FORM 6-K

1934 Act Registration No. 1-14700

 

 

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

 

FORM 6-K

 

 

REPORT OF FOREIGN PRIVATE ISSUER

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

THE SECURITIES EXCHANGE ACT OF 1934

For the month of August 2013

 

 

Taiwan Semiconductor Manufacturing Company Ltd.

(Translation of Registrant’s Name Into English)

 

 

No. 8, Li-Hsin Rd. 6,

Hsinchu Science Park,

Taiwan

(Address of Principal Executive Offices)

 

 

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

Form 20-F  x             Form 40-F  ¨

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

Yes  ¨            No   x

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

 

 

 


SIGNATURES

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

 

    Taiwan Semiconductor Manufacturing Company Ltd.
Date: August 16, 2013     By   /s/ Lora Ho
      Lora Ho
      Senior Vice President & Chief Financial Officer


Taiwan Semiconductor Manufacturing

Company Limited and Subsidiaries

Consolidated Financial Statements for the

Six Months Ended June 30, 2013 and 2012 and

Independent Accountants’ Review Report


INDEPENDENT ACCOUNTANTS’ REVIEW REPORT

The Board of Directors and Shareholders

Taiwan Semiconductor Manufacturing Company Limited

We have reviewed the accompanying consolidated balance sheets of Taiwan Semiconductor Manufacturing Company Limited and subsidiaries as of June 30, 2013, December 31, 2012, June 30, 2012 and January 1, 2012 and the related consolidated statements of comprehensive income for the three months ended June 30, 2013 and 2012 and for the six months ended June 30, 2013 and 2012, as well as the consolidated statements of changes in equity and cash flows for the six months ended June 30, 2013 and 2012. 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, International Financial Reporting Standard 1, “First-time adoption of International Financial Reporting Standards,” and International Accounting Standard 34, “Interim Financial Reporting,” endorsed by the Financial Supervisory Commission of the Republic of China.

August 13, 2013

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)

(Reviewed, Not Audited)

 

    June 30, 2013     December 31, 2012     June 30, 2012     January 1, 2012  
    Amount     %     Amount     %     Amount     %     Amount     %  

ASSETS

               

CURRENT ASSETS

               

Cash and cash equivalents (Note 6)

  $ 225,832,646        20      $ 143,410,588        15      $ 178,440,559        20      $ 143,472,277        18   

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

    20,010        —          39,554        —          23,734        —          15,360        —     

Available-for-sale financial assets (Note 8)

    1,070,537        —          2,410,635        —          2,477,046        —          3,308,770        —     

Held-to-maturity financial assets (Note 9)

    700,576        —          5,056,973        1        7,424,976        1        3,825,680        1   

Notes and accounts receivable, net (Note 11)

    79,742,708        7        57,777,586        6        60,610,432        7        45,830,288        6   

Receivables from related parties (Note 37)

    597,623        —          353,811        —          837,245        —          185,764        —     

Other receivables from related parties (Note 37)

    2,433,325        —          185,550        —          981,263        —          122,292        —     

Inventories (Notes 5 and 12)

    38,614,928        3        37,830,498        4        30,780,466        4        24,840,582        3   

Other current assets (Note 17)

    2,739,259        —          2,786,408        —          2,404,358        —          2,174,014        —     

Other financial assets (Note 38)

    710,741        —          473,833        —          603,940        —          617,142        —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total current assets

    352,462,353        30        250,325,436        26        284,584,019        32        224,392,169        28   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

NONCURRENT ASSETS

               

Available-for-sale financial assets (Note 8)

    49,581,219        4        38,751,245        4        —          —          —          —     

Held-to-maturity financial assets (Note 9)

    —          —          —          —          701,723        —          5,243,167        1   

Financial assets carried at cost (Note 13)

    3,667,697        1        3,605,077        —          4,084,014        —          4,315,005        1   

Investments accounted for using equity method

               

(Notes 5 and 14)

    25,012,840        2        23,360,918        3        23,320,630        3        24,886,931        3   

Property, plant and equipment (Notes 5 and 15)

    715,595,036        61        617,562,188        64        548,184,474        62        490,422,153        63   

Intangible assets (Notes 5 and 16)

    11,142,323        1        10,959,569        1        10,860,551        1        10,861,563        1   

Deferred income tax assets (Notes 5 and 31)

    8,667,948        1        13,128,219        2        13,376,990        2        13,604,218        2   

Refundable deposits (Note 37)

    2,412,290        —          2,426,712        —          4,296,083        —          4,518,863        1   

Other noncurrent assets (Notes 17 and 37)

    1,343,748        —          1,235,144        —          1,181,680        —          1,306,746        —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total noncurrent assets

    817,423,101        70        711,029,072        74        606,006,145        68        555,158,646        72   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

TOTAL

  $ 1,169,885,454        100      $ 961,354,508        100      $ 890,590,164        100      $ 779,550,815        100   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    June 30, 2013     December 31, 2012     June 30, 2012     January 1, 2012  
    Amount     %     Amount     %     Amount     %     Amount     %  
LIABILITIES AND EQUITY                
CURRENT LIABILITIES                

Short-term loans (Note 18)

  $ 31,466,400        3      $ 34,714,929        4      $ 30,772,585        3      $ 25,926,528        3   

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

    136,515        —          15,625        —          35,166        —          13,742        —     

Hedging derivative financial liabilities (Note 10)

    —          —          —          —          69        —          232        —     

Accounts payable

    14,391,539        1        14,490,429        2        14,126,994        1        10,530,487        1   

Payables to related parties (Note 37)

    811,195        —          748,613        —          1,309,966        —          1,328,521        —     

Salary and bonus payable

    7,135,399        1        7,535,296        1        5,518,151        1        6,148,499        1   

Accrued profit sharing to employees and bonus to directors and supervisors (Note 24)

    17,366,804        1        11,186,591        1        14,152,148        2        9,081,293        1   

Payables to contractors and equipment suppliers

    60,883,767        5        44,831,798        5        45,039,813        5        35,540,526        5   

Cash dividends payable (Note 24)

    77,773,307        7        —          —          77,762,637        9        —          —     

Income tax payable (Note 31)

    11,125,990        1        15,635,594        2        6,787,548        1        10,656,124        1   

Provisions (Notes 5 and 19)

    6,289,117        1        6,038,003        —          6,508,185        1        5,068,263        1   

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

    16,251,434        1        13,148,944        1        16,216,838        2        13,218,235        2   

Current portion of bonds payable and long-term bank loans (Notes 20 and 21)

    —          —          128,125        —          125,000        —          4,562,500        1   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total current liabilities

    243,631,467        21        148,473,947        16        218,355,100        25        122,074,950        16   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
NONCURRENT LIABILITIES                

Hedging derivative financial liabilities (Note 10)

    1,813,291        —          —          —          —          —          —          —     

Bonds payable (Note 20)

    169,801,262        14        80,000,000        8        35,000,000        4        18,000,000        3   

Long-term bank loans (Note 21)

    —          —          1,359,375        —          1,525,000        —          1,587,500        —     

Provisions (Note 19)

    6,623        —          4,891        —          3,398        —          2,889        —     

Other long-term payables (Note 22)

    36,000        —          54,000        —          113,770        —          —          —     

Obligations under finance leases (Note 15)

    760,186        —          748,115        —          749,794        —          870,993        —     

Accrued pension cost (Note 23)

    6,917,104        1        6,921,234        1        6,226,758        1        6,241,024        1   

Guarantee deposits

    166,112        —          203,890        —          253,346        —          443,983        —     

Others (Note 37)

    517,138        —          495,150        —          425,744        —          400,831        —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total noncurrent liabilities

    180,017,716        15        89,786,655        9        44,297,810        5        27,547,220        4   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities

    423,649,183        36        238,260,602        25        262,652,910        30        149,622,170        20   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

EQUITY ATTRIBUTABLE TO SHAREHOLDERS OF THE PARENT

               

Capital stock (Note 24)

    259,283,058        22        259,244,357        27        259,207,094        29        259,162,226        33   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Capital surplus (Note 24)

    55,828,587        5        55,675,340        6        55,596,476        6        55,471,662        7   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Retained earnings (Note 24)

               

Appropriated as legal capital reserve

    132,436,003        11        115,820,123        12        115,820,123        13        102,399,995        13   

Appropriated as special capital reserve

    2,785,741        —          7,606,224        1        7,606,224        1        6,433,874        1   

Unappropriated earnings

    286,801,018        25        284,985,121        29        194,624,285        22        211,630,458        27   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    422,022,762        36        408,411,468        42        318,050,632        36        320,464,327        41   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Others (Note 24)

    8,777,348        1        (2,780,485     —          (7,496,233     (1     (7,606,219     (1
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Equity attributable to shareholders of the parent

    745,911,755        64        720,550,680        75        625,357,969        70        627,491,996        80   

NONCONTROLLING INTERESTS (Note 24)

    324,516        —          2,543,226        —          2,579,285        —          2,436,649        —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total equity

    746,236,271        64        723,093,906        75        627,937,254        70        629,928,645        80   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
TOTAL   $ 1,169,885,454        100      $ 961,354,508        100      $ 890,590,164        100      $ 779,550,815        100   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
 

 

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

 

- 2 -


Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

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

(Reviewed, Not Audited)

 

     For the Three Months Ended June 30     For the Six Months Ended June 30  
     2013     2012     2013      2012  
     Amount     %     Amount     %     Amount     %      Amount     %  

NET REVENUE (Notes 5, 26, 37 and 42)

   $ 155,886,320        100      $ 128,186,331        100      $ 288,641,316        100       $ 233,801,162        100   

COST OF REVENUE (Notes 12, 33 and 37)

     79,467,520        51        65,579,011        51        151,456,246        52         120,789,358        52   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

GROSS PROFIT BEFORE ASSOCIATES ELIMINATION

     76,418,800        49        62,607,320        49        137,185,070        48         113,011,804        48   

REALIZED (UNREALIZED) GROSS PROFIT ON SALES TO ASSOCIATES

     3,386        —          (213,979     —          6,926        —           (139,950     —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

GROSS PROFIT

     76,422,186        49        62,393,341        49        137,191,996        48         112,871,854        48   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

OPERATING EXPENSES (Notes 5, 33 and 37)

                 

Research and development

     11,941,871        8        10,068,390        8        22,592,856        8         19,226,242        8   

General and administrative

     5,685,570        3        4,364,938        3        10,381,090        4         9,021,942        4   

Marketing

     1,164,693        1        1,104,741        1        2,194,492        1         2,205,176        1   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Total operating expenses

     18,792,134        12        15,538,069        12        35,168,438        13         30,453,360        13   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

OTHER OPERATING INCOME AND EXPENSES, NET (Notes 27 and 33)

     (970     —          16,816        —          33,533        —           (429,093     —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

INCOME FROM OPERATIONS (Note 42)

     57,629,082        37        46,872,088        37        102,057,091        35         81,989,401        35   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

NON-OPERATING INCOME AND EXPENSES

                 

Share of profits of associates and joint venture (Note 14)

     1,059,504        1        603,871        —          1,713,657        1         626,075        —     

Other income (Note 28)

     1,009,064        1        510,441        —          1,355,385        1         1,011,677        1   

Foreign exchange gain (loss), net

     640,998        —          (64,433     —          448,084        —           365,310        —     

Finance costs (Notes 10 and 29)

     (635,340     (1     (197,348     —          (1,129,338     —           (415,039     —     

Other gains and losses (Note 30)

     313,371        —          (1,767,688     (1     1,319,714        —           (1,947,439     (1
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Total non-operating income and expenses

     2,387,597        1        (915,157     (1     3,707,502        2         (359,416     —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

INCOME BEFORE INCOME TAX

     60,016,679        38        45,956,931        36        105,764,593        37         81,629,985        35   

INCOME TAX EXPENSE (Note 31)

     8,255,176        5        4,157,315        3        14,467,547        5         6,447,433        3   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

NET INCOME

     51,761,503        33        41,799,616        33        91,297,046        32         75,182,552        32   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

OTHER COMPREHENSIVE INCOME (LOSS) (Notes 10, 14, 24 and 31)

                 

Exchange differences arising on translation of foreign operations

     1,172,141        1        1,236,890        1        4,075,894        1         (1,387,883     (1

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

     4,669,793        3        1,542,651        1        7,495,485        3         1,822,823        1   

Cash flow hedges

     —          —          66        —          —          —           163        —     

Share of other comprehensive income of associates and joint venture

     (191,994     —          (22,321     —          (56,871     —           20,387        —     

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

     (29     —          (308,777     —          43,210        —           (308,929     —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

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

     5,649,911        4        2,448,509        2        11,557,718        4         146,561        —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

TOTAL COMPREHENSIVE INCOME FOR THE PERIOD

   $ 57,411,414        37      $ 44,248,125        35      $ 102,854,764        36       $ 75,329,113        32   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

NET INCOME (LOSS) ATTRIBUTABLE TO:

                 

Shareholders of the parent

   $ 51,807,725        33      $ 41,843,339        33      $ 91,384,601        32       $ 75,334,973        32   

Noncontrolling interests

     (46,222     —          (43,723     —          (87,555     —           (152,421     —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 
   $ 51,761,503        33      $ 41,799,616        33      $ 91,297,046        32       $ 75,182,552        32   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

TOTAL COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO:

                 

Shareholders of the parent

   $ 57,487,048        37      $ 44,294,525        35      $ 102,942,434        36       $ 75,444,959        32   

Noncontrolling interests

     (75,634     —          (46,400     —          (87,670     —           (115,846     —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 
   $ 57,411,414        37      $ 44,248,125        35      $ 102,854,764        36       $ 75,329,113        32   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

 

     For the Three Months Ended June 30      For the Six Months Ended June 30  
     2013      2012      2013      2012  
    

Income Attributable
to Shareholders of

the Parent

    

Income Attributable to
Shareholders of

the Parent

    

Income Attributable to
Shareholders of

the Parent

    

Income Attributable to

Shareholders of

the Parent

 

EARNINGS PER SHARE (NT$, Note 32)

           

Basic earnings per share

   $ 2.00       $ 1.61       $ 3.52       $ 2.91   
  

 

 

    

 

 

    

 

 

    

 

 

 

Diluted earnings per share

   $ 2.00       $ 1.61       $ 3.52       $ 2.91   
  

 

 

    

 

 

    

 

 

    

 

 

 

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

 

- 3 -


Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

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

(Reviewed, Not Audited)

 

    Equity Attributable to Shareholders of the Parent              
                                              Others                    
                                             

Foreign

Currency

Translation

   

Unrealized

Gain (loss)

from Available-

for-sale

                               
    Capital Stock - Common Stock           Retained Earnings                                    
    Shares                 Legal Capital     Special Capital     Unappropriated               Cash Flow                 Noncontrolling     Total  
    (In Thousands)     Amount     Capital Surplus     Reserve     Reserve     Earnings     Total     Reserve     Financial Assets     Hedges Reserve     Total     Total     Interests     Equity  

BALANCE, JANUARY 1, 2013

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

Appropriations of prior year’s earnings

                           

Legal capital reserve

    —          —          —          16,615,880        —          (16,615,880     —          —          —          —          —          —          —          —     

Reversal of special capital reserve

    —          —          —          —          (4,820,483     4,820,483        —          —          —          —          —          —          —          —     

Cash dividends to shareholders—NT$3.00 per share

    —          —          —          —          —          (77,773,307     (77,773,307     —          —          —          —          (77,773,307     —          (77,773,307
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

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

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income for the six months ended June 30, 2013

    —          —          —          —          —          91,384,601        91,384,601        —          —          —          —          91,384,601        (87,555     91,297,046   

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

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

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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

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

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Issuance of stock from exercise of employee stock options

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

Stock option compensation cost of subsidiary

    —          —          —          —          —          —          —          —          —          —          —          —          5,312        5,312   

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

    —          —          14,845        —          —          —          —          —          —          —          —          14,845        —          14,845   

Adjustments arising from changes in percentage of ownership in subsidiaries

    —          —          66,928        —          —          —          —          —          —          —          —          66,928        (66,928     —     

Increase in noncontrolling interests

    —          —          —          —          —          —          —          —          —          —          —          —          203,729        203,729   

Effect of deconsolidation of subsidiary

    —          —          —          —          —          —          —          —          —          —          —          —          (2,273,153     (2,273,153
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

BALANCE, JUNE 30, 2013

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

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

BALANCE, JANUARY 1, 2012

    25,916,222      $ 259,162,226      $ 55,471,662      $ 102,399,995      $ 6,433,874      $ 211,630,458      $ 320,464,327      $ (6,433,364   $ (1,172,762   $ (93   $ (7,606,219   $ 627,491,996      $ 2,436,649      $ 629,928,645   

Appropriations of prior year’s earnings

                           

Legal capital reserve

    —          —          —          13,420,128        —          (13,420,128     —          —          —          —          —          —          —          —     

Special capital reserve

    —          —          —          —          1,172,350        (1,172,350     —          —          —          —          —          —          —          —     

Cash dividends to shareholders—NT$3.00 per share

    —          —          —          —          —          (77,748,668     (77,748,668     —          —          —          —          (77,748,668     —          (77,748,668
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

    —          —          —          13,420,128        1,172,350        (92,341,146     (77,748,668     —          —          —          —          (77,748,668     —          (77,748,668
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income for the six months ended June 30, 2012

    —          —          —          —          —          75,334,973        75,334,973        —          —          —          —          75,334,973        (152,421     75,182,552   

Other comprehensive income for the six months ended June 30, 2012, net of income tax

    —          —          —          —          —          —          —          (1,397,520     1,507,441        65        109,986        109,986        36,575        146,561   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income for the six months ended June 30, 2012

    —          —          —          —          —          75,334,973        75,334,973        (1,397,520     1,507,441        65        109,986        75,444,959        (115,846     75,329,113   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Issuance of stock from exercise of employee stock options

    4,487        44,868        94,838        —          —          —          —          —          —          —          —          139,706        —          139,706   

Adjustments arising from changes in percentage of ownership in subsidiaries

    —          —          29,976        —          —          —          —          —          —          —          —          29,976        (29,976     —     

Increase in noncontrolling interests

    —          —          —          —          —          —          —          —          —          —          —          —          288,458        288,458   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

BALANCE, JUNE 30, 2012

    25,920,709      $ 259,207,094      $ 55,596,476      $ 115,820,123      $ 7,606,224      $ 194,624,285      $ 318,050,632      $ (7,830,884   $ 334,679      $ (28   $ (7,496,233   $ 625,357,969      $ 2,579,285      $ 627,937,254   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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

 

- 4 -


Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands of New Taiwan Dollars)

(Reviewed, Not Audited)

 

     For the Six Months
Ended June 30
 
     2013     2012  

CASH FLOWS FROM OPERATING ACTIVITIES

    

Income before income tax

   $ 105,764,593      $ 81,629,985   

Adjustments for:

    

Depreciation expense

     73,519,241        59,377,352   

Amortization expense

     1,071,590        1,088,886   

Stock option compensation cost of subsidiary

     5,312        —     

Finance costs

     1,129,338        415,039   

Share of profits of associates and joint venture

     (1,713,657     (626,075

Interest income

     (852,693     (941,732

Loss (gain) on disposal of property, plant and equipment and intangible assets, net

     (29,365     4,126   

Impairment loss on property, plant and equipment

     —          422,323   

Impairment loss of financial assets

     45,716        2,748,456   

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

     (990,713     (231,622

Gain on disposal of financial assets carried at cost, net

     (4,573     (134,109

Loss on disposal of investments in associates

     731        —     

Gain on deconsolidation of subsidiary

     (293,578     —     

Unrealized (realized) gross profit on sales to associates

     (6,926     139,950   

Loss (gain) on foreign exchange, net

     446,110        (859,032

Dividend income

     (502,692     (69,945

Settlement income from receiving equity securities

     (9,590     (642

Loss on hedging instruments

     1,937,366        —     

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

     (1,657,824     —     

Changes in operating assets and liabilities:

    

Derivative financial instruments

     140,919        13,050   

Receivables from related parties

     (510,193     (651,481

Notes and accounts receivable, net

     (22,223,842     (14,780,109

Other receivables from related parties

     (19,275     (43,115

Inventories

     (997,563     (5,939,884

Other current assets

     (90,235     (302,386

Other financial assets

     (64,259     92,707   

Accounts payable

     281,081        3,596,507   

Payables to related parties

     (27,167     (18,555

Salary and bonus payable

     (311,632     (630,348

Accrued profit sharing to employees and bonus to directors and supervisors

     6,180,213        5,070,855   

Accrued expenses and other current liabilities

     2,647,510        4,296,285   

Provisions

     280,544        1,442,181   

Accrued pension cost

     (1,194     (14,266
  

 

 

   

 

 

 

Cash generated from operations

     163,143,293        135,094,401   

Income taxes paid

     (14,334,965     (10,325,668
  

 

 

   

 

 

 

Net cash generated by operating activities

     148,808,328        124,768,733   
  

 

 

   

 

 

 

 

(Continued)

 

- 5 -


Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands of New Taiwan Dollars)

(Reviewed, Not Audited)

 

     For the Six Months
Ended June 30
 
     2013     2012  

CASH FLOWS FROM INVESTING ACTIVITIES

    

Acquisitions of:

    

Available-for-sale financial assets

   $ (10,102   $ (2,950

Financial assets carried at cost

     (16,616     (21,557

Property, plant and equipment

     (158,818,884     (108,038,091

Intangible assets

     (1,477,481     (806,248

Other assets

     (30,721     (22,442

Proceeds from disposal or redemption of:

    

Available-for-sale financial assets

     2,032,100        241,531   

Held-to-maturity financial assets

     4,445,850        830,368   

Financial assets carried at cost

     11,696        205,100   

Property, plant and equipment

     111,008        113,668   

Costs from entering into hedging transactions

     (143,982     —     

Interest received

     689,878        885,497   

Other dividends received

     493,557        69,945   

Dividends received from associates

     —          1,285,480   

Refundable deposits paid

     (23,124     (77,866

Refundable deposits refunded

     52,333        300,646   

Net cash outflow from deconsolidation of subsidiary (Note 34)

     (979,910     —     
  

 

 

   

 

 

 

Net cash used in investing activities

     (153,664,398     (105,036,919
  

 

 

   

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

    

Proceeds from issuance of bonds

     89,644,821        17,000,000   

Repayment of bonds

     —          (4,500,000

Increase (decrease) in short-term loans

     (4,087,493     5,150,666   

Increase in long-term bank loans

     650,000        —     

Repayment of long-term bank loans

     (62,500     —     

Repayment of other long-term payables

     —          (1,434,277

Interest paid

     (374,202     (292,797

Guarantee deposits received

     12,114        10,257   

Guarantee deposits refunded

     (53,881     (200,894

Decrease in obligations under finance leases

     (27,796     (86,328

Proceeds from exercise of employee stock options

     110,175        139,706   

Increase in noncontrolling interests

     217,860        302,427   
  

 

 

   

 

 

 

Net cash generated by financing activities

     86,029,098        16,088,760   
  

 

 

   

 

 

 

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS

     1,249,030        (852,292
  

 

 

   

 

 

 

NET INCREASE IN CASH AND CASH EQUIVALENTS

     82,422,058        34,968,282   

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

     143,410,588        143,472,277   
  

 

 

   

 

 

 

CASH AND CASH EQUIVALENTS, END OF PERIOD

   $ 225,832,646      $ 178,440,559   
  

 

 

   

 

 

 

 

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

 

- 6 -


Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2013 AND 2012

(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. Beginning in 2010, TSMC also engages in the researching, developing, designing, manufacturing and selling of solid state lighting devices and related applications products and systems, and renewable energy and efficiency related technologies and products.

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 of TSMC and its subsidiaries (collectively as the “Company”) are described in Notes 4 and 42.

 

2. THE AUTHORIZATION OF FINANCIAL STATEMENTS

The consolidated financial statements were reported to the Board of Directors and issued on August 13, 2013.

 

3. APPLICATION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRSs)

On May 14, 2009, the Financial Supervisory Commission (FSC) announced the roadmap of IFRSs adoption for R.O.C. companies. Accordingly, starting 2013, companies with shares listed on the TWSE or traded on the Taiwan GreTai Securities Market or Emerging Stock Market should prepare the consolidated financial statements in accordance with the Guidelines Governing the Preparation of Financial Reports by Securities Issuers, the IFRSs, International Accounting Standards (IASs), interpretations as well as related guidance translated by Accounting Research and Development Foundation (ARDF) endorsed by the FSC with the effective dates (collectively, “Taiwan-IFRSs”).

The new, revised or amended IFRSs, IASs, interpretations and related guidance in issue but not yet adopted by the Company as well as the effective dates issued by the International Accounting Standards Board (IASB), are stated as follows; however, the initial adoption to the following new, revised or amended standards and interpretations is still subject to the effective date to be published by the FSC.

 

- 7 -


New, Revised or Amended Standards and Interpretations

  

Effective Date Issued
by IASB (Note)

Endorsed by the FSC but the
effective dates have not yet

    been determined by the FSC

     

Amendments to IFRSs

   Improvements to IFRSs 2009—Amendment to IAS 39   

January 1, 2009 or January 1, 2010

IFRS 9 (2009)

   Financial Instruments    January 1, 2015

Amendment to IAS 39

   Embedded Derivatives   

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

Not yet endorsed by the FSC

     

Amendments to IFRSs

   Improvements to IFRSs 2010—Amendment to IAS 39   

July 1, 2010 or January 1, 2011

Amendments to IFRSs

   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

Amendments to IFRS 1

   Government Loans    January 1, 2013

Amendments to IFRS 1

  

Severe Hyperinflation and Removal of Fixed Dates for First-time Adopters

  

July 1, 2011

Amendment to IFRS 7

  

Disclosures-offsetting Financial Assets and Financial Liabilities

  

January 1, 2013

Amendments to IFRS 9 and IFRS 7

   Mandatory Effective Date and Transition Disclosure    January 1, 2015

Amendment to IFRS 7

   Disclosures—Transfers of Financial Assets    July 1, 2011

Amendment to IFRS 9

   Financial Instruments    January 1, 2015

Amendment to IFRS 10

   Consolidated Financial Statements    January 1, 2013

Amendment to IFRS 11

   Joint Arrangements    January 1, 2013

Amendment to 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 IFRS 27

   Investment Entities    January 1, 2014

Amendment to 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

Amendment to IAS 36

  

Recoverable Amount Disclosures for Non-Financial Assets

  

January 1, 2014

 

(Continued)

 

- 8 -


New, Revised or Amended Standards and Interpretations

  

Effective Date Issued
by IASB (Note)

Amendment to IAS 39

  

Novation of Derivatives and Continuation of Hedge Accounting

  

January 1, 2014

Amendment to IFRIC 20

  

Stripping Costs in the Production Phase of A Surface Mine

  

January 1, 2013

Amendment to IFRIC 21

   Levies    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 new, revised or amended standards or interpretations will not have a significant effect on the Company’s accounting policies.

 

  a. 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. All other financial assets must be measured at the fair value through profit or loss as of the balance sheet date.

 

  b. 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.

 

  c. IFRS 13, “Fair Value Measurement”

IFRS 13 establishes a single source of guidance for fair value measurements and disclosures about fair value measurements.

 

  d. A mendments to IAS 1, “Presentation of Items of Other Comprehensive Income”

The amendments to IAS 1 introduce a new disclosure terminology for other comprehensive income, which require additional disclosures in other comprehensive income. 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 Company expects the aforementioned amendments will change the Company’s presentation on the statement of comprehensive income.

 

- 9 -


  e. Amendments to IAS 19, “Employee Benefits”

The amendments to IAS 19 change the accounting for defined benefit plans, which require the Company to recognize changes in defined benefit obligations or assets, to disclose the components of the defined benefit costs, to eliminate the corridor approach and to accelerate the recognition of past service cost. According to the amendments, all actuarial gains and losses will be recognized 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 amendment also requires a broader disclosure in defined benefit plans.

 

  f. 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.

As of the date that the consolidated financial statements were authorized 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 above standards or interpretations. The related impact will be disclosed when the Company completes the evaluation.

 

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The consolidated financial statements are the Taiwan-IFRSs interim consolidated financial statements for part of the period covered by the Taiwan-IFRSs annual consolidated financial statements prepared for the year ended December 31, 2013. The Company’s date of transition to Taiwan-IFRSs is January 1, 2012, and the effect of the transition to Taiwan-IFRSs is disclosed in Note 43.

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.

Significant accounting policies are summarized as follows:

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 IFRS 1, “First-time adoption of International Financial Reporting Standards,” (IFRS 1) 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.

 

- 10 -


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

 

  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

 

June 30,

2013

    December 31,
2012
   

June 30,

2012

    January 1,
2012
    Note  

TSMC

 

TSMC North America

 

Selling and marketing of integrated circuits and semiconductor devices

 

San Jose, California, U.S.A.

    100     100     100     100     —     
 

TSMC Japan Limited (TSMC Japan)

 

Marketing activities

 

Yokohama, Japan

    100     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     100     —     
 

TSMC Korea Limited (TSMC Korea)

 

Customer service and technical supporting activities

 

Seoul, Korea

    100     100     100     100     a
 

TSMC Europe B.V. (TSMC Europe)

 

Marketing and engineering supporting activities

 

Amsterdam, the Netherlands

    100     100     100     100     a
 

TSMC Global, Ltd. (TSMC Global)

 

Investment activities

 

Tortola, British Virgin Islands

    100     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     100     —     
 

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

 

Investing in new start-up technology companies

 

Cayman Islands

    50     50     52     53     —     
 

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

 

Investing in new start-up technology companies

 

Cayman Islands

    98     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     99.5     a
 

Xintec Inc. (Xintec)

 

Wafer level chip size packaging service

 

Taoyuan, Taiwan

    b     40     40     40     —     

 

(Continued)

 

- 11 -


            Establishment   Percentage of Ownership      
Name of Investor   Name of Investee  

Main Businesses and

Products

 

and Operating

Location

 

June 30,

2013

    December 31,
2012
   

June 30,

2012

    January 1,
2012
    Note

TSMC

 

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     95     95     100   TSMC and TSMC GN aggregately have a controlling interest of 93% 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     100   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     —        —  

TSMC Partners

 

TSMC Design Technology Canada Inc. (TSMC Canada)

 

Engineering support activities

 

Ontario, Canada

    100     100     100     100   a)
 

TSMC Technology, Inc. (TSMC Technology)

 

Engineering support activities

 

Delaware, U.S.A.

    100     100     100     100   a)
 

TSMC Development, Inc. (TSMC Development)

 

Investment activities

 

Delaware, U.S.A.

    100     100     100     100   —  
 

InveStar Semiconductor Development Fund, Inc. (ISDF)

 

Investing in new start-up technology companies

 

Cayman Islands

    97     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     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     100   —  

VTAF III

 

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

 

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

 

Taipei, Taiwan

    58     58     58     57   a)
 

Growth Fund Limited (Growth Fund)

 

Investing in new start-up technology companies

 

Cayman Islands

    100     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     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     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     100   a)
 

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

 

Investing in solar related business

 

Amsterdam, the Netherlands

    100     100     100     100   a)
 

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

 

Investing in new start-up technology companies

 

Cayman Islands

    49     49     47     46   —  

TSMC Solar Europe

 

TSMC Solar Europe GmbH

 

Selling of solar related products and providing customer service

 

Hamburg, Germany

    100     100     100     100   a)

(Concluded)

 

  Note a: This is an insignificant subsidiary for which the financial statements are not reviewed by the Company’s independent accountants. The Company’s management believes the investment in such subsidiary has no material effect on the Company’s consolidated financial statements.
  Note b: TSMC has no power to govern the financial and operating policies of Xintec starting June 2013 for 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 34.

Other Significant Accounting Policies

The same accounting policies have been followed in this consolidated financial statements as were applied in the preparation of the Company’s consolidated financial statements for the three months ended March 31, 2013. For the summary of other significant accounting policies, please refer to Note 4 to the consolidated financial statements for the three months ended March 31, 2013.

 

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 three months ended March 31, 2013. For the related information, please refer to Note 5 to the consolidated financial statements for the three months ended March 31, 2013.

 

- 12 -


6. CASH AND CASH EQUIVALENTS

 

    

June 30,

2013

     December 31,
2012
    

June 30,

2012

    

January 1,

2012

 

Cash and deposits in banks

   $ 223,809,009       $ 140,072,294       $ 169,621,809       $ 139,637,363   

Repurchase agreements collateralized by corporate bonds

     1,635,358         2,691,042         3,620,337         —     

Repurchase agreements collateralized by short-term commercial paper

     199,899         349,341         1,038,952         —     

Repurchase agreements collateralized by government bonds

     188,380         297,911         4,159,461         3,834,914   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 225,832,646       $ 143,410,588       $ 178,440,559       $ 143,472,277   
  

 

 

    

 

 

    

 

 

    

 

 

 

Deposits in banks, for the purpose of meeting short-term cash commitments, consisted of highly liquid time deposits that were readily convertible to known amounts of cash and which were subject to an insignificant risk of changes in value.

 

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

 

    

June 30,

2013

     December 31,
2012
    

June 30,

2012

    

January 1,

2012

 

Derivative financial assets

           

Forward exchange contracts

   $ 17,252       $ 38,607       $ 23,576       $ 15,360   

Cross currency swap contracts

     2,758         947         158         —     
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 20,010       $ 39,554       $ 23,734       $ 15,360   
  

 

 

    

 

 

    

 

 

    

 

 

 

Derivative financial liabilities

           

Forward exchange contracts

   $ 135,184       $ 12,174       $ 33,883       $ 13,623   

Cross currency swap contracts

     1,331         3,451         1,283         119   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 136,515       $ 15,625       $ 35,166       $ 13,742   
  

 

 

    

 

 

    

 

 

    

 

 

 

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:

 

          Contract Amount
     Maturity Date    (In Thousands)

June 30, 2013

     

Sell NT$/Buy US$

   July 2013    NT$534,830/US$17,800

Sell US$/Buy EUR

   July 2013    US$386,201/EUR296,000

Sell US$/Buy JPY

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

Sell US$/Buy NT$

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

Sell US$/Buy RMB

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

(Continued)

 

- 13 -


          Contract Amount
     Maturity Date    (In Thousands)

December 31, 2012

     

Sell NT$/Buy EUR

   January 2013    NT$9,417,062/EUR246,000

Sell NT$/Buy US$

   January 2013    NT$590,403/US$20,400

Sell NT$/Buy JPY

   January 2013    NT$44,110/JPY130,000

Sell US$/Buy NT$

   January 2013 to March 2013    US$13,700/NT$398,239

Sell US$/Buy RMB

   January 2013    US$20,000/RMB124,735

June 30, 2012

     

Sell NT$/Buy EUR

   July 2012    NT$11,297/EUR300

Sell NT$/Buy JPY

   July 2012    NT$1,238,195/JPY3,293,000

Sell NT$/Buy US$

   July 2012 to August 2012    NT$507,764/US$17,000

Sell RMB/Buy US$

   July 2012    RMB1,258,088/US$199,000

Sell US$/Buy EUR

   July 2012    US$49,634/EUR39,579

Sell US$/Buy JPY

   July 2012 to August 2012    US$217,791/JPY17,317,277

Sell US$/Buy NT$

   July 2012 to September 2012    US$16,400/NT$486,689

January 1, 2012

     

Sell EUR/Buy NT$

   January 2012    EUR38,600/NT$1,528,206

Sell NT$/Buy US$

   January 2012 to February 2012    NT$163,491/US$5,400

Sell RMB/Buy US$

   January 2012    RMB1,118,705/US$177,000

Sell US$/Buy EUR

   January 2012    US$2,082/EUR1,591

Sell US$/Buy JPY

   January 2012    US$3,335/JPY259,830

Sell US$/Buy NT$

   January 2012 to February 2012    US$16,900/NT$510,122

(Concluded)

Outstanding cross currency swap contracts consisted of the following:

 

Maturity Date   

Contract Amount

(In Thousands)

  

Range of

Interest Rates
Paid

  

Range of

Interest Rates
Received

June 30, 2013

        

July 2013

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

December 31, 2012

        

January 2013

   NT$1,083,139/US$37,280    —      0.06%

January 2013

   US$275,000/NT$7,986,190    0.14%-0.17%    —  

June 30, 2012

        

July 2012

   NT$676,922/US$22,630    —      0.15%-0.20%

July 2012

   US$2,650/NT$79,200    0.30%-0.32%    —  

January 1, 2012

        

January 2012

   NT$420,431/US$13,880    —      0.48%

 

- 14 -


8. AVAILABLE-FOR-SALE FINANCIAL ASSETS

 

    

June 30,

2013

     December 31,
2012
    

June 30,

2012

    

January 1,

2012

 

Publicly traded stocks

   $ 50,643,339       $ 41,160,437       $ 2,476,537       $ 3,306,248   

Money market funds

     8,417         1,443         509         2,522   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 50,651,756       $ 41,161,880       $ 2,477,046       $ 3,308,770   
  

 

 

    

 

 

    

 

 

    

 

 

 

Current portion

   $ 1,070,537       $ 2,410,635       $ 2,477,046       $ 3,308,770   

Noncurrent portion

     49,581,219         38,751,245         —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 50,651,756       $ 41,161,880       $ 2,477,046       $ 3,308,770   
  

 

 

    

 

 

    

 

 

    

 

 

 

In October 2012, the Company acquired 5% of the outstanding equity of ASML Holding N.V. (ASML) for EUR837,816 thousand with a lock-up period of 2.5 years starting from the acquisition date. (Note 40f)

In the second quarter of 2012, the Company recognized an impairment loss on some of the overseas publicly traded stocks in the amount of NT$2,677,529 thousand due to the significant decline in fair value.

 

9. HELD-TO-MATURITY FINANCIAL ASSETS

 

    

June 30,

2013

     December 31,
2012
    

June 30,

2012

    

January 1,

2012

 

Corporate bonds

   $ 700,576       $ 5,056,973       $ 7,678,424       $ 8,614,527   

Government bonds

     —           —           448,275         454,320   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 700,576       $ 5,056,973       $ 8,126,699       $ 9,068,847   
  

 

 

    

 

 

    

 

 

    

 

 

 

Current portion

   $ 700,576       $ 5,056,973       $ 7,424,976       $ 3,825,680   

Noncurrent portion

     —           —           701,723         5,243,167   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 700,576       $ 5,056,973       $ 8,126,699       $ 9,068,847   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

10. HEDGING DERIVATIVE FINANCIAL INSTRUMENTS

 

    

June 30,

2013

     December 31,
2012
    

June 30,

2012

    

January 1,

2012

 

Financial liabilities—current

           

Cash flow hedges

           

Interest rate swap contracts

   $ —         $ —         $ 69       $ 232   
  

 

 

    

 

 

    

 

 

    

 

 

 

Financial liabilities—noncurrent

           

Fair value hedges

           

Stock forward contracts

   $ 1,813,291       $ —         $ —         $ —     
  

 

 

    

 

 

    

 

 

    

 

 

 

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

 

- 15 -


The outstanding stock forward contracts consisted of the following:

 

Contract Shares (In Thousands)    Maturity Date    Contract Price
June 30, 2013      
7,000    May 2015 to July 2015    Determined by the specific percentage of spot price on the trade date

In addition, the Company’s long-term bank loans bear floating interest rates; therefore, changes in the market interest rate may cause future cash flows to be volatile. Accordingly, the Company entered into an interest rate swap contract in order to hedge cash flow risk caused by floating interest rates.

The outstanding interest rate swap contract consisted of the following:

 

Contract Amount

(In Thousands)

   Maturity Date     

Range of Interest

Rates Paid

    

Range of Interest

Rates Received

June 30, 2012

        

NT$56,000

     August 31, 2012         1.38%       0.86%-0.87%

January 1, 2012

        

NT$80,000

     August 31, 2012         1.38%       0.63%-0.86%

For the three months and the six months ended June 30, 2012, the amount recognized in other comprehensive income and accumulated under the heading of cash flow hedges reserve from the above interest rate swap contract amounted to a net loss of NT$16 thousand and NT$17 thousand, respectively; the amount reclassified from equity and recognized as a loss from the above interest rate swap contract amounted to a net loss of NT$82 thousand and NT$180 thousand, respectively, which were included under finance costs in the consolidated statements of comprehensive income.

 

11. NOTES AND ACCOUNTS RECEIVABLE, NET

 

    

June 30,

2013

    December 31,
2012
   

June 30,

2012

   

January 1,

2012

 

Notes and accounts receivable

   $ 80,229,317      $ 58,257,798      $ 61,101,346      $ 46,321,240   

Allowance for doubtful receivables

     (486,609     (480,212     (490,914     (490,952
  

 

 

   

 

 

   

 

 

   

 

 

 

Notes and accounts receivable, net

   $ 79,742,708      $ 57,777,586      $ 60,610,432      $ 45,830,288   
  

 

 

   

 

 

   

 

 

   

 

 

 

The Company’s sales agreements typically provide that the payment is due 30 days from the invoice date for a majority of the costumers and 30 to 45 days after the end of the month in which sales occur for some customers. 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 an 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.

 

- 16 -


Aging analysis of notes and accounts receivable, net

 

    

June 30,

2013

     December 31,
2012
    

June 30,

2012

    

January 1,

2012

 

Neither past due nor impaired

   $ 71,025,800       $ 47,528,952       $ 53,751,066       $ 39,362,390   

Past due but not impaired

           

Past due within 30 days

     8,716,908         10,248,634         6,859,366         6,467,898   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 79,742,708       $ 57,777,586       $ 60,610,432       $ 45,830,288   
  

 

 

    

 

 

    

 

 

    

 

 

 

Movements of the allowance for doubtful receivables

 

     Six Months Ended June 30  
     2013     2012  

Balance, beginning of the period

   $ 480,212      $ 490,952   

Provision (reversal)

     9,464        (3

Effect of deconsolidation of subsidiary

     (3,157     —     

Effect of exchange rate changes

     90        (35
  

 

 

   

 

 

 

Balance, end of the period

   $ 486,609      $ 490,914   
  

 

 

   

 

 

 

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

 

    

June 30,

2013

     December 31,
2012
    

June 30,

2012

    

January 1,

2012

 

Not past due

   $ 30,724       $ 160,354       $ 285,368       $ 81,017   

Past due 1-30 days

     3,780         2,863         20,248         24,351   

Past due 31-60 days

     —           —           —           4,684   

Past due 61-120 days

     —           —           —           —     

Past due over 120 days

     —           3,157         3,292         9,769   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 34,504       $ 166,374       $ 308,908       $ 119,821   
  

 

 

    

 

 

    

 

 

    

 

 

 

The Company held bank guarantees and other credit enhancements as collateral for certain impaired accounts receivables. As of June 30, 2013, December 31, 2012, June 30, 2012 and January 1, 2012, the amount of the bank guarantee and other credit enhancements were US$203 thousand, US$1,000 thousand, nil and US$2,962 thousand, respectively.

 

12. INVENTORIES

 

    

June 30,

2013

     December 31,
2012
    

June 30,

2012

    

January 1,

2012

 

Finished goods

   $ 4,603,940       $ 6,244,824       $ 3,770,934       $ 3,347,849   

Work in process

     28,701,406         25,713,217         22,889,353         17,940,960   

Raw materials

     3,474,178         3,864,105         2,375,668         1,808,615   

Supplies and spare parts

     1,835,404         2,008,352         1,744,511         1,743,158   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 38,614,928       $ 37,830,498       $ 30,780,466       $ 24,840,582   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

- 17 -


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

 

     Three Months Ended June 30      Six Months Ended June 30  
     2013      2012      2013      2012  

Inventory losses

   $ 332,110       $ 399,336       $ 237,169       $ 1,041,643   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

13. FINANCIAL ASSETS CARRIED AT COST

 

    

June 30,

2013

     December 31,
2012
    

June 30,

2012

    

January 1,

2012

 

Non-publicly traded stocks

   $ 3,372,556       $ 3,314,713       $ 3,775,338       $ 4,004,314   

Mutual funds

     295,141         290,364         308,676         310,691   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 3,667,697       $ 3,605,077       $ 4,084,014       $ 4,315,005   
  

 

 

    

 

 

    

 

 

    

 

 

 

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

 

14. INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD

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

 

    

June 30,

2013

     December 31,
2012
    

June 30,

2012

    

January 1,

2012

 

Investments in associates

   $ 21,706,316       $ 20,325,277       $ 20,551,894       $ 22,033,567   

Investments in jointly controlled entities

     3,306,524         3,035,641         2,768,736         2,853,364   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 25,012,840       $ 23,360,918       $ 23,320,630       $ 24,886,931   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

  a. Investments in associates

Associates consisted of the following:

 

          Place of    Carrying Amount      % of Ownership and Voting Rights Held by the Company  
Name of Associate    Principal Activities   

Incorporation and

Operation

  

June 30,

2013

     December 31,
2012
    

June 30,

2012

     January 1,
2012
    

June 30,

2013

    December 31,
2012
   

June 30,

2012

    January 1,
2012
 

Vanguard International Semiconductor Corporation (VIS)

  

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

  

Hsinchu, Taiwan

   $ 9,619,243       $ 9,406,597       $ 8,816,718       $ 8,985,340         39     40     41     39

Systems on Silicon Manufacturing Company Pte Ltd. (SSMC)

  

Fabrication and supply of
integrated circuits

  

Singapore

     6,441,982         6,710,956         5,935,087         6,289,429         39     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

     2,714,439         2,992,899         4,697,083         5,609,002         20     20     20     20

 

(Continued)

 

- 18 -


          Place of    Carrying Amount      % of Ownership and Voting Rights Held by the Company  
Name of Associate    Principal Activities    Incorporation and
Operation
  

June 30,

2013

     December 31,
2012
    

June 30,

2012

     January 1,
2012
    

June 30,

2013

    December 31,
2012
   

June 30,

2012

    January 1,
2012
 

Xintec

  

Wafer level chip size packaging service

  

Taoyuan, Taiwan

   $ 1,816,848       $ —         $ —         $ —           40     —          —          —     

Global Unichip Corporation (GUC)

  

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

  

Hsinchu, Taiwan

     1,113,804         1,214,825         1,103,006         1,149,796         35     35     35     35

Mcube Inc. (Mcube)

  

Research, development, and sale of micro-semiconductor device

  

Delaware, U.S.A.

     —           —           —           —           25     25     25     25
        

 

 

    

 

 

    

 

 

    

 

 

          
         $ 21,706,316       $ 20,325,277       $ 20,551,894       $ 22,033,567            
        

 

 

    

 

 

    

 

 

    

 

 

          

(Concluded)

In February 2010, the Company acquired 75,316 thousand shares of Motech through a private placement for NT$6,228,661 thousand; following such acquisition, the Company’s percentage of ownership in Motech was 20%. Transfer of the aforementioned common shares within three years from the acquisition date is prohibited unless permitted by other related regulations.

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.

TSMC has no power to govern the financial and operating policies of Xintec starting June 2013 for 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 34.

Financial information of the Company’s associates was summarized as follows:

 

    

June 30,

2013

    December 31,
2012
   

June 30,

2012

   

January 1,

2012

 

Total assets

   $ 91,617,431      $ 76,889,298      $ 77,955,249      $ 79,721,042   

Total liabilities

     (33,211,301     (21,683,504     (24,668,372     (20,948,855
  

 

 

   

 

 

   

 

 

   

 

 

 

Net assets

   $ 58,406,130      $ 55,205,794      $ 53,286,877      $ 58,772,187   
  

 

 

   

 

 

   

 

 

   

 

 

 

The Company’s share of net assets of associates

   $ 21,706,316      $ 20,325,277      $ 20,551,894      $ 22,033,567   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

     Three Months Ended June 30     Six Months Ended June 30  
     2013     2012     2013      2012  

Net revenue

   $ 16,877,787      $ 14,797,853      $ 28,790,849       $ 26,803,897   
  

 

 

   

 

 

   

 

 

    

 

 

 

Net income (loss)

   $ 2,482,695      $ (126,751   $ 3,698,332       $ (60,581
  

 

 

   

 

 

   

 

 

    

 

 

 

The Company’s share of profits of associates

   $ 919,470      $ 276,414      $ 1,451,087       $ 294,521   
  

 

 

   

 

 

   

 

 

    

 

 

 

The Company’s share of other comprehensive income (loss) of associates

   $ (177,411   $ 9,853      $ 27,184       $ (9,797
  

 

 

   

 

 

   

 

 

    

 

 

 

The market prices of the investment accounted for using the equity method in publicly traded stocks calculated by the closing price at the balance sheet date are summarized as follows:

 

Name of Associate   

June 30,

2013

     December 31,
2012
    

June 30,

2012

    

January 1,

2012

 

VIS

   $ 21,359,599       $ 12,658,703       $ 8,732,307       $ 6,627,758   
  

 

 

    

 

 

    

 

 

    

 

 

 

Motech

   $ 3,311,110       $ 2,383,824       $ 3,586,671       $ 4,645,176   
  

 

 

    

 

 

    

 

 

    

 

 

 

GUC

   $ 4,533,391       $ 4,692,130       $ 4,855,537       $ 4,645,442   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

- 19 -


  b. Investments in jointly controlled entities

 

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

Name of Jointly

Controlled Entity

   Principal Activities    Incorporation and
Operation
  

June 30,

2013

     December 31,
2012
    

June 30,

2012

     January 1,
2012
    

June 30,

2013

    December 31,
2012
   

June 30,

2012

    January 1,
2012
 

VisEra Holding Company (VisEra Holding)

  

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

  

Cayman Islands

   $ 3,306,524       $ 3,035,641       $ 2,768,736       $ 2,853,364         49     49     49     49
        

 

 

    

 

 

    

 

 

    

 

 

          

Financial information of the Company’s jointly controlled entities was summarized as follows:

 

    

June 30,

2013

     December 31,
2012
    

June 30,

2012

    

January 1,

2012

 

Current assets

   $ 2,640,049       $ 1,887,122       $ 2,110,664       $ 1,616,916   
  

 

 

    

 

 

    

 

 

    

 

 

 

Noncurrent assets

   $ 1,709,301       $ 1,780,903       $ 1,864,819       $ 1,732,247   
  

 

 

    

 

 

    

 

 

    

 

 

 

Current liabilities

   $ 1,042,360       $ 631,803       $ 1,205,999       $ 495,066   
  

 

 

    

 

 

    

 

 

    

 

 

 

Noncurrent liabilities

   $ 466       $ 581       $ 748       $ 733   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

     Three Months Ended June 30     Six Months Ended June 30  
     2013     2012     2013     2012  

Net revenue

   $ 513,229      $ 481,230      $ 981,086      $ 704,769   
  

 

 

   

 

 

   

 

 

   

 

 

 

Cost of revenue

   $ 306,586      $ 313,929      $ 593,818      $ 521,469   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses

   $ 33,199      $ 32,074      $ 65,461      $ 60,591   
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-operating income, net

   $ 3,078      $ 183,689      $ 7,614      $ 190,209   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income tax benefit (expense)

   $ (36,488   $ 8,541      $ (66,851   $ 18,636   
  

 

 

   

 

 

   

 

 

   

 

 

 

The Company’s share of profits of joint venture

   $ 140,034      $ 327,457      $ 262,570      $ 331,554   
  

 

 

   

 

 

   

 

 

   

 

 

 

The Company’s share of other comprehensive income (loss) of joint venture

   $ (14,583   $ (32,174   $ (84,055   $ 30,184   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

15. PROPERTY, PLANT AND EQUIPMENT

 

    

June 30,

2013

     December 31,
2012
    

June 30,

2012

    

January 1,

2012

 

Land and land improvements

   $ 3,598,476       $ 1,159,755       $ 1,184,695       $ 1,185,573   

Buildings

     102,813,918         85,610,120         83,519,214         71,915,740   

Machinery and equipment

     422,956,875         404,382,298         375,866,592         294,814,381   

Office equipment

     7,446,328         6,907,376         6,294,029         5,148,538   

Assets under finance leases

     435,797         438,663         465,491         493,945   

Advance payments and construction in progress

     178,343,642         119,063,976         80,854,453         116,863,976   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 715,595,036       $ 617,562,188       $ 548,184,474       $ 490,422,153   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

- 20 -


     Six Months Ended June 30, 2013  
     Balance, Beginning
of Period
     Additions     Disposals     Reclassification      Effect of
Deconsolidation
of Subsidiary
    Effect of Exchange
Rate Changes
   

Balance,

End of Period

 

Cost

                

Land and land improvements

   $ 1,527,124       $ 3,212,000      $ —        $ —         $ (772,029   $ 24,183      $ 3,991,278   

Buildings

     197,411,851         23,769,868        —          3,797         (986,205     797,936        220,997,247   

Machinery and equipment

     1,279,893,177         86,321,847        (1,652,721     —           (5,630,854     2,409,161        1,361,340,610   

Office equipment

     20,067,943         2,151,385        (364,434     —           (1,055,809     50,718        20,849,803   

Assets under finance leases

     766,732         —          —          —           —          31,207        797,939   
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 
     1,499,666,827       $ 115,455,100      $ (2,017,155   $ 3,797       $ (8,444,897   $ 3,313,205        1,607,976,877   
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Accumulated depreciation and impairment

                

Land improvements

     367,369       $ 13,518      $ —        $ —         $ —        $ 11,915        392,802   

Buildings

     111,801,731         6,168,796        —          —           (226,908     439,710        118,183,329   

Machinery and equipment

     875,510,879         66,150,063        (1,572,265     —           (3,656,326     1,951,384        938,383,735   

Office equipment

     13,160,567         1,166,369        (364,197     —           (599,483     40,219        13,403,475   

Assets under finance leases

     328,069         20,495        —          —           —          13,578        362,142   
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 
     1,001,168,615       $ 73,519,241      $ (1,936,462   $ —         $ (4,482,717   $ 2,456,806        1,070,725,483   
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Advance payments and construction in progress

     119,063,976       $ 60,904,636      $ —        $ —         $ (1,632,860   $ 7,890        178,343,642   
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 
   $ 617,562,188                  $ 715,595,036   
  

 

 

               

 

 

 
     Six Months Ended June 30, 2012  
     Balance, Beginning
of Period
    

Additions

(Deductions)

    Disposals     Impairment      Reclassification     Effect of Exchange
Rate Changes
   

Balance,

End of Period

 

Cost

                

Land and land improvements

   $ 1,541,128       $ 18,500      $ —        $ —         $ —        $ (10,479   $ 1,549,149   

Buildings

     172,997,391         17,169,279        (53,088     —           —          (309,666     189,803,916   

Machinery and equipment

     1,057,926,529         134,779,209        (990,637     —           —          (907,517     1,190,807,584   

Office equipment

     17,041,306         2,030,616        (356,399     —           —          (34,136     18,681,387   

Assets under finance leases

     791,480         —          —          —           —          (13,142     778,338   
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 
     1,250,297,834       $ 153,997,604      $ (1,400,124   $ —         $ —        $ (1,274,940     1,401,620,374   
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Accumulated depreciation and impairment

                

Land improvements

     355,555       $ 13,526      $ —        $ —         $ —        $ (4,627     364,454   

Buildings

     101,081,651         5,398,508        (42,988     —           —          (152,469     106,284,702   

Machinery and equipment

     763,112,148         53,074,414        (891,975     422,323         —          (775,918     814,940,992   

Office equipment

     11,892,768         870,836        (348,528     —           —          (27,718     12,387,358   

Assets under finance leases

     297,535         20,068        —          —           —          (4,756     312,847   
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 
     876,739,657       $ 59,377,352      $ (1,283,491   $ 422,323       $ —        $ (965,488     934,290,353   
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Advance payments and construction in progress

     116,863,976       $ (35,905,734   $ —        $ —         $ (248   $ (103,541     80,854,453   
  

 

 

    

 

 

   

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 
   $ 490,422,153                  $ 548,184,474   
  

 

 

               

 

 

 

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

In the first quarter of 2012, the Company recognized impairment losses of NT$442,312 thousand related to property, plant and equipment of the foundry reportable segment since the carrying amount of some of property, plant and equipment is expected to be unrecoverable. Further, in the second quarter of 2012, the Company reversed the impairment losses of NT$19,989 thousand according to the result of impairment evaluation.

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

Future minimum lease gross payments were as follows:

 

    

June 30,

2013

     December 31,
2012
    

June 30,

2012

    

January 1,

2012

 

Minimum lease payments

           

Not later than 1 year

   $ 28,144       $ 27,042       $ 27,448       $ —     

Later than 1 year and not later than 5 years

     112,577         108,168         109,792         223,296   

Later than five years

     731,168         729,566         740,525         780,962   
  

 

 

    

 

 

    

 

 

    

 

 

 
     871,889         864,776         877,765         1,004,258   

Less: Future finance expenses

     103,072         108,471         119,759         133,265   
  

 

 

    

 

 

    

 

 

    

 

 

 

Present value of minimum lease payments

   $ 768,817       $ 756,305       $ 758,006       $ 870,993   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(Continued)

 

- 21 -


    

June 30,

2013

     December 31,
2012
    

June 30,

2012

    

January 1,

2012

 

Present value of minimum lease payments

           

Not later than 1 year

   $ 27,458       $ 26,382       $ 26,778       $ —     

Later than 1 year and not later than 5 years

     103,295         100,821         100,739         213,411   

Later than five years

     638,064         629,102         630,489         657,582   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 768,817       $ 756,305       $ 758,006       $ 870,993   
  

 

 

    

 

 

    

 

 

    

 

 

 

Current portion

   $ 8,631       $ 8,190       $ 8,212       $ —     

Noncurrent portion

     760,186         748,115         749,794         870,993   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 768,817       $ 756,305       $ 758,006       $ 870,993   
  

 

 

    

 

 

    

 

 

    

 

 

 

(Concluded)

There was no capitalization of interest for the six months ended June 30, 2013. During the three months and six months ended June 30, 2012, the Company capitalized the borrowing costs directly attributable to the acquisition or construction of property, plant and equipment. Information about capitalized interest was as follows:

 

     Three Months Ended June 30,
2012
  Six Months Ended June 30,
2012
     Interest      Rate   Interest      Rate

Capitalized interest

   $ 3,268       1.08%-1.20%   $ 6,442       1.08%-1.20%
  

 

 

      

 

 

    

 

16. INTANGIBLE ASSETS

 

    

June 30,

2013

     December 31,
2012
    

June 30,

2012

    

January 1,

2012

 

Goodwill

   $ 5,650,404       $ 5,523,707       $ 5,639,097       $ 5,693,999   

Technology license fees

     1,245,415         1,461,893         1,778,918         1,682,892   

Software and system design costs

     3,335,179         2,968,942         2,138,070         2,366,483   

Patent and others

     911,325         1,005,027         1,304,466         1,118,189   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 11,142,323       $ 10,959,569       $ 10,860,551       $ 10,861,563   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

     Six Months Ended June 30, 2013  
     Balance, Beginning
of Period
     Additions      Disposals     Reclassification     Effect of
Deconsolidation
of Subsidiary
    Effect of
Exchange Rate
Changes
    Balance,
End of Period
 

Cost

                

Goodwill

   $ 5,523,707       $ —         $ —        $ —        $ —        $ 126,697      $ 5,650,404   

Technology license fees

     4,590,548         —           —          (29,565     (113,340     (1,281     4,446,362   

Software and system design costs

     15,095,421         1,029,276         (16,573     (3,797     (25,335     4,628        16,083,620   

Patent and others

     3,094,664         204,019         (23,549     —          (42,089     4,642        3,237,687   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     28,304,340       $ 1,233,295       $ (40,122   $ (33,362   $ (180,764   $ 134,686        29,418,073   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Accumulated amortization

                

Technology license fees

     3,128,655       $ 140,160       $ —        $ —        $ (66,587   $ (1,281     3,200,947   

Software and system design costs

     12,126,479         646,735         (16,301     —          (12,661     4,189        12,748,441   

Patent and others

     2,089,637         284,695         (23,549     —          (25,195     774        2,326,362   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     17,344,771       $ 1.071,590       $ (39,850   $ —        $ (104,443   $ 3,682        18,275,750   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
   $ 10,959,569                  $ 11,142,323   
  

 

 

               

 

 

 

 

- 22 -


     Six Months Ended June 30, 2012  
     Balance,
Beginning of
Period
     Additions      Disposals     Reclassification     Effect of
Exchange Rate
Changes
    Balance,
End of Period
 

Cost

              

Goodwill

   $ 5,693,999       $ —         $ —        $ —        $ (54,902   $ 5,639,097   

Technology license fees

     4,370,173         147,825         —          191,580        (2,576     4,707,002   

Software and system design costs

     13,438,579         387,106         (26,931     (93,742     (2,285     13,702,727   

Patent and others

     2,670,031         419,142         —          93,990        (1,954     3,181,209   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 
     26,172,782       $ 954,073       $ (26,931   $ 191,828      $ (61,717     27,230,035   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Accumulated amortization

              

Technology license fees

     2,687,281       $ 242,179       $ —        $ —        $ (1,376     2,928,084   

Software and system design costs

     11,072,096         558,088         (26,931     (36,552     (2,044     11,564,657   

Patent and others

     1,551,842         288,619         —          36,552        (270     1,876,743   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 
     15,311,219       $ 1,088,886       $ (26,931   $ —        $ (3,690     16,369,484   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 
   $ 10,861,563                $ 10,860,551   
  

 

 

             

 

 

 

The recoverable amount of the Company’s goodwill has been tested for impairment at the end of the annual reporting period and was determined based on the value in use. The value in use was calculated based on the cash flow forecast from the financial budgets covering future five-year period, and the Company used annual discount rate of 9.00% and 9.68% in its test of impairment as of December 31, 2012 and 2011, respectively, to reflect the relevant specific risk in the cash-generating unit.

For the six months ended June 30, 2013 and 2012, the Company did not recognize any impairment loss on goodwill.

 

17. OTHER ASSETS

 

    

June 30,

2013

     December 31,
2012
    

June 30,

2012

    

January 1,

2012

 

Tax receivable

   $ 1,411,504       $ 1,565,104       $ 1,186,737       $ 708,891   

Prepaid expenses

     1,340,388         1,080,236         1,082,026         1,436,416   

Long-term receivable

     781,600         767,800         754,600         785,400   

Others

     549,515         608,412         562,675         550,053   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 4,083,007       $ 4,021,552       $ 3,586,038       $ 3,480,760   
  

 

 

    

 

 

    

 

 

    

 

 

 

Current portion

   $ 2,739,259       $ 2,786,408       $ 2,404,358       $ 2,174,014   

Noncurrent portion

     1,343,748         1,235,144         1,181,680         1,306,746   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 4,083,007       $ 4,021,552       $ 3,586,038       $ 3,480,760   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

18. SHORT-TERM LOANS

 

    

June 30,

2013

  December 31,
2012
 

June 30,

2012

 

January 1,

2012

Unsecured loans

        

Amount

   $31,466,400   $34,714,929   $30,772,585   $25,926,528
  

 

 

 

 

 

 

 

US$ (in thousands)

   $  1,050,000   $  1,195,500   $  1,029,700   $     856,000

Annual interest rate

   0.39%-0.42%   0.39%-0.58%   0.53%-0.77%   0.45%-1.00%

Maturity date

   Due in July
2013
  Due in January
2013
  Due by August
2012
  Due by February
2012

 

- 23 -


19. PROVISIONS

 

    

June 30,

2013

     December 31,
2012
    

June 30,

2012

    

January 1,

2012

 

Sales returns and allowances

   $ 6,289,117       $ 6,038,003       $ 6,508,185       $ 5,068,263   

Warranties

     6,623         4,891         3,398         2,889   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 6,295,740       $ 6,042,894       $ 6,511,583       $ 5,071,152   
  

 

 

    

 

 

    

 

 

    

 

 

 

Current portion

   $ 6,289,117       $ 6,038,003       $ 6,508,185       $ 5,068,263   

Noncurrent portion

     6,623         4,891         3,398         2,889   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 6,295,740       $ 6,042,894       $ 6,511,583       $ 5,071,152   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

     Sales Returns
and Allowances
    Warranties     Total  

Six months ended June 30, 2013

      

Balance, beginning of period

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

Provision

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

Payment

     (2,142,396     —          (2,142,396

Effect of deconsolidation of subsidiary

     (37,748     —          (37,748

Effect of exchange rate changes

     9,996        54        10,050   
  

 

 

   

 

 

   

 

 

 

Balance, end of period

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

 

 

   

 

 

   

 

 

 

Six months ended June 30, 2012

      

Balance, beginning of period

   $ 5,068,263      $ 2,889      $ 5,071,152   

Provision

     3,859,417        611        3,860,028   

Payment

     (2,417,745     —          (2,417,745

Effect of exchange rate changes

     (1,750     (102     (1,852
  

 

 

   

 

 

   

 

 

 

Balance, end of period

   $ 6,508,185      $ 3,398      $ 6,511,583   
  

 

 

   

 

 

   

 

 

 

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.

 

- 24 -


20. BONDS PAYABLE

 

    

June 30,

2013

     December 31,
2012
    

June 30,

2012

    

January 1,

2012

 

Domestic unsecured bonds:

           

Issued in September 2011 and repayable in September 2016, 1.40% interest payable annually

   $ 10,500,000       $ 10,500,000       $ 10,500,000       $ 10,500,000   

Issued in September 2011 and repayable in September 2018, 1.63% interest payable annually

     7,500,000         7,500,000         7,500,000         7,500,000   

Issued in January 2012 and repayable in January 2017, 1.29% interest payable annually

     10,000,000         10,000,000         10,000,000         —     

Issued in January 2012 and repayable in January 2019, 1.46% interest payable annually

     7,000,000         7,000,000         7,000,000         —     

Issued in August 2012 and repayable in August 2017, 1.28% interest payable annually

     9,900,000         9,900,000         —           —     

Issued in August 2012 and repayable in August 2019, 1.40% interest payable annually

     9,000,000         9,000,000         —           —     

Issued in September 2012 and repayable in September 2017, 1.28% interest payable annually

     12,700,000         12,700,000         —           —     

Issued in September 2012 and repayable in September 2019, 1.39% interest payable annually

     9,000,000         9,000,000         —           —     

Issued in October 2012 and repayable in October 2022, 1.53% interest payable annually

     4,400,000         4,400,000         —           —     

Issued in January 2013 and repayable in January 2018, 1.23% interest payable annually

     10,600,000         —           —           —     

Issued in January 2013 and repayable in January 2020, 1.35% interest payable annually

     10,000,000         —           —           —     

Issued in January 2013 and repayable in January 2023, 1.49% interest payable annually

     3,000,000         —           —           —     

Issued in February 2013 and repayable in February 2018, 1.23% interest payable annually

     6,200,000         —           —           —     

Issued in February 2013 and repayable in February 2020, 1.38% interest payable annually

     11,600,000         —           —           —     

Issued in February 2013 and repayable in February 2023, 1.50% interest payable annually

     3,600,000         —           —           —     

Issued in January 2002 and repayable in January 2012, 3.00% interest payable annually

     —           —           —           4,500,000   
  

 

 

    

 

 

    

 

 

    

 

 

 
     125,000,000         80,000,000         35,000,000         22,500,000   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(Continued)

 

- 25 -


    

June 30,

2013

    December 31,
2012
    

June 30,

2012

    

January 1,

2012

 

Overseas bonds:

          

Overseas unsecured corporate bonds of US$350,000 thousand

          

Issued in April 2013 and repayable in April 2016, annual coupon interest at 0.95% and payable semi-annually

   $ 10,488,800      $ —         $ —         $ —     

Overseas unsecured corporate bonds of US$1,150,000 thousand

          

Issued in April 2013 and repayable in April 2018, annual coupon interest at 1.625% and payable semi-annually

     34,463,200        —           —           —     

Less: Discounts on bonds payable

     (150,738     —           —           —     
  

 

 

   

 

 

    

 

 

    

 

 

 
     44,801,262        —           —           —     
  

 

 

   

 

 

    

 

 

    

 

 

 
   $ 169,801,262      $ 80,000,000       $ 35,000,000       $ 22,500,000   
  

 

 

   

 

 

    

 

 

    

 

 

 

Current portion

   $ —        $ —         $ —         $ 4,500,000   

Noncurrent portion

     169,801,262        80,000,000         35,000,000         18,000,000   
  

 

 

   

 

 

    

 

 

    

 

 

 
   $ 169,801,262      $ 80,000,000       $ 35,000,000       $ 22,500,000   
  

 

 

   

 

 

    

 

 

    

 

 

 

(Concluded)

With the approval from the FSC, the Company issued domestic unsecured bonds in the amount of NT$13,700,000 thousand and NT$12,500,000 thousand in July 2013 and August 2013, respectively.

 

21. LONG-TERM BANK LOANS

 

     December 31,
2012
    

June 30,

2012

    

January 1,

2012

 

Bank loans for working capital:

        

Repayable in full in one lump sum payment in June 2016 but repaid earlier of NT$100,000 thousand in September 2012, annual interest at 1.21% in 2013 and 1.08%-1.21% in 2012

   $ 550,000       $ 650,000       $ 650,000   

Repayable in full in one lump sum payment in March 2015 but repaid earlier of NT$50,000 thousand in August 2012, annual interest at 1.18%-1.37% in 2013 and 1.16%-1.18% in 2012

     450,000         500,000         500,000   

Repayable from July 2012 in 16 quarterly installments, annual interest at 1.24% in 2013 and 1.21%-1.24% in 2012

     262,500         300,000         300,000   

 

(Continued)

 

- 26 -


     December 31,
2012
    

June 30,

2012

    

January 1,

2012

 

Repayable from September 2012 in 16 quarterly installments, annual interest at 1.24% in 2013 and 1.21%-1.24% in 2012

   $ 175,000       $ 200,000       $ 200,000   

Repayable from October 2013 in 16 quarterly installments, annual interest at 1.24%-1.25% in 2013 and 1.23%-1.24% in 2012

     50,000         —           —     
  

 

 

    

 

 

    

 

 

 
   $ 1,487,500       $ 1,650,000       $ 1,650,000   
  

 

 

    

 

 

    

 

 

 

Current portion

   $ 128,125       $ 125,000       $ 62,500   

Noncurrent portion

     1,359,375         1,525,000         1,587,500   
  

 

 

    

 

 

    

 

 

 
   $ 1,487,500       $ 1,650,000       $ 1,650,000   
  

 

 

    

 

 

    

 

 

 

(Concluded)

As of June 30, 2013, the long-term bank loans were amounted to nil as a result of deconsolidation of Xintec (refer to Note 34).

 

22. OTHER LONG-TERM PAYABLES

 

    

June 30,

2013

     December 31,
2012
    

June 30,

2012

    

January 1,

2012

 

Payables for acquisition of property, plant and equipment

   $ 859,102       $ 825,447       $ 1,777,394       $ 3,399,855   

Payables for software and system design costs

     54,000         113,000         113,000         —     

Payables for technology transfer

     —           29,038         149,425         —     
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 913,102       $ 967,485       $ 2,039,819       $ 3,399,855   
  

 

 

    

 

 

    

 

 

    

 

 

 

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

   $ 877,102       $ 913,485       $ 1,926,049       $ 3,399,855   

Noncurrent portion

     36,000         54,000         113,770         —     
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 913,102       $ 967,485       $ 2,039,819       $ 3,399,855   
  

 

 

    

 

 

    

 

 

    

 

 

 

TSMC entered into an agreement with a counterparty in 2003 whereby TSMC China is obligated to purchase certain property, plant and equipment at the agreed-upon price within the contract period. If the purchase is not completed, TSMC China is obligated to compensate the counterparty for the loss incurred. The property, plant and equipment have been in use by TSMC China since 2004 and are being depreciated over their estimated service lives.

 

- 27 -


23. RETIREMENT BENEFIT PLANS

 

  a. Defined contribution plans

The pension mechanism under the Labor Pension Act (the “Act”) is deemed a defined contribution plan. Pursuant to the Act, TSMC, Xintec, Mutual-Pak, TSMC SSL and TSMC Solar have made monthly contributions equal to 6% of each employee’s monthly salary to employees’ pension accounts. Furthermore, TSMC North America, TSMC China, TSMC Europe, TSMC Canada, TSMC Solar NA and TSMC Solar Europe GmbH also make monthly contributions at certain percentages of the basic salary of their employees. Accordingly, the Company recognized expenses of NT$403,779 thousand and NT$336,114 thousand in the consolidated statements of comprehensive income for the three months ended June 30, 2013 and 2012, respectively; and of NT$788,237 thousand and NT$666,655 thousand in the consolidated statements of comprehensive income for the six months ended June 30, 2013 and 2012, respectively.

 

  b. Defined benefit plans

TSMC, Xintec, TSMC SSL and TSMC Solar have defined benefit plans under the Labor Standards Law that provide benefits based on an employee’s length of service and average monthly salary for the six-month period prior to retirement. The aforementioned companies contribute an amount equal to 2% of salaries paid each month to their respective pension funds (the Funds), which are administered by the Labor Pension Fund Supervisory Committee (the Committee) and deposited in the Committee’s name in the Bank of Taiwan.

The Company adopted projected unit credit method to measure the present value of the defined benefit obligation, current service costs and prior service costs.

The Company adopted the pension cost rate from the actuarial valuation as of December 31, 2012 and January 1, 2012 to determine and recognize pension expenses of NT$60,697 thousand and NT$54,669 thousand in the consolidated statements of comprehensive income for the three months ended June 30, 2013 and 2012, respectively; and of NT$121,387 thousand and NT$109,328 thousand in the consolidated statements of comprehensive income for the six months ended June 30, 2013 and 2012, respectively. For the information of the defined benefit plans as of December 31, 2012 and January 1, 2012, please refer to Note 23 to the consolidated financial statements for the three months ended March 31, 2013.

The pension costs information of the defined benefit plans was as follows:

 

     Three Months Ended June 30      Six Months Ended June 30  
     2013      2012      2013      2012  

Cost of revenue

   $ 39,557       $ 35,038       $ 78,256       $ 67,556   

Research and development expenses

     15,627         14,324         31,065         28,915   

General and administrative expenses

     4,394         4,173         9,815         10,581   

Marketing expenses

     1,119         1,134         2,251         2,276   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 60,697       $ 54,669       $ 121,387       $ 109,328   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

24. EQUITY

 

  a. Capital stock

 

    

June 30,

2013

     December 31,
2012
    

June 30,

2012

    

January 1,

2012

 

Authorized shares (in thousand)

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

 

 

    

 

 

    

 

 

    

 

 

 

Authorized capital

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

 

 

    

 

 

    

 

 

    

 

 

 

Issued and paid shares (in thousand)

     25,928,305         25,924,435         25,920,709         25,916,222   
  

 

 

    

 

 

    

 

 

    

 

 

 

Issued capital

   $ 259,283,058       $ 259,244,357       $ 259,207,094       $ 259,162,226   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

- 28 -


Issued common shares with par value of $10 per share entitled the right to vote and to receive dividends.

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

As of June 30, 2013, 1,091,351 thousand ADSs of TSMC were traded on the NYSE. The number of common shares represented by the ADSs was 5,456,755 thousand (one ADS represents five common shares).

 

  b. Capital surplus

 

    

June 30,

2013

     December 31,
2012
    

June 30,

2012

    

January 1,

2012

 

Additional paid-in capital

   $ 24,006,081       $ 23,934,607       $ 23,869,088       $ 23,774,250   

From merger

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

From convertible bonds

     8,892,847         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

     107,661         40,733         29,976         —     

From share of changes in equities of associates and joint venture

     17,433         2,588         —           —     

Donations

     55         55         55         55   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 55,828,587       $ 55,675,340       $ 55,596,476       $ 55,471,662   
  

 

 

    

 

 

    

 

 

    

 

 

 

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, which are limited 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;

 

  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.

 

- 29 -


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$3,483,909 thousand and NT$2,807,399 thousand for the three months ended June 30, 2013 and 2012, respectively; and NT$6,144,391 thousand and NT$5,043,952 thousand for the six months ended June 30, 2013 and 2012, respectively. Bonuses to directors were expensed based on estimated amount of payment. If the actual amounts subsequently approved by the shareholders differ from the estimated amounts, the differences are recorded in the year of shareholders’ resolution as a change in accounting estimate. If profit sharing approved for distribution to employees is in the form of common shares, the number of shares is determined by dividing the amount of profit sharing by the closing price (after considering the effect of dividends) of the shares on the day preceding the shareholders’ meeting.

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

Pursuant to existing regulations, the Company is required to set aside additional special capital reserve equivalent to the net debit balance of the other components of stockholders’ equity, such as the accumulated balance of foreign currency translation reserve, unrealized valuation gain/loss on 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 2012 and 2011 earnings have been approved by TSMC’s shareholders in its meetings held on June 11, 2013 and on June 12, 2012, respectively. The appropriations and dividends per share were as follows:

 

     Appropriation of Earnings      Dividends Per Share
(NT$)
 
     For Fiscal     For Fiscal      For Fiscal      For Fiscal  
     Year 2012     Year 2011      Year 2012      Year 2011  

Legal capital reserve

   $ 16,615,880      $ 13,420,128         

Special capital reserve

     (4,820,483     1,172,350         

Cash dividends to shareholders

     77,773,307        77,748,668       $ 3.00       $ 3.00   
  

 

 

   

 

 

       
   $ 89,568,704      $ 92,341,146         
  

 

 

   

 

 

       

TSMC’s profit sharing to employees and bonus to directors in the amounts of NT$11,115,240 thousand and NT$71,351 thousand in cash for 2012, respectively, and profit sharing to employees and bonus to directors in the amounts of NT$8,990,026 thousand and NT$62,324 thousand in cash for 2011, respectively, had been approved by the shareholders in its meeting held on June 11, 2013 and June 12, 2012, respectively. The aforementioned approved amount has no difference with the one approved by the Board of Directors in its meetings held on February 5, 2013 and February 14, 2012 and the same amount had been charged against earnings of 2012 and 2011, respectively.

The appropriations of earnings, payment of profit sharing to employees and bonus to directors for 2012 approved by the Board of Directors of TSMC were based on the financial statements for the year ended December 31, 2012 prepared under the R.O.C. GAAP and in accordance with the Guidelines Governing the Preparation of Financial Reports by Securities Issuers issued by the FSC before amendment.

 

- 30 -


The information about the appropriations of TSMC’s profit sharing to employees and bonus to 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:

 

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

Balance, beginning of period

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

Foreign currency translation reserve

     4,074,732        —          4,074,732   

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

     —          8,484,679        8,484,679   

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

     —          (987,693     (987,693

Share of other comprehensive income of associates and joint venture

     (58,050     225        (57,825

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

     774        (44     730   

Income tax effect

     —          43,210        43,210   
  

 

 

   

 

 

   

 

 

 

Balance, end of period

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

 

 

   

 

 

   

 

 

 

 

     Six Months Ended June 30, 2012  
     Foreign
Currency
Translation
Reserve
    Unrealized
Gain/Loss from
Available-for-
sale Financial
Assets
    Cash Flow
Hedges Reserve
    Total  

Balance, beginning of period

   $ (6,433,364   $ (1,172,762   $ (93   $ (7,606,219

Foreign currency translation reserve

     (1,426,037     —          —          (1,426,037

Changes in fair value of hedging instruments for cash flow hedges

     —          —          (7     (7

Changes in fair value of hedging instruments for cash flow hedges reclassified to profit or loss

     —          —          72        72   

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

     —          (625,490     —          (625,490

 

(Continued)

 

- 31 -


     Six Months Ended June 30, 2012  
     Foreign
Currency
Translation
Reserve
    Unrealized
Gain/Loss from
Available-for-
sale Financial
Assets
    Cash Flow
Hedges Reserve
    Total  

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

   $ —        $ 2,449,990      $ —        $ 2,449,990   

Share of other comprehensive income of associates and joint venture

     28,517        (8,130     —          20,387   

Income tax effect

     —          (308,929     —          (308,929
  

 

 

   

 

 

   

 

 

   

 

 

 

Balance, end of period

   $ (7,830,884   $ 334,679      $ (28   $ (7,496,233
  

 

 

   

 

 

   

 

 

   

 

 

 

(Concluded)

The exchange differences arising from the 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 hedge instrument. 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 gain or loss arising on changes in fair value of the hedging instruments that are recognized and accumulated in cash flow hedges reserve will be reclassified to profit or loss only when the hedge transaction affects profit or loss.

 

  e. Noncontrolling interests

 

     Six Months Ended June 30  
     2013     2012  

Balance, beginning of period

   $ 2,543,226      $ 2,436,649   

Share of noncontrolling interests

    

Net loss

     (87,555     (152,421

Changes in fair value of hedging instruments for cash flow hedges

     —          (10

Changes in fair value of hedging instruments for cash flow hedges reclassified to profit or loss

     —          108   

Adjustments arising from changes in percentage of ownership in subsidiaries

     (66,928     (29,976

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

     1,519        2,406   

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

     (3,020     (4,083

 

(Continued)

 

- 32 -


     Six Months Ended June 30  
     2013     2012  

Share of other comprehensive income of associates and joint venture

   $ 223      $ —     

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

     1        —     

Stock option compensation cost of subsidiary

     5,312        —     

Foreign currency translation reserve

     1,162        38,154   

Increase in noncontrolling interests

     203,729        288,458   

Effect of deconsolidation of subsidiary

     (2,273,153     —     
  

 

 

   

 

 

 

Balance, end of period

   $ 324,516      $ 2,579,285   
  

 

 

   

 

 

 

(Concluded)

 

25. SHARE-BASED PAYMENT

 

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

The Company elected to take the optional exemption from applying IFRS 2 retrospectively for the shared-based payment transactions granted and vested before January 1, 2012. The plans are described as follows:

TSMC’s Employee Stock Option Plans, consisting of the TSMC 2004 Plan, TSMC 2003 Plan and TSMC 2002 Plan, were approved by the Securities and Futures Bureau (SFB) on January 6, 2005, October 29, 2003 and June 25, 2002, respectively. The maximum number of options authorized to be granted under the TSMC 2004 Plan, TSMC 2003 Plan and TSMC 2002 Plan was 11,000 thousand, 120,000 thousand and 100,000 thousand, respectively, with each option eligible to subscribe for one common share of TSMC when exercised. The options may be granted to qualified employees of TSMC or any of its domestic or foreign subsidiaries, in which TSMC’s shareholding with voting rights, directly or indirectly, is more than fifty percent (50%). The options of all the plans are valid for ten years and exercisable at certain percentages subsequent to the second anniversary of the grant date. Under the terms of the plans, the options are granted at an exercise price equal to the closing price of TSMC’s common shares listed on the TWSE on the grant date.

Stock options of the plans that had never been granted or had been granted but subsequently canceled had expired as of June 30, 2013.

Information about TSMC’s outstanding options for the six months ended June 30, 2013 and 2012 was as follows:

 

    

Number of

Options

(In Thousands)

   

Weighted-

average

Exercise Price

(NT$)

 

Six months ended June 30, 2013

    

Balance, beginning of period

     5,945      $ 34.6   

Options exercised

     (3,870     28.5   
  

 

 

   

Balance, end of period

     2,075        46.0   
  

 

 

   

 

(Continued)

 

- 33 -


    

Number of

Options

(In Thousands)

   

Weighted-

average

Exercise Price

(NT$)

 

Six months ended June 30, 2012

    

Balance, beginning of period

     14,293      $ 32.1   

Options exercised

     (4,487     31.1   
  

 

 

   

Balance, end of period

     9,806        32.6   
  

 

 

   

(Concluded)

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

Information about TSMC’s outstanding options was as follows:

 

June 30, 2013    December 31, 2012
     Weighted-average         Weighted-average

Range of Exercise

Price

  

Remaining

Contractual Life

  

Range of Exercise

Price

  

Remaining

Contractual Life

(NT$)    (Years)    (NT$)    (Years)
$38.0-$50.1    1.6    $20.2-$28.3    0.4
      $38.0-$50.1    2.0
June 30, 2012    January 1, 2012
     Weighted-average         Weighted-average

Range of Exercise

Price

  

Remaining

Contractual Life

  

Range of Exercise

Price

  

Remaining

Contractual Life

(NT$)    (Years)    (NT$)    (Years)
$20.9-$29.3    0.8    $20.9-$29.3    1.2
$38.0-$50.1    2.5    $38.0-$50.1    2.9

As of June 30, 2013, all of the above outstanding options were exercisable.

 

  b. Application of IFRS 2

The Company applied IFRS 2 for the following plans as the shared-based payment transactions were granted and vested on or after January 1, 2012. The plans are described as follows:

The Board of Directors of TSMC SSL approved on December 18, 2012 and November 21, 2011 the issuance of new shares for cash and allocated 17,000 thousand shares and 17,175 thousand shares for 2013 and 2012 stock option plan, respectively, for their employees to subscribe to, according to the Company Law. The aforementioned shares were fully vested on the grant date.

 

- 34 -


Information about TSMC SSL’s employee stock options related to the aforementioned new shares issued was as follows:

 

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

Six months ended June 30, 2013

    

Balance, beginning of period

     —        $ —     

Options granted

     17,000        10.0   

Options exercised

     (17,000     10.0   
  

 

 

   

Balance, end of period

     —          —     
  

 

 

   

Six months ended June 30, 2012

    

Balance, beginning of period

     —        $ —     

Options granted

     17,175        10.0   

Options exercised

     (17,175     10.0   
  

 

 

   

Balance, end of period

     —          —     
  

 

 

   

The grant dates of aforementioned stock options were April 10, 2013 and January 9, 2012, respectively. TSMC SSL used the Black-Scholes model to determine the fair value of the options. The valuation assumptions were as follows:

 

     2013 Stock
Option Plan
    2012 Stock
Option Plan
 

Valuation assumptions:

    

Stock price on grant date (NT$/share)

   $ 4.6      $ 8.9   

Exercise price (NT$/share)

   $ 10.0      $ 10.0   

Expected volatility

     51.68     40.32

Expected life

     31 days        40 days   

Risk free interest rate

     0.60     0.76

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

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

The Board of Directors of TSMC Solar approved on November 21, 2011 the issuance of new shares for cash and allocated 12,341 thousand shares for their employees to subscribe to, according to the Company Law. The aforementioned shares were fully vested on the grant date.

 

- 35 -


Information about TSMC Solar’s employee stock options related to the aforementioned new shares issued was as follows:

 

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

Six months ended June 30, 2012

    

Balance, beginning of period

     —        $ —     

Options granted

     12,341        10.0   

Options exercised

     (12,341     10.0   
  

 

 

   

Balance, end of period

     —          —     
  

 

 

   

The grant date of aforementioned stock options was January 9, 2012. TSMC Solar used the Black-Scholes model to determine the fair value of the options. The valuation assumptions were as follows:

 

Valuation assumptions:

  

Stock price on grant date (NT$/share)

   $ 9.0   

Exercise price (NT$/share)

   $ 10.0   

Expected volatility

     40.32

Expected life

     40 days   

Risk free interest rate

     0.76

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

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

 

26. NET REVENUE

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

 

     Three Months Ended June 30      Six Months Ended June 30  
     2013      2012      2013      2012  

Net revenue from the sale of goods

   $ 155,758,012       $ 128,060,828       $ 288,390,575       $ 233,568,503   

Net revenue from the royalties

     128,308         125,503         250,741         232,659   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 155,886,320       $ 128,186,331       $ 288,641,316       $ 233,801,162   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

- 36 -


27. OTHER OPERATING INCOME AND EXPENSES, NET

 

     Three Months Ended June 30     Six Months Ended June 30  
     2013     2012     2013     2012  

Income (expenses) of rental assets

        

Rental income

   $ 3,572      $ 249      $ 7,255      $ 503   

Depreciation of rental assets

     (6,222     (1,433     (12,677     (3,789
  

 

 

   

 

 

   

 

 

   

 

 

 
     (2,650     (1,184     (5,422     (3,286

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

     655        (2,631     29,365        (4,126

Reversal of impairment loss/(impairment loss) on property, plant and equipment

     —          19,989        —          (422,323

Settlement income from receiving equity securities

     1,025        642        9,590        642   
  

 

 

   

 

 

   

 

 

   

 

 

 
   $ (970   $ 16,816      $ 33,533      $ (429,093
  

 

 

   

 

 

   

 

 

   

 

 

 

 

28. OTHER INCOME

 

     Three Months Ended June 30      Six Months Ended June 30  
     2013      2012      2013      2012  

Interest income

           

Bank deposits

   $ 499,423       $ 405,789       $ 833,500       $ 867,890   

Available-for-sale financial assets

     1,480         1,509         3,000         2,986   

Held-to-maturity financial assets

     5,469         33,198         16,193         70,856   
  

 

 

    

 

 

    

 

 

    

 

 

 
     506,372         440,496         852,693         941,732   

Dividend income

     502,692         69,945         502,692         69,945   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 1,009,064       $ 510,441       $ 1,355,385       $ 1,011,677   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

29. FINANCE COSTS

 

     Three Months Ended June 30     Six Months Ended June 30  
     2013      2012     2013      2012  

Interest expense

          

Corporate bonds

   $ 593,187       $ 125,112      $ 1,034,881       $ 266,534   

Bank loans

     29,682         58,735        72,120         113,673   

Finance leases

     4,909         16,545        9,697         40,596   

Others

     7,562         142        12,640         498   
  

 

 

    

 

 

   

 

 

    

 

 

 
     635,340         200,534        1,129,338         421,301   

Loss reclassified to profit or loss arising from effective portion for cash flow hedges

     —           82        —           180   

Capitalized interest

     —           (3,268     —           (6,442
  

 

 

    

 

 

   

 

 

    

 

 

 
   $ 635,340       $ 197,348      $ 1,129,338       $ 415,039   
  

 

 

    

 

 

   

 

 

    

 

 

 

 

- 37 -


30. OTHER GAINS AND LOSSES

 

     Three Months Ended June 30     Six Months Ended June 30  
     2013     2012     2013     2012  

Gain on disposal of financial assets, net

        

Available-for-sale financial assets

   $ 172,398      $ 149,246      $ 990,713      $ 231,622   

Financial assets carried at cost

     2,468        142,894        4,573        134,109   

Gain on deconsolidation of subsidiary

     293,578        —          293,578        —     

Settlement income

     451,050        448,275        451,050        448,275   

Other gains

     94,023        255,191        186,610        322,229   

Net gain/(loss) on financial instruments at FVTPL

        

Held for trading

     (408,731     55,268        (150,294     (189,737

Impairment loss of financial assets

        

Available-for-sale financial assets

     —          (2,677,529     —          (2,677,529

Financial assets carried at cost

     (45,716     (66,537     (45,716     (70,927

Fair value hedges

        

Loss from hedging instruments

     (2,587,357     —          (1,937,366     —     

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

     2,416,999        —          1,657,824        —     

Other losses

     (75,341     (74,496     (131,258     (145,481
  

 

 

   

 

 

   

 

 

   

 

 

 
   $ 313,371      $ (1,767,688   $ 1,319,714      $ (1,947,439
  

 

 

   

 

 

   

 

 

   

 

 

 

 

31. INCOME TAX

 

  a. Income tax expense recognized in profit or loss

Income tax expense consisted of the following:

 

     Three Months Ended June 30      Six Months Ended June 30  
     2013     2012      2013     2012  

Current income tax expense (benefit)

         

Current tax expense recognized for the current period

   $ 6,030,509      $ 3,559,326       $ 11,018,835      $ 6,430,572   

Income tax adjustments on prior years

     (634,420     48,049         (1,044,163     48,049   

Other income tax adjustments

     (16,082     4,152         (12,284     38,284   
  

 

 

   

 

 

    

 

 

   

 

 

 
     5,380,007        3,611,527         9,962,388        6,516,905   
  

 

 

   

 

 

    

 

 

   

 

 

 

 

(Continued)

 

- 38 -


     Three Months Ended June 30     Six Months Ended June 30  
     2013     2012     2013     2012  

Deferred income tax expense (benefit)

        

Temporary differences

   $ 32,657      $ (870,060   $ 1,041,130      $ (723,392

Income tax credits and loss carryforward

     2,920,986        1,415,848        3,542,503        653,920   

Effect of deconsolidation of subsidiary

     (78,474     —          (78,474     —     
  

 

 

   

 

 

   

 

 

   

 

 

 
     2,875,169        545,788        4,505,159        (69,472
  

 

 

   

 

 

   

 

 

   

 

 

 

Income tax expense recognized in profit or loss

   $ 8,255,176      $ 4,157,315      $ 14,467,547      $ 6,447,433   
  

 

 

   

 

 

   

 

 

   

 

 

 
           (Concluded

 

  b. Income tax expense recognized in other comprehensive income

 

     Three Months Ended June 30      Six Months Ended June 30  
     2013      2012      2013     2012  

Deferred income tax expense (benefit)

          

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

   $ 29       $ 308,777       $ (43,210   $ 308,929   
  

 

 

    

 

 

    

 

 

   

 

 

 

 

  c. Integrated income tax information

 

    

June 30,

2013

     December 31,
2012
    

June 30,

2012

    

January 1,

2012

 

Balance of the Imputation

           

Credit Account—TSMC

   $ 22,093,263       $ 8,130,060       $ 14,283,587       $ 4,003,228   
  

 

 

    

 

 

    

 

 

    

 

 

 

The actual creditable ratio for distribution of TSMC’s earnings of 2011 was 6.69%.

The estimated creditable ratio for distribution of TSMC’s 2012 earnings was approximately 7.75%, which is calculated based on draft amendment of the Income Tax Law not yet passed by the Legislative Yuan of the Republic of China as of the date that the consolidated financial statements were authorized for issue. The imputation credit allocated to shareholders is based on its balance as of the date of the dividend distribution. The estimated creditable ratio may change when the actual distribution of the imputation credit is made.

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

 

  d. Income tax examination

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

 

- 39 -


32. EARNINGS PER SHARE

 

     Three Months Ended June 30      Six Months Ended June 30  
     2013      2012      2013      2012  

Basic EPS

   $ 2.00       $ 1.61       $ 3.52       $ 2.91   
  

 

 

    

 

 

    

 

 

    

 

 

 

Diluted EPS

   $ 2.00       $ 1.61       $ 3.52       $ 2.91   
  

 

 

    

 

 

    

 

 

    

 

 

 

EPS is computed as follows:

 

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

Three months ended June 30, 2013

        

Basic EPS

        

Net income available to common shareholders of the parent

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

 

 

 

Effect of dilutive potential common shares

     —           1,192      
  

 

 

    

 

 

    

Diluted EPS

        

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

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

 

 

    

 

 

    

 

 

 

Three months ended June 30, 2012

        

Basic EPS

        

Net income available to common shareholders of the parent

   $ 41,843,339         25,920,703       $ 1.61   
        

 

 

 

Effect of dilutive potential common shares

     —           5,879      
  

 

 

    

 

 

    

Diluted EPS

        

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

   $ 41,843,339         25,926,582       $ 1.61   
  

 

 

    

 

 

    

 

 

 

Six months ended June 30, 2013

        

Basic EPS

        

Net income available to common shareholders of the parent

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

 

 

 

Effect of dilutive potential common shares

     —           2,340      
  

 

 

    

 

 

    

Diluted EPS

        

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

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

 

 

    

 

 

    

 

 

 

 

(Continued)

 

- 40 -


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

Six months ended June 30, 2012

        

Basic EPS

        

Net income available to common shareholders of the parent

   $ 75,334,973         25,919,175       $ 2.91   
        

 

 

 

Effect of dilutive potential common shares

     —           7,329      
  

 

 

    

 

 

    

Diluted EPS

        

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

   $ 75,334,973         25,926,504       $ 2.91   
  

 

 

    

 

 

    

 

 

 

(Concluded)

If the Company may settle the obligation by cash, by issuing shares, or in combination of both cash and shares, profit sharing to employees which will be settled in shares should be included in the weighted average number of shares outstanding in calculation of diluted EPS, if the shares have a dilutive effect. The number of shares is estimated by dividing the amount of profit sharing to employees in stock by the closing price (after considering the dilutive effect of dividends) of the common shares on the balance sheet date. 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 in the shareholders’ meeting in the following year.

 

33. ADDITIONAL INFORMATION OF EXPENSES BY NATURE

Net income included the following items:

 

     Three Months Ended June 30      Six Months Ended June 30  
     2013      2012      2013      2012  

a. Depreciation of property, plant and equipment

           

Recognized in cost of revenue

   $ 34,427,466       $ 29,266,334       $ 67,470,119       $ 54,111,631   

Recognized in operating expenses

     3,120,876         2,632,364         6,036,445         5,261,932   

Recognized in other operating income and expenses

     6,222         1,433         12,677         3,789   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 37,554,564       $ 31,900,131       $ 73,519,241       $ 59,377,352   
  

 

 

    

 

 

    

 

 

    

 

 

 

b. Amortization of intangible assets

           

Recognized in cost of revenue

   $ 281,530       $ 356,805       $ 576,662       $ 680,233   

Recognized in operating expenses

     258,547         203,895         494,928         408,653   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 540,077       $ 560,700       $ 1,071,590       $ 1,088,886   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(Continued)

 

- 41 -


     Three Months Ended June 30      Six Months Ended June 30  
     2013      2012      2013      2012  

c. Research and development costs expensed as incurred

   $ 11,941,871       $ 10,068,390       $ 22,592,856       $ 19,226,242   
  

 

 

    

 

 

    

 

 

    

 

 

 

d. Employee benefits expenses

           

Post-employment benefits (Note 23)

           

Defined contribution plans

   $ 403,779       $ 336,114       $ 788,237       $ 666,655   

Defined benefit plans

     60,697         54,669         121,387         109,328   
  

 

 

    

 

 

    

 

 

    

 

 

 
     464,476         390,783         909,624         775,983   

Share-based payments

           

Equity-settled share-based payments

     2,611         397         5,312         397   

Other employee benefits

     17,278,663         14,886,220         32,294,666         27,952,862   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 17,745,750       $ 15,277,400       $ 33,209,602       $ 28,729,242   
  

 

 

    

 

 

    

 

 

    

 

 

 

Employee benefits expense summarized by function

           

Recognized in cost of revenue

   $ 10,576,504       $ 9,018,651       $ 19,925,928       $ 16,499,499   

Recognized in operating expenses

     7,169,246         6,258,749         13,283,674         12,229,743   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 17,745,750       $ 15,277,400       $ 33,209,602       $ 28,729,242   
  

 

 

    

 

 

    

 

 

    

 

 

 

(Concluded)

 

34. DECONSOLIDATION OF SUBSIDIARY

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

 

  a. Consideration received

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

 

  b. Analysis of assets and liabilities over which the Company lost control

 

    

June 30,

2013

 

Current assets

  

Cash and cash equivalents

   $ 979,910   

Accounts receivable

     564,364   

Inventories

     213,133   

Others

     110,766   

 

(Continued)

 

- 42 -


    

June 30,

2013

 

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   
  

 

 

 

(Concluded)

 

  c. Gain on deconsolidation of subsidiary

 

    

Six Months
Ended June 30,

2013

 

Fair value of interest retained

   $ 1,816,848   
  

 

 

 

Less: Carrying amount of interest retained

  

Net assets deconsolidated

     3,796,423   

Noncontrolling interests

     (2,273,153
  

 

 

 
     1,523,270   
  

 

 

 

Gain on deconsolidation of subsidiary

   $ 293,578   
  

 

 

 

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

 

  d. Net cash outflow arising from deconsolidation of the subsidiary

 

    

Six Months
Ended June 30,

2013

 

The balance of cash and cash equivalents deconsolidated

   $ 979,910   
  

 

 

 

 

35. CAPITAL MANAGEMENT

The Company requires significant amounts of capital to build and expand its production facilities and equipment. In consideration of the industry dynamics, the Company manages its capital in a manner to ensure that it has sufficient and necessary financial resources to fund its working capital needs, capital asset purchases, research and development activities, dividend payments, debt service requirements and other business requirements associated with its existing operations over the next 12 months.

 

- 43 -


36. FINANCIAL INSTRUMENTS

 

  a. Categories of financial instruments

 

    

June 30,

2013

     December 31,
2012
    

June 30,

2012

    

January 1,

2012

 

Financial assets

           

FVTPL

           

Held for trading derivatives

   $ 20,010       $ 39,554       $ 23,734       $ 15,360   

Available-for-sale financial assets (Note)

     54,319,453         44,766,957         6,561,060         7,623,775   

Held-to-maturity financial assets

     700,576         5,056,973         8,126,699         9,068,847   

Loans and receivables

           

Cash and cash equivalents

     225,832,646         143,410,588         178,440,559         143,472,277   

Notes and accounts receivables (including related parties)

     80,340,331         58,131,397         61,447,677         46,016,052   

Other receivables

     3,804,679         1,307,473         2,219,280         1,403,694   

Refundable deposits

     2,412,290         2,426,712         4,296,083         4,518,863   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 367,429,985       $ 255,139,654       $ 261,115,092       $ 212,118,868   
  

 

 

    

 

 

    

 

 

    

 

 

 

Financial liabilities

           

FVTPL

           

Held for trading derivatives

   $ 136,515       $ 15,625       $ 35,166       $ 13,742   

Derivative instruments in designated hedge accounting relationships

     1,813,291         —           69         232   

Amortized cost

           

Short-term loans

     31,466,400         34,714,929         30,772,585         25,926,528   

Accounts payable (including related parties)

     15,202,734         15,239,042         15,436,960         11,859,008   

Payables to contactors and equipment suppliers

     60,883,767         44,831,798         45,039,813         35,540,526   

Cash dividends payable

     77,773,307         —           77,762,637         —     

Accrued expenses and other current liabilities

     12,933,671         9,316,232         10,803,925         7,796,538   

Bonds payable

     169,801,262         80,000,000         35,000,000         22,500,000   

Long-term bank loans

     —           1,487,500         1,650,000         1,650,000   

Other long-term payables

     913,102         967,485         2,039,819         3,399,855   

Guarantee deposits

     166,112         203,890         253,346         443,983   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 371,090,161       $ 186,776,501       $ 218,794,320       $ 109,130,412   
  

 

 

    

 

 

    

 

 

    

 

 

 

Note: Including financial assets carried at cost.

 

  b. Financial risk management objectives

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

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

 

- 44 -


  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 six months ended June 30, 2013 and 2012 would have decreased by NT$331,962 thousand and NT$504,452 thousand, respectively, after taking into consideration of the hedge 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 on the Company’s long-term bank loans are floating, changes in interest rates would affect the future cash flows but not the fair value. To reduce the cash flow risk caused by floating interest rates, the Company utilized an interest rate swap contract to partially hedge its exposure. As of June 30, 2013, the long-term bank loans bearing floating interest rates were amounted to nil as a result of deconsolidation of a subsidiary.

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$6,590 thousand for the six months ended June 30, 2012.

Other price risk

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

Assuming a hypothetical decrease of 5% in equity prices of the equity investments at the end of the reporting period, the net income for the six months ended June 30, 2013 and 2012 would have been unaffected as they were classified as available-for-sale; however, the other comprehensive income for the six months ended June 30, 2013 and 2012 would have decreased by NT$1,879,083 thousand and NT$308,146 thousand, respectively.

 

- 45 -


  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 balance sheet date, 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 hundreds of 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 June 30, 2013, December 31, 2012, June 30, 2012 and January 1, 2012, the Company’s ten largest customers accounted for 69%, 68%, 62% and 64% of accounts receivable, respectively. The Company believes the concentration of credit risk is insignificant for the remaining accounts receivable.

Financial credit risk

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

 

  e. Liquidity risk management

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

As of June 30, 2013, December 31, 2012, June 30, 2012 and January 1, 2012, the unused of financing facilities of the Company amounted to NT$55,098,102 thousand, NT$53,422,331 thousand, NT$61,928,356 thousand and NT$63,708,014 thousand, respectively.

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

 

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

June 30, 2013

              

Non-derivative financial liabilities

              

Short-term loans

   $ 31,470,473       $ —         $ —         $ —         $ 31,470,473   

Accounts payable (including related parties)

     15,202,734         —           —           —           15,202,734   

Payables to contactors and equipment suppliers

     60,883,767         —           —           —           60,883,767   

Cash dividends payable

     77,773,307         —           —           —           77,773,307   

Accrued expenses and other current liabilities

     12,933,671         —           —           —           12,933,671   

 

(Continued)

 

- 46 -


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

Bonds payable

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

Other long-term payables

     877,102        36,000        —           —           913,102   

Obligations under finance leases

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

Guarantee deposits

     —          166,112        —           —           166,112   
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

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

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

Derivative financial instruments

            

Forward exchange contracts

            

Outflows

     26,579,381        —          —           —           26,579,381   

Inflows

     (26,487,571     —          —           —           (26,487,571
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 
     91,810        —          —           —           91,810   
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

Cross currency swap contracts

            

Outflows

     1,200,176        —          —           —           1,200,176   

Inflows

     (1,201,117     —          —           —           (1,201,117
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 
     (941     —          —           —           (941
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

Stock forward contracts

            

Outflows

     —          14,753,429        —           —           14,753,429   

Inflows

     —          (14,753,429     —           —           (14,753,429
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 
     —          —          —           —           —     
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

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

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

December 31, 2012

            

Non-derivative financial liabilities

            

Short-term loans

   $ 34,721,003      $ —        $ —         $ —         $ 34,721,003   

Accounts payable (including related parties)

     15,239,042        —          —           —           15,239,042   

Payables to contactors and equipment suppliers

     44,831,798        —          —           —           44,831,798   

Accrued expenses and other current liabilities

     9,316,232        —          —           —           9,316,232   

Bonds payable

     1,108,150        2,216,300        44,911,191         37,834,474         86,070,115   

Long-term bank loans

     146,571        745,174        637,580         —           1,529,325   

Other long-term payables

     913,485        36,000        18,000         —           967,485   

Obligations under finance leases

     27,042        54,084        54,084         729,566         864,776   

Guarantee deposits

     —          203,890        —           —           203,890   
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 
     106,303,323        3,255,448        45,620,855         38,564,040         193,743,666   
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

Derivative financial instruments

            

Forward exchange contracts

            

Outflows

     11,030,154        —          —           —           11,030,154   

Inflows

     (11,059,396     —          —           —           (11,059,396
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 
     (29,242     —          —           —           (29,242
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

Cross currency swap contracts

            

Outflows

     9,068,589        —          —           —           9,068,589   

Inflows

     (9,068,727     —          —           —           (9,068,727
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 
     (138     —          —           —           (138
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 
   $ 106,273,943      $ 3,255,448      $ 45,620,855       $ 38,564,040       $ 193,714,286   
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

June 30, 2012

            

Non-derivative financial liabilities

            

Short-term loans

   $ 30,779,995      $ —        $ —         $ —         $ 30,779,995   

Accounts payable (including related parties)

     15,436,960        —          —           —           15,436,960   

Payables to contactors and equipment suppliers

     45,039,813        —          —           —           45,039,813   

Cash dividends payable

     77,762,637        —          —           —           77,762,637   

Accrued expenses and other current liabilities

     10,803,925        —          —           —           10,803,925   

Bonds payable

     500,450        1,000,900        21,329,148         14,808,455         37,638,953   

Long-term bank loans

     143,196        773,982        782,175         —           1,699,353   

Other long-term payables

     1,926,049        95,770        18,000         —           2,039,819   

Obligations under finance leases

     27,448        54,896        54,896         740,525         877,765   

Guarantee deposits

     —          253,346        —           —           253,346   
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 
     182,420,473        2,178,894        22,184,219         15,548,980         222,332,566   
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

 

(Continued)

 

- 47 -


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

Derivative financial instruments

             

Forward exchange contracts

             

Outflows

   $ 16,190,099      $ —         $ —         $ —         $ 16,190,099   

Inflows

     (16,228,937     —           —           —           (16,228,937
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 
     (38,838     —           —           —           (38,838
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Cross currency swap contracts

             

Outflows

     756,117        —           —           —           756,117   

Inflows

     (755,497     —           —           —           (755,497
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 
     620        —           —           —           620   
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Interest rate swap contracts

             

Outflows

     197        —           —           —           197   

Inflows

     (124     —           —           —           (124
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 
     73        —           —           —           73   
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 
   $ 182,382,328      $ 2,178,894       $ 22,184,219       $ 15,548,980       $ 222,294,421   
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

January 1, 2012

             

Non-derivative financial liabilities

             

Short-term loans

   $ 25,933,177      $ —         $ —         $ —         $ 25,933,177   

Accounts payable (including related parties)

     11,859,008        —           —           —           11,859,008   

Payables to contactors and equipment suppliers

     35,540,526        —           —           —           35,540,526   

Accrued expenses and other current liabilities

     7,796,538        —           —           —           7,796,538   

Bonds payable

     4,775,081        538,500         11,000,933         7,713,258         24,027,772   

Long-term bank loans

     79,558        778,190         849,021         —           1,706,769   

Other long-term payables

     3,399,855        —           —           —           3,399,855   

Obligations under finance leases

     —          167,472         55,824         780,962         1,004,258   

Guarantee deposits

     —          443,983         —           —           443,983   
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 
     89,383,743        1,928,145         11,905,778         8,494,220         111,711,886   
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Derivative financial instruments

             

Forward exchange contracts

             

Outflows

     7,736,197        —           —           —           7,736,197   

Inflows

     (7,726,584     —           —           —           (7,726,584
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 
     9,613        —           —           —           9,613   
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Cross currency swap contracts

             

Outflows

     420,431        —           —           —           420,431   

Inflows

     (420,397     —           —           —           (420,397
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 
     34        —           —           —           34   
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Interest rate swap contracts

             

Outflows

     706        —           —           —           706   

Inflows

     (442     —           —           —           (442
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 
     264        —           —           —           264   
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 
   $ 89,393,654      $ 1,928,145       $ 11,905,778       $ 8,494,220       $ 111,721,797   
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

(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.

 

    June 30, 2013     December 31, 2012     June 30, 2012     January 1, 2012  
    Carrying Amount     Fair Value     Carrying Amount     Fair Value     Carrying Amount     Fair Value     Carrying Amount     Fair Value  

Financial assets

               

Held-to-maturity financial assets

               

Corporate bonds

  $ 700,576      $ 704,777      $ 5,056,973      $ 5,066,363      $ 7,678,424      $ 7,700,578      $ 8,614,527      $ 8,674,016   

Government bonds

    —          —          —          —          448,275        448,329        454,320        454,047   

Financial liabilities

               

Measured at amortized cost

               

Bonds payable

    169,801,262        168,643,055        80,000,000        80,343,413        35,000,000        35,278,868        22,500,000        22,597,115   

 

- 48 -


  2) Fair value measurements recognized in the consolidated statement of financial position

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

 

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

 

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

 

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

 

     June 30, 2013  
     Level 1      Level 2      Level 3      Total  

Financial assets at FVTPL

           

Derivative financial instruments

   $ —         $ 20,010       $ —         $ 20,010   
  

 

 

    

 

 

    

 

 

    

 

 

 

Available-for-sale financial assets

           

Publicly traded stocks

   $ 50,643,339       $ —         $ —         $ 50,643,339   

Money market funds

     8,417         —           —           8,417   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 50,651,756       $ —         $ —         $ 50,651,756   
  

 

 

    

 

 

    

 

 

    

 

 

 

Financial liabilities at FVTPL

           

Derivative financial instruments

   $ —         $ 136,515       $ —         $ 136,515   
  

 

 

    

 

 

    

 

 

    

 

 

 

Hedging derivative financial liabilities

           

Stock forward contract

   $ —         $ 1,813,291       $ —         $ 1,813,291   
  

 

 

    

 

 

    

 

 

    

 

 

 
     December 31, 2012  
     Level 1      Level 2      Level 3      Total  

Financial assets at FVTPL

           

Derivative financial instruments

   $ —         $ 39,554       $ —         $ 39,554   
  

 

 

    

 

 

    

 

 

    

 

 

 

Available-for-sale financial assets

           

Publicly traded stocks

   $ 41,160,437       $ —         $ —         $ 41,160,437   

Money market funds

     1,443         —           —           1,443   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 41,161,880       $ —         $ —         $ 41,161,880   
  

 

 

    

 

 

    

 

 

    

 

 

 

Financial liabilities at FVTPL

           

Derivative financial instruments

   $ —         $ 15,625       $ —         $ 15,625   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

- 49 -


     June 30, 2012  
     Level 1      Level 2      Level 3      Total  

Financial assets at FVTPL

           

Derivative financial instruments

   $ —         $ 23,734       $ —         $ 23,734   
  

 

 

    

 

 

    

 

 

    

 

 

 

Available-for-sale financial assets

           

Publicly traded stocks

   $ 2,476,537       $ —         $ —         $ 2,476,537   

Money market funds

     509         —           —           509   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 2,477,046       $ —         $ —         $ 2,477,046   
  

 

 

    

 

 

    

 

 

    

 

 

 

Financial liabilities at FVTPL

           

Derivative financial instruments

   $ —         $ 35,166       $ —         $ 35,166   
  

 

 

    

 

 

    

 

 

    

 

 

 

Hedging derivative financial liabilities

           

Interest rate swap contract

   $ —         $ 69       $ —         $ 69   
  

 

 

    

 

 

    

 

 

    

 

 

 
     January 1, 2012  
     Level 1      Level 2      Level 3      Total  

Financial assets at FVTPL

           

Derivative financial instruments

   $ —         $ 15,360       $ —         $ 15,360   
  

 

 

    

 

 

    

 

 

    

 

 

 

Available-for-sale financial assets

           

Publicly traded stocks

   $ 3,306,248       $ —         $ —         $ 3,306,248   

Money market funds

     2,522         —           —           2,522   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 3,308,770       $ —         $ —         $ 3,308,770   
  

 

 

    

 

 

    

 

 

    

 

 

 

Financial liabilities at FVTPL

           

Derivative financial instruments

   $ —         $ 13,742       $ —         $ 13,742   
  

 

 

    

 

 

    

 

 

    

 

 

 

Hedging derivative financial liabilities

           

Interest rate swap contract

   $ —         $ 232       $ —         $ 232   
  

 

 

    

 

 

    

 

 

    

 

 

 

There were no transfers between Level 1 and 2 for the six months ended June 30, 2013 and 2012, respectively.

There were no purchases and disposals for assets on Level 3 for the six months ended June 30, 2013 and 2012, 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; interest rate swaps are measured at the present value of future cash flows estimated and discounted based on the applicable yield curves derived from quoted interest rates; 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.

 

- 50 -


    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.

 

37. 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. Operating transactions

 

     Net Revenue from Sale of Goods  
     Three Months Ended June 30      Six Months Ended June 30  
     2013      2012      2013      2012  

Associates

   $ 932,700       $ 1,489,336       $ 1,617,486       $ 2,636,030   

Joint venture

     311         1,123         839         2,305   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 933,011       $ 1,490,459       $ 1,618,325       $ 2,638,335   
  

 

 

    

 

 

    

 

 

    

 

 

 
     Net Revenue from Royalties  
     Three Months Ended June 30      Six Months Ended June 30  
     2013      2012      2013      2012  

Associates

   $ 127,829       $ 120,096       $ 248,245       $ 227,251   
  

 

 

    

 

 

    

 

 

    

 

 

 
     Purchases  
     Three Months Ended June 30      Six Months Ended June 30  
     2013      2012      2013      2012  

Associates

   $ 2,173,451       $ 2,158,983       $ 4,270,005       $ 3,764,529   
  

 

 

    

 

 

    

 

 

    

 

 

 
     Manufacturing Expenses  
     Three Months Ended June 30      Six Months Ended June 30  
     2013      2012      2013      2012  

Associates

   $ 6,380       $ 1,295       $ 12,752       $ 1,295   

Joint venture

     2,645         4,901         3,502         9,604   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 9,025       $ 6,196       $ 16,254       $ 10,899   
  

 

 

    

 

 

    

 

 

    

 

 

 
     Research and Development Expenses  
     Three Months Ended June 30      Six Months Ended June 30  
     2013      2012      2013      2012  

Joint venture

   $ 2,267       $ 2,647       $ 3,458       $ 4,461   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

- 51 -


     Sales of Machinery and Equipment  
     Three Months Ended June 30      Six Months Ended June 30  
     2013     2012      2013      2012  

Associates

   $ —        $ —         $ 11,418       $ —     

Joint venture

     —          —           —           9,000   
  

 

 

   

 

 

    

 

 

    

 

 

 
   $ —        $ —         $ 11,418       $ 9,000   
  

 

 

   

 

 

    

 

 

    

 

 

 
     Gains (Losses) from Sales of Machinery and Equipment, Net  
     Three Months Ended June 30      Six Months Ended June 30  
     2013     2012      2013      2012  

Associates

   $ (398   $ —         $ 2,565       $ —     

Joint venture

     58        58         116         97   
  

 

 

   

 

 

    

 

 

    

 

 

 
   $ (340   $ 58       $ 2,681       $ 97   
  

 

 

   

 

 

    

 

 

    

 

 

 
     Purchase of Machinery and Equipment and Intangible Assets  
     Three Months Ended June 30      Six Months Ended June 30  
     2013     2012      2013      2012  

Associates

   $ 11,835      $ 4,137       $ 11,835       $ 4,137   

Joint venture

     —          1,224         —           1,224   
  

 

 

   

 

 

    

 

 

    

 

 

 
   $ 11,835      $ 5,361       $ 11,835       $ 5,361   
  

 

 

   

 

 

    

 

 

    

 

 

 
     Non-operating Income  
     Three Months Ended June 30      Six Months Ended June 30  
     2013     2012      2013      2012  

Associates

   $ —        $ 5,116       $ —         $ 5,116   
  

 

 

   

 

 

    

 

 

    

 

 

 
The following balances were outstanding at the end of reporting period:   
     Receivables from Related Parties  
    

June 30,

2013

    December 31,
2012
    

June 30,

2012

    

January 1,

2012

 

Associates

   $ 597,459      $ 353,652       $ 836,578       $ 185,552   

Joint venture

     164        159         667         212   
  

 

 

   

 

 

    

 

 

    

 

 

 
   $ 597,623      $ 353,811       $ 837,245       $ 185,764   
  

 

 

   

 

 

    

 

 

    

 

 

 
     Other Receivables from Related Parties  
    

June 30,

2013

    December 31,
2012
    

June 30,

2012

    

January 1,

2012

 

Associates

   $ 2,433,325      $ 185,550       $ 570,070       $ 121,767   

Joint venture

     —          —           411,193         525   
  

 

 

   

 

 

    

 

 

    

 

 

 
   $ 2,433,325      $ 185,550       $ 981,263       $ 122,292   
  

 

 

   

 

 

    

 

 

    

 

 

 

 

- 52 -


     Refundable Deposits  
    

June 30,

2013

    December 31,
2012
   

June 30,

2012

    

January 1,

2012

 

Associates

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

Joint venture

     —          4        4         —     
  

 

 

   

 

 

   

 

 

    

 

 

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

 

 

   

 

 

   

 

 

    

 

 

 
     Payables to Related Parties  
    

June 30,

2013

    December 31,
2012
   

June 30,

2012

    

January 1,

2012

 

Associates

   $ 808,388      $ 746,532      $ 1,305,553       $ 1,325,791   

Joint venture

     2,807        2,081        4,413         2,730   
  

 

 

   

 

 

   

 

 

    

 

 

 
   $ 811,195      $ 748,613      $ 1,309,966       $ 1,328,521   
  

 

 

   

 

 

   

 

 

    

 

 

 
     Deferred Gains (Losses) from Disposal of Machinery and Equipment  
    

June 30,

2013

    December 31,
2012
   

June 30,

2012

    

January 1,

2012

 

Associates

   $ (10,320   $ (7,806   $ —         $ —     

Joint venture

     832        948        1,064         —     
  

 

 

   

 

 

   

 

 

    

 

 

 
   $ (9,488   $ (6,858   $ 1,064       $ —     
  

 

 

   

 

 

   

 

 

    

 

 

 

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’s other receivables from related parties was mainly dividend income.

The Company deferred the disposal gain/loss (classified under other noncurrent assets and other noncurrent liabilities) 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.

 

  b. Compensation of key management personnel:

The compensation to directors and other key management personnel were as follows:

 

     Three Months Ended June 30      Six Months Ended June 30  
     2013      2012      2013      2012  

Short-term employee benefits

   $ 463,386       $ 494,937       $ 630,966       $ 669,922   

Post-employment benefits

     1,177         903         2,348         1,764   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 464,563       $ 495,840       $ 633,314       $ 671,686   
  

 

 

    

 

 

    

 

 

    

 

 

 

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.

 

- 53 -


38. PLEDGED ASSETS

The Company provided certificate of deposits recorded in other financial assets as collateral mainly for building lease agreements. As of June 30, 2013, December 31, 2012, June 30, 2012 and January 1, 2012, the aforementioned other financial assets amounted to NT$120,987 thousand, NT$119,710 thousand, NT$120,523 thousand and NT$121,140 thousand, respectively.

 

39. SIGNIFICANT OPERATING LEASE ARRANGEMENTS

The Company leases several parcels of land, factory and office premises from the Science Park Administration and entered into lease agreements for its office premises and certain office equipment located in the United States, Europe, Japan, Shanghai and Taiwan. These operating leases expire between September 2013 and December 2032 and can be renewed upon expiration.

The Company expensed the lease payments as follows:

 

     Three Months Ended June 30      Six Months Ended June 30  
     2013      2012      2013      2012  

Minimum lease payments

   $ 267,349       $ 166,326       $ 467,482       $ 331,112   
  

 

 

    

 

 

    

 

 

    

 

 

 

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

 

    

June 30,

2013

     December 31,
2012
    

June 30,

2012

    

January 1,

2012

 

Not later than 1 year

   $ 841,055       $ 693,758       $ 634,571       $ 627,882   

Later than 1 year and not later than 5 years

     3,125,895         2,478,443         2,348,621         2,258,302   

Later than 5 years

     5,867,588         4,221,524         3,651,028         3,870,728   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 9,834,538       $ 7,393,725       $ 6,634,220       $ 6,756,912   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

40. 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 if 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.

 

  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, Philips parted with its semiconductor company which was renamed as NXP B.V. in September 2006. 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 Philips (now 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 fall below a specific percentage of its capacity, the defaulting party is required to compensate SSMC for all related unavoidable costs.

 

- 54 -


  c. In August 2006, TSMC filed a lawsuit against Semiconductor Manufacturing International Corporation, SMIC (Shanghai) and SMIC Americas (aggregately referred to as “SMIC”) in the Superior Court of California for Alameda County for breach of a 2005 agreement that settled an earlier trade secret misappropriation and patent infringement litigation between the parties, as well as for trade secret misappropriation, seeking injunctive relief and monetary damages. In September 2006, SMIC filed a cross-complaint against TSMC in the same court alleging breach of settlement agreement, implied covenant of good faith and fair dealing. SMIC also filed a civil action against TSMC in November 2006 with the Beijing People’s High Court alleging defamation and breach of good faith. On June 10, 2009, the Beijing People’s High Court ruled in favor of TSMC and dismissed SMIC’s lawsuit. On November 4, 2009, after a two-month trial, a jury in the California action found SMIC to have both breached the 2005 settlement agreement and misappropriated TSMC’s trade secrets. TSMC has subsequently settled both lawsuits with SMIC. Pursuant to the new settlement agreement, the parties have agreed to the entry of a stipulated judgment in favor of TSMC in the California action, and to the dismissal of SMIC’s appeal against the Beijing High Court’s finding in favor of TSMC. Under the new settlement agreement and the related stipulated judgment, SMIC has agreed to make cash payments by installments to TSMC totaling US$200 million, which are in addition to the US$135 million previously paid to TSMC under the 2005 settlement agreement, and, conditional upon relevant government regulatory approvals, to issue to TSMC a total of 1,789,493,218 common shares of Semiconductor Manufacturing International Corporation and a three-year warrant to purchase 695,914,030 common shares (subject to adjustment) of Semiconductor Manufacturing International Corporation at HK$1.30 per share (subject to adjustment). TSMC has acquired the above mentioned common shares in July 2010, which are recorded within available for sale financial assets, and obtained the subsequent cash settlement income in accordance with the agreement. The above mentioned warrant has expired without being exercised in July 2013.

 

  d. In June 2010, Keranos, LLC. filed a lawsuit 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 case in the U.S. District Court for the Eastern District of Texas. The outcome cannot be determined and the Company cannot make a reliable estimate of the contingent liability at this time.

 

  e. 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.

 

  f. 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 and TSMC shall provide EUR276,000 thousand to ASML’s research and development programs from 2013 to 2017.

 

  g. Amounts available under unused letters of credit as of June 30, 2013, December 31, 2012, June 30, 2012 and January 1, 2012 were NT$89,904 thousand, NT$99,671 thousand, NT$96,002 thousand and NT$263,880 thousand, respectively.

 

- 55 -


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

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

 

    June 30, 2013     December 31, 2012     June 30, 2012     January 1, 2012  
   

Foreign
Currencies

(In Thousands)

   

Exchange

Rate

(Note)

   

Foreign
Currencies

(In Thousands)

   

Exchange

Rate

(Note)

   

Foreign
Currencies

(In Thousands)

   

Exchange

Rate

(Note)

   

Foreign
Currencies

(In Thousands)

   

Exchange

Rate

(Note)

 

Financial assets

               

Monetary items

               

USD

  $ 5,679,233        29.968      $ 3,437,165        29.038      $ 4,479,936        29.880-29.885      $ 3,744,817        30.288   

EUR

    190,687        39.08        125,973        38.39-38.49        160,421        37.56-37.73        135,857        39.18-39.27   

JPY

    30,877,478        0.3033        35,734,874        0.3352-0.3364        29,478,683        0.3754-0.3776        37,276,671        0.3897-0.3906   

RMB

    522,386        4.85        102,995        4.66        334,695        4.73        201,385        4.81   

Non-monetary items

               

USD

    1,993,870        29.968        1,611,474        29.038        139,082        29.885        141,498        30.288   

HKD

    157,296        3.86        492,014        3.75        456,321        3.85        671,060        3.90   

Investments accounted for using equity method

               

USD

    318,157        29.968        328,281        29.038        284,093        29.885        294,797        30.288   

Financial liabilities

               

Monetary items

               

USD

    3,757,241        29.968        2,193,343        29.038        2,140,675        29.880-29.885        1,744,746        30.288   

EUR

    450,177        39.08        247,052        38.39-38.49        174,960        37.56-37.73        111,750        39.18-39.27   

JPY

    57,660,925        0.3033        43,311,360        0.3352-0.3364        44,485,239        0.3754-0.3776        35,349,169        0.3897-0.3906   

RMB

    198,447        4.85        205,930        4.66        214,203        4.73        278,877        4.81   

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

 

42. 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 operating profit as the measurement for segment profit and the basis of performance assessment. There was no material differences between the accounting policies of the operating segment and the accounting policies described in Note 4.

 

  b. Segment sales and operating results

 

     Foundry      Others     Elimination     Total  

Three months ended June 30, 2013

         

Net revenue from external customers

   $ 155,802,306       $ 84,014      $ —        $ 155,886,320   

Net revenue from sales among intersegments

     —           5,660        (5,660     —     

Income (loss) from operations

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

Three months ended June 30, 2012

         

Net revenue from external customers

     128,160,350         25,981        —          128,186,331   

Net revenue from sales among intersegments

     —           3,478        (3,478     —     

Income (loss) from operations

     47,522,630         (650,542     —          46,872,088   

 

(Continued)

 

- 56 -


     Foundry      Others     Elimination     Total  

Six months ended June 30, 2013

         

Net revenue from external customers

   $ 288,483,842       $ 157,474      $ —        $ 288,641,316   

Net revenue from sales among intersegments

     —           5,898        (5,898     —     

Income (loss) from operations

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

Six months ended June 30, 2012

         

Net revenue from external customers

     233,729,182         71,980        —          233,801,162   

Net revenue from sales among intersegments

     —           3,478        (3,478     —     

Income (loss) from operations

     83,180,742         (1,191,341     —          81,989,401   

(Concluded)

 

43. FIRST-TIME ADOPTION OF TAIWAN-IFRSs

 

  a. Basis of preparation for financial information under Taiwan-IFRSs

The Company prepares consolidated financial statements for the six months ended June 30, 2013 under Taiwan-IFRSs. As the basis of the preparation, the Company not only follows the significant accounting policies stated in Note 4 but also applies IFRS 1.

 

  b. Exemptions from IFRS 1

IFRS 1 establishes the procedures for the Company’s first consolidated financial statements prepared in accordance with Taiwan-IFRSs. According to IFRS 1, the Company is required to determine the accounting policies under Taiwan-IFRSs and retrospectively apply those accounting policies in its opening balance sheet at the date of transition to Taiwan-IFRSs; except for optional exemptions and mandatory exceptions to such retrospective application provided under IFRS 1. The main optional exemptions the Company adopted are summarized as follows:

 

  1) Business combinations. The Company elected not to apply IFRS 3, “Business Combinations,” retrospectively to business combinations that occurred before January 1, 2012. Therefore, in the opening balance sheet, the amount of goodwill generated from past business combinations remains the same compared with the one under R.O.C. GAAP as of December 31, 2011.

 

  2) Employee benefits. The Company elected to recognize all cumulative actuarial gains and losses in retained earnings as of January 1, 2012. In addition, the Company elected to apply the exemption disclosure requirement provided by IFRS 1, in which the amounts of present value of defined benefit obligations, the fair value of plan assets, the surplus or deficit in the plan and the experience adjustments are determined for each accounting period prospectively from the transition date.

 

  3) Share-based payment. The Company elected to take the optional exemption from applying IFRS 2 retrospectively for the shared-based payment transactions granted and vested before January 1, 2012.

 

  c. Effect of transition to Taiwan-IFRSs

Except for the additional information disclosed below, for the effect of transition to Taiwan-IFRSs on the Company’s consolidated balance sheets and the consolidated statements of comprehensive income, please refer to Note 42 to the consolidated financial statements for the three months ended March 31, 2013 for details.

 

- 57 -


  1) Reconciliation of consolidated balance sheet as of June 30, 2012

 

           Effect of Transition to
Taiwan-IFRSs
                 

R.O.C. GAAP

    Recognition and
Measurement
    Presentation     Taiwan-IFRSs     
Item    Amount     Difference     Difference     Amount      Item    Note

Current assets

              

Cash and cash equivalents

   $ 178,440,559      $ —        $ —        $ 178,440,559      

Cash and cash equivalents

  

Financial assets at fair value through profit or loss

     23,734        —          —          23,734      

Financial assets at fair value through profit or loss

  

Available-for-sale financial assets

     2,477,046        —          —          2,477,046      

Available-for-sale financial assets

  

Held-to-maturity financial assets

     7,424,976        —          —          7,424,976      

Held-to-maturity financial assets

  

Notes and accounts receivable

     61,101,346        —          (490,914     60,610,432      

Notes and accounts receivable

  

Receivables from related parties

     837,245        —          —          837,245      

Receivables from related parties

  

Allowance for doubtful receivables

     (490,914     —          490,914        —        

—  

  

Allowance for sales returns and others

     (6,508,185     —          6,508,185        —        

—  

   a)

Other receivables from related parties

     981,263        —          —          981,263      

Other receivables from related parties

  

Other financial assets

     603,940        —          —          603,940      

Other financial assets

  

Inventories

     30,780,466        —          —          30,780,466      

Inventories

  

Deferred income tax assets

     2,805,069        —          (2,805,069     —        

—  

   b)

Prepaid expenses and other current assets

     2,404,358        —          —          2,404,358      

Other current assets

  
  

 

 

   

 

 

   

 

 

   

 

 

       

Total current assets

     280,880,903        —          3,703,116        284,584,019      

Total current assets

  
  

 

 

   

 

 

   

 

 

   

 

 

       

Long-term investments

              

Investments accounted for using equity method

     23,372,224        (51,594     —          23,320,630      

Investments accounted for using equity method

   e)

Held-to-maturity financial assets

     701,723        —          —          701,723      

Held-to-maturity financial assets

  

Financial assets carried at cost

     4,084,014        —          —          4,084,014      

Financial assets carried at cost

  
  

 

 

   

 

 

   

 

 

   

 

 

       

Total long-term investments

     28,157,961        (51,594     —          28,106,367         
  

 

 

   

 

 

   

 

 

   

 

 

       

Net property, plant and equipment

     548,148,865        —          35,609        548,184,474      

Property, plant and equipment

   c)
  

 

 

   

 

 

   

 

 

   

 

 

       

Intangible assets

     10,860,551        —          —          10,860,551      

Intangible assets

  
  

 

 

   

 

 

   

 

 

   

 

 

       

Other assets

              

Deferred income tax assets

     10,344,401        227,520        2,805,069        13,376,990      

Deferred income tax assets

   b), d)

Refundable deposits

     4,296,083        —          —          4,296,083      

Refundable deposits

  

Others

     1,217,289        —          (35,609     1,181,680      

Other noncurrent assets

   c)
  

 

 

   

 

 

   

 

 

   

 

 

       

Total other assets

     15,857,773        227,520        2,769,460        18,854,753         
  

 

 

   

 

 

   

 

 

   

 

 

       

Total

   $ 883,906,053      $ 175,926      $ 6,508,185      $ 890,590,164      

Total

  
  

 

 

   

 

 

   

 

 

   

 

 

       

Current liabilities

              

Short-term loans

   $ 30,772,585      $ —        $ —        $ 30,772,585      

Short-term loans

  

Financial liabilities at fair value through profit or loss

     35,166        —          —          35,166      

Financial liabilities at fair value through profit or loss

  

Hedging derivative financial liabilities

     69        —          —          69      

Hedging derivative financial liabilities

  

Accounts payable

     14,126,994        —          —          14,126,994      

Accounts payable

  

Payables to related parties

     1,309,966        —          —          1,309,966      

Payables to related parties

  

Salary and bonus payable

     5,518,151        —          —          5,518,151      

Salary and bonus payable

  

Income tax payable

     6,787,548        —          —          6,787,548      

Income tax payable

  

Cash dividends payable

     77,762,637        —          —          77,762,637      

Cash dividends payable

  

Accrued profit sharing to employees and bonus to directors and supervisors

     14,152,148        —          —          14,152,148      

Accrued profit sharing to employees and bonus to directors and supervisors

  

Payables to contractors and equipment suppliers

     45,039,813        —          —          45,039,813      

Payables to contractors and equipment suppliers

  

Accrued expenses and other current liabilities

     16,216,838        —          —          16,216,838      

Accrued expenses and other current liabilities

  

Current portion of bonds payable and long-term bank loans

     125,000        —          —          125,000      

Current portion of bonds payable and long-term bank loans

  

     —          —          6,508,185        6,508,185      

Provisions

   a)
  

 

 

   

 

 

   

 

 

   

 

 

       

Total current liabilities

     211,846,915        —          6,508,185        218,355,100      

Total current liabilities

  
  

 

 

   

 

 

   

 

 

   

 

 

       

 

(Continued)

 

- 58 -


           Effect of Transition to
Taiwan-IFRSs
                

R.O.C. GAAP

    Recognition and
Measurement
    Presentation     Taiwan-IFRSs     
Item    Amount     Difference     Difference     Amount     Item    Note

Long-term liabilities

             

Bonds payable

   $ 35,000,000      $ —        $ —        $ 35,000,000     

Bonds payable

  

Long-term bank loans

     1,525,000        —          —          1,525,000     

Long-term bank loans

  

Other long-term payable

     113,770        —          —          113,770     

Other long-term payable

  

Obligations under capital leases

     749,794        —          —          749,794     

Obligations under capital leases

  
  

 

 

   

 

 

   

 

 

   

 

 

      

Total long-term liabilities

     37,388,564        —          —          37,388,564        
  

 

 

   

 

 

   

 

 

   

 

 

      

Other liabilities

             

Accrued pension cost

     3,930,438        2,296,320        —          6,226,758     

Accrued pension cost

   d)

Guarantee deposits

     253,346        —          —          253,346     

Guarantee deposits

  

     —          —          3,398        3,398     

Provisions

  

Others

     429,142        —          (3,398     425,744     

Other noncurrent liabilities

  
  

 

 

   

 

 

   

 

 

   

 

 

      

Total other liabilities

     4,612,926        2,296,320        —          6,909,246        
  

 

 

   

 

 

   

 

 

   

 

 

      

Total liabilities

     253,848,405        2,296,320        6,508,185        262,652,910     

Total liabilities

  
  

 

 

   

 

 

   

 

 

   

 

 

      

Equity attributable to shareholders of the parent

             

Capital stock

     259,207,094        —          —          259,207,094     

Capital stock

  
  

 

 

   

 

 

   

 

 

   

 

 

      

Capital surplus

     56,025,149        (428,673     —          55,596,476     

Capital surplus

   e)
  

 

 

   

 

 

   

 

 

   

 

 

      

Retained earnings

          

Retained earnings

  

Appropriated as legal capital reserve

     115,820,123        —          —          115,820,123     

Appropriated as legal capital reserve

  

Appropriated as special capital reserve

     7,606,224        —          —          7,606,224     

Appropriated as special capital reserve

  

Unappropriated earnings

     196,302,944        (1,678,659     —          194,624,285     

Unappropriated earnings

   d), e)
  

 

 

   

 

 

   

 

 

   

 

 

      
     319,729,291        (1,678,659     —          318,050,632        
  

 

 

   

 

 

   

 

 

   

 

 

      

Others

             

Cumulative translation adjustments

     (7,830,895     11        —          (7,830,884  

Foreign currency translation reserve

   e)

Unrealized gain on financial instruments

     334,651        —          28        334,679     

Unrealized gain/loss from available-for-sales financial assets

  

     —          —          (28     (28  

Cash flow hedging reserve

  
  

 

 

   

 

 

   

 

 

   

 

 

      
     (7,496,244     11        —          (7,496,233     
  

 

 

   

 

 

   

 

 

   

 

 

      

Equity attributable to shareholders of the parent

     627,465,290        (2,107,321     —          625,357,969     

Equity attributable to shareholders of the parent

  

Minority interests

     2,592,358        (13,073     —          2,579,285     

Noncontrolling interests

   d)
  

 

 

   

 

 

   

 

 

   

 

 

      

Total shareholders’ equity

     630,057,648        (2,120,394     —          627,937,254     

Total shareholders’ equity

  
  

 

 

   

 

 

   

 

 

   

 

 

      

Total

   $ 883,906,053      $ 175,926      $ 6,508,185      $ 890,590,164     

Total

  
  

 

 

   

 

 

   

 

 

   

 

 

      

(Concluded)

 

  2) Reconciliation of consolidated statement of comprehensive income for the six months ended June 30, 2012

 

           Effect of Transition to
Taiwan-IFRSs
                

R.O.C. GAAP

    Recognition and
Measurement
    Presentation     Taiwan-IFRSs     
Item    Amount     Difference     Difference     Amount     Item    Note

Net sales

   $ 233,568,503      $ —        $ 232,659      $ 233,801,162      Net revenue    f)

Cost of sales

     120,811,731        (22,373     —          120,789,358      Cost of revenue    d)
  

 

 

   

 

 

   

 

 

   

 

 

      

Gross profit before affiliates elimination

     112,756,772        22,373        232,659        113,011,804      Gross profit before associates elimination   

Unrealized gross profit from affiliates

     (139,950     —          —          (139,950   Unrealized profit on sales to associates   
  

 

 

   

 

 

   

 

 

   

 

 

      

Gross profit

     112,616,822        22,373        232,659        112,871,854      Gross profit   
  

 

 

   

 

 

   

 

 

   

 

 

      

Operating expenses

             

Research and development

     19,235,781        (9,539     —          19,226,242      Research and development    d)

General and administrative

     9,025,466        (3,524     —          9,021,942      General and administrative    d)

Marketing

     2,205,936        (760     —          2,205,176      Marketing    d)
  

 

 

   

 

 

   

 

 

   

 

 

      

Total operating expenses

     30,467,183        (13,823     —          30,453,360        
  

 

 

   

 

 

   

 

 

   

 

 

      

     —          —          (429,093     (429,093   Other operating income and expenses, net    f)
  

 

 

   

 

 

   

 

 

   

 

 

      

Income from operations

     82,149,639        36,196        (196,434     81,989,401      Income from operations   
  

 

 

   

 

 

   

 

 

   

 

 

      

 

(Continued)

 

- 59 -


            Effect of Transition to
Taiwan-IFRSs
                

R.O.C. GAAP

     Recognition and
Measurement
     Presentation     Taiwan-IFRSs     
Item    Amount      Difference      Difference     Amount     Item    Note

Non-operating income and gains

               

Equity in earnings of equity method investees, net

   $ 610,296       $ 15,779       $ —        $ 626,075     

Share of profits of associates and joint venture

   e)

Interest income

     941,732         —           (941,732     —       

—  

   f)

Settlement income

     448,275         —           (448,275     —       

—  

   f)

Gain on disposal of financial assets, net

     365,731         —           (365,731     —       

—  

   f)

Foreign exchange gain, net

     365,310         —           —          365,310     

Foreign exchange gain, net

  

Technical service income

     232,659         —           (232,659     —       

—  

   f)

Gain on disposal of property, plant and equipment and other assets

     21,176         —           (21,176     —       

—  

   f)

Others

     393,319         —           (393,319     —       

—  

   f)

     —           —           1,011,677        1,011,677     

Other income

   f)

     —           —           (1,947,439     (1,947,439  

Other gains and losses

   f)
  

 

 

    

 

 

    

 

 

   

 

 

      
     3,378,498         15,779         (3,338,654     55,623        
  

 

 

    

 

 

    

 

 

   

 

 

      

Non-operating expenses and losses

               

Impairment of financial assets

     2,748,456         —           (2,748,456     —       

—  

   f)

Impairment loss on idle assets

     422,323         —           (422,323     —       

—  

   f)

Interest expense

     415,039         —           —          415,039     

Finance cost

  

Valuation loss on financial instruments, net

     189,737         —           (189,737     —       

—  

   f)

Loss on disposal of property, plant and equipment

     25,302         —           (25,302     —       

—  

   f)

Others

     149,270         —           (149,270     —       

—  

   f)
  

 

 

    

 

 

    

 

 

   

 

 

      
     3,950,127         —           (3,535,088     415,039        
  

 

 

    

 

 

    

 

 

   

 

 

      

Income before income tax

     81,578,010         51,975         —          81,629,985     

Income before income tax

  

Income tax expense

     6,443,942         3,491         —          6,447,433     

Income tax expense

   d)
  

 

 

    

 

 

    

 

 

   

 

 

      

Net income

   $ 75,134,068       $ 48,484       $ —          75,182,552     

Net income

  
  

 

 

    

 

 

    

 

 

   

 

 

      
             (1,387,883  

Exchange differences on translating foreign operations

  
             1,822,823     

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

  
             163     

Cash flow hedges

  
             20,387     

Share of other comprehensive income of associates and joint venture

  
             (308,929  

Income tax expense relating to components of other comprehensive income

  
          

 

 

      
             146,561     

Other comprehensive income for the period, net of income tax

  
          

 

 

      
           $ 75,329,113     

Total comprehensive income for the period

  
          

 

 

      

 

(Concluded)

 

- 60 -


  3) Reconciliation of consolidated statement of comprehensive income for the three months ended June 30, 2012

 

           Effect of Transition to
Taiwan-IFRSs
                

R.O.C. GAAP

    Recognition and
Measurement
    Presentation     Taiwan-IFRSs     
Item    Amount     Difference     Difference     Amount     Item    Note

Net sales

   $ 128,060,828      $ —        $ 125,503      $ 128,186,331     

Net revenue

   f)

Cost of sales

     65,590,639        (11,628     —          65,579,011     

Cost of revenue

   d)
  

 

 

   

 

 

   

 

 

   

 

 

      

Gross profit before affiliates elimination

     62,470,189        11,628        125,503        62,607,320     

Gross profit before associates elimination

  

Unrealized gross profit from affiliates

     (213,979     —          —          (213,979  

Unrealized gross profit on sales to associates

  
  

 

 

   

 

 

   

 

 

   

 

 

      

Gross profit

     62,256,210        11,628        125,503        62,393,341     

Gross profit

  
  

 

 

   

 

 

   

 

 

   

 

 

      

Operating expenses

             

Research and development

     10,073,000        (4,610     —          10,068,390     

Research and development

   d)

General and administrative

     4,366,442        (1,504     —          4,364,938     

General and administrative

   d)

Marketing

     1,105,097        (356     —          1,104,741     

Marketing

   d)
  

 

 

   

 

 

   

 

 

   

 

 

      

Total operating expenses

     15,544,539        (6,470     —          15,538,069        
  

 

 

   

 

 

   

 

 

   

 

 

      

     —          —          16,816        16,816     

Other operating income and expenses, net

   f)
  

 

 

   

 

 

   

 

 

   

 

 

      

Income from operations

     46,711,671        18,098        142,319        46,872,088     

Income from operations

  
  

 

 

   

 

 

   

 

 

   

 

 

      

Non-operating income and gains

             

Equity in earnings of equity method investees, net

     589,344        14,527        —          603,871     

Share of profits of associates and joint venture

   e)

Interest income

     440,496        —          (440,496     —       

—  

   f)

Settlement income

     448,275        —          (448,275     —       

—  

   f)

Gain on settlement and disposal of financial assets, net

     292,140        —          (292,140     —       

—  

   f)

Technical service income

     125,503        —          (125,503     —       

—  

   f)

Valuation gain on financial assets, net

     55,268        —          (55,268     —       

—  

   f)

Gain on reversal of impairment loss on idle assets

     19,989        —          (19,989     —       

—  

   f)

Gain on disposal of property, plant and equipment and other assets

     18,941        —          (18,941     —       

—  

   f)

Others

     326,027        —          (326,027     —       

—  

   f)

     —          —          510,441        510,441     

Other income

   f)

     —          —          (1,767,688     (1,767,688  

Other gains and losses

   f)
  

 

 

   

 

 

   

 

 

   

 

 

      
     2,315,983        14,527        (2,983,886     (653,376     
  

 

 

   

 

 

   

 

 

   

 

 

      

Non-operating expenses and losses

             

Impairment of financial assets

     2,744,066        —          (2,744,066     —       

—  

   f)

Interest expense

     197,348        —          —          197,348     

Finance costs

  

Foreign exchange loss, net

     64,433        —          —          64,433     

Foreign exchange loss, net

  

Loss on disposal of property, plant and equipment

     21,572        —          (21,572     —       

—  

   f)

Others

     75,929        —          (75,929     —       

—  

   f)
  

 

 

   

 

 

   

 

 

   

 

 

      
     3,103,348        —          (2,841,567     261,781        
  

 

 

   

 

 

   

 

 

   

 

 

      

Income before income tax

     45,924,306        32,625        —          45,956,931     

Income before income tax

  

Income tax expense

     4,155,570        1,745        —          4,157,315     

Income tax expense

   d)
  

 

 

   

 

 

   

 

 

   

 

 

      

Net income

   $ 41,768,736      $ 30,880      $ —          41,799,616     

Net income

  
  

 

 

   

 

 

   

 

 

   

 

 

      
           1,236,890     

Exchange differences arising on translation of foreign operations

  
           1,542,651     

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

  
           66     

Cash flow hedges

  
           (22,321  

Share of other comprehensive income of associates and joint venture

  

 

(Continued)

 

- 61 -


          Effect of Transition to
Taiwan-IFRSs
               

R.O.C. GAAP

   Recognition and
Measurement
   Presentation    Taiwan-IFRSs     
Item    Amount    Difference    Difference    Amount     Item    Note
            $ (308,777  

Income tax expense relating to components of other comprehensive income

  
           

 

 

      
              2,448,509     

Other comprehensive income for the period, net of income tax

  
           

 

 

      
            $ 44,248,125     

Total comprehensive income for the period

  
           

 

 

      

(Concluded)

 

  4) Reconciliation of equity

 

     Note    June 30, 2012  

Equity under R.O.C. GAAP

      $ 630,057,648   

Adjustments:

     

Defined benefit plans

   d)      (2,068,800

Investments accounted for using the equity method

   e)      (51,594
     

 

 

 

Equity under Taiwan-IFRSs

      $ 627,937,254   
     

 

 

 

 

  d. Notes to the reconciliation of the significant differences:

 

  a) Allowance for sales returns and others

Under R.O.C. GAAP, provisions for estimated sales returns and others are recognized as a reduction in revenue in the period the related revenue is recognized based on historical experience. The corresponding allowance for sales returns and others is recorded as a deduction in accounts receivable. Under Taiwan-IFRSs, the allowance for sales returns and others is a present obligation with uncertain timing and an amount that arises from past events and is therefore reclassified as provisions in accordance with IAS No. 37, “Provisions, Contingent Liabilities and Contingent Assets.”

As of June 30, 2012, the amounts reclassified from allowance for sales returns and others to provisions were NT$6,508,185 thousand.

 

  b) Classifications of deferred income tax asset/liability and valuation allowance

Under R.O.C. GAAP, a deferred tax asset and liability is classified as current or noncurrent in accordance with the classification of its related asset or liability. However, if a deferred income tax asset or liability does not relate to an asset or liability in the financial statements, it is classified as either current or noncurrent based on the expected length of time before it is realized or settled. Under Taiwan-IFRSs, a deferred tax asset and liability is classified as noncurrent asset or liability.

In addition, under R.O.C. GAAP, valuation allowances are provided to the extent, if any, that it is more likely than not that deferred income tax assets will not be realized. In accordance with IAS No. 12, “Income Taxes,” deferred tax assets are only recognized to the extent that it is probable that there will be sufficient taxable profits and the valuation allowance account is no longer used.

 

- 62 -


As of June 30, 2012, the amounts reclassified from deferred income tax assets to noncurrent assets were NT$2,805,069 thousand.

 

  c) The classification of assets leased to others and idle assets

Under R.O.C. GAAP, assets leased to others and idle assets are classified under other assets. Under Taiwan-IFRSs, the aforementioned items are classified as property, plant and equipment according to their nature. In accordance with IAS No. 40, “Investment Property,” investment properties are defined as properties held to earn rentals or for capital appreciation; however, the Company’s assets leased to others are mainly dormitories leased to employees and factories leased to suppliers. The dormitories leased to employees are not classified as investment properties; factories leased to suppliers are not considered as investment properties since they cannot be sold separately and comprise only an insignificant portion of the plant.

As of June 30, 2012, the amounts reclassified from assets leased to others and idle assets to property, plant and equipment were NT$35,609 thousand.

 

  d) Employee benefits

The Company had previously applied an actuarial valuation on its defined benefit obligation and recognized the related pension cost and retirement benefit obligation in conformity with R.O.C. GAAP. Under Taiwan-IFRSs, the Company should carry out actuarial valuation on defined benefit obligation in accordance with IAS No. 19, “Employee Benefits.”

In addition, under R.O.C. GAAP, it is not allowed to recognize actuarial gains and losses from defined benefit plans directly to equity; instead, actuarial gains and losses should be accounted for under the corridor approach which resulted in the deferral of gains and losses. When using the corridor approach, actuarial gains and losses should be amortized over the expected average remaining working lives of the participating employees.

Under IAS No. 19, “Employee Benefits,” the Company elects to recognize actuarial gains and losses immediately in full in the period in which they occur, as other comprehensive income. The subsequent reclassification to earnings is not permitted.

At the transition date, the Company performed the actuarial valuation under IAS No. 19, “Employee Benefits,” and recognized the valuation difference directly to retained earnings under the requirement of IFRS 1. For the year ended December 31, 2012, total actuarial gains and losses were also recognized to other comprehensive income in accordance with actuarial valuation carried out in 2012.

In addition, under R.O.C. GAAP, the minimum pension liability should be recognized in the balance sheet. If the accrued pension cost is less than the minimum amount, the difference should be recognized as an additional liability. Under Taiwan-IFRSs, there is no aforementioned requirement of minimum pension liability.

As of June 30, 2012, accrued pension cost of the Company was adjusted for an increase of NT$2,296,320 thousand; deferred income tax assets were adjusted for an increase of NT$227,520 thousand; noncontrolling interests were adjusted for a decrease of NT$13,073 thousand. For the six months ended June 30, 2012, pension cost and income tax expense of the Company were adjusted for a decrease of NT$36,196 thousand and an increase of NT$3,491 thousand, respectively. For the three months ended June 30, 2012, pension cost and income tax expense of the Company were adjusted for a decrease of NT$18,098 thousand and an increase of NT$1,745 thousand, respectively.

 

- 63 -


  e) Investments accounted for using the equity method

The Company has evaluated significant differences between current accounting policies and Taiwan-IFRSs for the Company’s associates and joint ventures accounted for using the equity method. The significant difference is mainly due to the adjustment to employee benefits.

In addition, if the investing company subscribes to additional investee’s shares disproportionate to its existing ownership percentage that results in a decrease in the investing company’s ownership percentage in the investee, the resulting carrying amount of the investment in the investee differs from the amount of its share in the investee’s equity. Under R.O.C. GAAP, the investing company records such a difference as an adjustment to investments with the corresponding amount charged or credited to capital surplus. Under Taiwan-IFRSs, such a difference is still adjusted to investments and capital surplus; however, if the investing company’s ownership interest in an associate is reduced, the proportionate amount of the gains or losses previously recognized in other comprehensive income in relation to that associate shall be reclassified to profit or loss on the same basis as would be required if the investee had directly disposed of the related assets or liabilities.

As of June 30, 2012, as a result of the differences mentioned above, investment accounted for using the equity method was adjusted for a decrease of NT$51,594 thousand; foreign currency translation reserve was adjusted for an increase of NT$11 thousand; capital surplus was adjusted for a decrease of NT$428,673 thousand. In addition, share of profits of associates and joint venture was adjusted for an increase of NT$15,779 thousand and NT$14,527 thousand, respectively, for the six months and three months ended June 30, 2012, respectively.

 

  f) The reclassification of line items in the consolidated statement of comprehensive income

In accordance with the Guidelines Governing the Preparation of Financial Reports by Securities Issuers before its amendment due to the adoption of Taiwan-IFRSs, income from operations in the consolidated income statement only includes net revenue, cost of revenue and operating expenses. Under Taiwan-IFRSs, based on the nature of operating transactions, technical service income is reclassified under net revenue; rental revenue, depreciation of rental assets, net gain or loss on disposal of property, plant and equipment and other assets, and impairment loss on idle assets, are reclassified under other operating income and expenses, which are included in income from operations.

Under Taiwan-IFRSs, based on the nature of operating transactions, for the six months ended June 30, 2012, the Company reclassified technical service income of NT$232,659 thousand to net revenue; rental revenue of NT$503 thousand, other income of NT$642 thousand, net loss on disposal of property, plant and equipment and other assets of NT$4,126 thousand, depreciation of rental assets of NT$3,789 thousand and impairment loss on idle assets of NT$422,323 thousand to other operating income and expenses. In addition, interest income of NT$941,732 thousand and dividend income of NT$69,945 thousand were reclassified to other income; settlement income of NT$448,275 thousand, net gain on disposal of financial assets of NT$365,731 thousand, others of NT$322,229 thousand (under non-operating income and gains), net valuation loss on financial instruments of NT$189,737 thousand, impairment of financial assets of NT$2,748,456 thousand as well as others of NT$145,481 thousand (under non-operating expenses and losses) were reclassified to other gains and losses for the six months ended June 30, 2012. For the three months ended June 30, 2012, the Company also reclassified technical service income of NT$125,503 thousand to net revenue, rental revenue of NT$249 thousand, other income of NT$642 thousand, net loss on disposal of property, plant and equipment and other assets of NT$2,631 thousand, depreciation of rental assets of NT$1,433 thousand and gain on reversal of impairment loss on idle assets of NT$19,989 thousand to other operating income and expenses. In addition, interest income of NT$440,496 thousand and dividend income of NT$69,945 thousand were also reclassified to other income; settlement income of NT$448,275 thousand, net gain on disposal of financial assets of NT$292,140 thousand, others of NT$255,191 thousand (under non-operating income and gains), net valuation gain on financial instruments of NT$55,268 thousand, impairment of financial assets of NT$2,744,066 thousand as well as others of NT$74,496 thousand (under non-operating expenses and losses) were reclassified to other gains and losses for the three months ended June 30, 2012.

 

- 64 -


44. ADDITIONAL DISCLOSURES

Following are the additional disclosures required by the SFB for TSMC and its investees in which all significant intercompany balances and transactions are eliminated upon consolidation:

 

  a. Financings provided: Please see Table 1 attached;

 

  b. Endorsement/guarantee provided: Please see Table 2 attached;

 

  c. Marketable securities held: Please see Table 3 attached;

 

  d. Marketable securities acquired and disposed of at costs or prices of at least NT$100 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$100 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$100 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 instruments transaction: Please see Notes 7 and 10;

 

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

 

  k. Names, locations, and related information of investees over which TSMC exercises significant influence: Please see Table 9 attached;

 

  l. Information on investment in Mainland China

 

  1) The name of the investee in Mainland China, the main businesses and products, its issued capital, method of investment, information on inflow or outflow of capital, percentage of ownership, equity in the net gain or net loss, 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.

 

- 65 -


TABLE 1

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

FINANCINGS PROVIDED

FOR THE SIX MONTHS ENDED JUNE 30, 2013

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

 

                    Maximum
Balance for the
Period (US$ in
Thousands)
(Note 4)
                                                                   Financing
Company’s
Total Financing
Amount Limits
(Note 3)
 
                      Ending Balance
(US$ in
Thousands)
(Note 4)
    Amount
Actually Drawn
(US$ in
Thousands)
                                                 Financing
Limits for Each
Borrowing
Company
   
              

Financial

Statement

Account

               

Nature

for

Financing

          Reason
for
Financing
   Allowance
for Bad
Debt
                    
     Financing
Company
   Counter-
party
            Interest
Rate
        Transaction
Amounts
           Collateral       
No.                                  Item      Value       
1    TSMC Partners    TSMC China   

Other receivables from related parties

   $

(US$

3,895,840

130,000

  

  $ —        $ —          —        

The need for short-term financing

   $ —         Purchase equipment    $ —           —         $ —         $

 

41,053,732

(Note 1

  

  $ 41,053,732   
2    TSMC Development    TSMC Solar   

Other receivables from related parties

    

(US$

2,397,440

80,000

  

   

(US$

2,397,440

80,000

  

   

(US$

1,723,160

57,500

  

    0.20%-0.23%      

The need for short-term financing

     —         Operating capital      —           —           —          

 

5,846,207

(Notes 2 and 5

  

   

 

14,615,517

(Note 5

  

      TSMC SSL   

Other receivables from related parties

    

(US$

2,697,120

90,000

  

   

(US$

2,697,120

90,000

  

    —          —        

The need for short-term financing

     —         Operating capital      —           —           —          

 

5,846,207

(Notes 2 and 5

  

   

 

14,615,517

(Note 5

  

 

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. While offshore subsidiaries whose voting shares are 100% owned, directly or indirectly, by TSMC are not subject to the above restrictions. However, the respective lending limit for such borrower shall not exceed the net worth of TSMC Partners.
Note 2: 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 Development. In addition, the total amount lendable to any one borrower shall be no more than thirty percent (30%) of the borrower’s net worth. While subsidiaries whose voting shares are 90% and up owned, directly or indirectly, by TSMC are not subject to the above restrictions. However, the aggregate amounts lendable to all such borrowers and the total amount lendable to one such borrower shall be no more than forty percent (40%) of the net worth of TSMC Development.
Note 3: The total amount available for lending purpose shall not exceed the net worth of TSMC Partners and TSMC Development, respectively.
Note 4: The maximum balance for the period and ending balance represents the amounts approved by the Board of Directors.
Note 5: The amount was determined based on the reviewed financial statements in accordance with local accounting principles.

 

- 66 -


TABLE 2

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

ENDORSEMENTS/GUARANTEES PROVIDED

FOR THE SIX MONTHS ENDED JUNE 30, 2013

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

No.

   Endorsement/
Guarantee
Provider
  

 

Guaranteed Party

   Limits on
Endorsement/
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
Endorsement/
Guarantee
Collateralized
by Properties
     Ratio of Accumulated
Endorsement/
Guarantee to Net
Equity per Latest
Financial Statements
    Maximum
Endorsement/
Guarantee Amount
Allowable

(Note 2)
 
      Name    Nature of
Relationship
                

0

   TSMC    TSMC Global    Subsidiary    $ 186,477,939       $

(US$

44,952,000

 1,500,000

  

  $

(US$

44,952,000

 1,500,000

  

  $

(US$

44,952,000

 1,500,000

  

  $ —           6.0   $ 186,477,939   

 

Note 1: The ceiling for guaranteed amount to a company shall not exceed ten percent (10%) of the net worth of TSMC. In addition, the guaranteed amount shall not exceed net worth of the guaranteed company. 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 ceiling for total guaranteed amount shall not exceed twenty-five percent (25%) of the net worth of TSMC.
Note 3: The maximum balance for the period and ending balance represent the amounts approved by the Board of Directors.

 

- 67 -


TABLE 3

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

MARKETABLE SECURITIES HELD

JUNE 30, 2013

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

 

Held
Company
Name

  

Marketable Securities Type and Name

  

Relationship with the
Company

  

Financial
Statement
Account

   June 30, 2013      Note  
            Shares/Units
(In Thousands)
     Carrying Value
(Foreign
Currencies in
Thousands)
     Percentage
of
Ownership
(%)
     Market Value
or Net Asset
Value

(Foreign
Currencies
in Thousands)
    

TSMC

   Corporate bond                     
   Nan Ya Plastics Corporation       Held-to-maturity financial assets      —         $ 549,952         N/A       $ 553,742      
   China Steel Corporation            —           150,624         N/A         151,035      
  

Stock

                    
   Semiconductor Manufacturing International Corporation       Available-for-sale financial assets      275,957         270,921         1         607,161         Notes 1 and 2   
   TSMC Global    Subsidiary    Investments accounted for using equity method      1         59,567,335         100         59,567,335      
   TSMC Partners    Subsidiary         988,268         41,053,305         100         41,053,732      
   VIS    Investee accounted for using equity method         628,223         9,619,243         39         21,359,599      
   SSMC    Investee accounted for using equity method         314         6,441,982         39         6,227,998      
   TSMC Solar    Subsidiary         1,118,000         5,239,236         99         5,211,540      
   TSMC North America    Subsidiary         11,000         3,327,899         100         3,327,899      
   TSMC SSL    Subsidiary         554,674         2,934,989         92         2,934,989      
   Xintec    Investee accounted for using equity method         94,950         1,816,848         40         1,525,403      
   GUC    Investee accounted for using equity method         46,688         1,113,804         35         4,533,391      
   TSMC Europe    Subsidiary         —           258,876         100         258,876      
   TSMC Japan    Subsidiary         6         131,253         100         131,253      
   TSMC Korea    Subsidiary         80         26,896         100         26,896      
   United Industrial Gases Co., Ltd.       Financial assets carried at cost      21,230         193,584         10         381,791      
   Shin-Etsu Handotai Taiwan Co., Ltd.            10,500         105,000         7         334,326      
   W.K. Technology Fund IV            4,000         39,280         2         31,367      
  

Fund

                    
   Horizon Ventures Fund       Financial assets carried at cost      —           89,916         12         89,916      
   Crimson Asia Capital            —           55,385         1         55,385      
  

Capital

                    
   TSMC China    Subsidiary    Investments accounted for using equity method      —           20,754,814         100         20,831,292      
   VTAF III    Subsidiary         —           1,033,180         50         1,010,962      
   VTAF II    Subsidiary         —           451,211         98         444,965      
   Emerging Alliance    Subsidiary         —           148,516         99         148,516      
   TSMC GN    Subsidiary         —           53,149         100         53,149      

TSMC Solar

   Stock                     
   Motech    Investee accounted for using equity method    Investments accounted for using equity method      87,480         2,714,439         20         3,311,110         Note 3   
   TSMC Solar Europe    Subsidiary         —           118,459         100         118,459      
   TSMC Solar NA    Subsidiary         1         24,492         100         24,492      
  

Capital

                    
   VTAF III    Investee accounted for using equity method    Investments accounted for using equity method      —           1,364,661         49         1,364,661      

 

(Continued)

 

- 68 -


Held Company Name

  

Marketable Securities
Type and Name

  

Relationship with the
Company

  

Financial Statement
Account

   June 30, 2013      Note  
            Shares/Units
(In Thousands)
     Carrying Value
(Foreign Currencies
in Thousands)
     Percentage of
Ownership (%)
     Market Value
or Net

Asset Value
(Foreign
Currencies in
Thousands)
    

TSMC SSL

   Stock                     
   TSMC Lighting NA    Subsidiary   

Investments accounted for using equity method

     1       $ 2,919         100       $ 2,919      

TSMC GN

   Stock                     
   TSMC Solar   

Investee accounted for using equity method

  

Investments accounted for using equity method

     4,436         20,618         —           20,618      
   TSMC SSL   

Investee accounted for using equity method

        4,873         25,751         1         25,751      

TSMC Partners

   Stock                     
   TSMC Development    Subsidiary   

Investments accounted for using equity method

     —         US$  633,828         100       US$ 633,828      
   VisEra Holding Company   

Investee accounted for using equity method

        43,000       US$ 110,335         49       US$ 110,335      
   TSMC Technology    Subsidiary         —         US$ 12,367         100       US$ 12,367      
   ISDF II    Subsidiary         14,153       US$ 11,193         97       US$ 11,193      
   ISDF    Subsidiary         787       US$ 8,120         97       US$ 8,120      
   TSMC Canada    Subsidiary         2,300       US$ 4,627         100       US$ 4,627      
   Mcube Inc.   

Investee accounted for using equity method

        6,333         —           25         —        
  

Fund

                    
  

Shanghai Walden Venture Capital Enterprise

   —      Financial assets carried at cost      —         US$ 5,000         6       US$ 5,000      

TSMC North America

   Stock                     
   Spansion Inc.    —     

Available-for-sale financial assets

     272       US$ 5,179         —         US$ 3,411         Note 1   

TSMC Development

   Stock                     
   WaferTech    Subsidiary   

Investments accounted for using equity method

     293,637       US$ 241,076         100       US$  251,434      

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       US$ 28         —         US$ 28         Note 4   
   QST Holdings, LLC    —           —         US$ 141         4       US$ 141      
  

Capital

                    
   VTA Holdings    Subsidiary   

Investments accounted for using equity method

     —           —           7         —        

VTAF II

   Common stock                     
   Sentelic    —      Financial assets carried at cost      1,806       US$ 2,607         9       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      

 

(Continued)

 

- 69 -


Held
Company
Name

  

Marketable Securities
Type and Name

  

Relationship with the
Company

  

Financial Statement
Account

   June 30, 2013      Note  
            Shares/Units
(In Thousands)
     Carrying Value
(Foreign
Currencies
in Thousands)
     Percentage of
Ownership (%)
     Market Value
or Net

Asset Value
(Foreign
Currencies

in Thousands)
    

VTAF II

   Preferred stock                     
   5V Technologies, Inc.    —      Financial assets carried at cost      2,890       US$ 2,168         4       US$ 2,168      
   Aquantia    —           4,556       US$ 4,316         2       US$ 4,316      
   Cresta Technology Corporation    —           92       US$ 28         —         US$ 28      
   Impinj, Inc.    —           711       US$ 1,100         —         US$ 1,100      
   Next IO, Inc.    —           179       US$ 149         1       US$ 149         Note 5   
   QST Holdings, LLC    —           —         US$ 588         13       US$ 588      
  

Capital

                    
   VTA Holdings    Subsidiary   

Investments accounted for using equity method

     —           —           31         —        

VTAF III

   Common stock                     
  

Mutual-Pak Technology Co., Ltd.

   Subsidiary   

Investments accounted for using equity method

     15,643       US$ 1,451         58       US$ 1,004      
  

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$ 4,842         4       US$ 4,842      
   Powervation, Ltd.    —           509       US$ 7,938         16       US$ 7,938      
   Stion Corp.    —           8,152       US$  45,467         15       US$  45,467      
   Tilera, Inc.    —           3,890       US$ 3,025         2       US$ 3,025      
   Validity Sensors, Inc.    —           11,192       US$ 4,197         4       US$ 4,197      
  

Capital

                    
   Growth Fund    Subsidiary   

Investments accounted for using equity method

     —         US$ 362         100       US$ 362      
   VTA Holdings    Subsidiary         —           —           62         —        

ISDF

   Common stock                     
   Integrated Memory Logic, Inc.    —     

Available-for-sale financial assets

     868       US$ 184         1       US$ 2,104         Note 1   
   Memsic, Inc.    —           1,286       US$ 1,414         5       US$ 5,271         Note 1   
  

Preferred stock

                    
   Sonics, Inc.    —      Financial assets carried at cost      230       US$ 497         2       US$ 497      

ISDF II

   Common stock                     
   Memsic, Inc.    —     

Available-for-sale financial assets

     1,072       US$ 1,461         5       US$ 4,395         Note 1   
   Alchip Technologies Limited    —      Financial assets carried at cost      7,520       US$ 3,664         14       US$ 3,664      
   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)

 

- 70 -


Held

Company

Name

  

Marketable Securities
Type and Name

  

Relationship with the
Company

  

Financial Statement
Account

   June 30, 2013      Note  
            Shares/Units
(In Thousands)
     Carrying Value
(Foreign
Currencies in
Thousands)
     Percentage of
Ownership (%)
     Market Value or
Net

Asset Value
(Foreign
Currencies
in Thousands)
    

TSMC Solar Europe

   Stock                     
   TSMC Solar Europe GmbH    Subsidiary   

Investments accounted for using equity method

     —           EUR 2,945         100         EUR 2,945      

TSMC Global

   Stock                     
   ASML    —     

Available-for-sale financial assets

     20,993       US$  1,085,474         5         US$ 1,654,472         Notes 1 and 6   
  

Money market fund

                    
   Ssga Cash Mgmt Global Offshore    —     

Available-for-sale financial assets

     281       US$ 281         N/A       US$ 281         Note 1   

 

Note 1:  The carrying value is original carrying amount without fair value adjustment.
Note 2:  The carrying value includes the impairment loss in the amount of NT$412,901 thousand.
Note 3:  The carrying value includes the impairment loss in the amount of NT$1,186,674 thousand.
Note 4:  The carrying value includes the impairment loss in the amount of US$472 thousand.
Note 5:  The carrying value includes the impairment loss in the amount of US$1,070 thousand.
Note 6:  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.

(Concluded)

 

- 71 -


TABLE 4

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

MARKETABLE SECURITIES ACQUIRED AND DISPOSED OF AT COSTS OR PRICES OF AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL

FOR THE SIX MONTHS ENDED JUNE 30, 2013

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

 

Company

Name

 

Marketable
Securities

Type and
Name

 

Financial

Statement
Account

  Counter-
party
    Nature of
Relationship
    Beginning Balance     Acquisition     Disposal     Ending Balance (Note)  
          Shares/Units
(In Thousands)
    Amount
(Foreign
Currencies in
Thousands)
    Shares/Units
(In Thousands)
    Amount
(Foreign
Currencies in
Thousands)
    Shares/Units
(In Thousands)
    Amount
(Foreign
Currencies in
Thousands)
    Carrying Value
(Foreign
Currencies in
Thousands)
    Gain/Loss on
Disposal
(Foreign
Currencies in
Thousands)
    Shares/Units
(In Thousands)
    Amount
(Foreign
Currencies in
Thousands)
 

TSMC

 

Stock

                         
 

Semiconductor Manufacturing International Corporation

 

Available-for-sale financial assets

    —          —          1,277,958      $ 1,845,052        —        $ —          1,002,001      $ 1,830,424      $ 983,714      $ 846,710        275,957      $ 607,161   
 

TSMC SSL

 

Investments accounted

for using equity method

    —          Subsidiary        430,400        2,389,541        124,274        1,242,744        —          —          —          —          554,674        2,934,989   

TSMC Global

 

Corporate bond

                         
 

Aust + Nz Banking Group

 

Held-to-maturity financial assets

    —          —          20,000      US$ 19,999        —          —          20,000      US$ 20,000      US$ 20,000        —          —          —     
 

Commonwealth Bank of Australia

 

    —          —          25,000      US$ 25,000        —          —          25,000      US$ 25,000      US$ 25,000        —          —          —     
 

Commonwealth Bank of Australia

 

    —          —          25,000      US$ 25,000        —          —          25,000      US$ 25,000      US$ 25,000        —          —          —     
 

Deutsche Bank AG London

 

    —          —          20,000      US$ 19,999        —          —          20,000      US$ 20,000      US$ 20,000        —          —          —     
 

JP Morgan Chase + Co.

 

    —          —          35,000      US$ 35,006        —          —          35,000      US$ 35,000      US$ 35,000        —          —          —     
 

Westpac Banking Corp.

 

    —          —          25,000      US$ 25,000        —          —          25,000      US$ 25,000      US$ 25,000        —          —          —     

 

Note: The ending balance includes the amortization of premium/discount on bonds investments, unrealized valuation gains/ losses on financial assets, share of profits/losses of investees and other related adjustment to equity.

 

- 72 -


TABLE 5

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

ACQUISITION OF INDIVIDUAL REAL ESTATE PROPERTIES AT COSTS OF AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL

FOR THE SIX MONTHS ENDED JUNE 30, 2013

(Amounts in Thousands of New Taiwan Dollars)

 

Company

Name

 

Types of

Property

 

Transaction Date

  Transaction
Amount
   

Payment Term

 

Counter-party

  Nature of
Relationships
    Prior Transaction of Related Counter-party  

Price

Reference

 

Purpose of

Acquisition

 

Other

Terms

              Owner   Relationships   Transfer Date   Amount      

TSMC

  Land  

January 3, 2013

  $ 2,248,400     

By the contract

 

Miaoli County Government

    —        N/A   N/A   N/A   N/A   Public bidding  

Manufacturing purpose

  None
 

Fab

 

January 28, 2013 to June 27, 2013

    2,049,892     

By the construction progress

 

Da Cin Construction Co., Ltd.

    —        N/A   N/A   N/A   N/A   Public bidding  

Manufacturing purpose

  None
 

Fab

 

January 28, 2013 to June 26, 2013

    1,304,097     

By the construction progress

 

Fu Tsu Construction Co., Ltd.

    —        N/A   N/A   N/A   N/A   Public bidding  

Manufacturing purpose

  None
 

Fab

 

January 28, 2013 to June 26, 2013

    793,465     

By the construction progress

 

China Steel Structure Co., Ltd.

    —        N/A   N/A   N/A   N/A   Public bidding  

Manufacturing purpose

  None
 

Fab

 

January 28, 2013 to June 26, 2013

    320,244     

By the construction progress

 

I Domain Industrial Co., Ltd.

    —        N/A   N/A   N/A   N/A   Public bidding  

Manufacturing purpose

  None
 

Fab

 

January 28, 2013 to June 26, 2013

    294,223     

By the construction progress

 

Tasa Construction Corporation

    —        N/A   N/A   N/A   N/A   Public bidding  

Manufacturing purpose

  None
 

Fab

 

January 28, 2013 to June 26, 2013

    119,049     

By the construction progress

 

Mandartech Interiors Inc.

    —        N/A   N/A   N/A   N/A   Public bidding  

Manufacturing purpose

  None
 

Fab

 

February 23, 2013 to May 28, 2013

    132,116     

By the construction progress

 

Mega Facade Corporation

    —        N/A   N/A   N/A   N/A   Public bidding  

Manufacturing purpose

  None

 

- 73 -


TABLE 6

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

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

FOR THE SIX MONTHS ENDED JUNE 30, 2013

(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   $ 196,216,951        68     

Net 30 days after invoice date

    —          —        $ 56,663,448        71     
 

GUC

 

Investee accounted for using equity method

  Sales     964,328        1     

Net 30 days after monthly closing

    —          —          338,344        —       
 

VIS

 

Investee accounted for using equity method

  Sales     114,757        —       

Net 30 days after monthly closing

    —          —          —          —       
 

TSMC China

 

Subsidiary

  Purchases     8,089,257        26     

Net 30 days after monthly closing

    —          —          (1,393,493     8     
 

WaferTech

 

Indirect subsidiary

  Purchases     4,368,478        14     

Net 30 days after monthly closing

    —          —          (695,593     4     
 

VIS

 

Investee accounted for using equity method

  Purchases     3,037,262        10     

Net 30 days after monthly closing

    —          —          (482,748     3     
 

SSMC

 

Investee accounted for using equity method

  Purchases     1,232,556        4     

Net 30 days after monthly closing

    —          —          (283,473     2     

TSMC North America

 

GUC

 

Investee accounted for using equity method by TSMC

  Sales    

(US$

395,794

13,354

  

    —       

Net 30 days after invoice date

    —          —         

(US$

204,092

6,810

  

    —       

 

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.

 

- 74 -


TABLE 7

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

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

JUNE 30, 2013

(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

  $ 56,854,998      45   $ 19,596,608        —        $ 23,484,012      $ —     
 

SSMC

 

Investee accounted for using equity method

    1,450,878      (Note 2)     —          —          —          —     
 

VIS

 

Investee accounted for using equity method

    748,013      (Note 2)     —          —          —          —     
 

GUC

 

Investee accounted for using equity method

    485,719      55     —          —          —          —     

TSMC Development

 

TSMC Solar

 

The same parent company

   

(US$

1,725,670

57,584

  

  (Note 2)     —          —          —          —     

TSMC China

 

TSMC

 

Parent company

   

 

1,393,493

(RMB 285,656

  

  31     —          —          —          —     

TSMC Technology

 

TSMC

 

Parent company

   

(US$

142,889

4,768

  

  63     —          —          —          —     

WaferTech

 

TSMC

 

Parent company

   

(US$

695,593

23,211

  

  27     —          —          —          —     

TSMC North America

 

GUC

 

Investee accounted for using equity method by TSMC

   

(US$

204,092

6,810

  

  55    

(US$

16,091

537

  

    —         

(US$

168,727

5,630

  

    —     

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.

 

- 75 -


TABLE 8

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

INTERCOMPANY RELATIONSHIPS AND SIGNIFICANT INTERCOMPANY TRANSACTIONS

FOR THE SIX MONTHS ENDED JUNE 30, 2013

(Amounts in Thousands of New Taiwan Dollars)

 

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 the sale of goods

   $ 196,216,951         —           68
           

Receivables from related parties

     56,663,448         —           5
           

Other receivables from related parties

     191,550         —           —     
           

Payables to related parties

     22,497         —           —     
     

TSMC China

     1      

Net revenue from the sale of goods

     3,146         —           —     
           

Purchases

     8,089,257         —           3
           

Marketing expenses—commission

     42,902         —           —     
           

Disposal of property, plant and equipment

     31,045         —           —     
           

Loss on disposal of property, plant and equipment

     3,822         —           —     
           

Purchases of property, plant and equipment

     74,991         —           —     
           

Other receivables from related parties

     2,120         —           —     
           

Payables to related parties

     1,393,493         —           —     
           

Other noncurrent liabilities

     38,201         —           —     
     

TSMC Japan

     1      

Marketing expenses—commission

     121,378         —           —     
           

Payables to related parties

     54,826         —           —     
     

TSMC Europe

     1      

Marketing expenses—commission

     183,641         —           —     
           

Research and development expenses

     29,778         —           —     
           

Payables to related parties

     44,579         —           —     
     

TSMC Korea

     1      

Marketing expenses—commission

     11,779         —           —     
           

Payables to related parties

     2,981         —           —     
     

TSMC Technology

     1      

Research and development expenses

     372,642         —           —     
           

Payables to related parties

     142,889         —           —     
     

WaferTech

     1      

Net revenue from the sale of goods

     2,990         —           —     
           

Purchases

     4,368,478         —           2
           

Other receivables from related parties

     2,014         —           —     
           

Payables to related parties

     695,593         —           —     
     

TSMC Canada

     1      

Research and development expenses

     106,550         —           —     
           

Payables to related parties

     19,004         —           —     
     

Xintec (Note 3)

     1      

Manufacturing expenses

     106,290         —           —     
           

Research and development expenses

     1,418         —           —     
           

Disposal of property, plant and equipment

     26,977         —           —     
     

TSMC SSL

     1      

Other gains and losses

     4,500         —           —     
           

Other receivables from related parties

     2,407         —           —     
     

TSMC Solar

     1      

Manufacturing expenses

     1,129         —           —     
           

General and administrative expenses

     2,257         —           —     
           

Purchases of property, plant and equipment

     5,660         —           —     
           

Other gains and losses

     5,268         —           —     
           

Other receivables from related parties

     2,721         —           —     

 

(Continued)

 

- 76 -


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
 

1

  

TSMC Partners

  

TSMC China

   3   

Other income

   $ 2,784         —           —     

2

  

TSMC Development

  

WaferTech

   1   

Other receivables from related parties

     59,991         —           —     

3

  

TSMC North America

  

TSMC Technology

   3   

Other receivables from related parties

     5,651         —           —     

4

  

TSMC Solar

  

TSMC Solar Europe GmbH

   1   

Net revenue from the sale of goods

     26,934         —           —     
           

Receivables from related parties

     3,233         —           —     
     

TSMC Development

   3   

Finance costs

     1,735         —           —     
           

Other payables to related parties

     1,725,670         —           —     

5

  

TSMC China

  

Xintec (Note 3)

   3   

Disposal of property, plant and equipment

     48,193         —           —     

 

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.
Note 3: TSMC has no power to govern the financial and operating policies of Xintec starting June 2013 for 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.

(Concluded)

 

- 77 -


TABLE 9

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

NAMES, LOCATIONS, AND RELATED INFORMATION OF INVESTEES OVER WHICH THE COMPANY EXERCISES SIGNIFICANT INFLUENCE

JUNE 30, 2013

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

 

Investor
Company

 

Investee Company

 

Location

 

Main Businesses and Products

  Original Investment Amount     Balance as of June 30, 2013     Net Income
(Losses) of
the Investee
(Foreign
Currencies in
Thousands)
    Share of
Profits/Losses
of Investee
(Note 1)
(Foreign
Currencies in
Thousands)
   

Note

        June 30,
2013
(Foreign
Currencies in
Thousands)
    December 31,
2012
(Foreign
Currencies in
Thousands)
    Shares (In
Thousands)
    Percentage of
Ownership
    Carrying
Value
(Foreign
Currencies in
Thousands)
       

TSMC

 

TSMC Global

 

Tortola, British Virgin Islands

 

Investment activities

  $ 42,327,245      $ 42,327,245        1        100      $ 59,567,335      $ 99,297      $ 99,297     

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        41,053,305        1,269,416        1,269,469     

Subsidiary

 

TSMC China

 

Shanghai, China

 

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

    18,939,667        18,939,667        —          100        20,754,814        2,188,298        2,169,449     

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        9,619,243        2,015,438        803,177     

Investee accounted for using equity method

 

SSMC

 

Singapore

 

Fabrication and supply of integrated circuits

    5,120,028        5,120,028        314        39        6,441,982        2,340,338        907,817     

Investee accounted for using equity method

 

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        5,239,236        (851,279     (834,776  

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        3,327,899        26,814        26,814     

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        4,304,000        554,674        92        2,934,989        (815,067     (767,911  

Subsidiary

 

Xintec

 

Taoyuan, Taiwan

 

Wafer level chip size packaging service

    1,357,890        1,357,890        94,950        40        1,816,848        (22,127     (8,891  

Investee accounted for using equity method

 

GUC

 

Hsin-Chu, Taiwan

 

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

    386,568        386,568        46,688        35        1,113,804        109,595        38,032     

Investee accounted for using equity method

 

VTAF III

 

Cayman Islands

 

Investing in new start-up technology companies

    1,882,556        1,896,914        —          50        1,033,180        8,656        11,390     

Subsidiary

 

VTAF II

 

Cayman Islands

 

Investing in new start-up technology companies

    590,704        704,447        —          98        451,211        9,327        9,141     

Subsidiary

 

TSMC Europe

 

Amsterdam, the Netherlands

 

Marketing and engineering supporting activities

    15,749        15,749        —          100        258,876        18,892        18,892     

Subsidiary

 

Emerging Alliance

 

Cayman Islands

 

Investing in new start-up technology companies

    841,757        852,258        —          99        148,516        (8,035     (7,995  

Subsidiary

 

TSMC Japan

 

Yokohama, Japan

 

Marketing activities

    83,760        83,760        6        100        131,253        2,476        2,476     

Subsidiary

 

TSMC GN

 

Taipei, Taiwan

 

Investment activities

    100,000        100,000        —          100        53,149        (11,322     (11,322  

Subsidiary

 

TSMC Korea

 

Seoul, Korea

 

Customer service and technical supporting activities

    13,656        13,656        80        100        26,896        777        777     

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        2,714,439        (537,724     Note 2     

Investee accounted for using equity method

 

VTAF III

 

Cayman Islands

 

Investing in new start-up technology companies

    1,805,197        1,801,918        —          49        1,364,661        8,656        Note 2     

Investee accounted for using equity method

 

TSMC Solar Europe

 

Amsterdam, the Netherlands

 

Investing in solar related business

    504,107        504,107        —          100        118,459        (59,309     Note 2     

Subsidiary

 

TSMC Solar NA

 

Delaware, U.S.A.

 

Selling and marketing of solar related products

    205,772        205,772        1        100        24,492        (20,726     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        2,919        (36     Note 2     

Subsidiary

 

(Continued)

 

- 78 -


Investor

Company

 

Investee Company

 

Location

 

Main Businesses and Products

  Original Investment Amount     Balance as of June 30, 2013     Net Income
(Losses) of
the Investee
(Foreign
Currencies in
Thousands)
    Share of
Profits/Losses
of Investee
(Note 1)
(Foreign
Currencies in
Thousands)
   

Note

        June 30,
2013
(Foreign
Currencies in
Thousands)
    December 31,
2012
(Foreign
Currencies in
Thousands)
    Shares (In
Thousands)
    Percentage of
Ownership
    Carrying
Value
(Foreign
Currencies in
Thousands)
       

TSMC Partners

 

TSMC Development

 

Delaware, U.S.A.

 

Investment activities

  $

(US$

0.03

0.001

  

  $

(US$

0.03

0.001

  

    —          100      $

(US$

18,994,562

633,828

  

  $

(US$

873,196

29,461

  

    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$

1,288,624

43,000

  

   

(US$

1,288,624

43,000

  

    43,000        49       

(US$

3,306,524

110,335

  

   

(US$

534,331

18,028

  

    Note 2     

Investee accounted for using equity method

 

TSMC Technology

 

Delaware, U.S.A.

 

Engineering support activities

   

(US$

0.03

0.001

  

   

(US$

0.03

0.001

  

    —          100       

(US$

370,619

12,367

  

   

(US$

19,143

646

  

    Note 2     

Subsidiary

 

ISDF II

 

Cayman Islands

 

Investing in new start-up technology companies

   

(US$

424,137

14,153

  

   

(US$

424,137

14,153

  

    14,153        97       

(US$

335,435

11,193

  

   

(US$

(2,577

(87


) ) 

    Note 2     

Subsidiary

 

ISDF

 

Cayman Islands

 

Investing in new start-up technology companies

   

(US$

23,585

787

  

   

(US$

23,585

787

  

    787        97       

(US$

243,349

8,120

  

   

(US$

38,002

1,282

  

    Note 2     

Subsidiary

 

TSMC Canada

 

Ontario, Canada

 

Engineering support activities

   

(US$

68,926

2,300

  

   

(US$

68,926

2,300

  

    2,300        100       

(US$

138,653

4,627

  

   

(US$

8,072

272

  

    Note 2     

Subsidiary

 

Mcube Inc.

 

Delaware, U.S.A.

 

Research, development, and sale of micro-semiconductor device

   

(US$

53,942

1,800

  

   

(US$

53,942

1,800

  

    6,333        25        —         

(US$

(210,622

(7,106


)) 

    Note 2     

Investee accounted for using equity method

TSMC Development

 

WaferTech

 

Washington, U.S.A.

 

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

   

(US$

3,895,840

130,000

  

   

(US$

8,391,040

280,000

  

    293,637        100       

(US$

7,224,571

241,076

  

   

(US$

861,026

29,050

  

    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$

156,193

5,212

  

   

(US$

156,193

5,212

  

    15,643        58       

(US$

43,474

1,451

  

   

(US$

(7,137

(241


)) 

    Note 2     

Subsidiary

 

Growth Fund

 

Cayman Islands

 

Investing in new start-up technology companies

   

(US$

54,841

1,830

  

   

(US$

54,841

1,830

  

    —          100       

(US$

10,859

362

  

   

(US$

(183

(6


)) 

    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

484,592

12,400

  

   

(EUR

484,592

12,400

  

    —          100       

(EUR

115,077

2,945

  

   

(EUR

(59,635

(1,525


)) 

    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

    44,360        42,945        4,436        —          20,618        (851,279     Note 2     

Investee accounted for using equity method

 

TSMC SSL

 

Hsin-Chu, Taiwan

 

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

    48,725        34,266        4,873        1        25,751        (815,067     Note 2     

Investee accounted for using equity method

 

Note 1: The share of profits/losses of investee includes the effect of unrealized gross profit on sales to affiliates.
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.

(Concluded)

 

- 79 -


TABLE 10

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

INFORMATION ON INVESTMENT IN MAINLAND CHINA

FOR THE SIX MONTHS ENDED JUNE 30, 2013

(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, 2013
(US$ in
Thousands)
   

 

 

Investment
Flows

    Accumulated
Outflow of
Investment from
Taiwan as of
June 30, 2013
(US$ in
Thousands)
    Percentage of
Ownership
    Share of
Profits/Losses
    Carrying
Amount
as of
June 30, 2013
(US$ in
Thousands)
    Accumulated
Inward
Remittance of
Earnings as of
June 30, 2013
 
          Outflow     Inflow            

TSMC China

 

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

  $

(RMB

18,939,667

4,502,080

  

  (Note 1)   $

(US$

18,939,667

596,000

  

  $ —        $ —        $

(US$

18,939,667

596,000

  

    100   $

 

2,169,449

(Note 3

  

  $ 20,754,814      $ —     

Shanghai Walden Venture Capital Enterprise

 

Investing in new start-up technology companies

   

(US$

2,324,062

78,791

  

  (Note 2)    

(US$

147,485

5,000

  

    —          —         

(US$

147,485

5,000

  

    6     (Note 4    

(US$

149,840

5,000

  

    —     

 

Accumulated Investment in Mainland China

as of June 30, 2013

(US$ in Thousands)

  

Investment Amounts Authorized by

Investment Commission, MOEA

(US$ in Thousands)

  

Upper Limit on Investment

(US$ in Thousands)

$ 19,087,152

(US$ 601,000)

  

$19,087,152

(US$ 601,000)

  

$19,087,152

(US$ 601,000)

Note 1: TSMC directly invested US$596,000 thousand in TSMC China.

Note 2: TSMC indirectly invested in China company through third region, TSMC Partners.

Note 3: Amount was recognized based on the reviewed financial statements.

Note 4: TSMC Partners invested in financial assets carried at cost, share of profits/losses from which was not recognized.

 

- 80 -