                   

Held for trading

       450,728         (408,731 )          554,838         (150,294 )

Impairment loss of financial assets

                   

Financial assets carried at cost

       -         (45,716 )          -         (45,716 )

Fair value hedges

                   

Loss from hedging instruments

       (914,921 )       (2,587,357 )          (589,243 )       (1,937,366 )

Gain arising from changes in fair value of available-for-sale financial assets in hedge effective portion

       406,070         2,416,999            78,109         1,657,824  

Other losses

       (2,751 )       (75,093 )          (153,552 )       (130,527 )
    

 

 

     

 

 

        

 

 

     

 

 

 
     $   2,176,649       $ 313,371          $   2,220,033       $  1,319,714  
    

 

 

     

 

 

        

 

 

     

 

 

 

 

27. INCOME TAX

 

  a.

Income tax expense recognized in profit or loss

Income tax expense consisted of the following:

 

     Three Months Ended June 30          Six Months Ended June 30  
     2014    2013        2014    2013

Current income tax expense (benefit)

                     

Current tax expense recognized in the current period

     $   11,103,041        $   6,030,509          $   17,122,994        $   11,018,835  

Income tax adjustments on prior years

       404,566          (634,420 )          404,566          (1,044,163 )

Other income tax adjustments

       111,171          (16,082 )          138,167          (12,284 )
    

 

 

      

 

 

        

 

 

      

 

 

 
       11,618,778          5,380,007            17,665,727          9,962,388  
    

 

 

      

 

 

        

 

 

      

 

 

 

(Continued)

 

- 32 -


       Three Months Ended June 30          Six Months Ended June 30    
         2014           2013           2014           2013    

Deferred income tax expense (benefit)

                  

Temporary differences

     $ 619,822        $ 6,394        $ (54,048 )     $ 1,014,867  

Investment tax credits and loss carryforward

       2,199,663          2,868,775          2,282,648         3,490,292  
    

 

 

      

 

 

      

 

 

     

 

 

 
       2,819,485          2,875,169          2,228,600         4,505,159  
    

 

 

      

 

 

      

 

 

     

 

 

 

Income tax expense recognized in profit or loss

     $    14,438,263        $     8,255,176        $   19,894,327       $   14,467,547  
    

 

 

      

 

 

      

 

 

     

 

 

 

(Concluded)

 

  b.

Income tax expense recognized in other comprehensive income

 

       Three Months Ended June 30          Six Months Ended June 30    
         2014           2013           2014            2013    

Deferred income tax expense (benefit)

                   

Related to unrealized gain/loss on available-for-sale financial assets

       $   14,079              $         29              $   11,123               $  (43,210)      

 

  c.

Integrated income tax information

 

    

June 30,

2014

     December 31,  
2013
  

June 30,

2013

    

Balance of the Imputation

                 

Credit Account - TSMC

     $    37,461,918        $    15,242,724        $    22,093,263     
    

 

 

      

 

 

      

 

 

    

The estimated and actual creditable ratio for distribution of TSMC’s earnings of 2013 and 2012 were 9.78% and 7.75 %, respectively.

Under the Rule No.10204562810 issued by the Ministry of Finance, when calculating the creditable ratio in the year of first-time adoption of Taiwan-IFRSs, the Company has included the adjustments to retained earnings from the effect of transition to Taiwan-IFRSs in the accumulated unappropriated earnings.

The imputation credit allocated to shareholders is based on its balance as of the date of the dividend distribution. The estimated creditable ratio may change when the actual distribution of the imputation credit is made.

All of TSMC’s earnings generated prior to December 31, 1997 have been appropriated.

 

  d.

Income tax examination

The tax authorities have examined income tax returns of TSMC through 2011. All investment tax credit adjustments assessed by the tax authorities have been recognized accordingly.

 

- 33 -


28. EARNINGS PER SHARE

 

       Three Months Ended June 30          Six Months Ended June 30    
     2014    2013    2014    2013

Basic EPS

   $2.30    $2.00    $4.15    $3.52

Diluted EPS

   $2.30    $2.00    $4.15    $3.52

 

  EPS

is computed as follows:

 

     Amounts
(Numerator)
     Number of
Shares
(Denominator)
(In Thousands)
     EPS (NT$)    

Three months ended June 30,2014

        

Basic EPS

        

Net income available to common shareholders of the parent

     $      59,702,284         25,929,328       $2.30    

Effect of dilutive potential common shares

                             -                     662      
        

Diluted EPS

        

Net income available to common shareholders of the parent (including effect of dilutive potential common shares)

     $      59,702,284         25,929,990       $2.30    
        

Three months ended June 30,2013

        

Basic EPS

        

Net income available to common shareholders of the parent

     $      51,807,725         25,928,299       $2.00    

Effect of dilutive potential common shares

                             -                  1,192      
        

Diluted EPS

        

Net income available to common shareholders of the parent (including effect of dilutive potential common shares)

     $      51,807,725         25,929,491       $2.00    
        

Six months ended June 30, 2014

        

Basic EPS

        

Net income available to common shareholders of the parent

     $    107,573,029         25,929,089       $4.15    

Effect of dilutive potential common shares

                             -                     880      
        

Diluted EPS

        

Net income available to common shareholders of the parent (including effect of dilutive potential common shares)

     $    107,573,029         25,929,969       $4.15    
        

 

(Continued)

 

- 34 -


     Amounts
(Numerator)
   Number of
Shares
(Denominator)
(In Thousands)
   EPS (NT$)    

Six months ended June 30, 2013

            

Basic EPS

            

Net income available to common shareholders of the parent

     $     91,384,601               25,927,130      $3.52    

Effect of dilutive potential common shares

       -          2,340     
    

 

 

      

 

 

      

Diluted EPS

            

Net income available to common shareholders of the parent (including effect of dilutive potential common shares)

     $     91,384,601               25,929,470      $3.52    
              

(Concluded)

If the Company may settle the obligation by cash, by issuing shares, or in combination of both cash and shares, profit sharing to employees which will be settled in shares should be included in the weighted average number of shares outstanding in calculation of diluted EPS, if the shares have a dilutive effect. The number of shares is estimated by dividing the amount of profit sharing to employees in stock by the closing price (after considering the dilutive effect of dividends) of the common shares at the end of the reporting period. Such dilutive effect of the potential shares needs to be included in the calculation of diluted EPS until profit sharing to employees to be settled in the form of common stocks are approved by the shareholders in the following year.

 

29. ADDITIONAL INFORMATION OF EXPENSES BY NATURE

 

       Three Months Ended June 30          Six Months Ended June 30    
     2014    2013    2014    2013

a.   Depreciation of property, plant and   equipment

                   

Recognized in cost of revenue

     $ 41,804,816         $ 34,427,466         $ 79,262,241         $ 67,470,119   

Recognized in operating expenses

       3,541,464           3,120,876           7,063,759           6,036,445   

Recognized in other operating income and expenses

       6,221           6,222           12,443           12,677   
    

 

 

      

 

 

      

 

 

      

 

 

 
     $ 45,352,501        $ 37,554,564        $ 86,338,443        $ 73,519,241  
    

 

 

      

 

 

      

 

 

      

 

 

 

b.   Amortization of intangible assets

                   

Recognized in cost of revenue

     $ 320,331         $ 281,530         $ 653,798         $ 576,662   

Recognized in operating expenses

       306,282           258,547           609,250           494,928   
    

 

 

      

 

 

      

 

 

      

 

 

 
     $ 626,613        $ 540,077        $ 1,263,048        $ 1,071,590  
    

 

 

      

 

 

      

 

 

      

 

 

 

 

- 35 -


       Three Months Ended June 30          Six Months Ended June 30    
     2014    2013    2014    2013

c.   Research and development costs
     expensed as incurred

     $   13,609,070        $   11,941,871        $   25,675,692        $   22,592,856  
    

 

 

      

 

 

      

 

 

      

 

 

 

d.   Employee benefits expenses

                   

Post-employment benefits

                   

Defined contribution plans

     $ 430,816         $ 403,779         $ 843,268         $ 788,237   

Defined benefit plans

       59,085           60,697           143,381           121,387   
    

 

 

      

 

 

      

 

 

      

 

 

 
       489,901          464,476          986,649          909,624  

Equity-settled share-based payments

       -           2,611           -           5,312   

Other employee benefits

       19,025,491           17,278,663           35,856,007           32,294,666   
    

 

 

      

 

 

      

 

 

      

 

 

 
     $ 19,515,392        $ 17,745,750        $ 36,842,656        $ 33,209,602  
    

 

 

      

 

 

      

 

 

      

 

 

 

Employee benefits expense summarized by function

                   

Recognized in cost of revenue

     $ 11,589,156         $ 10,576,504         $ 21,998,135         $ 19,925,928   

Recognized in operating expenses

       7,926,236           7,169,246           14,844,521           13,283,674   
    

 

 

      

 

 

      

 

 

      

 

 

 
     $ 19,515,392        $ 17,745,750        $ 36,842,656        $ 33,209,602  
    

 

 

      

 

 

      

 

 

      

 

 

 

 

30. DECONSOLIDATION OF SUBSIDIARY

Starting June 2013, the Company no longer has power to govern the financial and operating policies of Xintec due to the loss of power to cast the majority of votes at meetings of the Board of Directors; accordingly, the Company derecognized related assets, liabilities and noncontrolling interests of Xintec.

 

  a.

Consideration received

The Company did not receive any consideration in the deconsolidation of Xintec.

 

  b.

Analysis of assets and liabilities over which the Company lost control

 

     June 30, 2013

Current assets

    

Cash and cash equivalents

     $ 979,910   

Accounts receivable

       564,364   

Inventories

       213,133   

Others

       110,766   

Noncurrent assets

    

Property, plant and equipment

       5,595,040   

Others

       164,311   

Current liabilities

    

Accounts payable

       (1,571,289)   

Others

       (291,715)   

 

(Continued)

 

- 36 -


     June 30, 2013

Noncurrent liabilities

    

Loans

     $  (1,940,625

Others

       (27,472 )
    

 

 

 

Net assets deconsolidated

     $ 3,796,423  
    

 

 

 

(Concluded)

  c.

Gain on deconsolidation of subsidiary

 

    

Six Months
Ended June 30,

2013

Fair value of interest retained

     $   1,816,848  
    

 

 

 

Less:   Carrying amount of interest retained

    

    Net assets deconsolidated

       3,796,423  

    Noncontrolling interests

       (2,273,153 )
    

 

 

 
       1,523,270  
    

 

 

 

Gain on deconsolidation of subsidiary

     $ 293,578  
    

 

 

 

Gain on deconsolidation of subsidiary was included in other gains and losses for the six months ended June 30, 2013.

 

  d.

Net cash outflow arising from deconsolidation of the subsidiary

 

    

Six Months
Ended June 30,

2013

The balance of cash and cash equivalents deconsolidated

     $   979,910  

 

31. FINANCIAL INSTRUMENTS

 

  a.

Categories of financial instruments

    

June 30,

2014

     December 31,
2013
    

June 30,

2013

 

Financial assets

        

FVTPL

        

Held for trading derivatives

   $ 158,265       $ 90,353       $ 20,010   

Available-for-sale financial assets (Note)

     61,100,010         61,628,343         54,319,453   

Held-to-maturity financial assets

     299,230         1,795,949         700,576   

Loans and receivables

        

Cash and cash equivalents

     255,053,573         242,695,447         225,832,646   

Notes and accounts receivables (including related parties)

     86,887,160         71,941,634         80,340,331   

Other receivables

     4,364,503         1,422,795         3,804,679   

Refundable deposits

     2,476,534         2,519,031         2,412,290   
  

 

 

    

 

 

    

 

 

 
   $  410,339,275       $  382,093,552       $  367,429,985   
  

 

 

    

 

 

    

 

 

 

 

(Continued)

 

- 37 -


    

June 30,

2014

   December 31,
2013
  

June 30,

2013

Financial liabilities

              

FVTPL

              

Held for trading derivatives

     $ 19,418        $ 33,750        $ 136,515  

Derivative financial instruments in designated hedge accounting relationships

       5,559,559          5,481,616          1,813,291  

Amortized cost

              

Short-term loans

       34,705,206          15,645,000          31,466,400  

Accounts payable (including related parties)

       21,697,296          16,358,716          15,202,734  

Payables to contractors and equipment suppliers

       34,657,746          89,810,160          60,883,767  

Cash dividends payable

       77,785,851          -          77,773,307  

Accrued expenses and other current liabilities

       17,572,283          13,649,615          12,933,671  

Bonds payable

       210,869,059          210,767,625          169,801,262  

Long-term bank loans

       40,000          40,000          -  

Other long-term payables

       54,000          54,000          913,102  

Guarantee deposits (classified under other noncurrent liabilities)

       157,011          151,660          166,112  
    

 

 

      

 

 

      

 

 

 
     $  403,117,429        $  351,992,142        $  371,090,161  
    

 

 

      

 

 

      

 

 

 

(Concluded)

 

  Note:

Including financial assets carried at cost.

 

  b.

Financial risk management objectives

The Company seeks to ensure sufficient cost-efficient funding readily available when needed. The Company manages its exposure to foreign currency risk, interest rate risk, equity price risk, credit risk and liquidity risk with the objective to reduce the potentially adverse effects the market uncertainties may have on its financial performance.

The plans for material treasury activities are reviewed by Audit Committees and/or Board of Directors in accordance with procedures required by relevant regulations or internal controls. During the implementation of such plans, Corporate Treasury function must comply with certain treasury procedures that provide guiding principles for overall financial risk management and segregation of duties.

 

  c.

Market risk

The Company is exposed to the market risks arising from changes in foreign exchange rates, interest rates and the prices in equity investments, and utilizes some derivative financial instruments to reduce the related risks.

Foreign currency risk

Most of the Company’s operating activities are denominated in foreign currencies. Consequently, the Company is exposed to foreign currency risk. To protect against reductions in value and the volatility of future cash flows caused by changes in foreign exchange rates, the Company utilizes derivative financial instruments, including currency forward contracts and cross currency swaps, to hedge its currency exposure. These instruments help to reduce, but do not eliminate, the impact of foreign currency exchange rate movements.

 

- 38 -


The Company also holds short-term borrowings in foreign currencies in proportion to its expected future cash flows. This allows foreign-currency-denominated borrowings to be serviced with expected future cash flows and provides a partial hedge against transaction translation exposure.

The Company’s sensitivity analysis to foreign currency risk mainly focuses on the foreign currency monetary items at the end of the reporting period. Assuming an unfavorable 10% movement in the levels of foreign exchanges against the New Taiwan dollar, the net income for the six months ended June 30, 2014 and 2013 would have decreased by NT$686,238 thousand and NT$331,962 thousand, respectively, after taking into consideration of the hedging contracts and the hedged items.

Interest rate risk

The Company is exposed to interest rate risk arising from borrowing at both fixed and floating interest rates. All of the Company’s long-term bonds have fixed interest rates and are measured at amortized cost. As such, changes in interest rates would not affect the future cash flows. On the other hand, because interest rates of the Company’s long-term bank loans are floating, changes in interest rates would affect the future cash flows but not the fair value.

Assuming the amount of floating interest rate bank loans at the end of the reporting period had been outstanding for the entire period and all other variables were held constant, a hypothetical increase in interest rates of 100 basis point (1%) would have resulted in an increase in the interest expense, net of tax, by approximately NT$166 thousand for the six months ended June 30, 2014.

Other price risk

The Company is exposed to equity price risk arising from available-for-sale equity investments. To reduce the equity price risk, the Company utilizes some stock forward contracts to partially hedge its exposure.

Assuming a hypothetical decrease of 5% in equity prices of the equity investments at the end of the reporting period, the net income for the six months ended June 30, 2014 and 2013 would have been unaffected as they were classified as available-for-sale; however, the other comprehensive income for the six months ended June 30, 2014 and 2013 would have decreased by NT$128,251 thousand and NT$1,879,083 thousand, respectively.

 

  d.

Credit risk management

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Company. The Company is exposed to credit risk from operating activities, primarily trade receivables, and from financing activities, primarily deposits, fixed-income investments and other financial instruments with banks. Credit risk is managed separately for business related and financial related exposures. As of the end of the reporting period, the Company’s maximum credit risk exposure is mainly from the carrying amount of financial assets recognized in the consolidated balance sheet.

Business related credit risk

The Company has considerable trade receivables outstanding with its customers worldwide. A substantial majority of the Company’s outstanding trade receivables are not covered by collateral or credit insurance. While the Company has procedures to monitor and limit exposure to credit risk on trade receivables, there can be no assurance such procedures will effectively limit its credit risk and avoid losses. This risk is heightened during periods when economic conditions worsen.

 

- 39 -


As of June 30, 2014, December 31, 2013 and June 30, 2013, the Company’s ten largest customers accounted for 67%, 68% and 69% of accounts receivable, respectively. The Company believes the concentration of credit risk is insignificant for the remaining accounts receivable.

Financial credit risk

The Company regularly monitors and reviews the transaction limit applied to counterparties and adjusts the concentration limit according to market conditions and the credit standing of the counterparties. The Company mitigates its exposure by selecting counterparties with investment-grade credit ratings.

 

  e.

Liquidity risk management

The objective of liquidity risk management is to ensure the Company has sufficient liquidity to fund its business requirements associated with existing operations over the next 12 months. The Company manages its liquidity risk by maintaining adequate cash and banking facilities.

As of June 30, 2014, December 31, 2013 and June 30, 2013, the unused of financing facilities of the Company amounted to NT$60,718,188 thousand, NT$76,689,543 thousand and NT$55,098,102 thousand, respectively.

The table below summarizes the maturity profile of the Company’s financial liabilities based on contractual undiscounted payments, including principal and interest.

 

    

Less Than

1 Year

    2-3 Years     4-5 Years      5+ Years      Total  

June 30, 2014

            

Non-derivative financial liabilities

            

Short-term loans

   $ 34,713,484      $ -      $ -       $ -       $ 34,713,484   

Accounts payable (including related parties)

     21,697,296        -        -         -         21,697,296   

Payables to contractors and equipment suppliers

     34,657,746        -        -         -         34,657,746   

Accrued expenses and other current liabilities

     17,572,283        -        -         -         17,572,283   

Bonds payable

     3,038,196        38,216,868        98,612,394         85,318,276         225,185,734   

Long-term bank loans

     1,450        15,079        21,208         7,579         45,316   

Other long-term payables

     36,000        18,000        -         -         54,000   

Obligations under finance leases

     27,921        55,843        753,300         -         837,064   

Guarantee deposits (classified under other noncurrent liabilities)

     -        157,011        -         -         157,011   
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 
         111,744,376            38,462,801            99,386,902             85,325,855             334,919,934   
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

Derivative financial instruments

            

Forward exchange contracts

            

Outflows

     21,906,386        -        -         -         21,906,386   

Inflows

     (21,976,316     -        -         -         (21,976,316
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 
     (69,930     -        -         -         (69,930
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

Cross currency swap contracts

            

Outflows

     28,436,568        -        -         -         28,436,568   

Inflows

     (28,543,835     -        -         -         (28,543,835
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 
     (107,267     -        -         -         (107,267
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

Stock forward contracts

            

Outflows

     42,712,852        10,162,117        -         -         52,874,969   

Inflows

     (42,712,852     (10,162,117     -         -         (52,874,969
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 
     -        -        -         -         -   
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 
   $ 111,567,179      $ 38,462,801      $ 99,386,902       $ 85,325,855       $ 334,742,737   
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

 

(Continued)

 

- 40 -


    

Less Than

1 Year

    2-3 Years     4-5 Years      5+ Years      Total  

December 31, 2013

            

Non-derivative financial liabilities

            

Short-term loans

   $ 15,646,783      $ -      $ -       $ -       $ 15,646,783   

Accounts payable (including related parties)

     16,358,716        -        -         -         16,358,716   

Payables to contractors and equipment suppliers

     89,810,160        -        -         -         89,810,160   

Accrued expenses and other current liabilities

     13,649,615        -        -         -         13,649,615   

Bonds payable

     3,036,130        28,388,887        100,830,341         94,360,103         226,615,461   

Long-term bank loans

     1,450        10,275        21,571         12,746         46,042   

Other long-term payables

     18,000        36,000        -         -         54,000   

Obligations under finance leases

     28,376        56,752        793,951         -         879,079   

Guarantee deposits (classified under other noncurrent liabilities)

     -        151,660        -         -         151,660   
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 
     138,549,230        28,643,574        101,645,863         94,372,849         363,211,516   
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

Derivative financial instruments

            

Forward exchange contracts

            

Outflows

     29,608,952        -        -         -         29,608,952   

Inflows

     (29,605,246     -        -         -         (29,605,246
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 
     3,706        -        -         -         3,706   
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

Cross currency swap contracts

            

Outflows

     1,639,215        -        -         -         1,639,215   

Inflows

     (1,641,384     -        -         -         (1,641,384
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 
     (2,169     -        -         -         (2,169
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

Stock forward contracts

            

Outflows

     -        37,431,626        -         -         37,431,626   

Inflows

     -        (37,431,626     -         -         (37,431,626
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 
     -        -        -         -         -   
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 
   $ 138,550,767      $ 28,643,574      $ 101,645,863       $ 94,372,849       $ 363,213,053   
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

June 30, 2013

            

Non-derivative financial liabilities

            

Short-term loans

   $ 31,470,473      $ -      $ -       $ -       $ 31,470,473   

Accounts payable (including related parties)

     15,202,734        -        -         -         15,202,734   

Payables to contractors and equipment suppliers

     60,883,767        -        -         -         60,883,767   

Cash dividends payable

     77,773,307        -        -         -         77,773,307   

Accrued expenses and other current liabilities

     12,933,671        -        -         -         12,933,671   

Bonds payable

     2,368,241        15,201,201        97,982,526         66,672,284         182,224,252   

Other long-term payables

     877,102        36,000        -         -         913,102   

Obligations under finance leases

     28,144        56,288        56,289         731,168         871,889   

Guarantee deposits

     -        166,112        -         -         166,112   
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 
     201,537,439        15,459,601        98,038,815         67,403,452         382,439,307   
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

Derivative financial instruments

            

Forward exchange contracts

            

Outflows

     26,579,381        -        -         -         26,579,381   

Inflows

     (26,487,571     -        -         -         (26,487,571
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 
     91,810        -        -         -         91,810   
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

Cross currency swap contracts

            

Outflows

     1,200,176        -        -         -         1,200,176   

Inflows

     (1,201,117     -        -         -         (1,201,117
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 
     (941     -        -         -         (941
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

Stock forward contracts

            

Outflows

     -        14,753,429        -         -         14,753,429   

Inflows

     -        (14,753,429     -         -         (14,753,429
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 
     -        -        -         -         -   
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 
   $   201,628,308      $     15,459,601      $     98,038,815       $     67,403,452       $   382,530,176   
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

 

(Concluded)

 

- 41 -


  f.

Fair value of financial instruments

 

  1)

Fair value of financial instruments carried at amortized cost

 

    

Except as detailed in the following table, the Company considers that the carrying amounts of financial assets and financial liabilities recognized in the consolidated financial statements approximate their fair values.

 

     June 30, 2014    December 31, 2013    June 30, 2013     
     Carrying
Amount
   Fair Value    Carrying
Amount
   Fair Value    Carrying
Amount
   Fair Value     

Financial assets

                                

Held-to-maturity financial assets

                                

Commercial paper

     $ 299,230        $ 299,857        $ 1,795,949        $ 1,795,612        $ -        $ -     

Corporate bonds

       -          -          -          -          700,576          704,777     

Financial liabilities

                                

Measured at amortized cost

                                

Bonds payable

       210,869,059          210,756,224          210,767,625          208,649,668          169,801,262          168,643,055     

 

  2)

Fair value measurements recognized in the consolidated balance sheets

 

    

The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable:

 

   

Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities;

 

   

Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

 

   

Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).

 

    June 30, 2014
         Level 1      Level 2      Level 3      Total      

Financial assets at FVTPL

               

Derivative financial instruments

     $ -       $ 158,265       $ -       $ 158,265     
    

 

 

    

 

 

    

 

 

    

 

 

   

Available-for-sale financial assets

               

Publicly traded stocks

     $ 59,082,115       $ -       $ -       $ 59,082,115     

Money market funds

       367         -         -         367     
    

 

 

    

 

 

    

 

 

    

 

 

   
     $  59,082,482       $ -       $               -       $  59,082,482     
    

 

 

    

 

 

    

 

 

    

 

 

   

Financial liabilities at FVTPL

               

Derivative financial instruments

     $ -       $ 19,418       $ -       $ 19,418     
    

 

 

    

 

 

    

 

 

    

 

 

   

Hedging derivative financial liabilities

               

Stock forward contract

     $ -       $   5,559,559       $ -       $ 5,559,559     
    

 

 

    

 

 

    

 

 

    

 

 

   

 

- 42 -


     December 31, 2013
     Level 1    Level 2    Level 3    Total     

Financial assets at FVTPL

                      

Derivative financial instruments

     $ -        $ 90,353        $               -        $ 90,353     
    

 

 

      

 

 

      

 

 

      

 

 

      

Available-for-sale financial assets

                      

Publicly traded stocks

     $ 59,481,569        $ -        $ -        $ 59,481,569     

Money market funds

       1,183          -          -          1,183     
    

 

 

      

 

 

      

 

 

      

 

 

      
     $ 59,482,752        $ -        $ -        $ 59,482,752     
    

 

 

      

 

 

      

 

 

      

 

 

      

Financial liabilities at FVTPL

                      

Derivative financial instruments

     $ -        $ 33,750        $ -        $ 33,750     
    

 

 

      

 

 

      

 

 

      

 

 

      

Hedging derivative financial liabilities

                      

Stock forward contract

     $ -        $ 5,481,616        $ -        $ 5,481,616     
    

 

 

      

 

 

      

 

 

      

 

 

      
     June 30, 2013     
     Level 1    Level 2    Level 3    Total     

Financial assets at FVTPL

                      

Derivative financial instruments

     $ -        $ 20,010        $ -        $ 20,010     
    

 

 

      

 

 

      

 

 

      

 

 

      

Available-for-sale financial assets

                      

Publicly traded stocks

     $ 50,643,339        $ -        $ -        $ 50,643,339     

Money market funds

       8,417          -          -          8,417     
    

 

 

      

 

 

      

 

 

      

 

 

      
     $  50,651,756        $ -        $ -        $  50,651,756     
    

 

 

      

 

 

      

 

 

      

 

 

      

Financial liabilities at FVTPL

                      

Derivative financial instruments

     $ -        $ 136,515        $ -        $ 136,515     
    

 

 

      

 

 

      

 

 

      

 

 

      

Hedging derivative financial liabilities

                      

Stock forward contract

     $ -        $     1,813,291        $ -        $ 1,813,291     
    

 

 

      

 

 

      

 

 

      

 

 

      

 

    

There were no transfers between Level 1 and 2 for the six months ended June 30, 2014 and 2013, respectively.

 

    

There were no purchases and disposals for assets on Level 3 for the six months ended June 30, 2014 and 2013, respectively.

 

  3)

Valuation techniques and assumptions used in fair value measurement

 

    

The fair values of financial assets and financial liabilities are determined as follows:

 

   

The fair values of financial assets and financial liabilities with standard terms and conditions and traded on active liquid markets are determined with reference to quoted market prices (includes publicly traded stocks and money market funds).

 

- 43 -


   

Forward exchange contracts and cross currency swap contracts are measured using quoted forward exchange rates and yield curves derived from quoted interest rates matching maturities of the contracts; and stock forward contracts are measured at the difference between the present value of stock forward price discounted based on the applicable yield curve derived from quoted interest rates and the stock spot price.

 

   

The fair values of other financial assets and financial liabilities are determined in accordance with generally accepted pricing models based on discounted cash flow analysis.

 

32. RELATED PARTY TRANSACTIONS

Intercompany balances and transactions between TSMC and its subsidiaries, which are related parties of TSMC, have been eliminated upon consolidation; therefore those items are not disclosed in this note. The following is a summary of transactions between the Company and other related parties:

 

  a.

Net Revenue

 

               Three Months Ended June 30                 Six Months Ended June 30      
              2014          2013              2014          2013      
Item    Related Party Categories                                                    

Net revenue from sale of goods

   Associates      $ 1,000,358         $ 932,700           $ 1,993,064         $ 1,617,486     
   Joint venture        315           311             650           839     
       

 

 

      

 

 

        

 

 

      

 

 

   
        $ 1,000,673         $ 933,011           $ 1,993,714         $ 1,618,325     
       

 

 

      

 

 

        

 

 

      

 

 

   

Net revenue from royalties

   Associates      $ 127,574         $ 127,829           $ 255,064         $ 248,245     
       

 

 

      

 

 

        

 

 

      

 

 

   

 

  b.

Purchases

 

           Three Months Ended June 30           Six Months Ended June 30     
              2014           2013               2014           2013       
Related Party Categories                                                             

Associates

        $   3,235,213          $   2,173,451            $       5,851,848          $   4,270,005      
       

 

 

       

 

 

         

 

 

       

 

 

    

 

  c.

Receivables from related parties

 

            

June 30,

2014

              

December 31,

2013

         

June 30,

2013

      
Item       Related Party Categories                                         

Receivables from related parties

    Associates    $ 462,704             $ 291,376          $ 597,459      
    Joint venture      28               332            164      
      

 

 

          

 

 

       

 

 

    
       $ 462,732             $ 291,708          $ 597,623      
      

 

 

          

 

 

       

 

 

    

Other receivables from related parties

    Associates    $      2,875,842             $      221,576          $    2,433,325      
      

 

 

          

 

 

       

 

 

    
                        

 

- 44 -


  d.

Payables to related parties

 

         

June 30,

2014

  

December 31,

2013

  

June 30,

2013

    
Item    Related Party Categories                    

Payables to related parties

   Associates      $ 1,679,807        $ 1,687,239        $ 808,388     
   Joint venture        1,974          1,217          2,807     
       

 

 

      

 

 

      

 

 

      
        $   1,681,781        $ 1,688,456        $       811,195     
       

 

 

      

 

 

      

 

 

      

 

  e.

Acquisition of property, plant and equipment and intangible assets

 

     Acquisition Price
       Three Months Ended June 30          Six Months Ended June 30    
          2014           2013                2014           2013       
Related Party Categories                                                          

Associates

      $             -          $   11,835             $             -          $   11,835      
     

 

 

       

 

 

          

 

 

       

 

 

    

 

  f.

Disposal of property, plant and equipment

 

     Proceeds
       Three Months Ended June 30          Six Months Ended June 30    
          2014           2013                2014           2013       
Related Party Categories                                                          

Associates

      $ 15,817          $         -             $ 15,817          $ 11,418      
     

 

 

       

 

 

          

 

 

       

 

 

    

 

     Gains (Losses)
       Three Months Ended June 30          Six Months Ended June 30    
          2014           2013               2014           2013       
Related Party Categories                                                         

Associates

      $   15,817          $ (398         $   15,817          $ 2,565      

Joint venture

        -                  58              -            116      
     

 

 

       

 

 

         

 

 

       

 

 

    
      $ 15,817          $ (340         $ 15,817          $   2,681      
     

 

 

       

 

 

         

 

 

       

 

 

    

 

       Deferred Gains (Losses) from Disposal of Property,  
Plant and Equipment
         

June 30,

2014

         

December 31,

2013

         

June 30,

2013

     
Related Party Categories                                        

Associates

      $ -          $ -          $ (10,320  

Joint venture

        -            -            832     
     

 

 

       

 

 

       

 

 

   
      $           -          $           -          $ (9,488  
     

 

 

       

 

 

       

 

 

   

 

- 45 -


  g.

Others

 

         

June 30,

2014

  

December 31,

2013

  

June 30,

2013

   
Item    Related Party Categories                   

Refundable deposits

   Associates      $   5,813        $  5,813        $   5,813    
       

 

 

      

 

 

      

 

 

     

 

             Three Months Ended June 30             Six Months Ended June 30      
              2014          2013              2014          2013      
Item    Related Party Categories                                                    

Manufacturing expenses

   Associates      $ 651,522         $ 6,380           $ 1,129,860         $ 12,752     
   Joint venture        2,109           2,645             4,695           3,502     
       

 

 

      

 

 

        

 

 

      

 

 

   
        $ 653,631         $ 9,025           $ 1,134,555         $ 16,254     
       

 

 

      

 

 

        

 

 

      

 

 

   

Research and development expenses

   Associates      $ 45,302         $ -           $ 53,333         $ -     
   Joint venture        233           2,267             841           3,458     
       

 

 

      

 

 

        

 

 

      

 

 

   
        $ 45,535         $ 2,267           $ 54,174         $ 3,458     
       

 

 

      

 

 

        

 

 

      

 

 

   

The sales prices and payment terms to related parties were not significantly different from those of sales to third parties. For other related party transactions, price and terms were determined in accordance with mutual agreements.

The Company leased machinery and equipment from Xintec. The lease terms and prices were determined in accordance with mutual agreements. The rental expense was paid quarterly and the related expense was classified under manufacturing expenses.

The Company deferred the disposal gain/loss derived from sales of property, plant and equipment to related parties (transactions with associates and joint venture), and then recognized such gain/loss over the depreciable lives of the disposed assets.

 

  h.

Compensation of key management personnel:

The compensation to directors and other key management personnel for the six months ended June 30, 2014 and 2013 were as follows:

 

      Three Months Ended June 30         Six Months Ended June 30    
         2014          2013              2014          2013      

Short-term employee benefits

     $ 430,685         $ 463,386           $ 763,022         $ 630,966     

Post-employment benefits

       976           1,177             33,930           2,348     
    

 

 

      

 

 

        

 

 

      

 

 

   
     $ 431,661         $ 464,563           $ 796,952         $ 633,314     
    

 

 

      

 

 

        

 

 

      

 

 

   

The compensation to directors and other key management personnel were determined by the Compensation Committee of TSMC in accordance with the individual performance and the market trends.

 

- 46 -


33. PLEDGED ASSETS

The Company provided certificate of deposits recorded in other financial assets as collateral mainly for building lease agreements. As of June 30, 2014, December 31, 2013 and June 30, 2013, the aforementioned other financial assets amounted to NT$120,705 thousand, NT$120,566 thousand and NT$120,987 thousand, respectively.

 

34. SIGNIFICANT OPERATING LEASE ARRANGEMENTS

The Company leases several parcels of land, factory and office premises from the Science Park Administration and entered into lease agreements for its office premises and certain office equipment located in the United States, Europe, Japan, Shanghai and Taiwan. These operating leases expire between September 2014 and February 2034 and can be renewed upon expiration.

Future minimum lease payments under the above non-cancellable operating leases are as follows:

 

    

June 30,

2014

   December 31,
2013
  

June 30,

2013

Not later than 1 year

     $ 872,608        $ 859,070        $ 841,055   

Later than 1 year and not later than 5 years

       2,959,087          3,053,029          3,125,895  

Later than 5 years

       5,215,876          5,534,848          5,867,588  
    

 

 

      

 

 

      

 

 

 
     $   9,047,571        $   9,446,947        $   9,834,538  
    

 

 

      

 

 

      

 

 

 

 

35. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNIZED COMMITMENTS

Significant contingent liabilities and unrecognized commitments of the Company as of the end of the reporting period, excluding those disclosed in other notes, were as follows:

 

  a.

Under a technical cooperation agreement with Industrial Technology Research Institute, the R.O.C. Government or its designee approved by TSMC can use up to 35% of TSMC’s capacity provided TSMC’s outstanding commitments to its customers are not prejudiced. The term of this agreement is for five years beginning from January 1, 1987 and is automatically renewed for successive periods of five years unless otherwise terminated by either party with one year prior notice. As of June 30, 2014, the R.O.C. Government did not invoke such right.

 

  b.

Under a Shareholders Agreement entered into with Philips and EDB Investments Pte Ltd. on March 30, 1999, the parties formed a joint venture company, SSMC, which is an integrated circuit foundry in Singapore. TSMC’s equity interest in SSMC was 32%. Nevertheless, in September 2006, Philips spun-off its semiconductor subsidiary which was renamed as NXP B.V. Further, TSMC and NXP B.V. purchased all the SSMC shares owned by EDB Investments Pte Ltd. pro rata according to the Shareholders Agreement on November 15, 2006. After the purchase, TSMC and NXP B.V. currently own approximately 39% and 61% of the SSMC shares, respectively. TSMC and NXP B.V. are required, in the aggregate, to purchase at least 70% of SSMC’s capacity, but TSMC alone is not required to purchase more than 28% of the capacity. If any party defaults on the commitment and the capacity utilization of SSMC falls below a specific percentage of its capacity, the defaulting party is required to compensate SSMC for all related unavoidable costs. There was no default from the aforementioned commitment as of June 30, 2014.

 

- 47 -


  c.

In June 2010, Keranos, LLC. filed a complaint in the U.S. District Court for the Eastern District of Texas alleging that TSMC, TSMC North America, and several other leading technology companies infringe three expired U.S. patents. In response, TSMC, TSMC North America, and several co-defendants in the Texas case filed a lawsuit against Keranos in the U.S. District Court for the Northern District of California in November 2010, seeking a judgment declaring that they did not infringe the asserted patents, and that those patents are invalid. These two litigations have been consolidated into a single lawsuit in the U.S. District Court for the Eastern District of Texas. In February 2014, the Court entered a final judgment in favor of TSMC, dismissing all of Keranos’ claims against TSMC with prejudice. In March, 2014, Keranos filed a notice of appeal to the U.S. Court of Appeals for the Federal Circuit. The outcome cannot be determined and the Company cannot make a reliable estimate of the contingent liability at this time.

 

  d.

In December 2010, Ziptronix, Inc. filed a complaint in the U.S. District Court for the Northern District of California accusing TSMC, TSMC North America and one other company of infringing several U.S. patents. The outcome cannot be determined and the Company cannot make a reliable estimate of the contingent liability at this time.

 

  e.

TSMC joined the Customer Co-Investment Program of ASML and entered into the investment agreement in August 2012. The agreement includes an investment of EUR837,816 thousand by TSMC Global to acquire 5% of ASML’s equity with a lock-up period of 2.5 years. TSMC Global has acquired the aforementioned equity on October 31, 2012. Both parties also signed the research and development funding agreement whereby TSMC shall provide EUR276,000 thousand to ASML’s research and development programs from 2013 to 2017. As of June 30, 2014, TSMC has paid EUR82,637 thousand to ASML under the research and development funding agreement.

 

  f.

In September 2013, Zond Inc. filed a complaint in U.S. District Court for the District of Massachusetts against TSMC, certain TSMC subsidiaries and other companies. Both sides have since then taken a number of further legal actions. The outcome cannot be determined and the Company cannot make a reliable estimate of the contingent liability at this time.

 

  g.

In December 2013, Tela Innovations (Tela), Inc. filed complaints in the U.S. District Court for the District of Delaware and in the United States International Trade Commission (ITC) accusing TSMC and TSMC North America of infringing one U.S. patent. The Delaware case had been stayed since February 2014. In March 2014, the ITC Court granted Tela’s motion to assert an additional U.S. patent against TSMC and TSMC North America. In January 2014, TSMC filed a lawsuit in the U.S. District Court for the District of North California against Tela for trade secret misappropriation and breach of contract. The outcome cannot be determined and the Company cannot make a reliable estimate of the contingent liability at this time.

 

  h.

In March 2014, DSS Technology Management, Inc. filed a complaint in the U.S. District Court for the Eastern District of Texas alleging that TSMC, TSMC North America, TSMC Development, Inc., and several other companies infringe one U.S. patent. The outcome cannot be determined and the Company cannot make a reliable estimate of the contingent liability at this time.

 

  i.

Amounts available under unused letters of credit as of June 30, 2014, December 31, 2013 and June 30, 2013 were NT$89,568 thousand, NT$89,400 thousand and NT$89,904 thousand, respectively.

 

- 48 -


36. EXCHANGE RATE INFORMATION OF FOREIGN-CURRENCY FINANCIAL ASSETS AND LIABILITIES

The significant financial assets and liabilities denominated in foreign currencies were as follows:

 

    

Foreign
Currencies

(In Thousands)

     Exchange Rate
(Note)
     Carrying
Amount
 

June 30, 2014

        

Financial assets

        

Monetary items

        

USD

     $       3,462,413           29.856        $   103,373,806   

EUR

     71,378           40.75          2,908,664   

JPY

     739,275           0.2946          217,790   

Non-monetary items

        

HKD

     184,891           3.85          711,832   

Financial liabilities

        

Monetary items

        

USD

     2,299,423           29.856          68,651,575   

EUR

     132,123           40.75          5,383,995   

JPY

     41,879,354           0.2946          12,337,658   

December 31, 2013

        

Financial assets

        

Monetary items

        

USD

     2,756,090           29.800          82,131,493   

EUR

     451,162           41.00          18,497,657   

JPY

     41,386,551           0.2834          11,728,949   

Non-monetary items

        

HKD

     168,334           3.84          646,402   

Financial liabilities

        

Monetary items

        

USD

     2,026,958           29.800          60,403,358   

EUR

     811,202           41.00          33,259,299   

JPY

     71,931,749           0.2834          20,385,458   

 

(Continued)

 

- 49 -


    

Foreign
Currencies

(In Thousands)

     Exchange Rate
(Note)
     Carrying
Amount
 

June 30, 2013

        

Financial assets

        

Monetary items

        

USD

     $      2,986,106           29.968        $     89,487,636   

EUR

     184,157           39.08          7,196,873   

JPY

     30,579,928           0.3033          9,274,892   

Non-monetary items

        

HKD

     157,296           3.86          607,161   

Financial liabilities

        

Monetary items

        

USD

     2,234,044           29.968          66,949,819   

EUR

     449,239           39.08          17,556,264   

JPY

     57,704,049           0.3033          17,501,638   

(Concluded)

 

  Note:

Exchange rate represents the number of N.T. dollars for which one foreign currency could be exchanged.

 

37. OPERATING SEGMENTS INFORMATION

 

  a.

Operating segments

The Company’s only reportable segment is the foundry segment. The foundry segment engages mainly in the manufacturing, selling, packaging, testing and computer-aided design of integrated circuits and other semiconductor devices and the manufacturing of masks. The Company also had other operating segments that did not exceed the quantitative threshold for separate reporting. These segments mainly engage in the researching, developing, designing, manufacturing and selling of solid state lighting devices and renewable energy and efficiency related technologies and products.

The Company uses the income from operations as the measurement for segment profit and the basis of performance assessment. There was no material differences between the accounting policies of the operating segment and the accounting policies described in Note 4.

 

  b.

Segment revenue and operating results

 

     Foundry      Others     Elimination       Total  

Three months ended June 30, 2014

         

Net revenue from external customers

   $   182,820,998       $         199,486      $                   -      $   183,020,484   

Net revenue from sales among intersegments

     -         12,323        (12,323     -   

Income from operations

     71,374,561         (660,642     -        70,713,919   

 

(Continued)

 

- 50 -


     Foundry      Others     Elimination       Total  

Three months ended June 30, 2013

         

Net revenue from external customers

     155,802,306         84,014        -        155,886,320   

Net revenue from sales among intersegments

     -         5,660        (5,660     -   

Income from operations

     58,289,165         (660,083     -        57,629,082   

Six months ended June 30, 2014

         

Net revenue from external customers

     330,896,123         339,533        -        331,235,656   

Net revenue from sales among intersegments

     -         26,895        (26,895     -   

Income from operations

     124,575,031         (1,338,752     -        123,236,279   

Six months ended June 30, 2013

         

Net revenue from external customers

     288,483,842         157,474        -        288,641,316   

Net revenue from sales among intersegments

     -         5,898        (5,898     -   

Income from operations

     103,400,482         (1,343,391     -        102,057,091  

(Concluded)

 

38. ADDITIONAL DISCLOSURES

Following are the additional disclosures required by the Securities and Futures Bureau (SFB) for TSMC:

 

  a.

Financings provided:    Please see Table 1 attached;

 

  b.

Endorsement/guarantee provided:    Please see Table 2 attached;

 

  c.

Marketable securities held (excluding investments in subsidiaries, associates and jointly controlled entities):    Please see Table 3 attached;

 

  d.

Marketable securities acquired and disposed of at costs or prices of at least NT$300 million or 20% of the paid-in capital:    Please see Table 4 attached;

 

  e.

Acquisition of individual real estate properties at costs of at least NT$300 million or 20% of the paid-in capital:    Please see Table 5 attached;

 

  f.

Disposal of individual real estate properties at prices of at least NT$300 million or 20% of the paid-in capital:    None;

 

  g.

Total purchases from or sales to related parties of at least NT$100 million or 20% of the paid-in capital:    Please see Table 6 attached;

 

  h.

Receivables from related parties amounting to at least NT$100 million or 20% of the paid-in capital:    Please see Table 7 attached;

 

  i.

Information about the derivative financial instruments transaction:    Please see Notes 7 and 10;

 

  j.

Others:    The business relationship between the parent and the subsidiaries, and significant transactions between them:    Please see Table 8 attached;

 

- 51 -


  k.

Names, locations, and related information of investees over which TSMC exercises significant influence (excluding information on investment in Mainland China):    Please see Table 9 attached;

 

  l.

Information on investment in Mainland China

 

  1)

The name of the investee in Mainland China, the main businesses and products, its issued capital, method of investment, information on inflow or outflow of capital, percentage of ownership, income (losses) of the investee, share of profits/losses of investee, ending balance, amount received as dividends from the investee, and the limitation on investee:    Please see Table 10 attached.

 

  2)

Significant direct or indirect transactions with the investee, its prices and terms of payment, unrealized gain or loss, and other related information which is helpful to understand the impact of investment in Mainland China on financial reports:    Please see Table 8 attached.

 

- 52 -


TABLE 1

 

Taiwan   Semiconductor Manufacturing Company Limited and Subsidiaries

FINANCINGS PROVIDED

FOR THE SIX MONTHS ENDED JUNE 30, 2014

(Amounts in Thousands of New Taiwan Dollars, Unless Specified Otherwise)

 

 

No.   Finan-
cing
Company
  Counter-
party
  Financial
      Statement      
Account
  Related
Party
 

Maximum

Balance
for
the Period
(US$ in
Thousands)

(Note 3)

 

Ending
Balance

(US$ in
Thousands)

(Note 3)

 

Amount
Actually
Drawn

(US$ in
Thousands)

  Interest
Rate
  Nature for
Financing
  Transac-
tion
Amounts
    Reason
for
Financing
  Allow-
ance
for
Bad
Debt
    Collateral    

Financing
Limits for
Each
Borrowing
Company

(Note 1)

   

Financing
Company’s
Total
Financing
Amount
Limits

(Note 2)

 
                         

 

Item

 

   

 

Value

 

     

 

1

 

 

TSMC
Partners

 

 

TSMC
Solar

 

 

Other receivables from related parties

 

 

Yes

 

 

 $  4,179,840

(US$
140,000)

 

 

 $  4,179,840

(US$
140,000)

 

 

 $  3,284,160

(US$
110,000)

 

 

0.37%-0.3805%

 

 

The need for  
short-term financing

 

 

 $

 

-

 

  

 

 

Operating
capital

 

 

 $

 

-

 

  

 

 

 

 

-

 

  

 

 

 $

 

-

 

  

 

 

 $

 

  17,566,701

 

  

 

 

 $

 

  43,916,752

 

  

        TSMC
SSL
 

Other receivables from related parties

 

  Yes   1,791,360

(US$
60,000)

  1,791,360

(US$
60,000)

  597,120

(US$
20,000)

  0.37%  

The need for short-term financing

    -      Operating
capital
    -        -        -        17,566,701        43,916,752   

 

Note 1:

 

The total amount for lending to a company for funding for a short-term period shall not exceed ten percent (10%) of the net worth of TSMC Partners. In addition, the total amount lendable to any one borrower shall be no more than thirty percent (30%) of the borrower’s net worth. The above restriction does not apply to the subsidiaries whose voting shares are 90% and up owned, directly or indirectly, by TSMC (90% and up owned subsidiaries). However, the aggregate amounts lendable to 90% and up owned subsidiaries and the total amount lendable to one such borrower of 90% and up owned subsidiaries shall not exceed forty percent (40%) of the net worth of TSMC Partners.

Note 2:

 

The total amount available for lending purpose shall not exceed the net worth of TSMC Partners.

Note 3:

 

The maximum balance for the period and ending balance represent the amounts approved by the Board of Directors.

 

- 53 -


TABLE 2

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

ENDORSEMENTS/GUARANTEES PROVIDED

FOR THE SIX MONTHS ENDED JUNE 30, 2014

(Amounts in Thousands of New Taiwan Dollars, Unless Specified Otherwise)

 

 

No.    

Endorse-

ment/ 

Guarantee 
Provider 

  Guaranteed Party  

Limits

on Endorse-

ment/  
Guarantee
Amount
Provided

to

Each
Guaranteed
Party

(Notes

1 and 2)

   

Maximum
Balance
for

the

Period
(US$ in
Thousands)

(Note 3)

   

Ending Balance
(US$ in
Thousands)

(Note 3)

   

Amount
Actually
Drawn

(US$ in
Thousands)

   

Amount

of Endorse-

ment/
Guarantee
Collateralized
by

Properties

   

Ratio

of

Accumu-

lated
Endorse-

ment/
Guarantee

to

Net

Equity

per

Latest
Financial
Statements

 

Maximum
Endorse-

ment/
Guarantee
Amount
Allowable

(Note 2)

   

Guarantee 

Provided
by

Parent
Company

 

Guarantee 

Provided
by A
Subsidiary

 

Guarantee

Provided

to
Subsidiaries
in
Mainland
China

   

 

Name  

 

 

 

 

 

Nature

of
Relationship 

                   
                           

0  

  TSMC   TSMC
Global
  Subsidiary   $   219,196,629         

 

 

 $      44,784,000

(US$  1,500,000

 

  

 

   

 

 $      44,784,000

(US$  1,500,000

  

   

 

 $      44,784,000

(US$  1,500,000

  

   $ -      5.1%   $   219,196,629      Yes   No   No

 

Note 1:

 

The total amount of the guarantee provided by TSMC to any individual entity shall not exceed ten percent (10%) of TSMC’s net worth, or the net worth of such entity. However, subsidiaries whose voting shares are 100% owned, directly or indirectly, by TSMC are not subject to the above restrictions after the approval of the Board of Directors.

Note 2:

 

The total amount of guarantee shall not exceed twenty-five percent (25%) of TSMC’s net worth.

Note 3:

 

The maximum balance for the period and ending balance represent the amounts approved by the Board of Directors.

 

- 54 -


TABLE 3

 

Taiwan   Semiconductor Manufacturing Company Limited and Subsidiaries

MARKETABLE SECURITIES HELD

JUNE 30, 2014

(Amounts in Thousands of New Taiwan Dollars, Unless Specified Otherwise)

 

 

Held

Company

Name

 

Marketable Securities      

Type and      

Name      

 

Relationship   

with the   

Company   

 

Financial Statement 

Account 

  JUNE 30, 2014     Note  
       

    Shares/Units    

    (In Thousands)    

   

Carrying

Value

(Foreign

Currencies

in Thousands)

   

Percentage of

    Ownership (%)    

 

Fair Value

(Foreign

Currencies

in Thousands)

   
                 

TSMC

 

Commercial paper

                         
   

Taiwan Power Company

  -      

Held-to-maturity financial assets

    30             $ 299,230          N/A        $ 299,857           
               
   

Stock

                         
   

Semiconductor Manufacturing International Corporation

  -      

Available-for-sale financial assets

    275,957            711,832               1       711,832          Note 1
   

United Industrial Gases Co., Ltd.

  -      

Financial assets carried at cost

    21,230            193,584             10       393,875           
   

Shin-Etsu Handotai Taiwan Co., Ltd.

  -      

    10,500            105,000               7     334,199           
   

W.K. Technology Fund IV

  -      

    4,000            39,280               2       35,746           
               
   

Fund

                         
   

Horizon Ventures Fund

  -      

Financial assets carried at cost

    -            78,303             12       78,303           
   

Crimson Asia Capital

  -      

    -            53,211               1       53,211           
               

TSMC Global

 

Stock

                         
   

ASML

  -      

Available-for-sale financial assets

    20,993             US$   1,954,417               5        US$   1,954,417          Note 2
               
   

Money market fund

                         
   

Ssga Cash Mgmt Global Offshore

  -      

Available-for-sale financial assets

    12             US$ 12          N/A        US$ 12           
               

TSMC Partners

 

Stock

                         
   

Mcube

  -      

Financial assets carried at cost

    6,333            -             16       -           
               
   

Fund

                         
   

Shanghai Walden Venture Capital Enterprise

  -      

Financial assets carried at cost

    -             US$ 5,000               6        US$ 5,000           
               

Emerging Alliance

 

Common stock

                         
   

Global Investment Holding Inc.

  -      

Financial assets carried at cost

    11,124             US$ 3,065               6        US$ 3,065           
   

RichWave Technology Corp.

  -      

    4,074             US$ 1,545             10        US$ 1,545           
               
   

Preferred stock

                         
   

Next IO, Inc.

  -      

Financial assets carried at cost

    8            -               -       -          Note 3
   

QST Holdings, LLC

  -      

    -             US$ 141               4        US$ 141           
               

ISDF

 

Preferred stock

                         
   

Sonics, Inc.

  -      

Financial assets carried at cost

    230             US$ 497               2        US$ 497           
               

ISDF II

 

Common stock

                         
   

Alchip Technologies Limited

  -      

Financial assets carried at cost

    6,857             US$ 3,341             14        US$ 3,341           
   

Sonics, Inc.

  -      

    278             US$ 10               3        US$ 10           
   

Goyatek Technology, Corp.

  -      

    745             US$ 163               6        US$ 163           
               
   

Preferred stock

                         
   

Sonics, Inc.

 

 

-    

 

 

Financial assets carried at cost

 

   

 

264    

 

  

 

     US$

 

456    

 

  

 

       3  

 

     US$

 

456    

 

  

 

   

(Continued)

 

- 55 -


Held

Company

Name

 

Marketable Securities        

Type and        

Name        

 

Relationship   

with the   

Company   

  

Financial Statement 

Account 

  JUNE 30, 2014     Note  
        

    Shares/Units    

    (In Thousands)    

   

Carrying

Value

(Foreign

Currencies

in Thousands)

   

Percentage of

    Ownership (%)    

 

Fair Value

(Foreign

Currencies

in Thousands)

   
                 

VTAF II

 

Common stock

                          
   

Sentelic

  -       

Financial assets carried at cost

    1,806             US$         2,607               8        US$         2,607           
   

Aether Systems, Inc.

  -       

    2,600             US$ 2,243             28        US$ 2,243           
   

RichWave Technology Corp.

  -       

    1,267             US$ 1,036               3        US$ 1,036           
               
   

Preferred stock

                          
   

5V Technologies, Inc.

  -       

Financial assets carried at cost

    963             US$ 2,168               2        US$ 2,168           
   

Aquantia

  -       

    4,643             US$ 4,441               2        US$ 4,441           
   

Cresta Technology Corporation

  -       

    92             US$ 28               -        US$ 28           
   

Impinj, Inc.

  -       

    711             US$ 1,100               -        US$ 1,100           
   

Next IO, Inc.

  -       

    179            -               1       -          Note 4
   

QST Holdings, LLC

  -       

    -             US$ 588             13        US$ 588           
               

VTAF III

 

Common stock

                          
   

Synaptics

  -       

Available-for-sale financial assets

    7             US$ 486               -        US$ 644           
   

Accton Wireless Broadband Corp.

  -       

Financial assets carried at cost

    2,249             US$ 315               6        US$ 315           
               
   

Preferred stock

                          
   

BridgeLux, Inc.

  -       

Financial assets carried at cost

    7,522             US$ 9,379               3        US$ 9,379           
   

GTBF, Inc.

  -       

    1,154             US$ 1,500          N/A        US$ 1,500           
   

LiquidLeds Lighting Corp.

  -       

    1,600             US$ 800             11        US$ 800           
   

Neoconix, Inc.

  -       

    4,147             US$ 170               -        US$ 170          Note 5
   

Powervation, Ltd.

  -       

    527             US$ 8,238             15        US$ 8,238           
   

Tilera, Inc.

 

 

-    

 

  

 

   

 

3,890    

 

  

 

     US$

 

3,025    

 

  

 

       2  

 

     US$

 

3,025    

 

  

 

   

 

Note 1:

 

The carrying value represents carrying amount less accumulated impairment of NT$412,901 thousand.

Note 2:

 

In October 2012, TSMC Global acquired 5% of the outstanding equity of ASML with a lock-up period of 2.5 years starting from the acquisition date.

Note 3:

 

The carrying value represents carrying amount less accumulated impairment of US$500 thousand.

  

Note 4:

 

The carrying value represents carrying amount less accumulated impairment of US$1,219 thousand.

  

Note 5:

 

The carrying value represents carrying amount less accumulated impairment of US$4,672 thousand.

   (Concluded)

 

- 56 -


TABLE 4

 

Taiwan   Semiconductor Manufacturing Company Limited and Subsidiaries

MARKETABLE SECURITIES ACQUIRED AND DISPOSED OF AT COSTS OR PRICES OF AT LEAST NT$300 MILLION OR 20% OF THE PAID-IN CAPITAL

FOR THE SIX MONTHS ENDED JUNE 30, 2014

(Amounts in Thousands of New Taiwan Dollars, Unless Specified Otherwise)

 

 

Company

Name

 

Market-

able

Securities
Type

and

Name

 

Financial

Statement

Account

 

Counter- 

party

 

Nature

of
Relation- 

ship

 

Beginning

Balance

    Acquisition     Disposal    

Ending

Balance (Note 1)

 
         

Shares/

Units

(In
Thou-

sands)

    Amount    

Shares/

Units

(In
Thou-

sands)

    Amount    

Shares/

Units

(In
Thou-

sands)

    Amount     Carrying
Value
   

Gain/
Loss

on
Disposal

   

Shares/
Units

(In

Thou-

sands)

      Amount  
                             

TSMC

 

Commercial Paper

                                                   
   

CPC Corporation, Taiwan

 

Held-to-maturity financial assets

  -   -     100        $     998,018        60        $    598,817        160      $     1,600,000        $    1,596,835      $ 3,165        -        $                -   
   

Taiwan Power Company

 

  -   -     80        797,931        80        797,906        130        1,300,000        1,296,607        3,393        30        299,230   
                             
   

Stock

                                                   
   

Vanguard International Semiconductor Corporation

 

Investments accounted for using equity method

  Public
Market
  Associate     628,223        10,556,348        -        -        82,000        3,471,883        1,443,240        2,028,643        546,223        9,205,352   
                             

TSMC

 

Stock

                                                   

Development 

 

WaferTech

 

Investments accounted for using equity method

 

  Note 2   Subsidiary     293,637        US$248,252        -        -        -        -        US$  50,000        -        293,637        US$220,951   

 

Note 1:

 

The ending balance includes share of profits/losses of investees and other related adjustment to equity.

Note 2:

 

The disposal is primarily consisted of capital return.

 

- 57 -


TABLE 5

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

ACQUISITION OF INDIVIDUAL REAL ESTATE PROPERTIES AT COSTS OF AT LEAST NT$300 MILLION OR 20% OF THE PAID-IN CAPITAL

FOR THE SIX MONTHS ENDED JUNE 30, 2014

(Amounts in Thousands of New Taiwan Dollars)

 

 

Company 
Name 
 

Types of 

Property 

 

Transaction

Date

  Transaction 
Amount 
  Payment
Term
  Counter-party  

Nature

of
Relation- 

ships

 

Prior Transaction

of Related

Counter-party

 

Price

Reference

  Purpose of
Acquisition
 

Other

Terms

              Owner   

Relation- 

ships

  Transfer 
Date
  Amount       
                 

TSMC

 

Fab

 

April 9, 2013 to February 21, 2014

  $      310,469   

Monthly settlement by the construction progress and acceptance

 

Mandartech Interiors Inc.

  -   N/A   N/A   N/A   N/A  

Bidding, price comparison and price negotiation

 

Manufacturing purpose

  None
   

Fab

 

January 13, 2013 to June 18, 2014

 

491,470 

 

Monthly settlement by the construction progress and acceptance

 

 

Tasa Construction Inc.

  -   N/A   N/A   N/A   N/A  

Bidding, price comparison and price negotiation

 

Manufacturing purpose

 

None

 

- 58 -


TABLE 6

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

TOTAL PURCHASES FROM OR SALES TO RELATED PARTIES OF AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL

FOR THE SIX MONTHS ENDED JUNE 30, 2014

(Amounts in Thousands of New Taiwan Dollars, Unless Specified Otherwise)

 

 

Company  

Name  

   Related    
Party    
   Nature of  
Relationships  
   Transaction Details    Abnormal
Transaction
   Notes/Accounts Payable
or Receivable
   Note 
        

Purchases/  

Sales  

  

Amount

(Foreign
Currencies

in Thousands)

    % to     
Total     
   Payment
Terms
  

Unit   
Price   

(Note)   

  

Payment   
Terms   

(Note)   

  

Ending
Balance

(Foreign
Currencies

in

Thousands)

    % to    
Total    
  
                       

TSMC

  

TSMC North America

  

Subsidiary

  

Sales

    $ 215,959,508      65      

Net 30 days from invoice date

   -        -         $ 59,308,777      70         
    

GUC

  

Associate

  

Sales

     1,200,675        -      

Net 30 days from the end of the month of when invoice is issued

   -        -          351,004        -         
    

TSMC China

  

Subsidiary

  

Purchases

     8,215,495      23      

Net 30 days from the end of the month of when invoice is issued

   -        -          (1,866,052     8         
    

WaferTech

  

Indirect subsidiary

  

Purchases

     4,059,315      11      

Net 30 days from the end of the month of when invoice is issued

   -        -          (637,224     3         
    

VIS

  

Associate

  

Purchases

     3,735,307      11      

Net 30 days from the end of the month of when invoice is issued

   -        -          (681,595     3         
    

SSMC

  

Associate

  

Purchases

     2,116,541        6      

Net 30 days from the end of the month of when invoice is issued

   -        -          (430,904     2         
                       

TSMC Solar

  

TSMC Solar Europe GmbH

  

Subsidiary

  

Sales

     188,719      64      

Net 30 days from the end of the month of when invoice is issued

   -        -          85,619      93         
                       

TSMC North America

 

  

GUC

 

  

Associate of TSMC

 

  

Sales

 

    

(US$

 

724,011

23,986

 

  

 

    -   

 

  

Net 30 days from invoice date

 

   -    

 

   -    

 

    

(US$

 

111,700

3,741

 

  

 

    -    

 

    

 

Note : The sales prices and payment terms to related parties were not significantly different from those of sales to third parties. For other related party transactions, prices and terms were determined in accordance with mutual agreements.

 

- 59 -


TABLE 7

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

RECEIVABLES FROM RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL

JUNE 30, 2014

(Amounts in Thousands of New Taiwan Dollars, Unless Specified Otherwise)

 

 

Company Name       Related Party       Nature of Relationships      

Ending Balance

(Foreign Currencies

in Thousands)

   

  Turnover Days  

(Note 1)

  Overdue  

 Amounts Received  

in Subsequent

Period

 

 Allowance for 

Bad Debts

         

 

Amount

 

        Action Taken        
                 

TSMC

 

TSMC North America  

 

Subsidiary

    $ 59,756,350         47     $   21,592,233        -     $  25,020,309       $              -  
   

GUC

 

Associate

    491,591         43     -        -   -     -  
   

VIS

 

Associate

    1,055,169         (Note 2)     -        -   -     -  
   

SSMC

 

Associate

    1,565,536         (Note 2)     -        -   -     -  
               

TSMC Partners

 

TSMC Solar

 

The same parent company

    3,291,392         (Note 2)     -        -   -     -  
          (US$ 110,242)                     
   

TSMC SSL

 

The same parent company

    597,991         (Note 2)     -        -   -     -  
          (US$ 20,029)                     
               

TSMC China

 

TSMC

 

Parent company

    1,866,052         35     -        -   -     -  
          (RMB 387,823)                     
               

TSMC North America  

 

GUC

 

Associate of TSMC

    111,700         23     -        -   -     -  
          (US$ 3,741)                     
               

TSMC Technology

 

TSMC

 

Parent company

    289,167         (Note 2)     -        -   -     -  
          (US$ 9,685)                     
               

WaferTech

 

TSMC

 

Parent company

    637,224         30     -        -   -     -  
              (US$

 

21,343)  

 

  

 

                       

 

Note 1:

  The calculation of turnover days excludes other receivables from related parties.

Note 2:

  The ending balance is primarily consisted of other receivables, which is not applicable for the calculation of turnover days.

 

- 60 -


TABLE 8

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

INTERCOMPANY RELATIONSHIPS AND SIGNIFICANT INTERCOMPANY TRANSACTIONS

(Amounts in Thousands of New Taiwan Dollars)

 

 

A. For the six months ended June 30, 2014

 

No.         Company Name                 Counter Party             

Nature of   
 Relationship   

(Note 1)   

  Intercompany Transactions
            Financial Statements Item           Amount        

Terms  

 (Note 2)  

  Percentage of 
Consolidated Net Revenue 
or Total Assets 
0       TSMC   TSMC North America       1      

Net revenue from sale of goods

  $  215,959,508                 65 %
                 

Receivables from related parties

  59,308,777                 4 %
                 

Other receivables from related parties

  447,573                 -  
                     

Payables to related parties

  5,766                 -  
       

TSMC China

      1      

Net revenue from sale of goods

  5,160                 -  
                 

Purchases

  8,215,495                 2 %
                 

Marketing expenses - commission

  49,400                 -  
                 

Disposal of property, plant and equipment

  1,551                 -  
                 

Gain on disposal of property, plant and equipment

  7,080                 -  
                 

Purchases of property, plant and equipment

  8,198                 -  
                 

Other receivables from related parties

  1,869                 -  
                     

Payables to related parties

  1,866,052                 -  
       

TSMC Japan

      1      

Marketing expenses - commission

  122,062                 -  
                     

Payables to related parties

  24,203                 -  
       

TSMC Europe

      1      

Marketing expenses - commission

  202,653                 -  
                 

Research and development expenses

  36,275                 -  
                     

Payables to related parties

  46,049                 -  
       

TSMC Korea

      1      

Marketing expenses - commission

  13,574                 -  
                     

Payables to related parties

  4,050                 -  
       

TSMC Technology

      1      

Research and development expenses

  581,061                 -  
                     

Payables to related parties

  289,167                 -  
       

WaferTech

      1      

Net revenue from sale of goods

  4,578                 -  
                 

Purchases

  4,059,315                 1 %
                 

Other receivables from related parties

  7,381                 -  
                 

Payables to related parties

  637,224                 -  
                 

Disposal of property, plant and equipment

  4,212                 -  
                     

Manufacturing expenses

  1,219                 -  
       

TSMC Canada

      1      

Research and development expenses

  104,408                 -  
                     

Payables to related parties

  16,885                 -  
       

TSMC SSL

      1      

Manufacturing expenses

  25,095                 -  
                 

Other gains and losses

  4,050                 -  
                 

Other receivables from related parties

  2,036                 -  
                 

Payables to related parties

  10,639                 -  
                     

Purchases of property, plant and equipment

  38,606                 -  

(Continued)

 

- 61 -


No.         Company Name                 Counter Party             

Nature of   
 Relationship   

(Note 1)   

  Intercompany Transactions
            Financial Statements Item           Amount        

Terms  

 (Note 2)  

  Percentage of 
Consolidated Net Revenue 
or Total Assets 

0    

  TSMC   TSMC Solar       1       Other gains and losses     $        4,818                   -  
                      Other receivables from related parties    2,467                   -  

1    

  TSMC Development   WaferTech       1       Other receivables from related parties   58,882                   -  

2    

  TSMC North America     TSMC Technology       3       Other receivables from related parties   19,477                   -  

3    

  TSMC Solar   TSMC Solar Europe GmbH       1       Net revenue from sale of goods   188,719                   -  
                      Receivables from related parties   85,619                   -  
        TSMC Solar North America         1       Net revenue from sale of goods   6,372                   -  
                      Receivables from related parties   6,318                   -  
        TSMC Partners       3       Finance costs   5,233                   -  
                      Other payables to related parties   3,291,392                   -  

4    

  TSMC SSL   TSMC Partners       3       Other payables to related parties   597,991                   -  
        TSMC China       3       Net revenue from sale of goods   3,197                   -  

 

Note 1:

  No. 1 represents the transactions from parent company to subsidiary.
  No. 3 represents the transactions between subsidiaries.

Note 2:

  The sales prices and payment terms of intercompany sales are not significantly different from those to third parties. For other intercompany transactions, prices and terms are determined in accordance with mutual agreements.

(Concluded)

 

- 62 -


TABLE 9

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

NAMES, LOCATIONS, AND RELATED INFORMATION OF INVESTEES OVER WHICH THE COMPANY EXERCISES SIGNIFICANT INFLUENCE (EXCLUDING INFORMATION ON INVESTMENT IN MAINLAND CHINA)

JUNE 30, 2014

(Amounts in Thousands of New Taiwan Dollars, Unless Specified Otherwise)

 

 

Investor  

Company  

 

Investee  

Company

 

  Location  

 

  Main Businesses and Products  

  Original Investment Amount     Balance as of June 30, 2014    

Net Income

(Losses) of the
Investee

(Foreign
 Currencies

in 

Thousands)

   

Share of

Profits/

Losses

of Investee

(Note 1)

(Foreign
 Currencies

in 

Thousands)

          Note      
       

June 30,

2014

(Foreign
Currencies

in

Thousands)

   

December 31,

2013

(Foreign
Currencies

in Thousands)

   

Shares

(In
  Thousands)  

   

 Percentage

of 
Ownership

 

Carrying
Value

(Foreign
 Currencies

in 

Thousands)

       
                       
TSMC   TSMC Global   Tortola, British Virgin Islands  

Investment activities

  $ 42,327,245       $ 42,327,245              100   $  64,609,321       $ 93,293       $ 93,293       Subsidiary
    TSMC Partners   Tortola, British Virgin Islands  

Investing in companies involved in the design, manufacture, and other related business in the semiconductor industry

    31,456,130         31,456,130         988,268       100     43,912,641         982,072         982,125       Subsidiary
    VIS   Hsin-Chu, Taiwan  

Research, design, development, manufacture, packaging, testing and sale of memory integrated circuits, LSI, VLSI and related parts

    11,786,871         13,232,288         546,223       33     9,205,352         2,665,771         885,867       Associate
    SSMC   Singapore  

Fabrication and supply of integrated circuits

    5,120,028         5,120,028         314       39     6,940,820         2,540,544         985,478       Associate
    TSMC Solar   Tai-Chung, Taiwan  

Engaged in researching, developing, designing, manufacturing and selling renewable energy and saving related technologies and products

    11,180,000         11,180,000         1,118,000       99     3,882,201         (660,694)        (653,196)      Subsidiary
    TSMC North America   San Jose, California, U.S.A.  

Selling and marketing of integrated circuits and semiconductor devices

    333,718         333,718         11,000       100     3,757,434         (53,385)        (53,385)      Subsidiary
    TSMC SSL   Hsin-Chu, Taiwan  

Engaged in researching, developing, designing, manufacturing and selling solid state lighting devices and related applications products and systems

    5,546,744         5,546,744         554,674       92     1,246,459         (981,710)        (908,460)      Subsidiary
    Xintec   Taoyuan, Taiwan  

Wafer level chip size packaging service

    1,357,890         1,357,890         94,950       40     1,875,195         202,791         57,902       Associate
    GUC   Hsin-Chu, Taiwan  

Researching, developing, manufacturing, testing and marketing of integrated circuits

    386,568         386,568         46,688       35     1,022,092         253,146         89,119       Associate
    VTAF III   Cayman Islands  

Investing in new start-up technology companies

    1,813,466         1,908,912              98     824,495         21,624         21,205       Subsidiary
    VTAF II   Cayman Islands  

Investing in new start-up technology companies

    602,454         596,514              98     443,893         (4,683)        (4,590)      Subsidiary
    TSMC Europe   Amsterdam, the Netherlands  

Marketing and engineering supporting activities

    15,749         15,749              100     309,333         20,626         20,626       Subsidiary
    Emerging Alliance   Cayman Islands  

Investing in new start-up technology companies

    844,775         841,757              99.5     146,399         (1,797)        (1,788)      Subsidiary
    TSMC Japan   Yokohama, Japan  

Marketing activities

    83,760         83,760              100     132,935         3,248         3,248       Subsidiary
    TSMC GN   Taipei, Taiwan  

Investment activities

    150,000         150,000              100     48,143         (17,204)        (17,204)      Subsidiary
    TSMC Korea   Seoul, Korea  

Customer service and technical supporting activities

    13,656         13,656         80       100     32,736         1,962         1,962       Subsidiary
                       
TSMC Solar    Motech   New Taipei, Taiwan  

Manufacturing and sales of solar cells, crystalline silicon solar cell, and test and measurement instruments and design and construction of solar power systems

    6,228,661         6,228,661         87,480       20     3,745,429         180,296         Note 2       Associate
    TSMC Solar Europe   Amsterdam, the Netherlands  

Investing in solar related business

    504,107         504,107              100     14,297         (75,342)        Note 2       Subsidiary
    TSMC Solar NA   Delaware, U.S.A.  

Selling and marketing of solar related products

    205,772         205,772              100     (5,969)        (14,447)        Note 2       Subsidiary
                       
TSMC SSL  

TSMC Lighting NA

 

  Delaware, U.S.A.  

Selling and marketing of solid state lighting related products

 

    3,133         3,133              100     2,873         (6)        Note 2       Subsidiary

(Continued)

 

- 63 -


Investor  

Company  

 

Investee  

Company  

    Location     Main Businesses and Products   Original Investment Amount     Balance as of June 30, 2014    

Net Income

(Losses) of

the Investee

(Foreign
 Currencies

in 

Thousands)

   

Share of

Profits/

Losses

of Investee

(Note 1)

(Foreign
 Currencies

in 

Thousands)

          Note      
       

June 30,

2014

(Foreign
Currencies

in

Thousands)

   

December 31,

2013

(Foreign
Currencies

in

Thousands)

   

Shares

(In
Thousands)

   

 Percentage

of 
Ownership

   

Carrying Value

(Foreign
 Currencies

in 

Thousands)

       
                       
TSMC Partners   TSMC Development    Delaware, U.S.A.  

Investment activities

  $

(US$

0.03  

0.001) 

  

  

  $

(US$

0.03  

0.001) 

  

  

           100              $

(US$

21,373,155  

715,875) 

  

  

  $

(US$

728,094  

 24,121) 

  

  

    Note 2      

Subsidiary 

    VisEra Holding   Cayman Islands  

Investing in companies involved in the design, manufacturing, and other related businesses in the semiconductor industry

   

(US$

1,283,808  

43,000) 

  

  

   

(US$

1,283,808  

43,000) 

  

  

    43,000         49               

(US$

3,570,515  

119,591) 

  

  

   

(US$

141,424  

4,685) 

  

  

    Note 2      

Jointly controlled entity

    TSMC Technology   Delaware, U.S.A.  

Engineering support activities

   

(US$

0.03  

0.001) 

  

  

   

(US$

0.03  

0.001) 

  

  

           100               

(US$

416,627  

13,955) 

  

  

   

(US$

29,248  

969) 

  

  

    Note 2      

Subsidiary 

    ISDF II   Cayman Islands  

Investing in new start-up technology companies

   

(US$

277,631  

9,299) 

  

  

   

(US$

422,552  

14,153) 

  

  

    14,153         97               

(US$

219,450  

7,350) 

  

  

   

(US$

42,967  

1,423) 

  

  

    Note 2      

Subsidiary 

    ISDF   Cayman Islands  

Investing in new start-up technology companies

   

(US$

17,406  

583) 

  

  

   

(US$

23,497  

787) 

  

  

    787         97               

(US$

16,578  

555) 

  

  

   

(US$

(848) 

(28)) 

  

  

    Note 2      

Subsidiary 

    TSMC Canada   Ontario, Canada  

Engineering support activities

   

(US$

68,669  

2,300) 

  

  

   

(US$

68,669  

2,300) 

  

  

    2,300         100               

(US$

150,075  

5,027) 

  

  

   

(US$

7,193  

238) 

  

  

    Note 2      

Subsidiary 

                       
TSMC Development    WaferTech   Washington, U.S.A.  

Manufacturing, selling, testing and computer-aided designing of integrated circuits and other semiconductor devices

   

(US$

895,680  

30,000) 

  

  

   

(US$

2,388,480  

80,000) 

  

  

    293,637         100               

(US$

6,596,716  

220,951) 

  

  

   

(US$

685,179  

 22,699) 

  

  

    Note 2      

Subsidiary 

                       
VTAF III   Mutual-Pak Technology Co., Ltd.   New Taipei, Taiwan  

Manufacturing and selling of electronic parts and researching, developing, and testing of RFID

   

(US$

155,609  

5,212) 

  

  

   

(US$

155,609  

5,212) 

  

  

    15,643         58               

(US$

34,484  

1,155) 

  

  

   

(US$

(3,334)  

(110)) 

  

  

    Note 2      

Subsidiary 

    Growth Fund   Cayman Islands  

Investing in new start-up technology companies

   

(US$

63,593  

2,130) 

  

  

   

(US$

63,593  

2,130) 

  

  

           100               

(US$

16,467  

552) 

  

  

   

(US$

(1,660) 

(55)) 

  

  

    Note 2      

Subsidiary 

    VTA Holdings   Delaware, U.S.A.  

Investing in new start-up technology companies

    -          -                 62                -          -          Note 2      

Subsidiary 

                       
VTAF II   VTA Holdings   Delaware, U.S.A.  

Investing in new start-up technology companies

    -          -                 31                -          -          Note 2      

Subsidiary 

                       
Emerging Alliance   VTA Holdings   Delaware, U.S.A.  

Investing in new start-up technology companies

    -          -                 7                -          -          Note 2      

Subsidiary 

                       
TSMC Solar Europe   TSMC Solar Europe GmbH   Hamburg, Germany  

Selling of solar related products and providing customer service

   

(EUR

505,300  

12,400) 

  

  

   

(EUR

505,300  

12,400) 

  

  

           100               

(EUR

18,066  

443) 

  

  

   

(EUR

(68,462) 

 (1,651)) 

  

  

    Note 2      

Subsidiary 

                       
TSMC GN   TSMC Solar   Tai-Chung, Taiwan  

Engaged in researching, developing, designing, manufacturing and selling renewable energy and saving related technologies and products

    53,092          52,498          5,309         -                18,332          (660,694)         Note 2      

Associate 

    TSMC SSL   Hsin-Chu, Taiwan  

Engaged in researching, developing, designing, manufacturing and selling solid state lighting devices and related applications products and systems

 

    86,549          54,359          8,655         1                19,476          (981,710)         Note 2      

Associate 

 

Note 1:

  The share of profits/losses of investee includes the effect of unrealized gross profit on intercompany transactions.

Note 2:

  The share of profits/losses of the investee company is not reflected herein as such amount is already included in the share of profits/losses of the investor company.

Note 3:

  Please refer to Table 10 for information on investment in Mainland China.

(Concluded)

 

- 64 -


TABLE 10

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

INFORMATION ON INVESTMENT IN MAINLAND CHINA

FOR THE SIX MONTHS ENDED JUNE 30, 2014

(Amounts in Thousands of New Taiwan Dollars, Unless Specified Otherwise)

 

 

Investee  
Company  
 

Main
Businesses
and

Products

            Method of 
Investment 
  Accumulated   Investment Flows     Accumulated                                   
     

Total Amount

of Paid-in

Capital

(Foreign
Currencies in

Thousands)

   

Outflow of 
Investment 
from Taiwan 

as of 
January 1, 

2014 

(US$ in 

Thousands) 

  Outflow     Inflow    

Outflow of 
Investment 
from Taiwan 

as of 

June 30, 

2014 

(US$ in 
Thousands) 

    Net Income
(Losses) of
the Investee
Company
    Percentage 
of 
Ownership 
  Share of
Profits/Losses
   

Carrying
Amount

as of

June 30, 2014

   

   Accumulated
   Inward
   Remittance

   of Earnings

   as of

   June 30,

   2014

 

 

TSMC China

 

 

Manufacturing and selling of integrated circuits at the order of and pursuant to product design specifications provided by customers

 

     

 

$        18,939,667 

(RMB 4,502,080) 

 

 

(Note 1)

 

 

  $   18,939,667

  (US$ 596,000)

 

 

$

 

            -

 

  

 

 

$

 

           -

 

  

 

 

 $

(US$

 

18,939,667 

596,000)

 

  

  

 

 

$

 

    2,801,700

 

  

 

 

100%

 

 

$

 

 

2,635,734

(Note 2) 

 

  

  

 

 

$

 

    26,034,876

 

  

 

 

$

 

-

 

  

 

Accumulated Investment in Mainland China 

as of June 30, 2014 

(US$ in Thousands) 

  

Investment Amounts Authorized by 

Investment Commission, MOEA 

(US$ in Thousands) 

  

Upper Limit on Investment

(US$ in Thousands)

 

$  18,939,667

(US$ 596,000)

 

  

 

$  18,939,667

(US$ 596,000)

 

  

 

$  18,939,667

(US$ 596,000)

 

 

Note 1:

 

TSMC directly invested US$596,000 thousand in TSMC China.

Note 2:

 

Amount was recognized based on the reviewed financial statements.

 

- 65 -