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 May 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: May 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

Three Months Ended March 31, 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 March 31, 2014 and 2013 and the related consolidated statements of comprehensive income, changes in equity and cash flows for the three months ended March 31, 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.

May 13, 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)

 

 

    March 31, 2014
(Reviewed)
    December 31, 2013
(Audited)
    March 31, 2013
(Reviewed)
 
         Amount          %              Amount          %              Amount          %      

ASSETS

                             

CURRENT ASSETS

                             

Cash and cash equivalents (Note 6)

     $ 231,697,295           18         $ 242,695,447           19         $ 186,028,798           18   

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

       11,425           -           90,353           -           18,206           -   

Available-for-sale financial assets (Note 8)

       845,002           -           760,793           -           1,162,904           -   

Held-to-maturity financial assets (Note 9)

       2,394,178           -           1,795,949           -           2,044,822           -   

Notes and accounts receivable, net (Note 11)

       73,774,054           6           71,649,926           6           65,472,529           6   

Receivables from related parties (Note 35)

       558,970           -           291,708           -           434,306           -   

Other receivables from related parties (Note 35)

       162,444           -           221,576           -           176,298           -   

Inventories (Note 12)

       43,481,269           3           37,494,893           3           37,833,465           4   

Other financial assets (Note 36)

       584,364           -           501,785           -           1,240,492           -   

Other current assets (Note 17)

       2,381,416           -           2,984,224           -           3,339,372           -   
    

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

 

Total current assets

       355,890,417           27           358,486,654           28           297,751,192           28   
    

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

 

NONCURRENT ASSETS

                             

Available-for-sale financial assets (Note 8)

       59,284,283           5           58,721,959           5           42,087,667           4   

Hedging derivative financial assets (Note 10)

       -           -           -           -           659,351           -   

Financial assets carried at cost (Note 13)

       2,055,075           -           2,145,591           -           3,703,593           1   

Investments accounted for using equity method (Note 14)

       29,507,728           2           28,316,260           2           24,252,070           2   

Property, plant and equipment (Note 15)

       828,011,580           64           792,665,913           63           666,447,384           63   

Intangible assets (Note 16)

       12,113,629           1           11,490,383           1           11,478,437           1   

Deferred income tax assets (Notes 4 and 30)

       7,893,479           1           7,239,609           1           11,610,593           1   

Refundable deposits (Note 35)

       2,560,988           -           2,519,031           -           2,385,571           -   

Other noncurrent assets (Note 17)

       1,422,102           -           1,469,577           -           1,253,868           -   
    

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

 

Total noncurrent assets

       942,848,864           73           904,568,323           72           763,878,534           72   
    

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

 

TOTAL

     $   1,298,739,281           100         $   1,263,054,977           100         $   1,061,629,726           100   
    

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

 

LIABILITIES AND EQUITY

                             

CURRENT LIABILITIES

                             

Short-term loans (Note 18)

     $ 24,843,645           2         $ 15,645,000           1         $ 35,842,800           3   

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

       188,535           -           33,750           -           4,223           -   

Accounts payable

       15,380,651           1           14,670,260           1           12,462,978           1   

Payables to related parties (Note 35)

       1,330,050           -           1,688,456           -           793,133           -   

Salary and bonus payable

       6,107,014           1           8,330,956           1           5,075,309           1   

Accrued profit sharing to employees and bonus to directors and supervisors (Note 23)

       16,018,761           1           12,738,801           1           13,864,935           1   

Payables to contractors and equipment suppliers

       53,461,455           4           89,810,160           7           48,601,349           5   

Income tax payable (Notes 4 and 30)

       28,433,542           2           22,563,286           2           20,164,514           2   

Provisions (Note 19)

       9,964,997           1           7,603,781           1           6,350,698           1   

Accrued expenses and other current liabilities (Notes 15 and 22)

       18,668,514           2           16,693,484           1           14,915,135           1   

Current portion of long-term bank loans (Note 21)

       -           -           -           -           131,250           -   
    

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

 

Total current liabilities

       174,397,164           14           189,777,934           15           158,206,324           15   
    

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

 

NONCURRENT LIABILITIES

                             

Hedging derivative financial liabilities (Note 10)

       5,279,032           -           5,481,616           -           -           -   

Bonds payable (Note 20)

       211,798,101           16           210,767,625           17           125,000,000           12   

Long-term bank loans (Note 21)

       40,000           -           40,000           -           1,325,000           -   

Other long-term payables (Note 22)

       36,000           -           36,000           -           54,000           -   

Obligations under finance leases (Note 15)

       783,275           -           776,230           -           768,935           -   

Accrued pension cost (Note 4)

       7,577,202           1           7,589,926           1           6,904,635           1   

Others (Note 19)

       830,406           -           810,561           -           721,747           -   
    

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

 

Total noncurrent liabilities

       226,344,016           17           225,501,958           18           134,774,317           13   
    

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

 

Total liabilities

       400,741,180           31           415,279,892           33           292,980,641           28   
    

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

 

EQUITY ATTRIBUTABLE TO SHAREHOLDERS OF THE PARENT

                             

Capital stock (Note 23)

       259,291,239           20           259,286,171           21           259,282,327           25   
    

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

 

Capital surplus (Note 23)

       55,835,280           4           55,858,626           4           55,762,572           5   
    

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

 

Retained earnings (Note 23)

                             

Appropriated as legal capital reserve

       132,436,003           10           132,436,003           11           115,820,123           11   

Appropriated as special capital reserve

       2,785,741           1           2,785,741           -           7,606,224           1   

Unappropriated earnings

       430,842,153           33           382,971,408           30           324,561,997           30   
    

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

 
       566,063,897           44           518,193,152           41           447,988,344           42   
    

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

 

Others (Note 23)

       16,583,227           1           14,170,306           1           3,098,025           -   
    

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

 

Equity attributable to shareholders of the parent

       897,773,643           69           847,508,255           67           766,131,268           72   

NONCONTROLLING INTERESTS (Note 23)

       224,458           -           266,830           -           2,517,817           -   
    

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

 

Total equity

       897,998,101           69           847,775,085           67           768,649,085           72   
    

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

 

TOTAL

     $ 1,298,739,281           100         $ 1,263,054,977           100         $ 1,061,629,726           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)

 

 

              Three Months Ended March 31             
    2014   2013  
         Amount          %              Amount          %  

NET REVENUE (Notes 25, 35 and 40)

     $   148,215,172           100           $   132,754,996           100   

COST OF REVENUE (Notes 12, 32 and 35)

       77,836,093           53             71,988,726           54   
    

 

 

      

 

 

        

 

 

      

 

 

 

GROSS PROFIT BEFORE REALIZED GROSS PROFIT ON SALES TO ASSOCIATES

       70,379,079           47             60,766,270           46   

REALIZED GROSS PROFIT ON SALES TO ASSOCIATES

       21,017           -             3,540           -   
    

 

 

      

 

 

        

 

 

      

 

 

 

GROSS PROFIT

       70,400,096           47             60,769,810           46   
    

 

 

      

 

 

        

 

 

      

 

 

 

OPERATING EXPENSES (Notes 32 and 35)

                     

Research and development

       12,066,622           8             10,650,985           8   

General and administrative

       4,655,671           3             4,695,520           3   

Marketing

       1,152,702           1             1,029,799           1   
    

 

 

      

 

 

        

 

 

      

 

 

 

Total operating expenses

       17,874,995           12             16,376,304           12   
    

 

 

      

 

 

        

 

 

      

 

 

 

OTHER OPERATING INCOME AND EXPENSES, NET (Notes 26 and 32)

       (2,741        -             34,503           -   
    

 

 

      

 

 

        

 

 

      

 

 

 

INCOME FROM OPERATIONS (Note 40)

       52,522,360           35             44,428,009           34   
    

 

 

      

 

 

        

 

 

      

 

 

 

NON-OPERATING INCOME AND EXPENSES

                     

Share of profits of associates and joint venture

       955,380           1             654,153           -   

Other income (Note 27)

       613,699           -             346,321           -   

Foreign exchange loss, net

       (36,401        -             (192,914        -   

Finance costs (Note 28)

       (796,580        -             (493,998        -   

Other gains and losses (Note 29)

       43,384           -             1,006,343           1   
    

 

 

      

 

 

        

 

 

      

 

 

 

Total non-operating income and expenses

       779,482           1             1,319,905           1   
    

 

 

      

 

 

        

 

 

      

 

 

 

INCOME BEFORE INCOME TAX

       53,301,842           36             45,747,914           35   

INCOME TAX EXPENSE (Notes 4 and 30)

       5,456,064           4             6,212,371           5   
    

 

 

      

 

 

        

 

 

      

 

 

 

NET INCOME

       47,845,778           32             39,535,543           30   
    

 

 

      

 

 

        

 

 

      

 

 

 

 

(Continued)

 

- 3 -


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)

 

 

              Three Months Ended March 31             
    2014   2013  
         Amount          %              Amount          %  

OTHER COMPREHENSIVE INCOME (LOSS) (Notes 23 and 30)

                     

Exchange differences arising on translation of foreign operations

     $ 2,831,381           2           $ 2,903,753           2   

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

       (415,445        -             2,825,692           2   

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

       (4,747        -             135,123           -   

Income tax benefit related to components of other comprehensive income

       2,956           -             43,239           -   
    

 

 

      

 

 

        

 

 

      

 

 

 

Other comprehensive income for the period, net of income tax

       2,414,145           2             5,907,807           4   
    

 

 

      

 

 

        

 

 

      

 

 

 

TOTAL COMPREHENSIVE INCOME FOR THE PERIOD

     $ 50,259,923           34           $ 45,443,350           34   
    

 

 

      

 

 

        

 

 

      

 

 

 

NET INCOME (LOSS) ATTRIBUTABLE TO:

                     

Shareholders of the parent

     $ 47,870,745           32           $ 39,576,876           30   

Noncontrolling interests

       (24,967        -             (41,333        -   
    

 

 

      

 

 

        

 

 

      

 

 

 
     $ 47,845,778           32           $ 39,535,543           30   
    

 

 

      

 

 

        

 

 

      

 

 

 

TOTAL COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO:

                     

Shareholders of the parent

     $ 50,283,666           34           $ 45,455,386           34   

Noncontrolling interests

       (23,743        -             (12,036        -   
    

 

 

      

 

 

        

 

 

      

 

 

 
     $    50,259,923             34           $    45,443,350             34   
    

 

 

      

 

 

        

 

 

      

 

 

 

 

     2014    2013
    

  Income Attributable to  
Shareholders of

the Parent

  

  Income Attributable to  

Shareholders of

the Parent

EARNINGS PER SHARE (NT$, Note 31)

         

Basic earnings per share

     $     1.85        $     1.53  
    

 

 

      

 

 

 

Diluted earnings per share

     $ 1.85        $ 1.53  
    

 

 

      

 

 

 

 

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

 

- 4 -


Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(In Thousands of New Taiwan Dollars)

(Reviewed, Not Audited)

 

 

    Equity Attributable to Shareholders of the Parent              
                                              Others                    
                                             

Foreign

Currency

Translation

Reserve

   

Unrealized

Gain/Loss

from
Available-

for-sale

Financial
Assets

   

Cash Flow

Hedges
Reserve

   

Total

    Total    

Non-
controlling

Interests

   

Total

Equity

 
    Capital Stock -
Common Stock
          Retained Earnings                
   

Shares

(In

          Capital     Legal
Capital
    Special
Capital
   

Unappro-

priated

                     
    Thousands)     Amount     Surplus     Reserve     Reserve     Earnings     Total                

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   

Net income for the three months ended March 31, 2014

    -        -        -        -        -        47,870,745        47,870,745        -        -        -        -        47,870,745        (24,967     47,845,778   

Other comprehensive income for the three months ended March 31, 2014, net of income tax

    -        -        -        -        -        -        -        2,807,924        (395,098     95        2,412,921        2,412,921        1,224        2,414,145   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income for the three months ended March 31, 2014

    -        -        -        -        -        47,870,745        47,870,745        2,807,924        (395,098     95        2,412,921        50,283,666        (23,743     50,259,923   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Issuance of stock from exercise of employee stock options

    507        5,068        17,235        -        -        -        -        -        -        -        -        22,303        -        22,303   

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

    -        -        (29,636     -        -        -        -        -        -        -        -        (29,636     -        (29,636

Adjustments arising from changes in percentage of ownership in subsidiaries

    -        -        (10,945     -        -        -        -        -        -        -        -        (10,945     10,945        -   

Decrease in noncontrolling interests

    -        -        -        -        -        -        -        -        -        -        -        -        (29,574     (29,574
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

BALANCE, MARCH 31, 2014

    25,929,124      $ 259,291,239      $ 55,835,280      $ 132,436,003      $ 2,785,741      $ 430,842,153      $ 566,063,897      $ (4,332,438   $ 20,915,683      $ (18   $ 16,583,227      $ 897,773,643      $ 224,458      $ 897,998,101   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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   

Net income for the three months ended March 31, 2013

    -        -        -        -        -        39,576,876        39,576,876        -        -        -        -        39,576,876        (41,333     39,535,543   

Other comprehensive income for the three months ended March 31, 2013, net of income tax

    -        -        -        -        -        -        -        3,006,684        2,871,826        -        5,878,510        5,878,510        29,297        5,907,807   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income for the three months ended March 31, 2013

    -        -        -        -        -        39,576,876        39,576,876        3,006,684        2,871,826        -        5,878,510        45,455,386        (12,036     45,443,350   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Issuance of stock from exercise of employee stock options

    3,797        37,970        69,384        -        -        -        -        -        -        -        -        107,354        -        107,354   

Stock option compensation cost of subsidiary

    -        -        -        -        -        -        -        -        -        -        -        -        2,701        2,701   

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

    -        -        14,238        -        -        -        -        -        -        -        -        14,238        -        14,238   

Adjustments arising from changes in percentage of ownership in subsidiaries

    -        -        3,610        -        -        -        -        -        -        -        -        3,610        (3,610     -   

Decrease in noncontrolling interests

    -        -        -        -        -        -        -        -        -        -        -        -        (12,464     (12,464
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

BALANCE, MARCH 31, 2013

    25,928,232      $  259,282,327      $  55,762,572      $  115,820,123      $  7,606,224      $  324,561,997      $  447,988,344      $ (7,747,122   $ 10,845,147      $ -      $  3,098,025      $  766,131,268      $ 2,517,817      $  768,649,085   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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

 

- 5 -


Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands of New Taiwan Dollars)

(Reviewed, Not Audited)

 

 

    Three Months Ended March 31  
         2014     2013  

CASH FLOWS FROM OPERATING ACTIVITIES

      

Income before income tax

     $ 53,301,842      $ 45,747,914   

Adjustments for:

      

Depreciation expense

       40,985,942        35,964,677   

Amortization expense

       636,435        531,513   

Stock option compensation cost of subsidiary

       -        2,701   

Finance costs

       796,580        493,998   

Share of profits of associates and joint venture

       (955,380     (654,153

Interest income

       (613,699     (346,321

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

       (497     (28,710

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

       (20,987     (818,315

Gain on disposal of financial assets carried at cost, net

       (23,758     (2,105

Loss on disposal of investments in associates

       -        484   

Realized gross profit on sales to associates

       (21,017     (3,540

Loss on foreign exchange, net

       2,665,824        704,013   

Income from receipt of equity securities in settlement of trade receivables

       -        (8,565

Gain from hedging instruments

       (325,678     (649,991

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

       327,961        759,175   

Changes in operating assets and liabilities:

      

Derivative financial instruments

       233,713        9,946   

Notes and accounts receivable, net

       (2,124,198     (7,695,015

Receivables from related parties

       (267,262     (80,495

Other receivables from related parties

       4,415        9,252   

Inventories

       (5,986,376     (2,967

Other financial assets

       (28,952     66,064   

Other current assets

       615,697        (541,426

Accounts payable

       722,298        (2,065,468

Payables to related parties

       (358,406     69,794   

Salary and bonus payable

       (2,223,942     (2,459,987

Accrued profit sharing to employees and bonus to directors and supervisors

       3,279,960        2,678,344   

Accrued expenses and other current liabilities

       2,073,184        1,637,627   

Provisions

       2,359,196        306,904   

Accrued pension cost

       (12,724     (16,599
    

 

 

   

 

 

 

Cash generated from operations

       95,040,171        73,608,749   

Income taxes paid

       (179,230     (39,077
    

 

 

   

 

 

 

Net cash generated by operating activities

       94,860,941        73,569,672   
    

 

 

   

 

 

 

 

(Continued)

 

- 6 -


Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands of New Taiwan Dollars)

(Reviewed, Not Audited)

 

 

    Three Months Ended March 31  
         2014     2013  

CASH FLOWS FROM INVESTING ACTIVITIES

      

Acquisitions of:

      

Available-for-sale financial assets

     $ (5,181   $ (4,022

Financial assets carried at cost

       (3,782     (16,511

Held-to-maturity financial assets

       (1,396,723     -   

Property, plant and equipment

       (114,905,317     (80,418,491

Intangible assets

       (1,178,194     (951,989

Other assets

       -        (11,896

Proceeds from disposal or redemption of:

      

Available-for-sale financial assets

       62,843        915,865   

Held-to-maturity financial assets

       800,000        3,091,725   

Financial assets carried at cost

       28,533        9,564   

Property, plant and equipment

       55,255        12,531   

Cash refund from long-term receivables

       78,060        -   

Interest received

       596,277        315,163   

Refundable deposits paid

       (7,869     (5,693

Refundable deposits refunded

       16,506        30,841   
    

 

 

   

 

 

 

Net cash used in investing activities

       (115,859,592     (77,032,913
    

 

 

   

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

      

Increase in short-term loans

       8,819,028        230,321   

Proceeds from issuance of bonds

       -        45,000,000   

Repayment of long-term bank loans

       -        (31,250

Interest paid

       (863,834     (331,695

Guarantee deposits received

       3,744        3,436   

Guarantee deposits refunded

       (1,443     (26,382

Proceeds from exercise of employee stock options

       22,303        107,354   

Decrease in noncontrolling interests

       (29,574     (12,464
    

 

 

   

 

 

 

Net cash generated by financing activities

       7,950,224        44,939,320   
    

 

 

   

 

 

 

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS

       2,050,275        1,142,131   
    

 

 

   

 

 

 

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

       (10,998,152     42,618,210   

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

       242,695,447        143,410,588   
    

 

 

   

 

 

 

CASH AND CASH EQUIVALENTS, END OF PERIOD

     $ 231,697,295      $ 186,028,798   
    

 

 

   

 

 

 

 

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 THREE MONTHS ENDED MARCH 31, 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 40.

 

  2.

THE AUTHORIZATION OF FINANCIAL STATEMENTS

The accompanying consolidated financial statements were reported to the Board of Directors and issued on May 13, 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.

 

- 9 -


  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.

 

  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.

Staring 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 March 31, 2014 and January 1, 2014, the primary impacts on the Company include the adjustment in accrued pension cost for a decrease of NT$796,305 thousand and NT$788,263 thousand, respectively, and the adjustment in retained earnings for an increase of NT$706,285 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.

 

- 10 -


New, Revised or Amended Standards and Interpretations

  

Effective Date Issued

by IASB (Note 1)

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

  

Note 2

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

  

Note 2

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

 

Note 1:

  

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

Note 2:

  

The IASB tentatively decided that an entity should apply IFRS 9 for annual periods beginning on or after January 1, 2018.

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”

Under IFRS 9, 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. If the objective of the Company’s business model is to hold the financial asset to collect the contractual cash flows which are solely for payments of principal and interest on the principal amount outstanding, such assets are measured at the amortized cost. The other financial assets not met the aforementioned criteria must be measured at the fair value through profit or loss.

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)

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.

 

- 11 -


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.

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 consolidated financial statements incorporate the financial statements of TSMC and entities controlled by TSMC (its subsidiaries). Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

Income and expenses of subsidiaries acquired or disposed of are included in the consolidated statement of comprehensive income from the effective date of acquisition and up to the effective date of disposal, as appropriate. Total comprehensive income of subsidiaries is attributed to the shareholders of the parent and to the noncontrolling interests even if this results in the noncontrolling interests having a deficit balance.

When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by the Company.

All intra-group transactions, balances, income and expenses are eliminated in full on consolidation.

Changes in the Company’s ownership interests in subsidiaries that do not result in the Company losing control over the subsidiaries are accounted for as equity transactions. The carrying amounts of the Company’s interests and the noncontrolling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the noncontrolling interests are adjusted and the fair value of the consideration paid or received is recognized directly in equity and attributed to shareholders of the parent.

When the Company loses control of a subsidiary, a gain or loss is recognized in profit or loss and is calculated as the difference between:

 

  a.

the aggregate of the fair value of consideration received and the fair value of any retained interest at the date when control is lost; and

 

- 12 -


  b.

the previous carrying amount of the assets (including goodwill), and liabilities of the subsidiary and any noncontrolling interest.

The Company shall account for all amounts recognized in other comprehensive income in relation to the subsidiary on the same basis as would be required if the Company had directly disposed of the related assets and liabilities.

The fair value of any investment retained in the former subsidiary at the date when control is lost is regarded as the cost on initial recognition of an investment in an associate.

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
     March 31,
  2014
  December 31,
2013
  March 31,  
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

     50%     50%     50%   -
  

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)
  

Xintec Inc. (Xintec)

  

Wafer level chip size packaging service

  

Taoyuan, Taiwan

         b)         b)     40%   -
  

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%     95%  

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%   -
  

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%   -

 

(Continued)

 

- 13 -


               Establishment    Percentage of Ownership    
Name of Investor    Name of Investee    Main Businesses and Products    and Operating
Location
     March 31,
  2014
  December 31,
2013
  March 31,  
2013  
  Note

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)

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)
  

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

  

Investing in new start-up technology companies

  

Cayman Islands

     49%     49%     49%   -

TSMC Solar Europe

  

TSMC Solar Europe GmbH

  

Selling of solar related products and providing customer service

  

Hamburg, Germany

   100%   100%   100%   a)

(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:

  

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 33.

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.

 

  6.

CASH AND CASH EQUIVALENTS

 

    

March 31,

2014

          December 31,
2013
         

March 31,

2013

 

Cash and deposits in banks

   $ 224,475,625          $ 238,014,580          $ 182,657,223   

Repurchase agreements collateralized by corporate bonds

     3,071,910            1,809,344            2,361,274   

Repurchase agreements collateralized by short-term commercial paper

     2,927,812            2,395,644            499,825   

Repurchase agreements collateralized by government bonds

     922,097            475,879            510,476   

Commercial paper

     299,851            -            -   
  

 

 

       

 

 

       

 

 

 
   $   231,697,295          $   242,695,447          $   186,028,798   
  

 

 

       

 

 

       

 

 

 

 

- 14 -


  7.

FINANCIAL ASSETS AND LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS

 

    

March 31,

2014

   December 31,
2013
  

March 31,

2013

Derivative financial assets

              

Cross currency swap contracts

     $ 7,490        $ -        $ 8,613  

Forward exchange contracts

       3,935          90,353          9,593  
    

 

 

      

 

 

      

 

 

 
     $ 11,425        $ 90,353        $ 18,206  
    

 

 

      

 

 

      

 

 

 

Derivative financial liabilities

              

Forward exchange contracts

     $ 186,105        $    29,573        $     3,808  

Cross currency swap contracts

       2,430          4,177          415  
    

 

 

      

 

 

      

 

 

 
     $  188,535        $ 33,750        $ 4,223  
    

 

 

      

 

 

      

 

 

 

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)

March 31, 2014

     

Sell EUR/Buy US$

   April 2014    EUR1,030/ US$1,421

Sell NT$/Buy EUR

   April 2014    NT$419,405/EUR10,000

Sell NT$/Buy JPY

   April 2014    NT$941,573/JPY3,150,000

Sell NT$/Buy US$

   April 2014    NT$962,307/US$31,700

Sell US$/Buy EUR

   April 2014    US$266,577/EUR193,700

Sell US$/Buy JPY

   April 2014    US$498,716/JPY50,938,160    

Sell US$/Buy RMB

   April 2014 to June 2014    US$86,000/RMB525,831

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

March 31, 2013

     

Sell NT$/Buy US$

   April 2013    NT$810,124/US$27,200

Sell NT$/Buy JPY

   April 2013    NT$14,261/JPY45,000

Sell US$/Buy JPY

   April 2013    US$73,191/JPY6,893,306

Sell US$/Buy NT$

   April 2013 to June 2013    US$14,340/NT$424,772

Sell US$/Buy RMB

   April 2013 to May 2013    US$64,000/RMB399,375

 

- 15 -


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

March 31, 2014

        

April 2014

   NT$2,222,031/US$73,080    -    0.45%-0.76%

December 31, 2013

        

January 2014

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

March 31, 2013

        

April 2013

   NT$1,448,327/US$48,580    -    0.20%-0.57%

April 2013

   US$252,000/NT$7,525,120    0.50%-0.60%    -

 

  8.

AVAILABLE-FOR-SALE FINANCIAL ASSETS

 

    

March 31,

2014

   December 31,
2013
  

March 31,

2013

Publicly traded stocks

     $   60,122,854        $   59,481,569        $   43,248,325  

Money market funds

       6,431          1,183          2,246  
    

 

 

      

 

 

      

 

 

 
     $ 60,129,285        $ 59,482,752        $ 43,250,571  
    

 

 

      

 

 

      

 

 

 

Current portion

     $ 845,002        $ 760,793        $ 1,162,904  

Noncurrent portion

       59,284,283          58,721,959          42,087,667  
    

 

 

      

 

 

      

 

 

 
     $ 60,129,285        $ 59,482,752        $ 43,250,571  
    

 

 

      

 

 

      

 

 

 

 

  9.

HELD-TO-MATURITY FINANCIAL ASSETS

 

    

      March 31,      

2014

   December 31,
2013
  

      March 31,      

2013

Current portion

              

Commercial paper

     $ 2,394,178        $   1,795,949        $ -  

Corporate bonds

       -          -          2,044,822  
    

 

 

      

 

 

      

 

 

 
     $   2,394,178        $ 1,795,949        $   2,044,822  
    

 

 

      

 

 

      

 

 

 

 

- 16 -


10.

HEDGING DERIVATIVE FINANCIAL INSTRUMENTS

 

    

March 31,

2014

   December 31,
2013
  

March 31,

2013

Financial assets - noncurrent

              

Fair value hedges

              

Stock forward contracts

     $ -        $ -        $   659,351  
    

 

 

      

 

 

      

 

 

 

Financial liabilities- noncurrent

              

Fair value hedges

              

Stock forward contracts

     $   5,279,032        $   5,481,616        $ -  
    

 

 

      

 

 

      

 

 

 

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:

 

    

March 31,

2014

   December 31,
2013
  

March 31,

2013

Contract amount (US$ in thousands)

   $50,253,432    $37,431,626    $11,707,678
   (US$1,648,572)    (US$1,256,095)    (US$   391,968)

 

11.

NOTES AND ACCOUNTS RECEIVABLE, NET

 

    

March 31,

2014

    December 31,
2013
   

March 31,

2013

 

Notes and accounts receivable

   $   74,260,712      $   72,136,514      $   65,962,277   

Allowance for doubtful receivables

     (486,658     (486,588     (489,748
  

 

 

   

 

 

   

 

 

 

Notes and accounts receivable, net

   $ 73,774,054      $ 71,649,926      $ 65,472,529   
  

 

 

   

 

 

   

 

 

 

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.

 

- 17 -


Aging analysis of notes and accounts receivable, net

 

    

March 31,

2014

   December 31,
2013
  

March 31,

2013

Neither past due nor impaired

     $   66,347,383        $   64,112,564        $   56,678,899  

Past due but not impaired

              

Past due within 30 days

       7,426,671          7,537,362          8,793,630  
    

 

 

      

 

 

      

 

 

 
     $ 73,774,054        $ 71,649,926        $ 65,472,529  
    

 

 

      

 

 

      

 

 

 

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

         -          21,147          21,147  

Reversal

         (230 )        (20,917 )        (21,147 )

Effect of exchange rate changes

         -          70          70  
      

 

 

      

 

 

      

 

 

 

Balance at March 31, 2014

       $ 7,828        $ 478,830        $ 486,658  
      

 

 

      

 

 

      

 

 

 

Balance at January 1, 2013

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

Provision

         -          44,699          44,699  

Reversal

         (35,235 )        -          (35,235 )

Effect of exchange rate changes

         1,632          (1,560 )        72  
      

 

 

      

 

 

      

 

 

 

Balance at March 31, 2013

       $    103,733        $    386,015        $    489,748  
      

 

 

      

 

 

      

 

 

 

Aging analysis of accounts receivable that is individually determined to be impaired

 

      

March 31,

2014

     December 31,
2013
    

March 31,

2013

Not past due

       $ -          $ 38          $ 97,405  

Past due 1-30 days

         -            276            1,867  

Past due 31-60 days

         -            80            521  

Past due 61-120 days

         321            158            783  

Past due over 121 days

         7,832            7,824            3,157  
      

 

 

        

 

 

        

 

 

 
       $       8,153          $       8,376          $     103,733  
      

 

 

        

 

 

        

 

 

 

The Company held bank guarantees and other credit enhancements as collateral for certain impaired accounts receivables. As of March 31, 2014, December 31, 2013 and March 31, 2013, the amount of the bank guarantee and other credit enhancements were NT$325 thousand (US$11 thousand), NT$318 thousand (US$11 thousand) and nil, respectively.

 

- 18 -


12.

INVENTORIES

 

    

March 31,

2014

   December 31,
2013
  

March 31,

2013

Finished goods

     $ 7,332,318        $ 7,245,209        $ 6,953,902  

Work in process

       31,895,019          26,033,625          25,517,540  

Raw materials

       2,444,274          2,435,269          3,320,050  

Supplies and spare parts

       1,809,658          1,780,790          2,041,973  
    

 

 

      

 

 

      

 

 

 
     $   43,481,269        $   37,494,893        $   37,833,465  
    

 

 

      

 

 

      

 

 

 

Write-down of inventories to net realizable value in the amount of NT$590,034 thousand was included in the cost of revenue for the three months ended March 31, 2014. The reserve for inventory write-downs in the amount of NT$94,941 thousand was reversed in the cost of revenue for the three months ended March 31, 2013 when the related inventory items were scrapped or sold.

 

13.

FINANCIAL ASSETS CARRIED AT COST

 

    

March 31,

2014

     December 31,
2013
    

March 31,

2013

Non-publicly traded stocks

     $ 1,771,146          $ 1,865,078          $ 3,408,947  

Mutual funds

       283,929            280,513            294,646  
    

 

 

        

 

 

        

 

 

 
     $   2,055,075          $   2,145,591          $   3,703,593  
    

 

 

        

 

 

        

 

 

 

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:

 

    

March 31,

2014

     December 31,
2013
    

March 31,

2013

 

Associates

   $ 25,954,914       $ 24,823,807       $ 21,075,728   

Jointly controlled entities

     3,552,814         3,492,453         3,176,342   
  

 

 

    

 

 

    

 

 

 
   $   29,507,728       $   28,316,260       $   24,252,070   
  

 

 

    

 

 

    

 

 

 

 

- 19 -


  a.

Investments in associates

Associates consisted of the following:

 

Name of Associate

  

Principal Activities

  

Place of

Incorporation
and Operation

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

March 31,

2014

   December 31,
2013
  

March 31,

2013

  

March 31,

2014

   December 31,
2013
  

March 31,

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

     $ 11,073,716        $ 10,556,348        $ 9,783,163          39%          39%          40%  

Systems on Silicon Manufacturing Company Pte Ltd. (SSMC)

  

Fabrication and supply of integrated circuits

  

Singapore

       8,036,044          7,457,733          7,292,694          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

  

Taipei, Taiwan

       3,855,061          3,887,462          2,752,394          20%          20%          20%  

Xintec

  

Wafer level chip size packaging service

  

Taoyuan, Taiwan

       1,863,039          1,866,123          -          40%          40%          -  

Global Unichip Corporation (GUC)

  

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

  

Hsinchu, Taiwan

       1,127,054          1,056,141          1,247,477          35%          35%          35%  

Mcube Inc. (Mcube)

  

Research, development, and sale of micro-semiconductor device

  

Delaware, U.S.A.

       -          -          -          -            -          25%  
          

 

 

      

 

 

      

 

 

                
           $   25,954,914        $   24,823,807        $   21,075,728                 
          

 

 

      

 

 

      

 

 

                

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 33.

On April 14, 2014, the Company sold 82,000 thousand common shares of VIS and recognized a disposal gain of NT$2,028,643 thousand in the second quarter of 2014. After the sale, the Company owned approximately 33.7% of the equity interest in VIS.

 

- 20 -


  b.

Investments in jointly controlled entities

Jointly controlled entities consisted of the following:

 

Name of Jointly
Controlled Entity

  

Principal Activities

  

Place of

Incorporation
and Operation

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

March 31,

2014

   December 31,
2013
  

March 31,

2013

  

March 31,

2014

  December 31,
2013
 

March 31,

2013

VisEra Holding Company (VisEra Holding)

  

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

  

Cayman Islands

       $   3,552,814          $   3,492,453          $   3,176,342          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

       -          2,519,647          9,108,620          606,260          -          63,974,216          76,208,743  

Disposals or retirements

       -          -          (223,116 )        (318,888 )        -          -          (542,004 )

Effect of exchange rate changes

       17,761          198,335          959,428          32,285          2,400          3,217          1,213,426  
    

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

 

Balance at March 31, 2014

     $ 4,004,670        $ 231,900,718        $ 1,423,764,726        $ 22,381,689        $ 806,830        $ 336,151,226        $ 2,019,009,859  
    

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

 

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

       6,898          3,584,230          36,724,579          659,617          10,618          -          40,985,942  

Disposals or retirements

       -          -          (223,075 )        (318,888 )        -          -          (541,963 )

Effect of exchange rate changes

       9,318          144,311          909,022          26,776          1,092          -          1,090,519  
    

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

 

Balance at March 31, 2014

     $ 420,408        $ 128,962,707        $ 1,046,624,215        $ 14,593,276        $ 397,673        $ -        $ 1,190,998,279  
    

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

 

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 March 31, 2014

     $ 3,584,262        $ 102,938,011        $ 377,140,511        $ 7,788,413        $ 409,157        $ 336,151,226        $ 828,011,580  
    

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

 

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          1,653,205          10,143,673          1,157,523          -          68,238,002          84,404,403  

Disposals or retirements

       -          -          (1,054,277 )        (287,361 )        -          -          (1,341,638 )

Effect of exchange rate changes

       21,609          492,285          1,632,861          35,168          16,498          4,299          2,202,720  
    

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

 

Balance at March 31, 2013

     $ 4,760,733        $ 199,557,341        $ 1,290,615,434        $ 20,973,273        $ 783,230        $    187,306,277        $   1,703,996,288  
    

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

 

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

       6,715          2,930,306          32,449,040          568,497          10,119          -          35,964,677  

Disposals or retirements

       -          -          (1,052,478 )        (287,126 )        -          -          (1,339,604 )

Effect of exchange rate changes

       10,609          288,001          1,422,674          26,783          7,149          -          1,755,216  
    

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

 

Balance at March 31, 2013

     $ 384,693        $ 115,020,038        $ 908,330,115        $ 13,468,721        $ 345,337        $ -        $ 1,037,548,904  
    

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

 

Carrying amounts at March 31, 2013

     $       4,376,040        $ 84,537,303        $ 382,285,319        $ 7,504,552        $ 437,893        $ 187,306,277        $ 666,447,384  
    

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

 

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.

The Company entered into agreements to lease buildings from December 2003 to November 2018 that qualify as finance leases.

Future minimum lease gross payments were as follows:

 

    

March 31,

2014

  December 31,
2013
 

March 31,

2013

Minimum lease payments

            

Not later than 1 year

     $ 28,456       $ 28,376       $ 27,622  

Later than 1 year and not later than 5 years

       853,104         850,703         110,488  

Later than five years

       -         -         745,222  
    

 

 

     

 

 

     

 

 

 
       881,560         879,079         883,332  

Less:    Future finance expenses

       (89,396 )       (94,040 )       (105,979 )
    

 

 

     

 

 

     

 

 

 

Present value of minimum lease payments

     $   792,164       $   785,039       $   777,353  
    

 

 

     

 

 

     

 

 

 

 

(Continued)

 

- 21 -


    

March 31,

2014

   December 31,
2013
  

March 31,

2013

Present value of minimum lease payments

              

Not later than 1 year

     $ 27,762        $ 27,684        $ 26,948  

Later than 1 year and not later than 5 years

       764,402          757,355          107,803  

Later than five years

       -          -          642,602  
    

 

 

      

 

 

      

 

 

 
     $ 792,164        $ 785,039        $ 777,353  
    

 

 

      

 

 

      

 

 

 

Current portion

     $ 8,889        $ 8,809        $ 8,418  

Noncurrent portion

         783,275            776,230            768,935  
    

 

 

      

 

 

      

 

 

 
     $ 792,164        $ 785,039        $ 777,353  
    

 

 

      

 

 

      

 

 

 

(Concluded)

There was no capitalization of borrowing costs for the three months ended March 31, 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

       -            371,030          269,160          526,097            1,166,287  

Retirements

       -            -          (20,353 )        -            (20,353 )

Effect of exchange rate changes

       93,047            (954 )        537          380            93,010  
    

 

 

        

 

 

      

 

 

      

 

 

        

 

 

 

Balance at March 31, 2014

     $ 5,720,564          $ 4,814,904        $ 17,336,149        $ 4,255,873          $ 32,127,490  
    

 

 

        

 

 

      

 

 

      

 

 

        

 

 

 

Accumulated amortization

                            

Balance at January 1, 2014

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

Additions

       -            123,690          359,025          153,720            636,435  

Retirements

       -            -          (20,353 )        -            (20,353 )

Effect of exchange rate changes

       -            (954 )        526          44            (384 )
    

 

 

        

 

 

      

 

 

      

 

 

        

 

 

 

Balance at March 31, 2014

     $ -          $ 3,464,403        $ 13,778,333        $ 2,771,125          $ 20,013,861  
    

 

 

        

 

 

      

 

 

      

 

 

        

 

 

 

Carrying amounts at January 1, 2014

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

 

 

        

 

 

      

 

 

      

 

 

        

 

 

 

Carrying amounts at March 31, 2014

     $ 5,720,564          $ 1,350,501        $ 3,557,816        $ 1,484,748          $ 12,113,629  
    

 

 

        

 

 

      

 

 

      

 

 

        

 

 

 

Cost

                            

Balance at January 1, 2013

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

Additions

       -            -          763,917          200,815            964,732  

Retirements

       -            -          (700 )        -            (700 )

Reclassification

       -            (29,565 )        -          -            (29,565 )

Effect of exchange rate changes

       113,210            442          2,400          2,442            118,494  
    

 

 

        

 

 

      

 

 

      

 

 

        

 

 

 

Balance at March 31, 2013

     $ 5,636,917          $ 4,561,425        $ 15,861,038        $ 3,297,921          $ 29,357,301  
    

 

 

        

 

 

      

 

 

      

 

 

        

 

 

 

Accumulated amortization

                            

Balance at January 1, 2013

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

Additions

       -            67,617          313,690          150,206            531,513  

Retirements

       -            -          (428 )        -            (428 )

Effect of exchange rate changes

       -            441          2,164          403            3,008  
    

 

 

        

 

 

      

 

 

      

 

 

        

 

 

 

Balance at March 31, 2013

     $ -          $ 3,196,713        $     12,441,905        $       2,240,246          $     17,878,864  
    

 

 

        

 

 

      

 

 

      

 

 

        

 

 

 

Carrying amounts at March 31, 2013

     $       5,636,917          $       1,364,712        $ 3,419,133        $ 1,057,675          $ 11,478,437  
    

 

 

        

 

 

      

 

 

      

 

 

        

 

 

 

 

- 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 three months ended March 31, 2014 and 2013, the Company did not recognize any impairment loss on goodwill.

 

17.

OTHER ASSETS

 

    

March 31,

2014

   December 31,
2013
  

March 31,

2013

Tax receivable

     $ 1,327,531        $ 1,781,376        $ 1,397,893  

Prepaid expenses

       1,068,105          1,081,957          1,855,312  

Long-term receivable

       754,020          820,000          764,200  

Others

       653,862          770,468          575,835  
    

 

 

      

 

 

      

 

 

 
     $ 3,803,518        $ 4,453,801        $ 4,593,240  
    

 

 

      

 

 

      

 

 

 

Current portion

     $   2,381,416        $   2,984,224        $   3,339,372  

Noncurrent portion

       1,422,102          1,469,577          1,253,868  
    

 

 

      

 

 

      

 

 

 
     $ 3,803,518        $ 4,453,801        $ 4,593,240  
    

 

 

      

 

 

      

 

 

 

 

18.

SHORT-TERM LOANS

 

    

March 31,

2014

   December 31,
2013
  

March 31,

2013

Unsecured loans

              

Amount

     $   24,843,645        $   15,645,000        $   35,842,800  
    

 

 

      

 

 

      

 

 

 

Original loan content

              

US$ (in thousands)

     $ 815,000        $ 525,000        $ 1,200,000  

Annual interest rate

       0.38%-0.50%          0.38%-0.42%          0.41%-0.49%  

Maturity date

      
 
Due in April
2014
 
 
      
 
Due in
January 2014
 
 
      
 
Due in April
2013
 
 

 

19.

PROVISIONS

 

    

March 31,

2014

     December 31,
2013
    

March 31,

2013

Sales returns and allowances

     $ 9,964,997          $ 7,603,781          $ 6,350,698  

Warranties

       12,925            10,452            5,199  
    

 

 

        

 

 

        

 

 

 
     $   9,977,922          $   7,614,233          $   6,355,897  
    

 

 

        

 

 

        

 

 

 

 

(Continued)

 

- 23 -


    

March 31,

2014

   December 31,
2013
  

March 31,

2013

Current portion

     $ 9,964,997        $ 7,603,781        $ 6,350,698  

Noncurrent portion (classified under other noncurrent liabilities)

       12,925          10,452          5,199  
    

 

 

      

 

 

      

 

 

 
     $   9,977,922        $   7,614,233        $   6,355,897     
    

 

 

      

 

 

      

 

 

 

(Concluded)

 

     Sales Returns
and Allowances
  Warranties   Total

Three months ended March 31, 2014

            

Balance, beginning of period

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

Provision

       4,354,104         3,064         4,357,168  

Payment

       (1,997,250 )       (722 )       (1,997,972 )

Effect of exchange rate changes

       4,362         131         4,493  
    

 

 

     

 

 

     

 

 

 

Balance, end of period

     $ 9,964,997       $         12,925       $ 9,977,922  
    

 

 

     

 

 

     

 

 

 

Three months ended March 31, 2013

            

Balance, beginning of period

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

Provision

       1,746,905         323         1,747,228  

Payment

       (1,440,324 )       -         (1,440,324 )

Effect of exchange rate changes

       6,114         (15 )       6,099  
    

 

 

     

 

 

     

 

 

 

Balance, end of period

     $    6,350,698       $ 5,199       $    6,355,897  
    

 

 

     

 

 

     

 

 

 

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

 

    

March 31,

2014

  December 31,
2013
 

March 31,

2013

Noncurrent portion

            

Domestic unsecured bonds

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

Overseas unsecured bonds

       45,724,500         44,700,000         -  
    

 

 

     

 

 

     

 

 

 
       211,924,500         210,900,000         125,000,000  

Less:    Discounts on bonds payable

       (126,399 )       (132,375 )       -  
    

 

 

     

 

 

     

 

 

 
     $   211,798,101       $   210,767,625       $   125,000,000  
    

 

 

     

 

 

     

 

 

 

 

- 24 -


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%  

 

21.

LONG-TERM BANK LOANS

 

    

March 31,

2014

   December 31,
2013
  

March 31,

2013

Bank loans for working capital

     $ 40,000        $ 40,000        $ 1,456,250  
    

 

 

      

 

 

      

 

 

 

Current portion

     $ -        $ -        $ 131,250  

Noncurrent portion

       40,000          40,000          1,325,000  
    

 

 

      

 

 

      

 

 

 
     $       40,000        $       40,000        $   1,456,250  
    

 

 

      

 

 

      

 

 

 

In relation to the deconsolidation of Xintec in June 2013 (refer to Note 33), long-term bank loans of Xintec have been derecognized.

 

22.

OTHER LONG-TERM PAYABLES

 

    

March 31,

2014

     December 31,
2013
    

March 31,

2013

Payables for software and system design costs

     $ 54,000          $ 54,000          $ 113,000  

Payables for acquisition of property, plant and equipment

       -            -            843,160  
    

 

 

        

 

 

        

 

 

 
     $ 54,000          $ 54,000          $ 956,160  
    

 

 

        

 

 

        

 

 

 

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

     $ 18,000          $ 18,000          $ 902,160  

Noncurrent portion

       36,000            36,000            54,000  
    

 

 

        

 

 

        

 

 

 
     $       54,000          $       54,000          $   956,160  
    

 

 

        

 

 

        

 

 

 

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.

 

- 25 -


23.

EQUITY

 

  a.

Capital stock

 

    

March 31,

2014

   December 31,
2013
  

March 31,

2013

Authorized shares (in thousands)

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

 

 

      

 

 

      

 

 

 

Authorized capital

     $ 280,500,000        $ 280,500,000        $ 280,050,000  
    

 

 

      

 

 

      

 

 

 

Issued and paid shares (in thousands)

       25,929,124          25,928,617          25,928,232  
    

 

 

      

 

 

      

 

 

 

Issued capital

     $   259,291,239        $   259,286,171        $   259,282,327  
    

 

 

      

 

 

      

 

 

 

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 March 31, 2014, 1,077,434 thousand ADSs of TSMC were traded on the NYSE. The number of common shares represented by the ADSs was 5,387,171 thousand shares (one ADS represents five common shares).

 

  b.

Capital surplus

 

    

   March 31,   

2014

   December 31,
2013
  

   March 31,   

2013

Additional paid-in capital

     $ 24,034,598        $ 24,017,363        $ 24,003,991  

From merger

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

From convertible bonds

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

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

       89,882          100,827          44,343  

From share of changes in equities of associates and joint venture

       13,388          43,024          16,826  

Donations

       55          55          55  
    

 

 

      

 

 

      

 

 

 
     $   55,835,280        $   55,858,626        $   55,762,572  
    

 

 

      

 

 

      

 

 

 

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 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.

 

  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;

 

- 26 -


  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.

TSMC accrued profit sharing to employees based on certain percentage of net income during the period, which amounted to NT$3,200,716 thousand and NT$2,660,482 thousand for the three months ended March 31, 2014 and 2013, respectively. Bonuses to members of the Board of Directors were expensed based on estimated amount payable. If the actual amounts subsequently approved by the shareholders differ from the amounts estimated, the differences are recorded in the year such bonuses are approved by the shareholders 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 Board of Directors in its meeting held on February 18, 2014 and by TSMC’s shareholders in its meeting held 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             
    

 

 

        

 

 

            

 

- 27 -


The Board of Directors of TSMC also approved on February 18, 2014 the profit sharing to employees and bonus to members of the Board of Directors in the amounts of NT$12,634,665 thousand and NT$104,136 thousand in cash for 2013, respectively. There is no significant difference between the aforementioned approved amounts and the amounts charged against earnings of 2013.

The appropriations of earnings, profit sharing to employees and bonus to members of the Board of Directors for 2013 are to be presented for approval in the TSMC’s shareholders’ meeting to be held on June 24, 2014 (expected).

TSMC’s profit sharing to employees and bonus to members of the Board of Directors in the amounts of NT$11,115,240 thousand and NT$71,351 thousand in cash for 2012, respectively, had been approved by shareholders in its meeting held on June 11, 2013. The aforementioned approved amounts are the same as the amounts approved by the Board of Directors in its meetings held on February 5, 2013, and the same amounts had been charged against earnings of 2012.

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.

 

  d.

Others

Changes in others were as follows:

 

     Three Months Ended March 31, 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

           2,830,754         -         -         2,830,754  

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

       -         (395,296 )       -         (395,296 )  

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

       -         (20,649 )       -         (20,649 )

Share of other comprehensive income of associates and joint venture

       (22,830 )       17,891                        95         (4,844 )

Income tax effect

       -         2,956         -         2,956  
    

 

 

     

 

 

     

 

 

     

 

 

 

Balance, end of period

     $ (4,332,438 )     $   20,915,683       $ (18 )     $   16,583,227  
    

 

 

     

 

 

     

 

 

     

 

 

 

 

- 28 -


     Three Months Ended March 31, 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

       2,871,521         -         -             2,871,521  

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

       -         3,644,263         -          3,644,263  

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

       -         (815,636 )       -          (815,636 )  

Share of other comprehensive income of associates and joint venture

       134,653         (14 )       -          134,639  

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

       510         (26 )       -          484  

Income tax effect

       -         43,239         -          43,239  
    

 

 

     

 

 

     

 

 

      

 

 

 

Balance, end of period

     $ (7,747,122 )     $   10,845,147       $                  -        $ 3,098,025  
    

 

 

     

 

 

     

 

 

      

 

 

 

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.

 

- 29 -


  e.

Noncontrolling interests

 

       Three Months Ended March 31  
     2014   2013

Balance, beginning of period

     $ 266,830       $ 2,543,226  

Share of noncontrolling interests

        

Net loss

       (24,967 )       (41,333 )  

Exchange differences arising on translation of foreign operations

       627         32,232  

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

       838         (256 )

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

       (338 )       (2,679 )

Stock option compensation cost of subsidiary

       -         2,701  

Share of other comprehensive income of associates and joint venture

       97         -  

Adjustments arising from changes in percentage of ownership in subsidiaries

       10,945         (3,610 )

Decrease in noncontrolling interests

       (29,574 )       (12,464 )
    

 

 

     

 

 

 

Balance, end of period

     $ 224,458       $ 2,517,817  
    

 

 

     

 

 

 

 

24.

SHARE-BASED PAYMENT

The Company did not issue employee stock option plans for the three months ended March 31, 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$)

Three months ended March 31, 2014

        

Balance, beginning of period

       1,763         $45.9  

Options exercised

       (507 )       44.0  
    

 

 

     

Balance, end of period

       1,256         46.7  
    

 

 

     

Balance exercisable, end of period

       1,256         46.7  
    

 

 

     

Three months ended March 31, 2013

        

Balance, beginning of period

       5,945         $34.6  

Options exercised

           (3,797 )       28.3  
    

 

 

     

Balance, end of period

       2,148         45.7  
    

 

 

     

Balance exercisable, end of period

       2,148         45.7  
    

 

 

     

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.

 

- 30 -


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

 

March 31, 2014

 

December 31, 2013

 

March 31, 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)
$43.2-$47.2   1.0   $43.2-$47.2   1.0   $20.2-$28.3   0.2
        $38.0-$50.1   1.8

 

    Xintec

  

Number of
Options

(In Thousands)

  Weighted-
average
Exercise Price
(NT$)

Three months ended March 31, 2013

        

Balance, beginning of period

       515       $ 13.8  

Options exercised

       (58 )       14.7  
    

 

 

     

Balance, end of period

           457         13.7  
    

 

 

     

Balance exercisable, end of period

       453         13.8  
    

 

 

     

The exercise prices have been adjusted to reflect the distribution of earnings by Xintec in accordance with the stock option plans.

Information about Xintec’s outstanding options was as follows:

 

March 31, 2013    

    Range of Exercise

    Price

    (NT$)

 

 

Weighted-average    

Remaining    

Contractual Life    

(Years)    

 

 
    $10.7-$12.5   3.5      
    $14.8-$18.6   4.4      

 

  b.

Application of IFRS 2

 

    Xintec   

Number of
Options

(In Thousands)

  Weighted-
average
Exercise
Price (NT$)

Three months ended March 31, 2013

        

Balance, beginning of period

       5,528       $   22.1  

Options forfeited

       (262 )       22.1  
    

 

 

     

Balance, end of period

           5,266         22.1  
    

 

 

     

Balance exercisable, end of period

       -         -     
    

 

 

     

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

     $ 5.82      
    

 

 

     

The exercise prices have been adjusted to reflect the distribution of earnings by Xintec in accordance with the stock option plan.

 

- 31 -


As of March 31, 2013, the range of exercise prices for Xintec’s outstanding stock options was NT$22.1; the weighted-average remaining contractual life was 4.2 years.

The grant date of aforementioned stock options was June 14, 2012. Xintec used the Black-Scholes model to determine the fair value of the options. The valuation assumptions were as follows:

 

     Xintec    

Valuation assumptions:

  

Stock price on grant date (NT$/share)

     $  19.42       

Exercise price (NT$/share)

     22.30       

Expected volatility

     43.73%        

Expected life

     3.875 years   

Expected dividend yield

     -   

Risk free interest rate

     0.96%       

The stock price on grant date was determined based on the market approach. The expected volatility was calculated based on the historical stock prices of the comparative companies of Xintec.

For the three months ended March 31, 2013, Xintec recognized compensation cost of the above stock option in the amount of NT$2,701 thousand.

 

25.

NET REVENUE

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

 

      Three Months Ended March 31  
    2014   2013

Net revenue from sale of goods

    $   147,997,622            $   132,632,563    

Net revenue from royalties

      217,550           122,433    
   

 

 

       

 

 

     
    $   148,215,172         $   132,754,996    
   

 

 

       

 

 

     

 

26.

OTHER OPERATING INCOME AND EXPENSES, NET

 

      Three Months Ended March 31  
    2014   2013

Income (expenses) of rental assets

             

Rental income

    $ 2,984         $ 3,683             

Depreciation of rental assets

      (6,222 )         (6,455 )    
   

 

 

       

 

 

     
      (3,238 )         (2,772 )    

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

      497           28,710      

Income from receipt of equity securities in settlement of trade receivables

      -           8,565      
   

 

 

       

 

 

     
    $    (2,741 )                  $   34,503      
   

 

 

       

 

 

     

 

- 32 -


27.

OTHER INCOME

 

   

Three Months Ended March 31

         2014      2013

Interest income

             

Bank deposits

       $ 607,811          $ 334,077     

Available-for-sale financial assets

         1,604            1,520  

Held-to-maturity financial assets

         4,284            10,724  
      

 

 

        

 

 

 
       $ 613,699          $ 346,321  
      

 

 

        

 

 

 

 

28.

FINANCE COSTS

 

   

Three Months Ended March 31

         2014      2013

Interest expense

             

Corporate bonds

       $ 769,977          $ 441,694     

Bank loans

         21,628            42,438  

Finance leases

         4,969            4,788  

Others

         6            5,078  
      

 

 

        

 

 

 
       $ 796,580          $ 493,998  
      

 

 

        

 

 

 

 

29.

OTHER GAINS AND LOSSES

 

   

Three Months Ended March 31

         2014      2013

Gain on disposal of financial assets, net

             

Available-for-sale financial assets

       $ 20,987          $ 818,315     

Financial assets carried at cost

         23,758            2,105  

Other gains

         47,613            92,587  

Net gain on financial instruments at FVTPL

             

Held for trading

         104,110            258,437  

Fair value hedges

             

Gain from hedging instruments

         325,678            649,991  

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

         (327,961 )          (759,175 )

Other losses

         (150,801 )          (55,917 )
      

 

 

        

 

 

 
       $ 43,384          $ 1,006,343  
      

 

 

        

 

 

 

 

- 33 -


30.

INCOME TAX

 

  a.

Income tax expense recognized in profit or loss

Income tax expense consisted of the following:

 

   

 Three Months Ended March 31 

         2014   2013

Current income tax expense (benefit)

          

Current tax expense recognized in the current period

       $ 6,019,953       $ 4,988,326  

Income tax adjustments on prior years

         -         (409,743 )   

Other income tax adjustments

         26,996         3,798  
      

 

 

     

 

 

 
         6,046,949         4,582,381  
      

 

 

     

 

 

 

Deferred income tax expense (benefit)

          

The origination and reversal of temporary differences

         (673,870 )       1,008,473  

Investment tax credits and operating loss carryforward

         82,985         621,517  
      

 

 

     

 

 

 
         (590,885 )       1,629,990  
      

 

 

     

 

 

 

Income tax expense recognized in profit or loss

       $ 5,456,064       $ 6,212,371  
      

 

 

     

 

 

 

 

  b.

Income tax benefit recognized in other comprehensive income

 

        Three Months Ended March 31   
     2014   2013

Deferred income tax benefit

        

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

     $      2,956        $   43,239         
    

 

 

     

 

 

 

 

  c.

Integrated income tax information

 

    

March 31,

2014

       December 31,
2013
      

March 31,

2013

 

Balance of the Imputation

            

Credit Account - TSMC

   $   15,242,724         $   15,242,724         $    8,130,060     
  

 

 

      

 

 

      

 

 

 

The estimated and actual creditable ratio for distribution of TSMC’s earnings of 2013 and 2012 were 9.80% 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.

 

- 34 -


  d.

Income tax examination

The tax authorities have examined income tax returns of TSMC through 2010. All investment tax credit adjustments assessed by the tax authorities have been recognized accordingly.

 

31.

EARNINGS PER SHARE

 

     Three Months Ended March 31
           2014    2013      

Basic EPS

         $1.85    $1.53      

Diluted EPS

         $1.85    $1.53      

EPS is computed as follows:

 

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

Three months ended March 31, 2014

        

Basic EPS

        

Net income available to common shareholders of the parent

   $ 47,870,745         25,928,848       $1.85
        

 

Effect of dilutive potential common shares

     -         992      
  

 

 

    

 

 

    

Diluted EPS

        

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

   $ 47,870,745         25,929,840       $1.85
  

 

 

    

 

 

    

 

Three months ended March 31, 2013

        

Basic EPS

        

Net income available to common shareholders of the parent

   $ 39,576,876         25,925,949       $1.53
        

 

Effect of dilutive potential common shares

     -         3,469      
  

 

 

    

 

 

    

Diluted EPS

        

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

   $ 39,576,876         25,929,418       $1.53
  

 

 

    

 

 

    

 

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.

 

- 35 -


32.

ADDITIONAL INFORMATION OF EXPENSES BY NATURE

Net income included the following items:

 

          Three Months Ended March 31  
             2014        2013      

a.

 

Depreciation of property, plant and equipment

           
 

Recognized in cost of revenue

     $ 37,457,425         $ 33,042,653     
 

Recognized in operating expenses

       3,522,295           2,915,569     
 

Recognized in other operating income and expenses

       6,222           6,455     
      

 

 

      

 

 

   
       $ 40,985,942         $ 35,964,677     
      

 

 

      

 

 

   

b.

 

Amortization of intangible assets

           
 

Recognized in cost of revenue

     $ 333,467         $ 295,132     
 

Recognized in operating expenses

       302,968           236,381     
      

 

 

      

 

 

   
       $ 636,435         $ 531,513     
      

 

 

      

 

 

   

c.

 

Research and development costs expensed as incurred

     $ 12,066,622         $ 10,650,985     
      

 

 

      

 

 

   

d.

 

Employee benefits expenses

           
 

Post-employment benefits

           
 

Defined contribution plans

     $ 412,452         $ 384,458     
 

Defined benefit plans

       84,296           60,690     
      

 

 

      

 

 

   
         496,748           445,148     
 

Equity-settled share-based payments

       -           2,701     
 

Other employee benefits

       16,830,516           15,016,003     
      

 

 

      

 

 

   
       $ 17,327,264         $ 15,463,852     
      

 

 

      

 

 

   
 

Employee benefits expense summarized by function

           
 

Recognized in cost of revenue

     $ 10,408,979         $ 9,349,424     
 

Recognized in operating expenses

       6,918,285           6,114,428     
      

 

 

      

 

 

   
       $ 17,327,264         $ 15,463,852     
      

 

 

      

 

 

   

 

33.

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.

 

- 36 -


  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  

Noncurrent liabilities

      

Loans

       (1,940,625  

Others

       (27,472  
    

 

 

   

Net assets deconsolidated

     $ 3,796,423     
    

 

 

   

 

  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     

 

- 37 -


34.

FINANCIAL INSTRUMENTS

 

  a.

Categories of financial instruments

 

    

March 31,

2014

       December 31,
2013
      

March 31,

2013

 

Financial assets

            

FVTPL

            

Held for trading derivatives

   $ 11,425         $ 90,353         $ 18,206   

Derivative financial instruments in designated hedge accounting relationships

     -           -           659,351   

Available-for-sale financial assets (Note)

     62,184,360           61,628,343           46,954,164   

Held-to-maturity financial assets

     2,394,178           1,795,949           2,044,822   

Loans and receivables

            

Cash and cash equivalents

     231,697,295           242,695,447           186,028,798   

Notes and accounts receivables (including related parties)

     74,333,024           71,941,634           65,906,835   

Other receivables

     1,377,629           1,422,795           2,058,132   

Refundable deposits

     2,560,988           2,519,031           2,385,571   
  

 

 

      

 

 

      

 

 

 
   $   374,558,899         $   382,093,552         $   306,055,879   
  

 

 

      

 

 

      

 

 

 

Financial liabilities

            

FVTPL

            

Held for trading derivatives

   $ 188,535         $ 33,750         $ 4,223   

Derivative financial instruments in designated hedge accounting relationships

     5,279,032           5,481,616           -   

Amortized cost

            

Short-term loans

     24,843,645           15,645,000           35,842,800   

Accounts payable (including related parties)

     16,710,701           16,358,716           13,256,111   

Payables to contractors and equipment suppliers

     53,461,455           89,810,160           48,601,349   

Accrued expenses and other current liabilities

     15,528,728           13,649,615           10,608,820   

Bonds payable

     211,798,101           210,767,625           125,000,000   

Long-term bank loans

     40,000           40,000           1,456,250   

Other long-term payables

     54,000           54,000           956,160   

Guarantee deposits (classified under other noncurrent liabilities)

     154,505           151,660           184,780   
  

 

 

      

 

 

      

 

 

 
   $   328,058,702         $   351,992,142         $   235,910,493   
  

 

 

      

 

 

      

 

 

 

Note:    Including financial assets carried at cost.

 

- 38 -


  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.

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 three months ended March 31, 2014 and 2013 would have decreased by NT$306,019 thousand and NT$442,582 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$83 thousand and NT$3,022 thousand for the three months ended March 31, 2014 and 2013, respectively.

 

- 39 -


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 three months ended March 31, 2014 and 2013 would have been unaffected as they were classified as available-for-sale; however, the other comprehensive income for the three months ended March 31, 2014 and 2013 would have decreased by NT$326,779 thousand and NT$1,784,693 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.

As of March 31, 2014, December 31, 2013 and March 31, 2013, the Company’s ten largest customers accounted for 66%, 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 March 31, 2014, December 31, 2013 and March 31, 2013, the unused of financing facilities of the Company amounted to NT$72,980,416 thousand, NT$76,689,543 thousand and NT$56,979,550 thousand, respectively.

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

 

- 40 -


     Less Than
1 Year
     2-3 Years      4-5 Years      5+ Years      Total  

March 31, 2014

              

Non-derivative financial liabilities

              

Short-term loans

   $ 24,847,820       $ -       $ -       $ -       $ 24,847,820   

Accounts payable (including related parties)

     16,710,701         -         -         -         16,710,701   

Payables to contractors and equipment suppliers

     53,461,455         -         -         -         53,461,455   

Accrued expenses and other current liabilities

     15,528,728         -         -         -         15,528,728   

Bonds payable

     3,051,998         38,560,734         99,689,272         85,635,101         226,937,105   

Long-term bank loans

     1,450         12,689         21,390         10,151         45,680   

Other long-term payables

     18,000         36,000         -         -         54,000   

Obligations under finance leases

     28,456         56,913         796,191         -         881,560   

Guarantee deposits (classified under other noncurrent liabilities)

     -         154,505         -         -         154,505   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     113,648,608         38,820,841         100,506,853         85,645,252         338,621,554   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Derivative financial instruments

              

Forward exchange contracts

              

Outflows

     28,316,400         -         -         -         28,316,400   

Inflows

     (28,118,463      -         -         -         (28,118,463
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     197,937         -         -         -         197,937   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Cross currency swap contracts

              

Outflows

     2,222,031         -         -         -         2,222,031   

Inflows

     (2,227,698      -         -         -         (2,227,698
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     (5,667      -         -         -         (5,667
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Stock forward contracts

              

Outflows

     -         50,253,432         -         -         50,253,432   

Inflows

     -         (50,253,432      -         -         (50,253,432
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     -         -         -         -         -   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   $   113,840,878       $     38,820,841       $   100,506,853       $     85,645,252       $   338,813,824   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

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
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(Continued)

 

- 41 -


     Less Than
1 Year
     2-3 Years      4-5 Years      5+ Years      Total  

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   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

March 31, 2013

              

Non-derivative financial liabilities

              

Short-term loans

   $ 35,849,740       $ -       $ -       $ -       $ 35,849,740   

Accounts payable (including related parties)

     13,256,111         -         -         -         13,256,111   

Payables to contractors and equipment suppliers

     48,601,349         -         -         -         48,601,349   

Accrued expenses and other current liabilities

     10,608,820         -         -         -         10,608,820   

Bonds payable

     1,708,570         3,417,140         62,727,592         66,906,447         134,759,749   

Long-term bank loans

     149,638         749,650         601,313         -         1,500,601   

Other long-term payables

     902,160         36,000         18,000         -         956,160   

Obligations under finance leases

     27,622         55,244         55,244         745,222         883,332   

Guarantee deposits (classified under other noncurrent liabilities)

     -         184,780         -         -         184,780   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     111,104,010         4,442,814         63,402,149         67,651,669         246,600,642   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Derivative financial instruments

              

Forward exchange contracts

              

Outflows

     5,350,454         -         -         -         5,350,454   

Inflows

     (5,333,513      -         -         -         (5,333,513
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     16,941         -         -         -         16,941   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Cross currency swap contracts

              

Outflows

     8,975,315         -         -         -         8,975,315   

Inflows

     (8,976,156      -         -         -         (8,976,156
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     (841      -         -         -         (841
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Stock forward contracts

              

Outflows

     -         11,707,678         -         -         11,707,678   

Inflows

     -         (11,707,678      -         -         (11,707,678
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     -         -         -         -         -   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   $ 111,120,110       $ 4,442,814       $ 63,402,149       $ 67,651,669       $ 246,616,742   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
                 (Concluded

 

  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.

 

     March 31, 2014      December 31, 2013      March 31, 2013  
    

Carrying

Amount

     Fair Value     

Carrying

Amount

     Fair Value     

Carrying

Amount

     Fair Value    

Financial assets

                 

Held-to-maturity financial assets

                 

Commercial paper

       $ 2,394,178       $ 2,397,299           $ 1,795,949       $ 1,795,612           $ -       $ -     

Corporate bonds

     -         -         -         -         2,044,822         2,053,750     

Financial liabilities

                 

Measured at amortized cost

                 

Bonds payable

     211,798,101         210,788,163         210,767,625         208,649,668         125,000,000         125,232,890     

 

- 42 -


  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).

 

    March 31, 2014
         Level 1        Level 2        Level 3        Total      

Financial assets at FVTPL

                     

Derivative financial instruments

     $ -         $ 11,425         $ -         $ 11,425     
    

 

 

      

 

 

      

 

 

      

 

 

   

Available-for-sale financial assets

                     

Publicly traded stocks

     $   60,122,854         $ -         $ -         $   60,122,854     

Money market funds

       6,431           -           -           6,431     
    

 

 

      

 

 

      

 

 

      

 

 

   
     $   60,129,285         $ -         $ -         $   60,129,285     
    

 

 

      

 

 

      

 

 

      

 

 

   

Financial liabilities at FVTPL

                     

Derivative financial instruments

     $ -         $ 188,535         $ -         $ 188,535     
    

 

 

      

 

 

      

 

 

      

 

 

   

Hedging derivative financial liabilities

                     

Stock forward contract

     $ -         $ 5,279,032         $ -         $ 5,279,032     
    

 

 

      

 

 

      

 

 

      

 

 

   
    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     
    

 

 

      

 

 

      

 

 

      

 

 

   

 

- 43 -


    March 31, 2013
         Level 1        Level 2        Level 3        Total      

Financial assets at FVTPL

                     

Derivative financial instruments

     $ -         $ 18,206         $ -         $ 18,206     
    

 

 

      

 

 

      

 

 

      

 

 

   

Hedging derivative financial assets

                     

Stock forward contract

     $ -         $   659,351         $ -         $ 659,351     
    

 

 

      

 

 

      

 

 

      

 

 

   

Available-for-sale financial assets

                     

Publicly traded stocks

     $   43,248,325         $ -         $ -         $   43,248,325     

Money market funds

       2,246           -           -           2,246     
    

 

 

      

 

 

      

 

 

      

 

 

   
     $   43,250,571         $ -         $ -         $   43,250,571     
    

 

 

      

 

 

      

 

 

      

 

 

   

Financial liabilities at FVTPL

                     

Derivative financial instruments

     $ -         $ 4,223         $ -         $ 4,223     
    

 

 

      

 

 

      

 

 

      

 

 

   

There were no transfers between Level 1 and 2 for the three months ended March 31, 2014 and 2013, respectively.

There were no purchases and disposals for assets on Level 3 for the three months ended March 31, 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).

 

   

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.

 

- 44 -


35.

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 March 31  
         2014   2013

Item

  

Related Party Categories

             

Net revenue from sale of goods

  

Associates

    $ 992,706         $   684,786             
  

Joint venture

      335           528      
      

 

 

       

 

 

     
       $ 993,041         $   685,314      
      

 

 

       

 

 

     

Net revenue from royalties

  

Associates

    $   127,490                  $   120,416      
      

 

 

       

 

 

     

 

  b.

Purchases

 

       Three Months Ended March 31  
     2014    2013

Related Party Categories

               

Associates

     $   2,616,635               $   2,096,554            
    

 

 

        

 

 

     

 

  c.

Receivables from related parties

 

        

    March 31,    

2014

 

    December 31,    

2013

 

March 31,  

2013  

Item

  

Related Party Categories

                   

Receivables from related parties

  

Associates

    $   558,757           $   291,376         $   433,950    
  

Joint venture

      213                      332                  356    
      

 

 

         

 

 

       

 

 

     
       $   558,970           $   291,708         $   434,306    
      

 

 

         

 

 

       

 

 

     

Other receivables from related parties

  

Associates

    $   162,444           $   221,576         $   176,298    
      

 

 

         

 

 

       

 

 

     

 

  d.

Payables to related parties

 

        

    March 31,    

2014

 

    December 31,    

2013

 

March 31,  

2013  

Item

  

Related Party Categories

           

Payables to related parties

  

Associates

  $   1,328,422        $   1,687,239        $   791,504     
  

Joint venture

    1,628          1,217          1,629     
    

 

 

     

 

 

     

 

 

   
     $   1,330,050                $   1,688,456           $   793,133     
    

 

 

     

 

 

     

 

 

   

 

- 45 -


  e.

Disposal of property, plant and equipment

 

    Proceeds    Gains (Losses)
            Three Months Ended        
March  31
           Three Months Ended        
March  31
         2014         2013             2014         2013    

Related Party Categories

                     

Associates

   $         -          $     11,418         $         -          $     2,963     

Joint venture

     -            -           -            58     
  

 

 

       

 

 

      

 

 

       

 

 

   
   $ -          $ 11,418         $ -          $ 3,021     
  

 

 

       

 

 

      

 

 

       

 

 

   

 

   

Deferred Gains (Losses) from Disposal of Property,

Plant and Equipment

        

March 31,

2014

  

December 31,

2013

  

March 31,

2013

   

Related Party Categories

                  

Associates

     $         -          $         -          $ (7,410  

Joint venture

       -            -                 890     
    

 

 

       

 

 

       

 

 

   
     $ -          $ -          $ (6,520  
    

 

 

       

 

 

       

 

 

   

 

  f.

Others

 

         

March 31,

2014

  

December 31,

2013

  

March 31,

2013

Item

 

Related Party Categories

                 

Refundable deposits      

 

Associates

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

Joint venture

     -            -            4      
    

 

 

       

 

 

       

 

 

    
     $   5,813          $   5,813          $   5,817      
    

 

 

       

 

 

       

 

 

    

 

         Three Months Ended March 31
              2014         2013    

Item

  

Related Party Categories

            

Manufacturing expenses        

  

Associates

     $ 478,338          $ 6,372     
  

Joint venture

             2,586            857     
       

 

 

       

 

 

   
        $ 480,924          $ 7,229     
       

 

 

       

 

 

   

Research and development expenses

  

Associates

     $ 8,031          $ -     
  

Joint venture

       608                  1,191     
       

 

 

       

 

 

   
        $ 8,639          $ 1,191     
       

 

 

       

 

 

   

 

- 46 -


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.

 

  g.

Compensation of key management personnel:

The compensation to directors and other key management personnel for the three months ended March 31, 2014 and 2013 were as follows:

 

   

Three Months Ended March 31

         2014         2013    

Short-term employee benefits

     $  332,337       $  167,580  

Post-employment benefits

           32,954               1,171  
     $  365,291       $  168,751  

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.

 

36.

PLEDGED ASSETS

The Company provided certificate of deposits recorded in other financial assets as collateral mainly for building lease agreements. As of March 31, 2014, December 31, 2013 and March 31, 2013, the aforementioned other financial assets amounted to NT$123,199 thousand, NT$120,566 thousand and NT$122,858 thousand, respectively.

 

37.

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 June 2014 and February 2034 and can be renewed upon expiration.

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

 

    

March 31,

2014

           December 31,
2013
          

March 31,

2013

Not later than 1 year

   $     876,502        $     859,070        $     617,235

Later than 1 year and not later than 5 years

       2,993,556            3,053,029            2,917,307

Later than 5 years

       5,515,717            5,534,848            5,075,559
   $  9,385,775        $  9,446,947        $  8,610,101

 

- 47 -


38.

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 March 31, 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 March 31, 2014.

 

  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 March 31, 2014, TSMC has paid EUR69,271 thousand to ASML under the research and development funding agreement.

 

  f.

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.

 

- 48 -


 

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.

 

  g.

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.

 

  h.

Amounts available under unused letters of credit as of March 31, 2014, December 31, 2013 and March 31, 2013 were NT$91,449 thousand, NT$89,400 thousand and NT$89,607 thousand, respectively.

 

39. 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        

March 31, 2014

         

Financial assets

         

Monetary items

         

USD

  $    2,710,009     30.483       $   82,609,207   

EUR

  72,007     41.89         3,016,359   

JPY

  5,027,589     0.2958         1,487,161   

Non-monetary items

         

HKD

  160,055     3.93         629,017   

Financial liabilities

         

Monetary items

         

USD

  2,068,120     30.483         63,042,501   

EUR

  273,217     41.89         11,445,055   

JPY

  57,864,266     0.2958         17,116,250   

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   

 

(Continued)

 

- 49 -


    

Foreign
Currencies

(In Thousands)

   Exchange Rate
(Note)
   Carrying  
Amount  

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    

March 31, 2013

              

Financial assets

              

Monetary items

              

USD

       2,610,008          29.869          77,958,330    

JPY

       36,676,101          0.3164-0.3172          11,604,329    

EUR

       272,647          38.21-38.23          10,417,835    

Non-monetary items

              

HKD

       195,871          3.85          754,103    

Financial liabilities

              

Monetary items

              

USD

       2,390,165          29.869          71,391,828    

JPY

       45,632,888          0.3164-0.3172          14,438,251    

EUR

       285,991          38.21-38.23          10,927,715    

(Concluded)

 

  Note:

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

 

40.

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.

 

- 50 -


  b.

Segment revenue and operating results

 

     Foundry      Others      Elimination      Total

Three months ended March 31, 2014

                         

Net revenue from external customers

     $ 148,075,125          $ 140,047          $ -          $ 148,215,172  

Net revenue from sales among intersegments

       -            14,573            (14,573 )          -  

Income (loss) from operations

       53,200,470            (678,110 )          -            52,522,360  

Three months ended March 31, 2013

                         

Net revenue from external customers

         132,681,536                      73,460                                -              132,754,996  

Net revenue from sales among intersegments

       -            238            (238 )          -  

Income (loss) from operations

       45,111,317            (683,308 )          -            44,428,009  

 

41.

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;

 

  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;

 

- 51 -


  1.

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 THREE MONTHS ENDED MARCH 31, 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 Thous-

ands)

(Note 3)

 

Ending
Balance

(US$ in
Thous-

ands)

(Note 3)

 

Amount
Actually
Drawn

(US$

in
Thous-

ands)

  Interest
Rate
  Nature for
Financing 
 

Transac-

tion
Amounts

    Reason
for
Financing
 

Allow-

ance
for

Bad

Debt

    Collateral    

Finan-

cing Limits
for Each
Borrow-

ing
Company

(Note 1)

   

Finan-

cing
Company’s
Total
Financing
Amount
Limits

(Note 2)

 
                         

 

Item

 

 

    Value      

1

  TSMC
   Partners
  TSMC
   Solar
 

Other receivables from related parties

  Yes   $4,267,620

(US$
140,000)

  $4,267,620

(US$
140,000)

  $2,743,470

(US$
90,000)

  0.37%-
0.3805%
 

The need for short-term financing

  $   -      Operating
capital
  $   -        -        -        $  17,682,809        $  44,207,023   
        TSMC
   SSL
 

Other receivables from related parties

  Yes   1,828,980

(US$
60,000)

  1,828,980

(US$
60,000)

  609,660

(US$
20,000)

  0.37%  

The need for short-term financing

    -      Operating
capital
    -        -        -        17,682,809        44,207,023   

 

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 THREE MONTHS ENDED MARCH 31, 2014

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

 

 

 

No.    

Endorsement/ 

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
Accumulated
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       $ 224,443,411      $

(US$

45,724,500

 1,500,000

  

  $

(US$

45,724,500

 1,500,000

  

  $

(US$

45,724,500

 1,500,000

  

  $ -        5.1   $ 224,443,411      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

MARCH 31, 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    
  March 31, 2014     Note  
        

Shares/Units  

(In  
Thousands)  

   

Carrying  

Value  

(Foreign  

Currencies  

in Thousands)  

    Percentage of    
Ownership    
(%)    
 

Fair Value  

(Foreign  
Currencies  
in Thousands)  

   
           

TSMC

 

Commercial paper

                      
   

CPC Corporation, Taiwan

  -   

Held-to-maturity financial assets

    120        $ 1,197,510          N/A         $ 1,199,105           
   

Taiwan Power Company

  -    ”             120        1,196,668          N/A         1,198,194           
           
   

Stock

                      
   

Semiconductor Manufacturing International Corporation

  -   

Available-for-sale financial assets

    275,957        629,017          1     629,017          Note 1      
   

United Industrial Gases Co., Ltd.

  -   

Financial assets carried at cost

    21,230        193,584          10     463,134           
   

Shin-Etsu Handotai Taiwan Co., Ltd.

  -    ”             10,500        105,000          7     341,413           
   

W.K. Technology Fund IV

  -    ”             4,000        39,280          2     35,555           
           
   

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$ 1,944,831          5     US$   1,944,831          Note 2      
   

Money market fund

                      
   

Ssga Cash Mgmt Global Offshore

  -   

Available-for-sale financial assets

    211        US$ 211          N/A         US$ 211           
           

TSMC North America

 

Stock

                      
   

Spansion Inc.

  -   

Available-for-sale financial assets

    270        US$ 4,701           -     US$ 4,701           
           

TSMC Partners

 

Stock

                      
   

Mcube

  -   

Financial assets carried at cost

    6,333        -          17     -           
           
   

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

    7,196        US$ 3,506          14     US$ 3,506           
   

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    
   March 31, 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

     36           US$ 2,174             -        US$ 2,174            
    

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            
    

Stion Corp.

   -   

”        

     8,152           US$ -           15        US$ -           Note 6
    

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.

 

Note 6: The carrying value represents carrying amount less accumulated impairment of US$55,474 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 THREE MONTHS ENDED MARCH 31, 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

 
         

Shares/
Units

(In
Thousands)

    Amount    

Shares/
Units

(In
Thousands)

    Amount    

Shares/
Units

(In
Thousands)

    Amount     Carrying
Value
   

Gain/
Loss

on
Disposal

   

Shares/
Units

(In
Thousands)

    Amount  

 

TSMC

  Commercial Paper                                                                                              
   

CPC Corporation, Taiwan

 

Held-to-maturity financial assets

 

-

 

-

 

 

100

  

 

$

    998,018

  

 

 

60

  

 

$

    598,817

  

 

 

40

  

 

$

400,000

  

 

$

    399,325

  

 

$

675

  

 

 

120

  

 

$

    1,197,510

  

   

Taiwan Power Company

 

    -   -     80        797,931        80        797,906        40        400,000        399,169        831        120        1,196,668   

 

- 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 THREE MONTHS ENDED MARCH 31, 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

 

- 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 THREE MONTHS ENDED MARCH 31, 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    $ 97,588,897        65      

Net 30 days from invoice date

     -         -       $ 47,858,135        66        
    

GUC

   Associate    Sales      611,925        -      

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

     -         -         448,216        1        
    

TSMC China

   Subsidiary    Purchases      3,741,378        23      

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

     -         -         (1,349,683     8        
    

WaferTech

   Indirect
subsidiary
   Purchases      1,882,094        12      

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

     -         -         (543,244     3        
    

VIS

   Associate    Purchases      1,621,882        10      

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

     -         -         (605,137     3        
    

SSMC

   Associate    Purchases      994,753        6      

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

     -         -         (420,435     2        

TSMC Solar

  

TSMC Solar Europe GmbH

   Subsidiary    Sales      101,865        79      

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

     -         -         54,888        99        

TSMC North America

 

  

GUC

 

   Associate
of
TSMC

 

   Sales

 

    

(US$

 

350,141

11,576

 

  

 

   

 

-

 

  

 

  

Net 30 days from invoice date

 

    

 

-

 

  

 

    

 

-

 

  

 

    

(US$

 

110,541

3,626

 

  

 

   

 

-

 

  

 

    

 

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

MARCH 31, 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

   $ 48,217,029      47    $ 17,071,703         -      $ 19,025,233      $ -   
    

GUC

  

Associate

     448,216      50      -         -        -        -   
    

VIS

  

Associate

     104,960      (Note 2)      -         -        -        -   
                 

TSMC Partners

  

TSMC Solar

  

The same parent company

    

(US$

2,748,032

90,150

  

  (Note 2)      -         -        -        -   
    

TSMC SSL

  

The same parent company

    

(US$

609,992

20,011

  

  (Note 2)      -         -        -        -   
                 

TSMC China

  

TSMC

  

Parent company

    

(RMB

1,349,683

275,232

  

  35      -         -        -        -   
                 

TSMC North America

  

GUC

  

Associate of TSMC

    

(US$

110,541

3,626

  

  24      48,959         -        55,755        -   
                 

TSMC Technology

  

TSMC

  

Parent company

    

(US$

196,835

6,457

  

  (Note 2)      -         -        -        -   
                 

WaferTech

  

TSMC

  

Parent company

    

(US$

543,244

17,821

  

 

30

 

    

 

-

 

  

 

    

 

-

 

  

 

   

 

-

 

  

 

   

 

-

 

  

 

 

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 three months ended March 31, 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

   $ 97,588,897       -    66%
                 

Receivables from related parties

     47,858,135       -      4%
                 

Other receivables from related parties

     358,894       -    -
                 

Payables to related parties

     5,026       -    -
       

TSMC China

   1       

Net revenue from sale of goods

     1,374       -    -
                 

Purchases

     3,741,378       -       3%
                 

Marketing expenses - commission

     22,359       -    -
                 

Disposal of property, plant and equipment

     1,551       -    -
                 

Gain on disposal of property, plant and equipment

     3,540       -    -
                 

Other receivables from related parties

     2,280       -    -
                 

Payables to related parties

     1,349,683       -    -
       

TSMC Japan

   1       

Marketing expenses - commission

     58,217       -    -
                 

Payables to related parties

     19,935       -    -
       

TSMC Europe

   1       

Marketing expenses - commission

     96,839       -    -
                 

Research and development expenses

     17,752       -    -
                 

Payables to related parties

     47,456       -    -
       

TSMC Korea

   1       

Marketing expenses - commission

     5,789       -    -
                 

Payables to related parties

     1,534       -    -
       

TSMC Technology

   1       

Research and development expenses

     266,049       -    -
                 

Payables to related parties

     196,835       -    -
       

WaferTech

   1       

Net revenue from sale of goods

     2,955       -    -
                 

Purchases

     1,882,094       -       1%
                 

Other receivables from related parties

     2,344       -    -
                 

Payables to related parties

     543,244       -    -
                 

Disposal of property, plant and equipment

     4,212       -    -
       

TSMC Canada

   1       

Research and development expenses

     51,819       -    -
                 

Payables to related parties

     16,264       -    -
       

TSMC SSL

   1       

Manufacturing expenses

     14,573       -    -
                 

Other gains and losses

     2,025       -    -
                 

Other receivables from related parties

     2,221       -    -
                   

Payables to related parties

     15,059       -    -

 

(Continued)

 

- 61 -


                    Intercompany Transactions
No.     Company Name     Counter Party  

Nature of  
Relationship  

(Note 1)  

  Financial Statements Item   Amount    

Terms  

(Note 2)  

  Percentage
of
Consolidated
Net Revenue
or Total
Assets

0  

  TSMC   TSMC Solar   1  

Other gains and losses

  $ 2,409      -   -
               

Other receivables from related parties

    2,594      -   -

1  

  TSMC Development   WaferTech   1  

Other receivables from related parties

    48,933      -   -

2  

  TSMC North America   TSMC Technology   3  

Other receivables from related parties

    6,706      -   -

3  

  TSMC Solar   TSMC Solar Europe GmbH   1  

Net revenue from sale of goods

    101,865      -   -
             

Receivables from related parties

    54,888      -   -
      TSMC Partners   3  

Finance costs

    2,452      -   -
               

Other payables to related parties

    2,748,032      -   -

4  

  TSMC SSL   TSMC Partners   3  

Other payables to related parties

    609,992      -   -

 

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)

MARCH 31, 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 March 31, 2014     Net Income    

Share of

Profits/
Losses

    Note
       

March 31,
2014

(Foreign
Currencies
in
Thousands)

   

December 31,

2013

(Foreign
Currencies

in
Thousands)

   

Shares

(In
Thousands)

    Percentage
of
Ownership
   

Carrying
Value

(Foreign
Currencies
in
Thousands)

    (Losses) of
the Investee
(Foreign
Currencies
in
Thousands)
   

of Investee

(Note 1)

(Foreign
Currencies
in
Thousands)

   
               
TSMC   TSMC Global   Tortola, British Virgin Islands  

Investment activities

  $ 42,327,245      $ 42,327,245        1        100      $ 65,997,205      $ 7,986      $ 7,986      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        44,202,675        386,026        386,053      Subsidiary
    VIS   Hsin-Chu, Taiwan  

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

    13,232,288        13,232,288        628,223        39        11,073,716        1,342,928        518,372      Associate
    SSMC   Singapore  

Fabrication and supply of integrated circuits

    5,120,028        5,120,028        314        39        8,036,044        1,054,272        408,952      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        4,216,351        (342,118     (338,100   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        3,777,449        (98,231     (98,231   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        1,811,086        (372,495     (343,888   Subsidiary
    Xintec   Taoyuan, Taiwan  

Wafer level chip size packaging service

    1,357,890        1,357,890        94,950        40        1,863,039        (9,569     (3,847   Associate
    GUC   Hsin-Chu, Taiwan  

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

    386,568        386,568        46,688        35        1,127,054        138,434        48,692      Associate
    VTAF III   Cayman Islands  

Investing in new start-up technology companies

    1,917,920        1,908,912        -        50        946,953        9,425        9,250      Subsidiary
    VTAF II   Cayman Islands  

Investing in new start-up technology companies

    602,454        596,514        -        98        453,643        (4,127     (4,044   Subsidiary
    TSMC Europe   Amsterdam, the Netherlands  

Marketing and engineering supporting activities

    15,749        15,749        -        100        307,327        10,083        10,083      Subsidiary
    Emerging Alliance   Cayman Islands  

Investing in new start-up technology companies

    844,775        841,757        -        99.5        150,407        (870     (866   Subsidiary
    TSMC Japan   Yokohama, Japan  

Marketing activities

    83,760        83,760        6        100        131,771        1,545        1,545      Subsidiary
    TSMC GN   Taipei, Taiwan  

Investment activities

    150,000        150,000        -        100        68,219        (6,005     (6,005   Subsidiary
    TSMC Korea   Seoul, Korea  

Customer service and technical supporting activities

    13,656        13,656        80        100        30,378        479        479      Subsidiary
               

TSMC Solar

  Motech   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        3,858,653        153,345        Note 2      Associate
    VTAF III   Cayman Islands  

Investing in new start-up technology companies

    1,806,693        1,806,693        -        49        -        9,425        Note 2      Associate
   

TSMC Solar Europe

  Amsterdam, the Netherlands  

Investing in solar related business

    504,107        504,107        -        100        30,726        (59,531     Note 2      Subsidiary
   

TSMC Solar NA

  Delaware, U.S.A.  

Selling and marketing of solar related products

    205,772        205,772        1        100        2,877        (5,575     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        1        100        2,933        (6     Note 2      Subsidiary

 

(Continued)

 

- 63 -


Investor

        Company         

 

Investee

Company 

  Location   Main Businesses and Products    Original Investment
Amount
    Balance as of March 31, 2014     Net Income    

Share of

Profits/

Losses

          Note       
       

March 31,
2014

(Foreign
Currencies in
Thousands)

   

December 31,

2013

(Foreign
Currencies

in
Thousands)

   

Shares

(In
Thousands)

    Percentage
of
Ownership
   

Carrying
Value

(Foreign
Currencies

in Thousands)

    (Losses) of
the Investee
(Foreign
Currencies
in
Thousands)
   

of Investee

(Note 1)

(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$

21,394,198

701,840

  

  $

(US$

305,091

10,087

  

    Note 2      Subsidiary
   

VisEra Holding Company

  Cayman     Islands  

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

   

(US$

1,310,769

43,000

  

   

(US$

1,310,769

43,000

  

    43,000        49       

(US$

3,552,814

116,551

  

   

(US$

35,149

1,162

  

    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$

408,836

13,412

  

   

(US$

12,896

426

  

    Note 2      Subsidiary
    ISDF II   Cayman     Islands  

Investing in new start-up technology companies

   

(US$

283,461

9,299

  

   

(US$

431,426

14,153

  

    14,153        97       

(US$

201,054

6,596

  

   

(US$

19,540

646

  

    Note 2      Subsidiary
    ISDF   Cayman     Islands  

Investing in new start-up technology companies

   

(US$

17,772

583

  

   

(US$

23,990

787

  

    787        97       

(US$

17,072

560

  

   

(US$

(707

(23


)) 

    Note 2      Subsidiary
   

TSMC Canada

  Ontario,     Canada  

Engineering support activities

   

(US$

70,111

2,300

  

   

(US$

70,111

2,300

  

    2,300        100       

(US$

144,906

4,754

  

   

(US$

(11,587

(383


)) 

    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$

2,438,640

80,000

  

   

(US$

2,438,640

80,000

  

    293,637        100       

(US$

7,855,367

257,697

  

   

(US$

285,680

9,445

  

    Note 2      Subsidiary
               
VTAF III  

Mutual-Pak Technology Co., Ltd.

 

Taipei,

    Taiwan

 

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

   

(US$

158,877

5,212

  

   

(US$

158,877

5,212

  

    11,868        58       

(US$

39,207

1,286

  

   

(US$

4,283

142

  

    Note 2      Subsidiary
    Growth Fund   Cayman     Islands  

Investing in new start-up technology companies

   

(US$

64,929

2,130

  

   

(US$

64,929

2,130

  

    -        100       

(US$

17,589

577

  

   

(US$

(894

(30


)) 

    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

519,436

12,400

  

   

(EUR

519,436

12,400

  

    -        100       

(EUR

27,320

652

  

   

(EUR

(59,859)

(1,442))

  

  

    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        -        19,920        (342,118     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

 

    72,161        54,359        7,216        1        23,541        (372,495     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 THREE MONTHS ENDED MARCH 31, 2014

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

 

 

Investee
Company 
   Main
Businesses
and
Products
  

Total Amount
of Paid-in
Capital

(Foreign
Currencies in
Thousands)

    Method of 
Investment 
 

Accumulated
Outflow of
Investment
from Taiwan
as of
January 1,
2014

(US$ in
Thousands)

    Investment Flows     

Accumulated
Outflow of
Investment
from Taiwan as
of

March 31, 2014
(US$ in
Thousands)

    Net
Income
(Losses)
of the
Investee
Company
     Percentage
of
  Ownership  
  Share of
Profits/Losses
    

Carrying
Amount

as of

March 31,
2014

    

    Accumulated
    Inward
    Remittance
    of Earnings
    as of

    March 31,
2014

 
           

 

 

Outflow

 

 

 

    

 

 

Inflow

 

 

 

                 

 

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

 

  

 

 

 

 

$                -

 

  

  

 

 

 

$                -

 

  

  

 

 

 

 

$            18,939,667

(US$           596,000

 

  

 

 

$

 

  1,053,956

 

  

  

 

100%

 

 

$

 

 

1,042,892

(Note 2)  

 

  

  

  

 

$

 

  24,928,058

 

  

  

 

    $

 

-

 

  

 

Accumulated Investment in Mainland China  

as of March 31, 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 -