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 November 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: November 15, 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

Nine months ended September 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 September 30, 2013, December 31, 2012, September 30, 2012 and January 1, 2012 and the related consolidated statements of comprehensive income for the three months ended September 30, 2013 and 2012 and for the nine months ended September 30, 2013 and 2012, as well as the consolidated statements of changes in equity and cash flows for the nine months ended September 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.

November 12, 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)

 

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

ASSETS

               

CURRENT ASSETS

               

Cash and cash equivalents (Note 6)

  $ 216,603,697        19      $ 143,410,588        15      $ 138,738,113        16      $ 143,472,277        18   

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

    188,970        —          39,554        —          58,690        —          15,360        —     

Available-for-sale financial assets (Note 8)

    672,179        —          2,410,635        —          2,067,730        —          3,308,770        —     

Held-to-maturity financial assets (Note 9)

    700,285        —          5,056,973        1        6,854,611        1        3,825,680        1   

Hedging derivative financial assets (Note 10)

    —          —          —          —          28,189        —          —          —     

Notes and accounts receivable, net (Note 11)

    78,844,389        7        57,777,586        6        64,386,937        7        45,830,288        6   

Receivables from related parties (Note 37)

    827,480        —          353,811        —          925,245        —          185,764        —     

Other receivables from related parties (Note 37)

    194,408        —          185,550        —          157,144        —          122,292        —     

Inventories (Notes 5 and 12)

    36,916,527        3        37,830,498        4        33,249,045        4        24,840,582        3   

Other current assets (Note 17)

    2,740,765        —          2,786,408        —          2,639,414        —          2,174,014        —     

Other financial assets (Note 38)

    522,137        —          473,833        —          469,979        —          617,142        —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total current assets

    338,210,837        29        250,325,436        26        249,575,097        28        224,392,169        28   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

NONCURRENT ASSETS

               

Available-for-sale financial assets (Note 8)

    61,145,097        5        38,751,245        4        —          —          —          —     

Held-to-maturity financial assets (Note 9)

    —          —          —          —          701,435        —          5,243,167        1   

Financial assets carried at cost (Note 13)

    2,124,507        —          3,605,077        —          3,981,251        —          4,315,005        1   

Investments accounted for using equity method (Notes 5 and 14)

    25,903,920        2        23,360,918        3        23,907,158        3        24,886,931        3   

Property, plant and equipment (Notes 5 and 15)

    727,716,024        62        617,562,188        64        580,114,062        66        490,422,153        63   

Intangible assets (Notes 5 and 16)

    11,393,280        1        10,959,569        1        10,888,854        1        10,861,563        1   

Deferred income tax assets (Notes 5 and 31)

    7,165,944        1        13,128,219        2        13,058,484        2        13,604,218        2   

Refundable deposits (Note 37)

    2,464,658        —          2,426,712        —          2,331,966        —          4,518,863        1   

Other noncurrent assets (Note 17)

    1,415,948        —          1,235,144        —          1,213,129        —          1,306,746        —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total noncurrent assets

    839,329,378        71        711,029,072        74        636,196,339        72        555,158,646        72   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

TOTAL

  $ 1,177,540,215        100      $ 961,354,508        100      $ 885,771,436        100      $ 779,550,815        100   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

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

LIABILITIES AND EQUITY

               

CURRENT LIABILITIES

  

           

Short-term loans (Note 18)

  $ 18,053,096        2      $ 34,714,929        4      $ 29,749,650        3      $ 25,926,528        3   

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

    18,876        —          15,625        —          20,013        —          13,742        —     

Hedging derivative financial liabilities (Note 10)

    —          —          —          —          —          —          232        —     

Accounts payable

    13,478,598        1        14,490,429        2        13,773,108        2        10,530,487        1   

Payables to related parties (Note 37)

    1,594,104        —          748,613        —          783,253        —          1,328,521        —     

Salary and bonus payable

    7,668,518        1        7,535,296        1        6,994,285        1        6,148,499        1   

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

    9,946,700        1        11,186,591        1        8,654,015        1        9,081,293        1   

Payables to contractors and equipment suppliers

    58,381,100        5        44,831,798        5        32,785,881        4        35,540,526        5   

Income tax payable (Note 31)

    17,025,992        1        15,635,594        2        10,855,245        1        10,656,124        1   

Provisions (Notes 5 and 19)

    6,720,214        1        6,038,003        —          6,900,184        —          5,068,263        1   

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

    15,396,990        1        13,148,944        1        15,312,033        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

    148,284,188        13        148,473,947        16        125,952,667        14        122,074,950        16   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

NONCURRENT LIABILITIES

               

Hedging derivative financial liabilities (Note 10)

    6,144,025        —          —          —          —          —          —          —     

Bonds payable (Note 20)

    210,416,434        18        80,000,000        8        75,600,000        9        18,000,000        3   

Long-term bank loans (Note 21)

    40,000        —          1,359,375        —          1,393,750        —          1,587,500        —     

Provisions (Note 19)

    7,344        —          4,891        —          3,619        —          2,889        —     

Other long-term payables (Note 22)

    36,000        —          54,000        —          54,000        —          —          —     

Obligations under finance leases (Note 15)

    758,732        —          748,115        —          737,034        —          870,993        —     

Accrued pension cost (Note 23)

    6,931,366        1        6,921,234        1        6,233,278        1        6,241,024        1   

Guarantee deposits

    149,622        —          203,890        —          229,212        —          443,983        —     

Others

    597,743        —          495,150        —          480,559        —          400,831        —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total noncurrent liabilities

    225,081,266        19        89,786,655        9        84,731,452        10        27,547,220        4   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities

    373,365,454        32        238,260,602        25        210,684,119        24        149,622,170        20   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

EQUITY ATTRIBUTABLE TO SHAREHOLDERS OF THE PARENT

               

Capital stock (Note 24)

    259,283,910        22        259,244,357        27        259,220,476        29        259,162,226        33   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Capital surplus (Note 24)

    55,841,716        5        55,675,340        6        55,630,425        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

    338,752,961        29        284,985,121        29        244,003,918        28        211,630,458        27   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    473,974,705        40        408,411,468        42        367,430,265        42        320,464,327        41   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Others (Note 24)

    14,776,668        1        (2,780,485     —          (9,783,800     (1     (7,606,219     (1
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Equity attributable to shareholders of the parent

    803,876,999        68        720,550,680        75        672,497,366        76        627,491,996        80   

NONCONTROLLING INTERESTS (Note 24)

    297,762        —          2,543,226        —          2,589,951        —          2,436,649        —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total equity

    804,174,761        68        723,093,906        75        675,087,317        76        629,928,645        80   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

TOTAL

  $ 1,177,540,215        100      $ 961,354,508        100      $ 885,771,436        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 September 30     For the Nine Months Ended September 30  
    2013     2012     2013     2012  
    Amount         %          Amount         %         Amount         %         Amount         %      

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

  $ 162,577,034        100      $ 141,499,253        100      $ 451,218,350        100      $ 375,300,415        100   

COST OF REVENUE (Notes 12, 33 and 37)

    83,636,464        51        72,344,501        51        235,092,710        52        193,133,859        52   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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

    78,940,570        49        69,154,752        49        216,125,640        48        182,166,556        48   

REALIZED (UNREALIZED) GROSS PROFIT ON SALES TO ASSOCIATES

    (49,759     —          10,381        —          (42,833     —          (129,569     —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

GROSS PROFIT

    78,890,811        49        69,165,133        49        216,082,807        48        182,036,987        48   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

OPERATING EXPENSES (Notes 5, 33 and 37)

               

Research and development

    13,357,075        8        10,656,855        8        35,949,931        8        29,883,097        8   

General and administrative

    4,738,276        3        4,478,517        3        15,119,366        3        13,500,459        3   

Marketing

    1,164,881        1        1,234,982        1        3,359,373        1        3,440,158        1   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

    19,260,232        12        16,370,354        12        54,428,670        12        46,823,714        12   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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

    (12,525     —          3,199        —          21,008        —          (425,894     —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

INCOME FROM OPERATIONS (Note 42)

    59,618,054        37        52,797,978        37        161,675,145        36        134,787,379        36   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

NON-OPERATING INCOME AND EXPENSES

               

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

    1,113,243        1        712,186        1        2,826,900        1        1,338,261        —     

Other income (Note 28)

    433,395        —          353,132        —          1,788,780        —          1,364,809        —     

Foreign exchange gain (loss), net

    (314,948     —          (157,185     —          133,136        —          208,125        —     

Finance costs (Notes 10 and 29)

    (732,326     —          (270,379     —          (1,861,664     —          (685,418     —     

Other gains and losses (Note 30)

    (767,534     (1     326,609        —          552,180        —          (1,620,830     —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total non-operating income and expenses

    (268,170     —          964,363        1        3,439,332        1        604,947        —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

INCOME BEFORE INCOME TAX

    59,349,884        37        53,762,341        38        165,114,477        37        135,392,326        36   

INCOME TAX EXPENSE (Note 31)

    7,415,132        5        4,340,047        3        21,882,679        5        10,787,480        3   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

NET INCOME

    51,934,752        32        49,422,294        35        143,231,798        32        124,604,846        33   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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

               

Exchange differences arising on translation of foreign operations

    (1,740,459     (1     (2,239,717     (2     2,335,435        1        (3,627,600     (1

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

    7,685,269        5        (112,534     —          15,180,754        3        1,710,289        1   

Cash flow hedges

    —          —          28,258        —          —          —          28,421        —     

Share of other comprehensive income of associates and joint venture

    37,947        —          48,074        —          (18,924     —          68,461        —     

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

    10,274        —          (24,497     —          53,484        —          (333,426     —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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

    5,993,031        4        (2,300,416     (2     17,550,749        4        (2,153,855     —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

TOTAL COMPREHENSIVE INCOME FOR THE PERIOD

  $ 57,927,783        36      $ 47,121,878        33      $ 160,782,547        36      $ 122,450,991        33   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

NET INCOME (LOSS) ATTRIBUTABLE TO:

               

Shareholders of the parent

  $ 51,951,943        32      $ 49,379,633        35      $ 143,336,544        32      $ 124,714,606        33   

Noncontrolling interests

    (17,191     —          42,661        —          (104,746     —          (109,760     —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  $ 51,934,752        32      $ 49,422,294        35      $ 143,231,798        32      $ 124,604,846        33   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

TOTAL COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO:

               

Shareholders of the parent

  $ 57,951,263        36      $ 47,092,066        33      $ 160,893,697        36      $ 122,537,025        33   

Noncontrolling interests

    (23,480     —          29,812        —          (111,150     —          (86,034     —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  $ 57,927,783        36      $ 47,121,878        33      $ 160,782,547        36      $ 122,450,991        33   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

    For the Three Months Ended September 30     For the Nine Months Ended September 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      $ 1.90      $ 5.53      $ 4.81   
 

 

 

   

 

 

   

 

 

   

 

 

 

Diluted earnings per share

  $ 2.00      $ 1.90      $ 5.53      $ 4.81   
 

 

 

   

 

 

   

 

 

   

 

 

 

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

 

- 3 -


Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

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

(Reviewed, Not Audited)

 

    Equity Attributable to Shareholders of the Parent              
                                              Others                    
    Capital Stock—Common
Stock
          Retained Earnings    

Foreign
Currency

Translation
Reserve

   

Unrealized
Gain (Loss)
from Available-

for-sale
Financial Assets

    Cash Flow
Hedges Reserve
    Total     Total     Noncontrolling
Interests
   

Total

Equity

 
    Shares
(In Thousands)
    Amount     Capital Surplus     Legal
Capital
Reserve
   

Special

Capital
Reserve

    Unappropriated
Earnings
    Total                

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 nine months ended September 30, 2013

    —          —          —          —          —          143,336,544        143,336,544        —          —          —          —          143,336,544        (104,746     143,231,798   

Other comprehensive income for the nine months ended September 30, 2013, net of income tax

    —          —          —          —          —          —          —          2,315,276        15,241,944        (67     17,557,153        17,557,153        (6,404     17,550,749   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income for the nine months ended September 30, 2013

    —          —          —          —          —          143,336,544        143,336,544        2,315,276        15,241,944        (67     17,557,153        160,893,697        (111,150     160,782,547   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Issuance of stock from exercise of employee stock options

    3,956        39,553        74,613        —          —          —          —          —          —          —          —          114,166        —          114,166   

Stock option compensation cost of subsidiary

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

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

    —          —          27,011        —          —          —          —          —          —          —          —          27,011        —          27,011   

Adjustments arising from changes in percentage of ownership in subsidiaries

    —          —          64,752        —          —          —          —          —          —          —          —          64,752        (64,752     —     

Increase in noncontrolling interests

    —          —          —          —          —          —          —          —          —          —          —          —          198,279        198,279   

Effect of deconsolidation of subsidiary

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

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

BALANCE, SEPTEMBER 30, 2013

    25,928,391      $ 259,283,910      $ 55,841,716      $ 132,436,003      $ 2,785,741      $ 338,752,961      $ 473,974,705      $ (8,438,530   $ 23,215,265      $ (67   $ 14,776,668      $ 803,876,999      $ 297,762      $ 804,174,761   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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 nine months ended September 30, 2012

    —          —          —          —          —          124,714,606        124,714,606        —          —          —          —          124,714,606        (109,760     124,604,846   

Other comprehensive income for the nine months ended September 30, 2012, net of income tax

    —          —          —          —          —          —          —          (3,618,876     1,413,013        28,282        (2,177,581     (2,177,581     23,726        (2,153,855
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income for the nine months ended September 30, 2012

    —          —          —          —          —          124,714,606        124,714,606        (3,618,876     1,413,013        28,282        (2,177,581     122,537,025        (86,034     122,450,991   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Issuance of stock from exercise of employee stock options

    5,825        58,250        118,206        —          —          —          —          —          —          —          —          176,456        —          176,456   

Stock option compensation cost of subsidiary

    —          —          —          —          —          —          —          —          —          —          —          —          3,372        3,372   

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

    —          —          2,601        —          —          —          —          —          —          —          —          2,601        —          2,601   

Adjustments arising from changes in percentage of ownership in subsidiaries

    —          —          37,956        —          —          —          —          —          —          —          —          37,956        (37,956     —     

Increase in noncontrolling interests

    —          —          —          —          —          —          —          —          —          —          —          —          273,920        273,920   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

BALANCE, SEPTEMBER 30, 2012

    25,922,047      $ 259,220,476      $ 55,630,425      $ 115,820,123      $ 7,606,224      $ 244,003,918      $ 367,430,265      $ (10,052,240   $ 240,251      $ 28,189      $ (9,783,800   $ 672,497,366      $ 2,589,951      $ 675,087,317   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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 Nine Months
Ended September 30
 
     2013     2012  

CASH FLOWS FROM OPERATING ACTIVITIES

    

Income before income tax

   $ 165,114,477      $ 135,392,326   

Adjustments for:

    

Depreciation expense

     113,400,781        93,501,687   

Amortization expense

     1,629,482        1,642,604   

Stock option compensation cost of subsidiary

     5,312        3,372   

Finance costs

     1,861,664        685,418   

Share of profits of associates and joint venture

     (2,826,900     (1,338,261

Interest income

     (1,282,220     (1,294,864

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

     (19,554     (263

Impairment loss on property, plant and equipment

     —          422,323   

Impairment loss of financial assets

     1,541,170        2,748,616   

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

     (1,239,442     (321,580

Gain on disposal of financial assets carried at cost, net

     (32,199     (127,480

Loss on disposal of investments in associates

     733        1,009   

Gain on deconsolidation of subsidiary

     (293,578     —     

Unrealized gross profit on sales to associates

     42,833        129,569   

Loss (gain) on foreign exchange, net

     353,755        (1,707,952

Dividend income

     (506,560     (69,945

Income from receipt of equity securities in settlement of trade receivables

     (9,590     (886

Loss on hedging instruments

     6,319,146        —     

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

     (5,989,610     —     

Changes in operating assets and liabilities:

    

Derivative financial instruments

     (145,680     (37,059

Receivables from related parties

     (740,050     (739,481

Notes and accounts receivable, net

     (21,325,495     (18,556,562

Other receivables from related parties

     77,757        (34,852

Inventories

     700,838        (8,408,463

Other current assets

     (79,924     (476,904

Other financial assets

     39,939        107,508   

Accounts payable

     (959,796     2,891,661   

Payables to related parties

     755,742        (559,968

Salary and bonus payable

     221,487        845,786   

Accrued profit sharing to employees and bonus to directors and supervisors

     (1,239,891     (427,278

Accrued expenses and other current liabilities

     2,906,280        4,418,928   

Provisions

     714,527        1,839,277   

Accrued pension cost

     13,068        (7,746
  

 

 

   

 

 

 

Cash generated from operations

     259,008,502        210,520,540   

Income taxes paid

     (14,398,067     (10,355,944
  

 

 

   

 

 

 

Net cash generated by operating activities

     244,610,435        200,164,596   
  

 

 

   

 

 

 

(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 Nine Months
Ended September 30
 
     2013     2012  

CASH FLOWS FROM INVESTING ACTIVITIES

    

Acquisitions of:

    

Available-for-sale financial assets

   $ (16,496   $ (4,434

Financial assets carried at cost

     (18,059     (6,833

Property, plant and equipment

     (213,640,001     (186,371,680

Intangible assets

     (2,013,354     (1,106,734

Proceeds from disposal or redemption of:

    

Available-for-sale financial assets

     2,370,217        616,757   

Held-to-maturity financial assets

     4,445,850        1,278,089   

Financial assets carried at cost

     53,857        236,735   

Property, plant and equipment

     97,368        116,748   

Other assets

     —          8,259   

Costs from entering into hedging transactions

     (143,982     —     

Interest received

     1,194,967        1,340,623   

Other dividends received

     506,560        69,945   

Dividends received from associates

     2,141,881        2,088,472   

Refundable deposits paid

     (67,513     (103,531

Refundable deposits refunded

     81,922        2,290,428   

Net cash outflow from deconsolidation of subsidiary (Note 34)

     (979,910     —     
  

 

 

   

 

 

 

Net cash used in investing activities

     (205,986,693     (179,547,156
  

 

 

   

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

    

Proceeds from issuance of bonds

     130,844,821        57,600,000   

Repayment of bonds

     —          (4,500,000

Increase (decrease) in short-term loans

     (17,314,261     4,494,916   

Increase in long-term bank loans

     690,000        50,000   

Repayment of long-term bank loans

     (62,500     (181,250

Repayment of other long-term payables

     (853,788     (2,367,866

Interest paid

     (1,242,377     (683,003

Guarantee deposits received

     14,916        14,814   

Guarantee deposits refunded

     (71,982     (229,585

Decrease in obligations under finance leases

     (27,796     (124,923

Proceeds from exercise of employee stock options

     114,166        176,456   

Cash dividends

     (77,773,307     (77,748,668

Increase in noncontrolling interests

     212,410        273,920   
  

 

 

   

 

 

 

Net cash generated (used) by financing activities

     34,530,302        (23,225,189
  

 

 

   

 

 

 

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS

     39,065        (2,126,415
  

 

 

   

 

 

 

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

     73,193,109        (4,734,164

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

     143,410,588        143,472,277   
  

 

 

   

 

 

 

CASH AND CASH EQUIVALENTS, END OF PERIOD

   $ 216,603,697      $ 138,738,113   
  

 

 

   

 

 

 

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 NINE MONTHS ENDED SEPTEMBER 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 and operating segments information 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 November 12, 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 (2010)   

Financial Instruments

   January 1, 2015
IFRS 10   

Consolidated Financial Statements

   January 1, 2013
IFRS 11   

Joint Arrangements

   January 1, 2013
IFRS 12   

Disclosure of Interests in Other Entities

   January 1, 2013

Amendments to IFRS 10,

    IFRS 11 and IFRS 12

  

Consolidated financial Statements, Joint Arrangements, and Disclosure of Interests in Other Entities: Transition Guidance

   January 1, 2013

Amendments to IFRS 10,

    IFRS 12 and IAS 27

  

Investment Entities

   January 1, 2014
IFRS 13   

Fair Value Measurement

   January 1, 2013
Amendment to IAS 1   

Presentation of Items of Other Comprehensive Income

   July 1, 2012
Amendment to IAS 12   

Deferred Tax: Recovery of Underlying Assets

   January 1, 2012
Amendment to IAS 19   

Employee Benefits

   January 1, 2013
Amendment to IAS 27   

Separate Financial Statements

   January 1, 2013
Amendment to IAS 28   

Investments in Associates and Joint Ventures

   January 1, 2013
Amendment to IAS 32   

Offsetting of Financial Assets and Financial Liabilities

   January 1, 2014
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
IFRIC 20   

Stripping Costs in the Production Phase of A Surface Mine

   January 1, 2013
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. Amendments 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
and Operating

Location

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

September 30,

2013

   

December 31,

2012

   

September 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     50     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)

(Continued)

 

- 11 -


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

Establishment

and
Operating

Location

 

September 30,

2013

   

December 31,

2012

   

September 30,

2012

   

January 1,

2012

    Note

TSMC

 

Xintec Inc. (Xintec)

 

Wafer level chip size packaging service

 

Taoyuan, Taiwan

    b     40%        40%        40%      —  
 

TSMC Solid State Lighting Ltd. (TSMC SSL)

 

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

 

Hsin-Chu, Taiwan

    92%        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%        49%        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 due to the loss of power to cast the majority of votes at meetings of the Board of Directors. As a result, Xintec is no longer consolidated and is accounted for using the equity method. Please refer to Note 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.

 

- 12 -


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.

 

6. CASH AND CASH EQUIVALENTS

 

    

September 30,

2013

     December 31,
2012
    

September 30,

2012

    

January 1,

2012

 

Cash and deposits in banks

   $ 213,978,108       $ 140,072,294       $ 135,330,257       $ 139,637,363   

Repurchase agreements collateralized by corporate bonds

     2,052,723         2,691,042         2,534,741         —     

Repurchase agreements collateralized by short-term commercial paper

     449,803         349,341         399,585         —     

Repurchase agreements collateralized by government bonds

     123,063         297,911         473,530         3,834,914   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 216,603,697       $ 143,410,588       $ 138,738,113       $ 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

 

    

September 30,

2013

     December 31,
2012
    

September 30,

2012

    

January 1,

2012

 

Derivative financial assets

           

Forward exchange contracts

   $ 26,051       $ 38,607       $ 55,995       $ 15,360   

Cross currency swap contracts

     162,919         947         2,695         —     
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 188,970       $ 39,554       $ 58,690       $ 15,360   
  

 

 

    

 

 

    

 

 

    

 

 

 

Derivative financial liabilities

           

Forward exchange contracts

   $ 2,086       $ 12,174       $ 16,045       $ 13,623   

Cross currency swap contracts

     16,790         3,451         3,968         119   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 18,876       $ 15,625       $ 20,013       $ 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.

 

- 13 -


Outstanding forward exchange contracts consisted of the following:

 

     Maturity Date   

Contract Amount

(In Thousands)

September 30, 2013

     

Sell NT$/Buy JPY

   October 2013    NT$14,344/JPY48,000

Sell NT$/Buy US$

   October 2013    NT$639,824/US$21,650

Sell US$/Buy EUR

   October 2013    US$428,345/EUR317,000

Sell US$/Buy JPY

   October 2013    US$64,418/JPY6,352,719

Sell US$/Buy RMB

   October 2013 to December 2013    US$117,000/RMB718,331

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

September 30, 2012

     

Sell NT$/Buy EUR

   October 2012    NT$7,684/EUR200

Sell NT$/Buy JPY

   October 2012 to November 2012    NT$149,017/JPY393,000

Sell NT$/Buy US$

   October 2012 to November 2012    NT$449,412/US$15,000

Sell RMB/Buy US$

   October 2012    RMB685,056/US$108,000

Sell US$/Buy EUR

   October 2012    US$52,421/EUR40,500

Sell US$/Buy JPY

   October 2012    US$315,000/JPY24,525,215

Sell US$/Buy NT$

   October 2012 to December 2012    US$106,190/NT$3,131,774

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

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

September 30, 2013

        

October 2013

   NT$1,366,150/US$46,080    —      0.32%-0.60%

October 2013 to November 2013

   US$1,199,000/NT$35,692,006    0.31%-3.51%    —  

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%    —  

(Continued)

 

- 14 -


Maturity Date   

Contract Amount

(In Thousands)

  

Range of

Interest Rates
Paid

  

Range of

Interest Rates
Received

September 30, 2012

        

October 2012

   NT$833,013/US$28,280    —      0.04%-0.05%

October 2012

   US$170,000/NT$4,991,030    0.10%-0.11%    —  

January 1, 2012

        

January 2012

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

(Concluded)        

 

8. AVAILABLE-FOR-SALE FINANCIAL ASSETS

 

    

September 30,

2013

     December 31,
2012
    

September 30,

2012

    

January 1,

2012

 

Publicly traded stocks

   $ 61,802,636       $ 41,160,437       $ 2,067,730       $ 3,306,248   

Money market funds

     14,640         1,443         —           2,522   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 61,817,276       $ 41,161,880       $ 2,067,730       $ 3,308,770   
  

 

 

    

 

 

    

 

 

    

 

 

 

Current portion

   $ 672,179       $ 2,410,635       $ 2,067,730       $ 3,308,770   

Noncurrent portion

     61,145,097         38,751,245         —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 61,817,276       $ 41,161,880       $ 2,067,730       $ 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

 

    

September 30,

2013

     December 31,
2012
    

September 30,

2012

    

January 1,

2012

 

Corporate bonds

   $ 700,285       $ 5,056,973       $ 7,556,046       $ 8,614,527   

Government bonds

     —           —           —           454,320   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 700,285       $ 5,056,973       $ 7,556,046       $ 9,068,847   
  

 

 

    

 

 

    

 

 

    

 

 

 

Current portion

   $ 700,285       $ 5,056,973       $ 6,854,611       $ 3,825,680   

Noncurrent portion

     —           —           701,435         5,243,167   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 700,285       $ 5,056,973       $ 7,556,046       $ 9,068,847   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

- 15 -


10. HEDGING DERIVATIVE FINANCIAL INSTRUMENTS

 

    

September 30,

2013

     December 31,
2012
    

September 30,

2012

    

January 1,

2012

 

Financial assets

           

Current

           

Cash flow hedges

           

Forward exchange contract

   $ —         $ —         $ 28,189       $ —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Financial liabilities

           

Current

           

Cash flow hedges

           

Interest rate swap contracts

   $ —         $ —         $ —         $ 232   
  

 

 

    

 

 

    

 

 

    

 

 

 

Noncurrent

           

Fair value hedges

           

Stock forward contracts

   $ 6,144,025       $ —         $ —         $ —     
  

 

 

    

 

 

    

 

 

    

 

 

 

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.

The outstanding stock forward contracts consisted of the following:

 

Contract Shares (In Thousands)    Maturity Date    Contract Price

September 30, 2013

     

8,250

   May 2015 to

September 2015

   Determined by the specific percentage of
spot price on the trade date

The Company entered into derivative contracts to hedge cash flow risk arising from foreign exchange rate fluctuations of an expected equity transaction in September 2012. Outstanding forward exchange contracts consisted of the following:

 

     Maturity Date      Contract Amount
(In Thousands)
 

September 30, 2012

     

Sell US$/Buy EUR

     October 2012       US$ 257,759/EUR200,000   

For the three months and nine months ended September 30, 2012, the amount recognized in other comprehensive income and accumulated under the heading of cash flow hedges reserve from the above forward exchange contract both amounted to a net gain of NT$28,189 thousand.

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 interest rate swap contract of the Company was due in August 2012.

 

- 16 -


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

January 1, 2012

        

NT$80,000

     August 31, 2012         1.38%       0.63%-0.86%

For the three months and the nine months ended September 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 gain of NT$22 thousand and NT$5 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$47 thousand and NT$227 thousand, respectively, which were included under finance costs in the consolidated statements of comprehensive income.

 

11. NOTES AND ACCOUNTS RECEIVABLE, NET

 

    

September 30,

2013

    December 31,
2012
   

September 30,

2012

   

January 1,

2012

 

Notes and accounts receivable

   $ 79,330,887      $ 58,257,798      $ 64,876,527      $ 46,321,240   

Allowance for doubtful receivables

     (486,498     (480,212     (489,590     (490,952
  

 

 

   

 

 

   

 

 

   

 

 

 

Notes and accounts receivable, net

   $ 78,844,389      $ 57,777,586      $ 64,386,937      $ 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.

Aging analysis of notes and accounts receivable, net

 

    

September 30,

2013

     December 31,
2012
    

September 30,

2012

    

January 1,

2012

 

Neither past due nor impaired

   $ 71,148,159       $ 47,528,952       $ 55,324,138       $ 39,362,390   

Past due but not impaired

           

Past due within 30 days

     7,696,230         10,248,634         9,062,799         6,467,898   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 78,844,389       $ 57,777,586       $ 64,386,937       $ 45,830,288   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

- 17 -


Movements of the allowance for doubtful receivables

 

     Nine Months Ended
September 30
 
     2013     2012  

Balance, beginning of the period

   $ 480,212      $ 490,952   

Provision (reversal)

     9,380        (3

Write-off

     —          (1,272

Effect of deconsolidation of subsidiary

     (3,157     —     

Effect of exchange rate changes

     63        (87
  

 

 

   

 

 

 

Balance, end of the period

   $ 486,498      $ 489,590   
  

 

 

   

 

 

 

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

 

    

September 30,

2013

     December 31,
2012
    

September 30,

2012

    

January 1,

2012

 

Not past due

   $ 7,557       $ 160,354       $ 125,474       $ 81,017   

Past due 1-30 days

     6,832         2,863         10,165         24,351   

Past due 31-60 days

     4,576         —           —           4,684   

Past due over 120 days

     —           3,157         —           9,769   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 18,965       $ 166,374       $ 135,639       $ 119,821   
  

 

 

    

 

 

    

 

 

    

 

 

 

The Company held bank guarantees and other credit enhancements as collateral for certain impaired accounts receivables. As of September 30, 2013, December 31, 2012, September 30, 2012 and January 1, 2012, the amount of the bank guarantee and other credit enhancements were US$9 thousand, US$1,000 thousand, US$1,985 thousand and US$2,962 thousand, respectively.

 

12. INVENTORIES

 

    

September 30,

2013

     December 31,
2012
    

September 30,

2012

    

January 1,

2012

 

Finished goods

   $ 6,696,080       $ 6,244,824       $ 4,255,500       $ 3,347,849   

Work in process

     25,528,912         25,713,217         24,686,231         17,940,960   

Raw materials

     2,889,113         3,864,105         2,429,431         1,808,615   

Supplies and spare parts

     1,802,422         2,008,352         1,877,883         1,743,158   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 36,916,527       $ 37,830,498       $ 33,249,045       $ 24,840,582   
  

 

 

    

 

 

    

 

 

    

 

 

 

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

 

     Three Months Ended
September 30
     Nine Months Ended
September 30
 
     2013      2012      2013      2012  

Inventory losses

   $ 252,245       $ 443,728       $ 489,414       $ 1,485,371   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

- 18 -


13. FINANCIAL ASSETS CARRIED AT COST

 

    

September 30,

2013

     December 31,
2012
    

September 30,

2012

    

January 1,

2012

 

Non-publicly traded stocks

   $ 1,844,469       $ 3,314,713       $ 3,689,527       $ 4,004,314   

Mutual funds

     280,038         290,364         291,724         310,691   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 2,124,507       $ 3,605,077       $ 3,981,251       $ 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.

The Company recognized impairment loss on financial assets carried at cost in the amount of NT$1,495,454 thousand and NT$160 thousand for the three months ended September 30, 2013 and 2012, respectively; and of NT$1,541,170 thousand and NT$71,087 thousand for the nine months ended September 30, 2013 and 2012, respectively.

 

14. INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD

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

 

    

September 30,

2013

     December 31,
2012
    

September 30,

2012

    

January 1,

2012

 

Associates

   $ 22,459,686       $ 20,325,277       $ 20,993,580       $ 22,033,567   

Jointly controlled entities

     3,444,234         3,035,641         2,913,578         2,853,364   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 25,903,920       $ 23,360,918       $ 23,907,158       $ 24,886,931   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

  a. Investments in associates

Associates consisted of the following:

 

       

Place of

Incorporation and
Operation

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

September 30,

2013

    December 31,
2012
   

September 30,

2012

    January 1,
2012
   

September 30,

2013

    December 31,
2012
   

September 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   $ 10,107,307      $ 9,406,597      $ 9,121,036      $ 8,985,340        39     40     41     39

Systems on Silicon Manufacturing Company Pte Ltd. (SSMC)

 

Fabrication and supply of integrated circuits

  Singapore     6,870,266        6,710,956        6,253,232        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     2,713,227        2,992,899        4,449,280        5,609,002        20     20     20     20

Xintec

 

Wafer level chip size packaging service

  Taoyuan, Taiwan     1,785,184        —          —          —          40     —          —          —     

Global Unichip Corporation (GUC)

 

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

  Hsinchu, Taiwan     983,702        1,214,825        1,170,032        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
     

 

 

   

 

 

   

 

 

   

 

 

         
      $ 22,459,686      $ 20,325,277      $ 20,993,580      $ 22,033,567           
     

 

 

   

 

 

   

 

 

   

 

 

         

 

- 19 -


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

TSMC has no power to govern the financial and operating policies of Xintec starting June 2013 due to the loss of power to cast the majority of votes at meetings of the Board of Directors. As a result, Xintec is no longer consolidated and is accounted for using the equity method. Please refer to Note 34.

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.

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.

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

 

    

September 30,

2013

    December 31,
2012
   

September 30,

2012

   

January 1,

2012

 

Total assets

   $ 86,577,100      $ 76,889,298      $ 78,210,258      $ 79,721,042   

Total liabilities

     (25,288,666     (21,683,504     (23,922,106     (20,948,855
  

 

 

   

 

 

   

 

 

   

 

 

 

Net assets

   $ 61,288,434      $ 55,205,794      $ 54,288,152      $ 58,772,187   
  

 

 

   

 

 

   

 

 

   

 

 

 

The Company’s share of net assets of associates

   $ 22,459,686      $ 20,325,277      $ 20,993,580      $ 22,033,567   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

     Three Months Ended
September 30
     Nine Months Ended
September 30
 
     2013      2012      2013      2012  

Net revenue

   $ 16,901,548       $ 14,721,518       $ 45,692,397       $ 41,525,415   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net income

   $ 3,107,787       $ 1,230,675       $ 6,806,119       $ 1,170,094   
  

 

 

    

 

 

    

 

 

    

 

 

 

The Company’s share of profits of associates

   $ 969,247       $ 558,002       $ 2,420,334       $ 852,523   
  

 

 

    

 

 

    

 

 

    

 

 

 

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

   $ 1,108       $ 3,115       $ 28,292       $ (6,682
  

 

 

    

 

 

    

 

 

    

 

 

 

The market prices of the investments 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   

September 30,

2013

     December 31,
2012
    

September 30,

2012

    

January 1,

2012

 

VIS

   $ 20,323,030       $ 12,658,703       $ 11,370,845       $ 6,627,758   
  

 

 

    

 

 

    

 

 

    

 

 

 

Motech

   $ 4,435,225       $ 2,383,824       $ 2,703,125       $ 4,645,176   
  

 

 

    

 

 

    

 

 

    

 

 

 

GUC

   $ 4,066,513       $ 4,692,130       $ 5,439,136       $ 4,645,442   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

- 20 -


b. Investments in jointly controlled entities

Jointly controlled entities consisted of the following:

 

Name of Jointly
Controlled Entity
  Principal Activities  

Place of

Incorporation and

Operation

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

September 30,

2013

    December 31,
2012
   

September 30,

2012

    January 1,
2012
   

September 30,

2013

    December 31,
2012
   

September 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
  $ 3,444,234      $ 3,035,641      $ 2,913,578      $ 2,853,364        49     49     49     49
     

 

 

   

 

 

   

 

 

   

 

 

         

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

 

    

September 30,

2013

     December 31,
2012
    

September 30,

2012

    

January 1,

2012

 

Current assets

   $ 2,221,606       $ 1,887,122       $ 1,531,298       $ 1,616,916   
  

 

 

    

 

 

    

 

 

    

 

 

 

Noncurrent assets

   $ 1,641,911       $ 1,780,903       $ 1,975,543       $ 1,732,247   
  

 

 

    

 

 

    

 

 

    

 

 

 

Current liabilities

   $ 418,821       $ 631,803       $ 592,516       $ 495,066   
  

 

 

    

 

 

    

 

 

    

 

 

 

Noncurrent liabilities

   $ 462       $ 581       $ 747       $ 733   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

     Three Months Ended
September 30
     Nine Months Ended
September 30
 
     2013      2012      2013     2012  

Net revenue

   $ 482,576       $ 546,251       $ 1,463,662      $ 1,251,020   
  

 

 

    

 

 

    

 

 

   

 

 

 

Cost of revenue

   $ 311,902       $ 334,873       $ 905,720      $ 856,342   
  

 

 

    

 

 

    

 

 

   

 

 

 

Operating expenses

   $ 34,084       $ 30,024       $ 99,545      $ 90,615   
  

 

 

    

 

 

    

 

 

   

 

 

 

Non-operating income, net

   $ 31,673       $ 3,205       $ 39,287      $ 193,414   
  

 

 

    

 

 

    

 

 

   

 

 

 

Income tax expense

   $ 24,267       $ 30,375       $ 91,118      $ 11,739   
  

 

 

    

 

 

    

 

 

   

 

 

 

The Company’s share of profits of joint venture

   $ 143,996       $ 154,184       $ 406,566      $ 485,738   
  

 

 

    

 

 

    

 

 

   

 

 

 

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

   $ 36,839       $ 44,959       $ (47,216   $ 75,143   
  

 

 

    

 

 

    

 

 

   

 

 

 

 

15. PROPERTY, PLANT AND EQUIPMENT

 

    

September 30,

2013

     December 31,
2012
    

September 30,

2012

    

January 1,

2012

 

Land and land improvements

   $ 3,586,612       $ 1,159,755       $ 1,170,071       $ 1,185,573   

Buildings

     105,868,005         85,610,120         86,982,731         71,915,740   

Machinery and equipment

     427,938,323         404,382,298         418,513,468         294,814,381   

Office equipment

     7,689,194         6,907,376         6,558,696         5,148,538   

Assets under finance leases

     421,911         438,663         444,782         493,945   

Advance payments and construction in progress

     182,211,979         119,063,976         66,444,314         116,863,976   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 727,716,024       $ 617,562,188       $ 580,114,062       $ 490,422,153   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

- 21 -


    Nine Months Ended September 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   $ 13,860      $ 3,980,955   

Buildings

    197,411,851        30,371,814        —          3,797        (986,205     586,240        227,387,497   

Machinery and equipment

    1,279,893,177        127,162,251        (2,094,599     —          (5,630,854     1,628,558        1,400,958,533   

Office equipment

    20,067,943        3,006,548        (506,366     —          (1,055,809     29,489        21,541,805   

Assets under finance leases

    766,732        —          —          —          —          24,593        791,325   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    1,499,666,827      $ 163,752,613      $ (2,600,965   $ 3,797      $ (8,444,897   $ 2,282,740        1,654,660,115   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Accumulated depreciation and impairment

             

Land improvements

    367,369      $ 20,332      $ —        $ —        $ —        $ 6,642        394,343   

Buildings

    111,801,731        9,642,611        —          —          (226,908     302,058        121,519,492   

Machinery and equipment

    875,510,879        101,931,987        (2,024,038     —          (3,656,326     1,257,708        973,020,210   

Office equipment

    13,160,567        1,774,915        (506,117     —          (599,483     22,729        13,852,611   

Assets under finance leases

    328,069        30,936        —          —          —          10,409        369,414   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    1,001,168,615      $ 113,400,781      $ (2,530,155   $ —        $ (4,482,717   $ 1,599,546        1,109,156,070   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Advance payments and construction in progress

    119,063,976      $ 64,777,969      $ —        $ —        $ (1,632,860   $ 2,894        182,211,979   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  $ 617,562,188                $ 727,716,024   
 

 

 

             

 

 

 

 

    Nine Months Ended September 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      $ —        $ —        $ —        $ (25,431   $ 1,534,197   

Buildings

    172,997,391        23,699,216        (53,487     —          —          (772,172     195,870,948   

Machinery and equipment

    1,057,926,529        208,463,387        (1,125,566     —          (35     (2,354,872     1,262,909,443   

Office equipment

    17,041,306        2,790,915        (472,763     —          35        (75,533     19,283,960   

Assets under finance leases

    791,480        —          —          —          —          (31,217     760,263   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    1,250,297,834      $ 234,972,018      $ (1,651,816   $ —        $ —        $ (3,259,225     1,480,358,811   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Accumulated depreciation and impairment

             

Land improvements

    355,555      $ 20,335      $ —        $ —        $ —        $ (11,764     364,126   

Buildings

    101,081,651        8,248,043        (43,387     —          —          (398,090     108,888,217   

Machinery and equipment

    763,112,148        83,843,149        (1,028,311     422,323        (8     (1,953,326     844,395,975   

Office equipment

    11,892,768        1,359,994        (464,794     —          8        (62,712     12,725,264   

Assets under finance leases

    297,535        30,166        —          —          —          (12,220     315,481   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    876,739,657      $ 93,501,687      $ (1,536,492   $ 422,323      $ —        $ (2,438,112     966,689,063   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Advance payments and construction in progress

    116,863,976      $ (50,318,756   $ —        $ —        $ (2,086   $ (98,820     66,444,314   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  $ 490,422,153                $ 580,114,062   
 

 

 

             

 

 

 

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.

For the nine months ended September 30, 2012, the Company recognized impairment loss of NT$422,323 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.

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

Future minimum lease gross payments were as follows:

 

    

September 30,

2013

     December 31,
2012
    

September 30,

2012

    

January 1,

2012

 

Minimum lease payments

           

Not later than 1 year

   $ 27,912       $ 27,042       $ 26,809       $ —     

Later than 1 year and not later than 5 years

     111,648         108,168         107,236         223,296   

Later than five years

     725,137         729,566         723,303         780,962   
  

 

 

    

 

 

    

 

 

    

 

 

 
     864,697         864,776         857,348         1,004,258   

Less: Future finance expenses

     97,353         108,471         112,244         133,265   
  

 

 

    

 

 

    

 

 

    

 

 

 

Present value of minimum lease payments

   $ 767,344       $ 756,305       $ 745,104       $ 870,993   
  

 

 

    

 

 

    

 

 

    

 

 

 

(Continued)

 

- 22 -


    

September 30,

2013

     December 31,
2012
    

September 30,

2012

    

January 1,

2012

 

Present value of minimum lease payments

           

Not later than 1 year

   $ 27,231       $ 26,382       $ 26,156       $ —     

Later than 1 year and not later than 5 years

     102,443         100,821         98,397         213,411   

Later than five years

     637,670         629,102         620,551         657,582   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 767,344       $ 756,305       $ 745,104       $ 870,993   
  

 

 

    

 

 

    

 

 

    

 

 

 

Current portion

   $ 8,612       $ 8,190       $ 8,070       $ —     

Noncurrent portion

     758,732         748,115         737,034         870,993   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 767,344       $ 756,305       $ 745,104       $ 870,993   
  

 

 

    

 

 

    

 

 

    

 

 

 

(Concluded)

There was no capitalization of interest for the nine months ended September 30, 2013. During the nine months ended September 30, 2012, the Company capitalized the borrowing costs directly attributable to the acquisition or construction of property, plant and equipment. For the three months and the nine months ended September 30, 2012, the amount of capitalized interest was nil and NT$6,442 thousand, respectively, and the capitalized interest rate was 1.08%-1.20%.

 

16. INTANGIBLE ASSETS

 

    

September 30,

2013

     December 31,
2012
    

September 30,

2012

    

January 1,

2012

 

Goodwill

   $ 5,596,319       $ 5,523,707       $ 5,560,762       $ 5,693,999   

Technology license fees

     1,174,288         1,461,893         1,548,893         1,682,892   

Software and system design costs

     3,666,125         2,968,942         2,627,158         2,366,483   

Patent and others

     956,548         1,005,027         1,152,041         1,118,189   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 11,393,280       $ 10,959,569       $ 10,888,854       $ 10,861,563   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

    Nine Months Ended September 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      $ —        $ —        $ —        $ —        $ 72,612      $ 5,596,319   

Technology license fees

    4,590,548        —          —          (29,565     (113,340     (1,164     4,446,479   

Software and system design costs

    15,095,421        1,809,264        (17,486     (110,746     (25,335     3,498        16,754,616   

Patent and others

    3,094,664        287,840        (23,549     101,007        (42,089     3,662        3,421,535   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    28,304,340      $ 2,097,104      $ (41,035   $ (39,304   $ (180,764   $ 78,608        30,218,949   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Accumulated amortization

             

Technology license fees

    3,128,655      $ 211,287      $ —        $ —        $ (66,587   $ (1,164     3,272,191   

Software and system design costs

    12,126,479        994,698        (17,214     (5,942     (12,661     3,131        13,088,491   

Patent and others

    2,089,637        423,497        (23,549     —          (25,195     597        2,464,987   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    17,344,771      $ 1,629,482      $ (40,763   $ (5,942   $ (104,443   $ 2,564        18,825,669   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  $ 10,959,569                $ 11,393,280   
 

 

 

             

 

 

 

 

- 23 -


    Nine Months Ended September 30, 2012  
   

Balance,

Beginning of

Period

    Additions     Disposals     Reclassification     Effect of
Exchange Rate
Changes
   

Balance,

End of Period

 

Cost

           

Goodwill

  $ 5,693,999      $ —        $ —        $ —        $ (133,237   $ 5,560,762   

Technology license fees

    4,370,173        29,565        —          191,580        (527     4,590,791   

Software and system design costs

    13,438,579        1,162,867        (48,201     (91,904     (5,114     14,456,227   

Patent and others

    2,670,031        422,527        (91,844     93,990        (4,641     3,090,063   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    26,172,782      $ 1,614,959      $ (140,045   $ 193,666      $ (143,519     27,697,843   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Accumulated amortization

           

Technology license fees

    2,687,281      $ 354,029      $ —        $ —        $ 588        3,041,898   

Software and system design costs

    11,072,096        846,409        (48,201     (36,552     (4,683     11,829,069   

Patent and others

    1,551,842        442,166        (91,844     36,552        (694     1,938,022   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    15,311,219      $ 1,642,604      $ (140,045   $ —        $ (4,789     16,808,989   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  $ 10,861,563              $ 10,888,854   
 

 

 

           

 

 

 

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 nine months ended September 30, 2013 and 2012, the Company did not recognize any impairment loss on goodwill.

 

17. OTHER ASSETS

 

    

September 30,

2013

     December 31,
2012
    

September 30,

2012

    

January 1,

2012

 

Tax receivable

   $ 1,471,795       $ 1,565,104       $ 1,462,504       $ 708,891   

Prepaid expenses

     1,258,358         1,080,236         1,042,826         1,436,416   

Long-term receivable

     796,400         767,800         756,400         785,400   

Others

     630,160         608,412         590,813         550,053   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 4,156,713       $ 4,021,552       $ 3,852,543       $ 3,480,760   
  

 

 

    

 

 

    

 

 

    

 

 

 

Current portion

   $ 2,740,765       $ 2,786,408       $ 2,639,414       $ 2,174,014   

Noncurrent portion

     1,415,948         1,235,144         1,213,129         1,306,746   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 4,156,713       $ 4,021,552       $ 3,852,543       $ 3,480,760   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

- 24 -


18. SHORT-TERM LOANS

 

    

September 30,

2013

     December 31,
2012
    

September 30,

2012

    

January 1,

2012

 

Unsecured loans

           

Amount

   $ 18,053,096       $ 34,714,929       $ 29,749,650       $ 25,926,528   
  

 

 

    

 

 

    

 

 

    

 

 

 

Original loan content

           

US$ (in thousands)

   $ 610,500       $ 1,195,500       $ 1,015,000       $ 856,000   

Annual interest rate

     0.38%-0.40%         0.39%-0.58%         0.42%-0.65%         0.45%-1.00%   

Maturity date

    
 
Due in
October 2013
  
  
    

 

Due in

January 2013

  

  

    
 
Due in
October 2012
  
  
    
 
Due by
February 2012
  
  

 

19. PROVISIONS

 

    

September 30,

2013

     December 31,
2012
    

September 30,

2012

    

January 1,

2012

 

Sales returns and allowances

   $ 6,720,214       $ 6,038,003       $ 6,900,184       $ 5,068,263   

Warranties

     7,344         4,891         3,619         2,889   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 6,727,558       $ 6,042,894       $ 6,903,803       $ 5,071,152   
  

 

 

    

 

 

    

 

 

    

 

 

 

Current portion

   $ 6,720,214       $ 6,038,003       $ 6,900,184       $ 5,068,263   

Noncurrent portion

     7,344         4,891         3,619         2,889   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 6,727,558       $ 6,042,894       $ 6,903,803       $ 5,071,152   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

     Sales Returns
and Allowances
    Warranties     Total  

Nine months ended September 30, 2013

      

Balance, beginning of period

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

Provision

     3,798,683        3,687        3,802,370   

Payment

     (3,086,482     (1,361     (3,087,843

Effect of deconsolidation of subsidiary

     (37,748     —          (37,748

Effect of exchange rate changes

     7,758        127        7,885   
  

 

 

   

 

 

   

 

 

 

Balance, end of period

   $ 6,720,214      $ 7,344      $ 6,727,558   
  

 

 

   

 

 

   

 

 

 

Nine months ended September 30, 2012

      

Balance, beginning of period

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

Provision

     6,462,738        820        6,463,558   

Payment

     (4,624,281     —          (4,624,281

Effect of exchange rate changes

     (6,536     (90     (6,626
  

 

 

   

 

 

   

 

 

 

Balance, end of period

   $ 6,900,184      $ 3,619      $ 6,903,803   
  

 

 

   

 

 

   

 

 

 

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.

 

- 25 -


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

 

20. BONDS PAYABLE

 

    

September 30,

2013

     December 31,
2012
    

September 30,

2012

    

January 1,

2012

 

Domestic unsecured bonds

   $ 166,200,000       $ 80,000,000       $ 75,600,000       $ 22,500,000   

Overseas unsecured bonds

     44,356,500         —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 
     210,556,500         80,000,000         75,600,000         22,500,000   

Less: Discounts on bonds payable

     140,066         —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 210,416,434       $ 80,000,000       $ 75,600,000       $ 22,500,000   
  

 

 

    

 

 

    

 

 

    

 

 

 

Current portion

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

Noncurrent portion

     210,416,434         80,000,000         75,600,000         18,000,000   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 210,416,434       $ 80,000,000       $ 75,600,000       $ 22,500,000   
  

 

 

    

 

 

    

 

 

    

 

 

 

The major terms of domestic unsecured bonds are as follows:

 

          Issuance   Tranche    Issuance Period   Total Amount  

Coupon

Rate

 

Repayment and

Interest Payment

100-1

  A    September 2011 to   September 2016   $10,500,000   1.40%  

Bullet repayment;
interest payable annually

  B    September 2011 to   September 2018   7,500,000   1.63%  

100-2

  A    January 2012 to   January 2017   10,000,000   1.29%  
  B    January 2012 to   January 2019   7,000,000   1.46%  

101-1

  A    August 2012 to   August 2017   9,900,000   1.28%  
  B    August 2012 to   August 2019   9,000,000   1.40%  

101-2

  A    September 2012 to   September 2017   12,700,000   1.28%  
  B    September 2012 to   September 2019   9,000,000   1.39%  

101-3

  —      October 2012 to   October 2022   4,400,000   1.53%  

101-4

  A    January 2013 to   January 2018   10,600,000   1.23%  
  B    January 2013 to   January 2020   10,000,000   1.35%  
  C    January 2013 to   January 2023   3,000,000   1.49%  

(Continued)

 

- 26 -


    Issuance   Tranche    Issuance Period   Total Amount  

Coupon

Rate

 

Repayment and

Interest Payment

102-1

  A    February 2013 to   February 2018   $6,200,000   1.23%  

Bullet repayment;
interest payable annually

  B   

February 2013 to

  February 2020

  11,600,000   1.38%  
  C   

February 2013 to

  February 2023

  3,600,000   1.50%  

102-2

  A   

July 2013 to

  July 2020

  10,200,000   1.50%  
  B   

July 2013 to

  July 2023

  3,500,000   1.70%  

102-3

  A   

August 2013 to

  August 2017

  4,000,000   1.34%  
  B   

August 2013 to

  August 2019

  8,500,000   1.52%  

102-4

  A   

September 2013 to

  September 2016

  1,500,000   1.35%  
  B   

September 2013 to

  September 2017

  1,500,000   1.45%  
  C   

September 2013 to

  March 2019

  1,400,000   1.60%  

Bullet repayment; interest payable annually (interest for the six months prior to maturity will accrue on the basis of actual days and be repayable at maturity)

  D   

September 2013 to

  March 2021

  2,600,000   1.85%  
  E   

September 2013 to

  March 2023

  5,400,000   2.05%  
  F   

September 2013 to

  September 2023

  2,600,000   2.10%  

Bullet repayment; interest payable annually

Domestic

      5th

  C   

January 2002 to

  January 2012

  4,500,000   3.00%  

(Concluded)

The major terms of overseas unsecured bonds are as follows:

 

Issuance Period  

Total Amount

(US$)

  Coupon Rate  

Repayment and Interest

Payment

April 2013 to April 2016

  $350,000   0.95%  

Bullet repayment; interest payable semi-annually

April 2013 to April 2018

  1,150,000   1.625%  

 

- 27 -


21. LONG-TERM BANK LOANS

 

    

September 30,

2013

     December 31,
2012
    

September 30,

2012

    

January 1,

2012

 

Bank loans for working capital:

           

Repayable from April 2016 in 16 quarterly installments, annual interest rate at 3.63% in 2013

   $ 40,000       $ —         $ —         $ —     

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

     —           550,000         550,000         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 rate at 1.16%-1.18% in 2012

     —           450,000         450,000         500,000   

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

     —           262,500         281,250         300,000   

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

     —           175,000         187,500         200,000   

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

     —           50,000         50,000         —     
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 40,000       $ 1,487,500       $ 1,518,750       $ 1,650,000   
  

 

 

    

 

 

    

 

 

    

 

 

 

Current portion

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

Noncurrent portion

     40,000         1,359,375         1,393,750         1,587,500   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 40,000       $ 1,487,500       $ 1,518,750       $ 1,650,000   
  

 

 

    

 

 

    

 

 

    

 

 

 

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

 

- 28 -


22. OTHER LONG-TERM PAYABLES

 

    

September 30,

2013

     December 31,
2012
    

September 30,

2012

    

January 1,

2012

 

Payables for software and system design costs

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

Payables for acquisition of property, plant and equipment

     —           825,447         818,361         3,399,855   

Payables for technology transfer

     —           29,038         29,310         —     
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 54,000       $ 967,485       $ 960,671       $ 3,399,855   
  

 

 

    

 

 

    

 

 

    

 

 

 

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

   $ 18,000       $ 913,485       $ 906,671       $ 3,399,855   

Noncurrent portion

     36,000         54,000         54,000         —     
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 54,000       $ 967,485       $ 960,671       $ 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. The property, plant and equipment have been in use by TSMC China since 2004. The aforementioned payables were totally paid in July 2013.

 

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 Technology, 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$402,495 thousand and NT$364,639 thousand in the consolidated statements of comprehensive income for the three months ended September 30, 2013 and 2012, respectively; and of NT$1,190,732 thousand and NT$1,031,294 thousand in the consolidated statements of comprehensive income for the nine months ended September 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.

 

- 29 -


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$60,702 thousand and NT$56,697 thousand in the consolidated statements of comprehensive income for the three months ended September 30, 2013 and 2012, respectively; and of NT$182,089 thousand and NT$166,025 thousand in the consolidated statements of comprehensive income for the nine months ended September 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 of the defined benefit plans were as follows:

 

     Three Months Ended
September 30
     Nine Months Ended
September 30
 
     2013      2012      2013      2012  

Cost of revenue

   $ 39,638       $ 35,128       $ 117,894       $ 102,684   

Research and development expenses

     15,621         14,321         46,686         43,236   

General and administrative expenses

     4,349         6,179         14,164         16,760   

Marketing expenses

     1,094         1,069         3,345         3,345   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 60,702       $ 56,697       $ 182,089       $ 166,025   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

24. EQUITY

 

  a. Capital stock

 

    

September 30,

2013

     December 31,
2012
    

September 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)

     25,928,391         25,924,435         25,922,047         25,916,222   
  

 

 

    

 

 

    

 

 

    

 

 

 

Issued capital

   $ 259,283,910       $ 259,244,357       $ 259,220,476       $ 259,162,226   
  

 

 

    

 

 

    

 

 

    

 

 

 

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 September 30, 2013, 1,088,027 thousand ADSs of TSMC were traded on the NYSE. The number of common shares represented by the ADSs was 5,440,133 thousand shares (one ADS represents five common shares).

 

- 30 -


b. Capital surplus

 

    

September 30,

2013

     December 31,
2012
    

September 30,

2012

    

January 1,

2012

 

Additional paid-in capital

   $ 24,009,220       $ 23,934,607       $ 23,892,456       $ 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

     105,485         40,733         40,557         —     

From share of changes in equities of associates and joint venture

     29,599         2,588         —           —     

Donations

     55         55         55         55   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 55,841,716       $ 55,675,340       $ 55,630,425       $ 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.

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.

 

- 31 -


TSMC accrued profit sharing to employees based on certain percentage of net income during the period, which amounted to NT$3,492,973 thousand and NT$3,289,330 thousand for the three months ended September 30, 2013 and 2012, respectively; and NT$9,637,364 thousand and NT$8,333,282 thousand for the nine months ended September 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
Year 2012
    For Fiscal
Year 2011
     For Fiscal
Year 2012
     For Fiscal
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.

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.

 

- 32 -


d. Others

Changes in others were as follows:

 

     Nine Months Ended September 30, 2013  
     Foreign
Currency
Translation
Reserve
    Unrealized Gain
(Loss) from
Available-for-
sale Financial
Assets
    Cash Flow
Hedges Reserve
    Total  

Balance, beginning of period

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

Exchange differences arising on translation of foreign operations

     2,334,714        —          —          2,334,714   

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

     —          16,417,454        —          16,417,454   

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

     —          (1,229,330     —          (1,229,330

Share of other comprehensive income of associates and joint venture

     (20,214     380        (67     (19,901

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

     776        (44     —          732   

Income tax effect

     —          53,484        —          53,484   
  

 

 

   

 

 

   

 

 

   

 

 

 

Balance, end of period

   $ (8,438,530   $ 23,215,265      $ (67   $ 14,776,668   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

     Nine Months Ended September 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

Exchange differences arising on translation of foreign operations

     (3,658,135     —          —          (3,658,135

Changes in fair value of hedging instruments for cash flow hedges

     —          —          28,191        28,191   

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

     —          —          91        91   

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

     —          (643,360     —          (643,360
           (Continued

 

- 33 -


     Nine Months Ended September 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

   $ —        $ 2,677,529      $ —         $ 2,677,529   

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

     —          (316,932     —           (316,932

Share of other comprehensive income of associates and joint venture

     39,259        29,202        —           68,461   

Income tax effect

     —          (333,426     —           (333,426
  

 

 

   

 

 

   

 

 

    

 

 

 

Balance, end of period

   $ (10,052,240   $ 240,251      $ 28,189       $ (9,783,800
  

 

 

   

 

 

   

 

 

    

 

 

 
            (Concluded

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

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

The cash flow hedges reserve represents the cumulative effective portion of gains or losses arising on changes in fair value of the hedging instruments entered into as cash flow hedges. The cumulative 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

 

     Nine Months Ended September 30  
     2013        2012  

Balance, beginning of period

   $ 2,543,226         $ 2,436,649   

Share of noncontrolling interests

       

Net loss

     (104,746        (109,760

Exchange differences arising on translation of foreign operations

     721           30,535   

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

     2,741           (2,300

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

     (10,111        (4,648
          (Continued

 

- 34 -


     Nine Months Ended September 30  
     2013        2012  

Changes in fair value of hedging instruments for cash flow hedges

   $ —           $ 3   

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

     —             136   

Stock option compensation cost of subsidiary

     5,312           3,372   

Share of other comprehensive income of associates and joint venture

     244           —     

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

     1           —     

Adjustments arising from changes in percentage of ownership in subsidiaries

     (64,752        (37,956

Increase in noncontrolling interests

     198,279           273,920   

Effect of deconsolidation of subsidiary

     (2,273,153        —     
  

 

 

      

 

 

 

Balance, end of period

   $ 297,762         $ 2,589,951   
  

 

 

      

 

 

 
          (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 September 30, 2013.

 

- 35 -


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

 

    

Number of

Options

(In Thousands)

   

Weighted-

average

Exercise Price

(NT$)

 

Nine months ended September 30, 2013

    

Balance, beginning of period

     5,945      $ 34.6   

Options exercised

     (3,956     28.9   
  

 

 

   

Balance, end of period

     1,989        45.9   
  

 

 

   

Nine months ended September 30, 2012

    

Balance, beginning of period

     14,293      $ 31.4   

Options exercised

     (5,825     30.3   

Options canceled

     (135     34.6   
  

 

 

   

Balance, end of period

     8,333        32.6   
  

 

 

   

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:

 

September 30, 2013

    December 31, 2012  
Range of Exercise
Price
(NT$)
   Weighted-average
Remaining
Contractual Life
(Years)
    Range of Exercise
Price
(NT$)
     Weighted-average
Remaining
Contractual Life
(Years)
 

$38.0-$50.1

     1.3      $ 20.2-$28.3         0.4   
     $ 38.0-$50.1         2.0   

 

September 30, 2012

    January 1, 2012  
Range of Exercise
Price
(NT$)
   Weighted-average
Remaining
Contractual Life
(Years)
    Range of Exercise
Price
(NT$)
     Weighted-average
Remaining
Contractual Life
(Years)
 

$20.2-$28.3

     0.6      $ 20.9-$29.3         1.2   

$38.0-$50.1

     2.2      $ 38.0-$50.1         2.9   

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

 

- 36 -


  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 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.

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

 

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

Nine months ended September 30, 2013

    

Balance, beginning of period

     —        $ —     

Options granted

     17,000        10.0   

Options exercised

     (17,000     10.0   
  

 

 

   

Balance, end of period

     —          —     
  

 

 

   

Nine months ended September 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 options 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 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.

 

- 37 -


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

 

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

Nine months ended September 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 options 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
September 30
     Nine Months Ended
September 30
 
     2013      2012      2013      2012  

Net revenue from the sale of goods

   $ 162,446,219       $ 141,375,451       $ 450,836,794       $ 374,943,954   

Net revenue from royalties

     130,815         123,802         381,556         356,461   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 162,577,034       $ 141,499,253       $ 451,218,350       $ 375,300,415   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

- 38 -


27. OTHER OPERATING INCOME AND EXPENSES, NET

 

     Three Months Ended
September 30
    Nine Months Ended
September 30
 
     2013     2012     2013     2012  

Income (expenses) of rental assets

        

Rental income

   $ 3,508      $ —        $ 10,763      $ 503   

Depreciation of rental assets

     (6,222     (1,434     (18,899     (5,223
  

 

 

   

 

 

   

 

 

   

 

 

 
     (2,714     (1,434     (8,136     (4,720

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

     (9,811     4,389        19,554        263   

Impairment loss on property, plant and equipment

     —          —          —          (422,323

Income from receipt of equity securities in settlement of trade receivables

     —          244        9,590        886   
  

 

 

   

 

 

   

 

 

   

 

 

 
   $ (12,525   $ 3,199      $ 21,008      $ (425,894
  

 

 

   

 

 

   

 

 

   

 

 

 

 

28. OTHER INCOME

 

     Three Months Ended
September 30
     Nine Months Ended
September 30
 
     2013      2012      2013      2012  

Interest income

           

Bank deposits

   $ 424,053       $ 319,380       $ 1,257,553       $ 1,187,270   

Available-for-sale financial assets

     1,339         1,532         4,339         4,518   

Held-to-maturity financial assets

     4,135         32,220         20,328         103,076   
  

 

 

    

 

 

    

 

 

    

 

 

 
     429,527         353,132         1,282,220         1,294,864   

Dividend income

     3,868         —           506,560         69,945   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 433,395       $ 353,132       $ 1,788,780       $ 1,364,809   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

29. FINANCE COSTS

 

     Three Months Ended
September 30
     Nine Months Ended
September 30
 
     2013      2012      2013      2012  

Interest expense

           

Corporate bonds

   $ 699,980       $ 211,432       $ 1,734,861       $ 477,966   

Bank loans

     26,668         46,892         98,788         160,565   

Finance leases

     4,940         4,831         14,637         16,026   

Others

     738         7,177         13,378         37,076   
  

 

 

    

 

 

    

 

 

    

 

 

 
     732,326         270,332         1,861,664         691,633   

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

     —           47         —           227   

Capitalized interest

     —           —           —           (6,442
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 732,326       $ 270,379       $ 1,861,664       $ 685,418   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

- 39 -


30. OTHER GAINS AND LOSSES

 

     Three Months Ended
September 30
    Nine Months Ended
September 30
 
     2013     2012     2013     2012  

Gain (loss) on disposal of financial assets, net

        

Available-for-sale financial assets

   $ 248,729      $ 89,958      $ 1,239,442      $ 321,580   

Financial assets carried at cost

     27,626        (6,629     32,199        127,480   

Gain on deconsolidation of subsidiary

     —          —          293,578        —     

Settlement income

     —          —          451,050        448,275   

Other gains

     94,444        88,360        281,054        410,589   

Net gain on financial instruments at FVTPL

        

Held for trading

     484,154        233,579        333,860        43,842   

Impairment loss of financial assets

        

Available-for-sale financial assets

     —          —          —          (2,677,529

Financial assets carried at cost

     (1,495,454     (160     (1,541,170     (71,087

Fair value hedges

        

Loss from hedging instruments

     (4,381,780     —          (6,319,146     —     

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

     4,331,786        —          5,989,610        —     

Other losses

     (77,039     (78,499     (208,297     (223,980
  

 

 

   

 

 

   

 

 

   

 

 

 
   $ (767,534   $ 326,609      $ 552,180      $ (1,620,830
  

 

 

   

 

 

   

 

 

   

 

 

 

 

31. INCOME TAX

 

  a. Income tax expense recognized in profit or loss

Income tax expense consisted of the following:

 

     Three Months Ended
September 30
     Nine Months Ended
September 30
 
     2013     2012      2013     2012  

Current income tax expense (benefit)

         

Current tax expense recognized for the current period

   $ 5,909,113      $ 4,085,587       $ 16,927,948      $ 10,516,159   

Income tax adjustments on prior years

     23,357        3,224         (1,020,806     51,273   

Other income tax adjustments

     (7,121     7,047         (19,405     45,331   
  

 

 

   

 

 

    

 

 

   

 

 

 
     5,925,349        4,095,858         15,887,737        10,612,763   
  

 

 

   

 

 

    

 

 

   

 

 

 

(Continued)

 

- 40 -


     Three Months Ended
September 30
    Nine Months Ended
September 30
 
     2013      2012     2013     2012  

Deferred income tax expense (benefit)

         

Effect of tax rate changes

   $ —         $ (543,611   $ —        $ (543,611

The origination and reversal of temporary differences

     137,229         86,690        1,178,359        (636,702

Income tax credits and loss carryforward

     1,352,554         701,110        4,895,057        1,355,030   

Effect of deconsolidation of subsidiary

     —           —          (78,474     —     
  

 

 

    

 

 

   

 

 

   

 

 

 
     1,489,783         244,189        5,994,942        174,717   
  

 

 

    

 

 

   

 

 

   

 

 

 

Income tax expense recognized in profit or loss

   $ 7,415,132       $ 4,340,047      $ 21,882,679      $ 10,787,480   
  

 

 

    

 

 

   

 

 

   

 

 

 

(Concluded)

A reconciliation of income before income tax and income tax expense recognized in profit or loss was as follows:

 

     Nine Months Ended
September 30
 
     2013     2012  

Income before tax

   $ 165,114,477      $ 135,392,326   
  

 

 

   

 

 

 

Income tax expense at the statutory rate

   $ 29,072,500      $ 25,313,164   

Tax effect of adjusting items:

    

Nondeductible expenses in determining taxable income

     (1,330,430     (2,051,178

Tax-exempt income

     (7,725,255     (8,575,286

Additional income tax on unappropriated earnings

     7,659,010        4,193,497   

Effect of tax rate changes on deferred income tax

     —          (543,611

The origination and reversal of temporary differences

     1,178,359        (636,702

Remeasurement of investment tax credits

     (5,814,829     (5,134,721

Remeasurement of loss carryforward

     (37,991     (1,874,287

Effect of deconsolidation of subsidiary

     (78,474     —     
  

 

 

   

 

 

 

Current income tax expense

     22,922,890        10,690,876   

Income tax adjustments on prior years

     (1,020,806     51,273   

Other income tax adjustments

     (19,405     45,331   
  

 

 

   

 

 

 

Income tax expense recognized in profit or loss

   $ 21,882,679      $ 10,787,480   
  

 

 

   

 

 

 

 

- 41 -


b. Income tax expense recognized in other comprehensive income

 

     Three Months Ended
September 30
     Nine Months Ended
September 30
 
     2013     2012      2013     2012  

Deferred income tax expense (benefit)

         

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

   $ (10,274   $ 24,497       $ (53,484   $ 333,426   
  

 

 

   

 

 

    

 

 

   

 

 

 

 

c. Integrated income tax information

 

    

September 30,

2013

     December 31,
2012
    

September 30,

2012

    

January 1,

2012

 

Balance of the Imputation

           

Credit Account—TSMC

   $ 15,242,724       $ 8,130,060       $ 8,136,884       $ 4,003,228   
  

 

 

    

 

 

    

 

 

    

 

 

 

The estimated and actual creditable ratio for distribution of TSMC’s earnings of 2012 and 2011 were 7.75% and 6.69%, respectively. Under the Rule No.10204562810 issued by the Ministry of Finance, when calculating the creditable ratio in the year of first-time adoption of Taiwan-IFRSs, companies should include the net increase/decrease to retained earnings from the effect of transition to Taiwan-IFRSs in the accumulated unappropriated earnings.

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

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

 

  d. Income tax examination

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

32. EARNINGS PER SHARE

 

     Three Months Ended
September 30
     Nine Months Ended
September 30
 
     2013      2012      2013      2012  

Basic EPS

   $ 2.00       $ 1.90       $ 5.53       $ 4.81   
  

 

 

    

 

 

    

 

 

    

 

 

 

Diluted EPS

   $ 2.00       $ 1.90       $ 5.53       $ 4.81   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

- 42 -


EPS is computed as follows:

 

     Amounts
(Numerator)
    

Number of
Shares
(Denominator)

(In Thousands)

     EPS
(NT$)
 

Three months ended September 30,2013

        

Basic EPS

        

Net income available to common shareholders of the parent

   $ 51,951,943         25,928,322       $ 2.00   
        

 

 

 

Effect of dilutive potential common shares

     —           1,162      
  

 

 

    

 

 

    

Diluted EPS

        

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

   $ 51,951,943         25,929,484       $ 2.00   
  

 

 

    

 

 

    

 

 

 

Three months ended September 30,2012

        

Basic EPS

        

Net income available to common shareholders of the parent

   $ 49,379,633         25,921,333       $ 1.90   
        

 

 

 

Effect of dilutive potential common shares

     —           5,724      
  

 

 

    

 

 

    

Diluted EPS

        

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

   $ 49,379,633         25,927,057       $ 1.90   
  

 

 

    

 

 

    

 

 

 

Nine months ended September 30, 2013

        

Basic EPS

        

Net income available to common shareholders of the parent

   $ 143,336,544         25,927,532       $ 5.53   
        

 

 

 

Effect of dilutive potential common shares

     —           1,968      
  

 

 

    

 

 

    

Diluted EPS

        

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

   $ 143,336,544         25,929,500       $ 5.53   
  

 

 

    

 

 

    

 

 

 

Nine months ended September 30, 2012

        

Basic EPS

        

Net income available to common shareholders of the parent

   $ 124,714,606         25,919,899       $ 4.81   
        

 

 

 

Effect of dilutive potential common shares

     —           7,139      
  

 

 

    

 

 

    

Diluted EPS

        

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

   $ 124,714,606         25,927,038       $ 4.81   
  

 

 

    

 

 

    

 

 

 

 

- 43 -


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
September 30
     Nine Months Ended
September 30
 
     2013      2012      2013      2012  

a.     Depreciation of property, plant and equipment

           

Recognized in cost of revenue

   $ 36,483,642       $ 31,394,353       $ 103,953,761       $ 85,505,984   

Recognized in operating expenses

     3,391,676         2,728,548         9,428,121         7,990,480   

Recognized in other operating income and expenses

     6,222         1,434         18,899         5,223   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 39,881,540       $ 34,124,335       $ 113,400,781       $ 93,501,687   
  

 

 

    

 

 

    

 

 

    

 

 

 

b.     Amortization of intangible assets

           

Recognized in cost of revenue

   $ 292,879       $ 345,860       $ 869,541       $ 1,026,093   

Recognized in operating expenses

     265,013         207,858         759,941         616,511   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 557,892       $ 553,718       $ 1,629,482       $ 1,642,604   
  

 

 

    

 

 

    

 

 

    

 

 

 

c.     Research and development costs expensed as

        incurred

   $ 13,357,075       $ 10,656,855       $ 35,949,931       $ 29,883,097   
  

 

 

    

 

 

    

 

 

    

 

 

 

d.     Employee benefits expenses

           

Post-employment benefits (Note 23)

           

Defined contribution plans

   $ 402,495       $ 364,639       $ 1,190,732       $ 1,031,294   

Defined benefit plans

     60,702         56,697         182,089         166,025   
  

 

 

    

 

 

    

 

 

    

 

 

 
     463,197         421,336         1,372,821         1,197,319   

Share-based payments

           

Equity-settled share-based payments

     —           2,975         5,312         3,372   

Other employee benefits

     17,480,981         16,447,437         49,775,647         44,400,299   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 17,944,178       $ 16,871,748       $ 51,153,780       $ 45,600,990   
  

 

 

    

 

 

    

 

 

    

 

 

 

Employee benefits expense summarized by function

           

Recognized in cost of revenue

   $ 10,676,625       $ 9,790,370       $ 30,602,553       $ 26,289,869   

Recognized in operating expenses

     7,267,553         7,081,378         20,551,227         19,311,121   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 17,944,178       $ 16,871,748       $ 51,153,780       $ 45,600,990   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

- 44 -


34. DECONSOLIDATION OF SUBSIDIARY

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

 

  a. Consideration received

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

 

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

 

    

June 30,

2013

 

Current assets

  

Cash and cash equivalents

   $ 979,910   

Accounts receivable

     564,364   

Inventories

     213,133   

Others

     110,766   

Noncurrent assets

  

Property, plant and equipment

     5,595,040   

Others

     164,311   

Current liabilities

  

Accounts payable

     (1,571,289

Others

     (291,715

Noncurrent liabilities

  

Loans

     (1,940,625

Others

     (27,472
  

 

 

 

Net assets deconsolidated

   $ 3,796,423   
  

 

 

 

 

  c. Gain on deconsolidation of subsidiary

 

    

Six Months
Ended June 30,

2013

 

Fair value of interest retained

   $ 1,816,848   
  

 

 

 

Less: Carrying amount of interest retained

  

Net assets deconsolidated

     3,796,423   

Noncontrolling interests

     (2,273,153
  

 

 

 
     1,523,270   
  

 

 

 

Gain on deconsolidation of subsidiary

   $ 293,578   
  

 

 

 

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

 

- 45 -


  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.

 

36. FINANCIAL INSTRUMENTS

 

  a. Categories of financial instruments

 

    

September 30,

2013

     December 31,
2012
    

September 30,

2012

    

January 1,

2012

 

Financial assets

           

FVTPL

           

Held for trading derivatives

   $ 188,970       $ 39,554       $ 58,690       $ 15,360   

Derivative instruments in designated hedge accounting relationships

     —           —           28,189         —     

Available-for-sale financial assets (Note)

     63,941,783         44,766,957         6,048,981         7,623,775   

Held-to-maturity financial assets

     700,285         5,056,973         7,556,046         9,068,847   

Loans and receivables

           

Cash and cash equivalents

     216,603,697         143,410,588         138,738,113         143,472,277   

Notes and accounts receivables (including related parties)

     79,671,869         58,131,397         65,312,182         46,016,052   

Other receivables

     1,393,288         1,307,473         1,262,762         1,403,694   

Refundable deposits

     2,464,658         2,426,712         2,331,966         4,518,863   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 364,964,550       $ 255,139,654       $ 221,336,929       $ 212,118,868   
  

 

 

    

 

 

    

 

 

    

 

 

 

Financial liabilities

           

FVTPL

           

Held for trading derivatives

   $ 18,876       $ 15,625       $ 20,013       $ 13,742   

Derivative instruments in designated hedge accounting relationships

     6,144,025         —           —           232   

Amortized cost

           

Short-term loans

     18,053,096         34,714,929         29,749,650         25,926,528   

Accounts payable (including related parties)

     15,072,702         15,239,042         14,556,361         11,859,008   

Payables to contactors and equipment suppliers

     58,381,100         44,831,798         32,785,881         35,540,526   

Accrued expenses and other current liabilities

     13,380,307         9,316,232         11,194,461         7,796,538   

Bonds payable

     210,416,434         80,000,000         75,600,000         22,500,000   

Long-term bank loans

     40,000         1,487,500         1,518,750         1,650,000   

Other long-term payables

     54,000         967,485         960,671         3,399,855   

Guarantee deposits

     149,622         203,890         229,212         443,983   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 321,710,162       $ 186,776,501       $ 166,614,999       $ 109,130,412   
  

 

 

    

 

 

    

 

 

    

 

 

 

Note: Including financial assets carried at cost.

 

- 46 -


  b. Financial risk management objectives

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

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

 

  c. Market risk

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

Foreign currency risk

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

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

The Company’s sensitivity analysis to foreign currency risk mainly focuses on the foreign currency monetary items and forward contracts designated as hedging instruments in cash flow hedge 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 nine months ended September 30, 2013 and 2012 would have decreased by NT$390,328 thousand and NT$464,243 thousand, respectively, and the equity as of September 30, 2013 and 2012 would have decreased by nil and NT$755,493 thousand, respectively, after taking into consideration of the hedging contracts and the hedged items.

Interest rate risk

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

Assuming the amount of floating interest rate bank loans at the end of the reporting period had been outstanding for the entire period and all other variables were held constant, a hypothetical increase in interest rates of 100 basis point (1%) would have resulted in an increase in the interest expense, net of tax, by approximately NT$83 thousand and NT$9,664 thousand for the nine months ended September 30, 2013 and 2012, respectively.

 

- 47 -


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 nine months ended September 30, 2013 and 2012 would have been unaffected as they were classified as available-for-sale; however, the other comprehensive income for the nine months ended September 30, 2013 and 2012 would have decreased by NT$1,982,639 thousand and NT$283,693 thousand, respectively.

 

  d. Credit risk management

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Company. The Company is exposed to credit risk from operating activities, primarily trade receivables, and from financing activities, primarily deposits, fixed-income investments and other financial instruments with banks. Credit risk is managed separately for business related and financial related exposures. As of the 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 September 30, 2013, December 31, 2012, September 30, 2012 and January 1, 2012, the Company’s ten largest customers accounted for 68%, 68%, 65% 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 September 30, 2013, December 31, 2012, September 30, 2012 and January 1, 2012, the unused of financing facilities of the Company amounted to NT$74,576,628 thousand, NT$53,422,331 thousand, NT$56,735,075 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.

 

- 48 -


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

September 30, 2013

            

Non-derivative financial liabilities

            

Short-term loans

   $ 18,054,545      $ —        $ —         $ —         $ 18,054,545   

Accounts payable (including related parties)

     15,072,702        —          —           —           15,072,702   

Payables to contractors and equipment suppliers

     58,381,100        —          —           —           58,381,100   

Accrued expenses and other current liabilities

     13,380,307        —          —           —           13,380,307   

Bonds payable

     3,031,089        28,365,613        100,905,347         94,765,194         227,067,243   

Long-term bank loans

     1,450        7,840        21,752         15,362         46,404   

Other long-term payables

     18,000        36,000        —           —           54,000   

Obligations under finance leases

     27,912        55,824        55,824         725,137         864,697   

Guarantee deposits

     —          149,622        —           —           149,622   
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 
     107,967,105        28,614,899        100,982,923         95,505,693         333,070,620   
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

Derivative financial instruments

            

Forward exchange contracts

            

Outflows

     18,685,458        —          —           —           18,685,458   

Inflows

     (18,648,781     —          —           —           (18,648,781
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 
     36,677        —          —           —           36,677   
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

Cross currency swap contracts

            

Outflows

     36,821,779        —          —           —           36,821,779   

Inflows

     (37,054,637     —          —           —           (37,054,637
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 
     (232,858     —          —           —           (232,858
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

Stock forward contracts

            

Outflows

     —          18,012,420        —           —           18,012,420   

Inflows

     —          (18,012,420     —           —           (18,012,420
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 
     —          —          —           —           —     
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 
   $ 107,770,924      $ 28,614,899      $ 100,982,923       $ 95,505,693       $ 332,874,439   
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

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 contractors 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   
  

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

(Continued)

 

- 49 -


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

September 30, 2012

             

Non-derivative financial liabilities

             

Short-term loans

   $ 29,755,776      $ —         $ —         $ —         $ 29,755,776   

Accounts payable (including related parties)

     14,556,361        —           —           —           14,556,361   

Payables to contractors and equipment suppliers

     32,785,881        —           —           —           32,785,881   

Accrued expenses and other current liabilities

     11,194,461        —           —           —           11,194,461   

Bonds payable

     1,040,830        2,081,660         44,917,871         33,232,144         81,272,505   

Long-term bank loans

     142,415        746,515         673,790         —           1,562,720   

Other long-term payables

     906,671        36,000         18,000         —           960,671   

Obligations under finance leases

     26,809        53,618         53,618         723,303         857,348   

Guarantee deposits

     —          229,212         —           —           229,212   
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 
     90,409,204        3,147,005         45,663,279         33,955,447         173,174,935   
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Derivative financial instruments

             

Forward exchange contracts

             

Outflows

     25,207,529        —           —           —           25,207,529   

Inflows

     (25,249,296     —           —           —           (25,249,296
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 
     (41,767     —           —           —           (41,767
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

Cross currency swap contracts

             

Outflows

     5,815,713        —           —           —           5,815,713   

Inflows

     (5,819,917     —           —           —           (5,819,917
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 
     (4,204     —           —           —           (4,204
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 
   $ 90,363,233      $ 3,147,005       $ 45,663,279       $ 33,955,447       $ 173,128,964   
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 

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 contractors 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)

 

- 50 -


  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.

 

    September 30, 2013     December 31, 2012     September 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

  $ 700,285      $ 701,689      $ 5,056,973      $ 5,066,363      $ 7,556,046      $ 7,572,791      $ 8,614,527      $ 8,674,016   

Government bonds

    —          —          —          —          —          —          454,320        454,047   

Financial liabilities

               

Measured at amortized cost

               

Bonds payable

    210,416,434        208,999,161        80,000,000        80,343,413        75,600,000        75,940,020        22,500,000        22,597,115   

 

  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).

 

     September 30, 2013  
     Level 1      Level 2      Level 3      Total  

Financial assets at FVTPL

           

Derivative financial instruments

   $ —         $ 188,970       $ —         $ 188,970   
  

 

 

    

 

 

    

 

 

    

 

 

 

Available-for-sale financial assets

           

Publicly traded stocks

   $ 61,802,636       $ —         $ —         $ 61,802,636   

Money market funds

     14,640         —           —           14,640   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 61,817,276       $ —         $ —         $ 61,817,276   
  

 

 

    

 

 

    

 

 

    

 

 

 

Financial liabilities at FVTPL

           

Derivative financial instruments

   $ —         $ 18,876       $ —         $ 18,876   
  

 

 

    

 

 

    

 

 

    

 

 

 

Hedging derivative financial liabilities

           

Stock forward contract

   $ —         $ 6,144,025       $ —         $ 6,144,025   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

- 51 -


     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   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

     September 30, 2012  
     Level 1      Level 2      Level 3      Total  

Financial assets at FVTPL

           

Derivative financial instruments

   $ —         $ 58,690       $ —         $ 58,690   
  

 

 

    

 

 

    

 

 

    

 

 

 

Hedging derivative financial assets

           

Forward exchange contract

   $ —         $ 28,189       $ —         $ 28,189   
  

 

 

    

 

 

    

 

 

    

 

 

 

Available-for-sale financial assets

           

Publicly traded stocks

   $ 2,067,730       $ —         $ —         $ 2,067,730   
  

 

 

    

 

 

    

 

 

    

 

 

 

Financial liabilities at FVTPL

           

Derivative financial instruments

   $ —         $ 20,013       $ —         $ 20,013   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

     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   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

- 52 -


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

There were no purchases and disposals for assets on Level 3 for the nine months ended September 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.

 

    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
September 30
     Nine Months Ended
September 30
 
     2013      2012      2013      2012  

Associates

   $ 1,550,041       $ 1,696,563       $ 3,167,527       $ 4,332,593   

Joint venture

     248         642         1,087         2,947   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 1,550,289       $ 1,697,205       $ 3,168,614       $ 4,335,540   
  

 

 

    

 

 

    

 

 

    

 

 

 
     Net Revenue from Royalties  
     Three Months Ended
September 30
     Nine Months Ended
September 30
 
     2013      2012      2013      2012  

Associates

   $ 130,815       $ 123,444       $ 379,060       $ 350,695   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

- 53 -


     Purchases  
     Three Months Ended
September 30
     Nine Months Ended
September 30
 
     2013     2012      2013     2012  

Associates

   $ 2,712,305      $ 2,290,626       $ 6,982,310      $ 6,055,155   
  

 

 

   

 

 

    

 

 

   

 

 

 
     Manufacturing Expenses  
     Three Months Ended
September 30
     Nine Months Ended
September 30
 
     2013     2012      2013     2012  

Associates

   $ 392,111      $ 3,566       $ 404,863      $ 4,861   

Joint venture

     1,283        3,787         4,785        13,391   
  

 

 

   

 

 

    

 

 

   

 

 

 
   $ 393,394      $ 7,353       $ 409,648      $ 18,252   
  

 

 

   

 

 

    

 

 

   

 

 

 
     Research and Development Expenses  
     Three Months Ended
September 30
     Nine Months Ended
September 30
 
     2013     2012      2013     2012  

Associates

   $ 312      $ 4,656       $ 312      $ 4,656   

Joint venture

     852        2,208         4,310        6,669   
  

 

 

   

 

 

    

 

 

   

 

 

 
   $ 1,164      $ 6,864       $ 4,622      $ 11,325   
  

 

 

   

 

 

    

 

 

   

 

 

 
     Sales of Property, Plant and Equipment  
     Three Months Ended
September 30
     Nine Months Ended
September 30
 
     2013     2012      2013     2012  

Associates

   $ 3,548      $ —         $ 14,966      $ —     

Joint venture

     —          —           —          9,000   
  

 

 

   

 

 

    

 

 

   

 

 

 
   $ 3,548      $ —         $ 14,966      $ 9,000   
  

 

 

   

 

 

    

 

 

   

 

 

 
     Gains (Losses) from Sales of Property, Plant and Equipment, Net  
     Three Months Ended
September 30
     Nine Months Ended
September 30
 
     2013     2012      2013     2012  

Associates

   $ (6,772   $ —         $ (4,207   $ —     

Joint venture

     832        58         948        155   
  

 

 

   

 

 

    

 

 

   

 

 

 
   $ (5,940   $ 58       $ (3,259   $ 155   
  

 

 

   

 

 

    

 

 

   

 

 

 

 

- 54 -


     Purchase of Property, Plant and Equipment and Intangible Assets  
     Three Months Ended
September 30
     Nine Months Ended
September 30
 
     2013      2012      2013      2012  

Associates

   $ 9,300       $ 17,631       $ 21,135       $ 21,768   

Joint venture

     —           —           —           1,224   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 9,300       $ 17,631       $ 21,135       $ 22,992   
  

 

 

    

 

 

    

 

 

    

 

 

 
     Non-operating Income  
     Three Months Ended
September 30
     Nine Months Ended
September 30
 
     2013      2012      2013      2012  

Associates

   $ —         $ 20       $ —         $ 5,136   
  

 

 

    

 

 

    

 

 

    

 

 

 

The following balances were outstanding at the end of reporting period:

 

     Receivables from Related Parties  
    

September 30,

2013

     December 31,
2012
    

September 30,

2012

    

January 1,

2012

 

Associates

   $ 827,323       $ 353,652       $ 924,935       $ 185,552   

Joint venture

     157         159         310         212   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 827,480       $ 353,811       $ 925,245       $ 185,764   
  

 

 

    

 

 

    

 

 

    

 

 

 
     Other Receivables from Related Parties  
    

September 30,

2013

     December 31,
2012
    

September 30,

2012

    

January 1,

2012

 

Associates

   $ 194,408       $ 185,550       $ 157,144       $ 121,767   

Joint venture

     —           —           —           525   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 194,408       $ 185,550       $ 157,144       $ 122,292   
  

 

 

    

 

 

    

 

 

    

 

 

 
     Refundable Deposits  
    

September 30,

2013

     December 31,
2012
    

September 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  
    

September 30,

2013

     December 31,
2012
    

September 30,

2012

    

January 1,

2012

 

Associates

   $ 1,592,616       $ 746,532       $ 779,862       $ 1,325,791   

Joint venture

     1,488         2,081         3,391         2,730   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 1,594,104       $ 748,613       $ 783,253       $ 1,328,521   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

- 55 -


     Deferred Gains (Losses) from Disposal of Machinery and Equipment  
    

September 30,

2013

     December 31,
2012
   

September 30,

2012

    

January 1,

2012

 

Associates

   $ —         $ (7,806   $ —         $ —     

Joint venture

     —           948        1,006         —     
  

 

 

    

 

 

   

 

 

    

 

 

 
   $ —         $ (6,858   $ 1,006       $ —     
  

 

 

    

 

 

   

 

 

    

 

 

 

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

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

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

 

  b. Compensation of key management personnel:

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

 

     Three Months Ended
September 30
     Nine Months Ended
September 30
 
     2013      2012      2013      2012  

Short-term employee benefits

   $ 433,540       $ 401,196       $ 1,064,506       $ 1,071,118   

Post-employment benefits

     1,081         903         3,429         2,667   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 434,621       $ 402,099       $ 1,067,935       $ 1,073,785   
  

 

 

    

 

 

    

 

 

    

 

 

 

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.

 

38. PLEDGED ASSETS

The Company provided certificate of deposits recorded in other financial assets as collateral mainly for building lease agreements. As of September 30, 2013, December 31, 2012, September 30, 2012 and January 1, 2012, the aforementioned other financial assets amounted to NT$119,657 thousand, NT$119,710 thousand, NT$120,761 thousand and NT$121,140 thousand, respectively.

 

- 56 -


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 January 2014 and December 2032 and can be renewed upon expiration.

The Company expensed the lease payments as follows:

 

     Three Months Ended
September 30
     Nine Months Ended
September 30
 
     2013      2012      2013      2012  

Minimum lease payments

   $ 207,129       $ 177,698       $ 674,611       $ 508,810   
  

 

 

    

 

 

    

 

 

    

 

 

 

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

 

    

September 30,

2013

     December 31,
2012
    

September 30,

2012

    

January 1,

2012

 

Not later than 1 year

   $ 855,050       $ 693,758       $ 688,636       $ 627,882   

Later than 1 year and not later than 5 years

     3,095,753         2,478,443         2,568,078         2,258,302   

Later than 5 years

     5,700,287         4,221,524         4,175,578         3,870,728   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 9,651,090       $ 7,393,725       $ 7,432,292       $ 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.

 

- 57 -


  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 September 30, 2013, December 31, 2012, September 30, 2012 and January 1, 2012 were NT$88,713 thousand, NT$99,671 thousand, NT$87,930 thousand and NT$263,880 thousand, respectively.

 

- 58 -


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

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

 

     September 30, 2013      December 31, 2012      September 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

   $ 5,588,215         29.571       $ 3,437,165         29.038       $ 4,497,012         29.31       $ 3,744,817         30.288   

EUR

     428,636         39.82         125,973         38.39-38.49         80,269         37.82-37.89         135,857         39.18-39.27   

JPY

     32,291,536         0.3016         35,734,874         0.3352-0.3364         10,086,700         0.3776-0.3777         37,276,671         0.3897-0.3906   

RMB

     775,484         4.81         102,995         4.66         66,627         4.62         201,385         4.81   

Non-monetary items

                       

USD

     2,464,088         29.571         1,611,474         29.038         345,383         29.31         141,498         30.288   

HKD

     143,498         3.81         492,014         3.75         429,815         3.78         671,060         3.90   

Investments accounted for using equity method

                       

USD

     348,805         29.571         328,281         29.038         305,453         29.31         294,797         30.288   

Financial liabilities

                       

Monetary items

                       

USD

     3,079,988         29.571         2,193,343         29.038         1,919,805         29.31         1,744,746         30.288   

EUR

     757,852         39.82         247,052         38.39-38.49         86,661         37.82-37.89         111,750         39.18-39.27   

JPY

     38,952,345         0.3016         43,311,360         0.3352-0.3364         30,796,781         0.3776-0.3777         35,349,169         0.3897-0.3906   

RMB

     206,520         4.81         205,930         4.66         213,842         4.62         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 September 30, 2013

         

Net revenue from external customers

   $ 162,503,501       $ 73,533      $ —        $ 162,577,034   

Net revenue from sales among intersegments

     —           8,939        (8,939     —     

Income (loss) from operations

     60,255,825         (637,771     —          59,618,054   

(Continued)

 

- 59 -


     Foundry      Others     Elimination     Total  

Three months ended September 30, 2012

         

Net revenue from external customers

   $ 141,495,125       $ 4,128      $ —        $ 141,499,253   

Net revenue from sales among intersegments

     —           3,489        (3,489     —     

Income (loss) from operations

     53,519,822         (721,844     —          52,797,978   

Nine months ended September 30, 2013

         

Net revenue from external customers

     450,987,343         231,007        —          451,218,350   

Net revenue from sales among intersegments

     —           14,837        (14,837     —     

Income (loss) from operations

     163,656,307         (1,981,162     —          161,675,145   

Nine months ended September 30, 2012

         

Net revenue from external customers

     375,224,307         76,108        —          375,300,415   

Net revenue from sales among intersegments

     —           6,967        (6,967     —     

Income (loss) from operations

     136,700,564         (1,913,185     —          134,787,379   

(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 nine months ended September 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.

 

- 60 -


  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.

 

  1) Reconciliation of consolidated balance sheet as of September 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

   $ 138,738,113      $ —        $ —        $ 138,738,113       Cash and cash equivalents   

Financial assets at fair value through profit or loss

     58,690        —          —          58,690      

Financial assets at fair value through profit or loss

  

Available-for-sale financial assets

     2,067,730        —          —          2,067,730       Available-for-sale financial assets   

Held-to-maturity financial assets

     6,854,611        —          —          6,854,611       Held-to-maturity financial assets   

Hedging derivative financial assets

     28,189        —          —          28,189       Hedging derivative financial assets   

Notes and accounts receivable

     64,876,527        —          (489,590     64,386,937       Notes and accounts receivable   

Receivables from related parties

     925,245        —          —          925,245       Receivables from related parties   

Allowance for doubtful receivables

     (489,590     —          489,590        —         —     

Allowance for sales returns and others

     (6,900,184     —          6,900,184        —         —        a

Other receivables from related parties

     157,144        —          —          157,144      

Other receivables from related parties

  

Other financial assets

     469,979        —          —          469,979       Other financial assets   

Inventories

     33,249,045        —          —          33,249,045       Inventories   

Deferred income tax assets

     2,650,432        —          (2,650,432     —         —        b

Prepaid expenses and other current assets

     2,639,414        —          —          2,639,414       Other current assets   
  

 

 

   

 

 

   

 

 

   

 

 

       

Total current assets

     245,325,345        —          4,249,752        249,575,097       Total current assets   
  

 

 

   

 

 

   

 

 

   

 

 

       

Long-term investments

              

Investments accounted for using equity method

     23,958,462        (51,304     —          23,907,158      

Investments accounted for using
equity method

     e

Held-to-maturity financial assets

     701,435        —          —          701,435       Held-to-maturity financial assets   

Financial assets carried at cost

     3,981,251        —          —          3,981,251       Financial assets carried at cost   
  

 

 

   

 

 

   

 

 

   

 

 

       

Total long-term investments

     28,641,148        (51,304     —          28,589,844         
  

 

 

   

 

 

   

 

 

   

 

 

       

Net property, plant and equipment

     580,079,887        —          34,175        580,114,062       Property, plant and equipment      c
  

 

 

   

 

 

   

 

 

   

 

 

       

Intangible assets

     10,888,854        —          —          10,888,854       Intangible assets   
  

 

 

   

 

 

   

 

 

   

 

 

       

Other assets

              

Deferred income tax assets

     10,137,266        270,786        2,650,432        13,058,484       Deferred income tax assets      b ), d) 

Refundable deposits

     2,331,966        —          —          2,331,966       Refundable deposits   

Others

     1,247,304        —          (34,175     1,213,129       Other noncurrent assets      c
  

 

 

   

 

 

   

 

 

   

 

 

       

Total other assets

     13,716,536        270,786        2,616,257        16,603,579         
  

 

 

   

 

 

   

 

 

   

 

 

       

Total

   $ 878,651,770      $ 219,482      $ 6,900,184      $ 885,771,436       Total   
  

 

 

   

 

 

   

 

 

   

 

 

       

(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  

Current liabilities

             

Short-term loans

   $ 29,749,650      $ —        $ —        $ 29,749,650     

Short-term loans

  

Financial liabilities at fair value through profit or loss

     20,013        —          —          20,013     

Financial liabilities at fair value through profit or loss

  

Accounts payable

     13,773,108        —          —          13,773,108     

Accounts payable

  

Payables to related parties

     783,253        —          —          783,253     

Payables to related parties

  

Income tax payable

     10,855,245        —          —          10,855,245     

Income tax payable

  

Salary and bonus payable

     6,994,285        —          —          6,994,285     

Salary and bonus payable

  

Accrued profit sharing to employees and bonus to directors and supervisors

     8,654,015        —          —          8,654,015     

Accrued profit sharing to employees and bonus to directors and supervisors

  

Payables to contractors and equipment suppliers

     32,785,881        —          —          32,785,881     

Payables to contractors and equipment suppliers

  

Accrued expenses and other current liabilities

     15,312,033        —          —          15,312,033     

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

  

     —          —          6,900,184        6,900,184     

Provisions

     a
  

 

 

   

 

 

   

 

 

   

 

 

      

Total current liabilities

     119,052,483        —          6,900,184        125,952,667     

Total current liabilities

  
  

 

 

   

 

 

   

 

 

   

 

 

      

Long-term liabilities

             

Bonds payable

     75,600,000        —          —          75,600,000     

Bonds payable

  

Long-term bank loans

     1,393,750        —          —          1,393,750     

Long-term bank loans

  

Other long-term payable

     54,000        —          —          54,000     

Other long-term payable

  

Obligations under capital leases

     737,034        —          —          737,034     

Obligations under capital leases

  
  

 

 

   

 

 

   

 

 

   

 

 

      

Total long-term liabilities

     77,784,784        —          —          77,784,784        
  

 

 

   

 

 

   

 

 

   

 

 

      

Other liabilities

             

Accrued pension cost

     3,955,056        2,278,222        —          6,233,278     

Accrued pension cost

     d

Guarantee deposits

     229,212        —          —          229,212     

Guarantee deposits

  

     —          —          3,619        3,619     

Provisions

  

Others

     484,178        —          (3,619     480,559     

Other noncurrent liabilities

  
  

 

 

   

 

 

   

 

 

   

 

 

      

Total other liabilities

     4,668,446        2,278,222        —          6,946,668        
  

 

 

   

 

 

   

 

 

   

 

 

      

Total liabilities

     201,505,713        2,278,222        6,900,184        210,684,119     

Total liabilities

  
  

 

 

   

 

 

   

 

 

   

 

 

      

Equity attributable to shareholders of the parent
    Capital stock

     259,220,476        —          —          259,220,476     

Capital stock

  
  

 

 

   

 

 

   

 

 

   

 

 

      

Capital surplus

     56,074,435        (444,010     —          55,630,425     

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

     245,605,674        (1,601,756     —          244,003,918     

Unappropriated earnings

     d ), e) 
  

 

 

   

 

 

   

 

 

   

 

 

      
     369,032,021        (1,601,756     —          367,430,265        
  

 

 

   

 

 

   

 

 

   

 

 

      

Others

             

Cumulative translation adjustments

     (10,052,181     (59     —          (10,052,240  

Foreign currency translation reserve

     e

Unrealized gain/loss on financial instruments

     268,440        —          (28,189     240,251     

Unrealized gain (loss) from available-for-sale financial assets

  

     —          —          28,189        28,189     

Cash flow hedging reserve

  
  

 

 

   

 

 

   

 

 

   

 

 

      
     (9,783,741     (59     —          (9,783,800     
  

 

 

   

 

 

   

 

 

   

 

 

      

Equity attributable to shareholders of the parent

     674,543,191        (2,045,825     —          672,497,366     

Equity attributable to shareholders of the parent

  

Minority interests

     2,602,866        (12,915     —          2,589,951     

Noncontrolling interests

     d
  

 

 

   

 

 

   

 

 

   

 

 

      

Total shareholders’ equity

     677,146,057        (2,058,740     —          675,087,317     

Total shareholders’ equity

  
  

 

 

   

 

 

   

 

 

   

 

 

      

Total

   $ 878,651,770      $ 219,482      $ 6,900,184      $ 885,771,436     

Total

  
  

 

 

   

 

 

   

 

 

   

 

 

      

(Concluded)

 

- 62 -


2) Reconciliation of consolidated statement of comprehensive income for the nine months ended September 30, 2012

 

          Effect of Transition to
Taiwan-IFRSs
                 

R.O.C. GAAP

   

Recognition and

Measurement
Difference

   

Presentation
Difference

    Taiwan-IFRSs      
Item   Amount         Amount     Item   Note  

Net sales

  $ 374,943,954      $ —        $ 356,461      $ 375,300,415      Net revenue     f

Cost of sales

    193,167,804        (33,945     —          193,133,859      Cost of revenue     d
 

 

 

   

 

 

   

 

 

   

 

 

     

Gross profit before affiliates elimination

    181,776,150        33,945        356,461        182,166,556     

Gross profit before unrealized gross profit on sales to associates

 

Unrealized gross profit from affiliates

    (129,569     —          —          (129,569  

Unrealized gross profit on sales to associates

 
 

 

 

   

 

 

   

 

 

   

 

 

     

Gross profit

    181,646,581        33,945        356,461        182,036,987      Gross profit  
 

 

 

   

 

 

   

 

 

   

 

 

     

Operating expenses

           

Research and development

    29,897,315        (14,218     —          29,883,097      Research and development     d

General and administrative

    13,505,479        (5,020     —          13,500,459      General and administrative     d

Marketing

    3,441,269        (1,111     —          3,440,158      Marketing     d
 

 

 

   

 

 

   

 

 

   

 

 

     

Total operating expenses

    46,844,063        (20,349     —          46,823,714       
 

 

 

   

 

 

   

 

 

   

 

 

     

—  

    —          —          (425,894     (425,894   Other operating income and expenses, net     f
 

 

 

   

 

 

   

 

 

   

 

 

     

Income from operations

    134,802,518        54,294        (69,433     134,787,379      Income from operations  
 

 

 

   

 

 

   

 

 

   

 

 

     

Non-operating income and gains

           

Equity in earnings of equity method investees, net

    1,305,776        32,485        —          1,338,261     

Share of profits of associates and joint venture

    e

Interest income

    1,294,864        —          (1,294,864     —        —       f

Gain on disposal of financial assets, net

    449,060        —          (449,060     —        —       f

Settlement income

    448,275        —          (448,275     —        —       f

Technical service income

    356,461        —          (356,461     —        —       f

Foreign exchange gain, net

    208,125        —          —          208,125      Foreign exchange gain, net  

Valuation gain on financial instruments, net

    43,842        —          (43,842     —        —       f

Gain on disposal of property, plant and equipment and other assets

    21,749        —          (21,749     —        —       f

Others

    481,489        —          (481,489     —        —       f

—  

    —          —          1,364,809        1,364,809      Other income     f

—  

    —          (1,009     (1,619,821     (1,620,830   Other gains and losses     e ), f) 
 

 

 

   

 

 

   

 

 

   

 

 

     
    4,609,641        31,476        (3,350,752     1,290,365       
 

 

 

   

 

 

   

 

 

   

 

 

     

Non-operating expenses and losses

           

Impairment loss of financial assets

    2,748,616        —          (2,748,616     —        —       f

Interest expense

    685,418        —          —          685,418      Finance cost  

Impairment loss on idle assets

    422,323        —          (422,323     —        —       f

Loss on disposal of property, plant and equipment

    21,486        —          (21,486     —        —       f

Others

    227,760        —          (227,760     —        —       f
 

 

 

   

 

 

   

 

 

   

 

 

     
    4,105,603        —          (3,420,185     685,418       
 

 

 

   

 

 

   

 

 

   

 

 

     

Income before income tax

    135,306,556        85,770        —          135,392,326      Income before income tax  

Income tax expense

    10,827,255        (39,775     —          10,787,480      Income tax expense     d
 

 

 

   

 

 

   

 

 

   

 

 

     

Net income

  $ 124,479,301      $ 125,545      $ —          124,604,846      Net income  
 

 

 

   

 

 

   

 

 

   

 

 

     
          (3,627,600  

Exchange differences arising on translation of foreign operations

 
          1,710,289     

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

 
          28,421      Cash flow hedges  
          68,461     

Share of other comprehensive income of associates and joint venture

 

(Continued)

 

- 63 -


        Effect of Transition to
Taiwan-IFRSs
             

R.O.C. GAAP

 

Recognition and

Measurement
Difference

 

Presentation
Difference

  Taiwan-IFRSs    
Item   Amount       Amount     Item   Note
        $ (333,426  

Income tax expense relating to components of other comprehensive income

 
       

 

 

     
          (2,153,855  

Other comprehensive income for the period, net of income tax

 
       

 

 

     
        $ 122,450,991     

Total comprehensive income for the period

 
       

 

 

     

(Concluded)

 

3) Reconciliation of consolidated statement of comprehensive income for the three months ended September 30, 2012

 

            Effect of Transition to
Taiwan-IFRSs
                   

R.O.C. GAAP

    

Recognition and

Measurement
Difference

   

Presentation
Difference

    Taiwan-IFRSs       
Item    Amount          Amount      Item    Note  

Net sales

   $ 141,375,451       $ —        $ 123,802      $ 141,499,253       Net revenue      f

Cost of sales

     72,356,073         (11,572     —          72,344,501       Cost of revenue      d
  

 

 

    

 

 

   

 

 

   

 

 

       

Gross profit before affiliates elimination

     69,019,378         11,572        123,802        69,154,752      

Gross profit before realized gross profit on sales to associates

  

Realized gross profit from affiliates

     10,381         —          —          10,381      

Realized gross profit on sales to associates

  
  

 

 

    

 

 

   

 

 

   

 

 

       

Gross profit

     69,029,759         11,572        123,802        69,165,133       Gross profit   
  

 

 

    

 

 

   

 

 

   

 

 

       

Operating expenses

               

Research and development

     10,661,534         (4,679     —          10,656,855       Research and development      d

General and administrative

     4,480,013         (1,496     —          4,478,517       General and administrative      d

Marketing

     1,235,333         (351     —          1,234,982       Marketing      d
  

 

 

    

 

 

   

 

 

   

 

 

       

Total operating expenses

     16,376,880         (6,526     —          16,370,354         
  

 

 

    

 

 

   

 

 

   

 

 

       

—  

     —           —          3,199        3,199      

Other operating income and expenses, net

     f
  

 

 

    

 

 

   

 

 

   

 

 

       

Income from operations

     52,652,879         18,098        127,001        52,797,978       Income from operations   
  

 

 

    

 

 

   

 

 

   

 

 

       

Non-operating income and gains

               

Equity in earnings of equity method investees, net

     695,480         16,706        —          712,186      

Share of profits of associates and joint venture

     e

Interest income

     353,132         —          (353,132     —         —        f

Valuation gain on financial assets, net

     233,579         —          (233,579     —         —        f

Technical service income

     123,802         —          (123,802     —         —        f

Gain on settlement and disposal of financial assets, net

     83,329         —          (83,329     —         —        f

Gain on disposal of property, plant and equipment and other assets

     4,389         —          (4,389     —         —        f

Others

     88,170         —          (88,170     —         —        f

—  

     —           —          353,132        353,132       Other income      f

—  

     —           (1,009     327,618        326,609       Other gains and losses      e ), f) 
  

 

 

    

 

 

   

 

 

   

 

 

       
     1,581,881         15,697        (205,651     1,391,927         
  

 

 

    

 

 

   

 

 

   

 

 

       

Non-operating expenses and losses

               

Interest expense

     270,379         —          —          270,379       Finance costs   

Foreign exchange loss, net

     157,185         —          —          157,185       Foreign exchange loss, net   

Impairment loss of financial assets

     160         —          (160     —         —        f

Others

     78,490         —          (78,490     —         —        f
  

 

 

    

 

 

   

 

 

   

 

 

       
     506,214         —          (78,650     427,564         
  

 

 

    

 

 

   

 

 

   

 

 

       

Income before income tax

     53,728,546         33,795        —          53,762,341       Income before income tax   

Income tax expense

     4,383,313         (43,266     —          4,340,047       Income tax expense      d
  

 

 

    

 

 

   

 

 

   

 

 

       

Net income

   $ 49,345,233       $ 77,061      $ —          49,422,294       Net income   
  

 

 

    

 

 

   

 

 

   

 

 

       

(Continued)

 

- 64 -


          Effect of Transition to
Taiwan-IFRSs
               

R.O.C. GAAP

  

Recognition and

Measurement
Difference

  

Presentation
Difference

   Taiwan-IFRSs     
Item    Amount          Amount     Item    Note
            $ (2,239,717  

Exchange differences arising on translation of foreign operations

  
              (112,534  

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

  
              28,258      Cash flow hedges   
              48,074     

Share of other comprehensive income of associates and joint venture

  
              (24,497  

Income tax expense relating to components of other comprehensive income

  
           

 

 

      
              (2,300,416  

Other comprehensive income for the period, net of income tax

  
           

 

 

      
            $ 47,121,878     

Total comprehensive income for the period

  
           

 

 

      

(Concluded)

 

4) Reconciliation of equity

 

     Note     September 30,
2012
 

Equity under R.O.C. GAAP

     $ 677,146,057   

Adjustments:

    

Defined benefit plans

     d     (2,007,436

Investments accounted for using the equity method

     e     (51,304
    

 

 

 

Equity under Taiwan-IFRSs

     $ 675,087,317   
    

 

 

 

 

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 September 30, 2012, the amounts reclassified from allowance for sales returns and others to provisions were NT$6,900,184 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.

 

- 65 -


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.

As of September 30, 2012, the amounts reclassified from deferred income tax assets to noncurrent assets were NT$2,650,432 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 September 30, 2012, the amounts reclassified from assets leased to others and idle assets to property, plant and equipment were NT$34,175 thousand.

 

  d) Employee benefits

The Company had recognized the pension cost and retirement benefit obligation under its defined benefit plans based on actuarial valuations performed 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 such actuarial 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 September 30, 2012, accrued pension cost of the Company was adjusted for an increase of NT$2,278,222 thousand; deferred income tax assets were adjusted for an increase of NT$270,786 thousand; noncontrolling interests were adjusted for a decrease of NT$12,915 thousand. For the nine months ended September 30, 2012, pension cost and income tax expense of the Company were adjusted for a decrease of NT$54,294 thousand and NT$39,775 thousand, respectively. For the three months ended September 30, 2012, pension cost and income tax expense of the Company were adjusted for a decrease of NT$18,098 thousand and NT$43,266 thousand, respectively.

 

- 66 -


  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 September 30, 2012, as a result of the differences mentioned above, investment accounted for using the equity method was adjusted for a decrease of NT$51,304 thousand; foreign currency translation reserve was adjusted for an decrease of NT$59 thousand; capital surplus was adjusted for a decrease of NT$444,010 thousand. In addition, share of profits of associates and joint venture was adjusted for an increase of NT$32,485 thousand and NT$16,706 thousand, respectively, for the nine months and three months ended September 30, 2012, respectively. Other gains and losses were both adjusted for a decrease of NT$1,009 thousand for the nine months and three months ended September 30, 2012.

 

  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 nine months ended September 30, 2012, the Company reclassified technical service income of NT$356,461 thousand to net revenue; rental revenue of NT$503 thousand, other income of NT$886 thousand, net gain on disposal of property, plant and equipment and other assets of NT$263 thousand, depreciation of rental assets of NT$5,223 thousand and impairment loss on idle assets of NT$422,323 thousand to other operating income and expenses. In addition, interest income of NT$1,294,864 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$449,060 thousand, others of NT$410,589 thousand (under non-operating income and gains), net valuation gain on financial instruments of NT$43,842 thousand, impairment loss of financial assets of NT$2,748,616 thousand as well as others of NT$222,971 thousand (under non-operating expenses and losses) were reclassified to other gains and losses for the nine months ended September 30, 2012. For the three months ended September 30, 2012, the Company also reclassified technical service income of NT$123,802 thousand to net revenue, other income of NT$244 thousand, net gain on disposal of property, plant and equipment and other assets of NT$4,389 thousand, depreciation of rental assets of NT$1,434 thousand to other operating income and expenses. In addition, interest income of NT$353,132 thousand was also reclassified to other income; net gain on disposal of financial assets of NT$83,329 thousand, others of NT$88,360 thousand (under non-operating income and gains), net valuation gain on financial instruments of NT$233,579 thousand, impairment loss of financial assets of NT$160 thousand as well as others of NT$77,490 thousand (under non-operating expenses and losses) were reclassified to other gains and losses for the three months ended September 30, 2012.

 

- 67 -


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.

 

- 68 -


TABLE 1

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

FINANCINGS PROVIDED

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2013

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

 

No.

  

Financing
Company

  

Counter-party

  

Financial Statement Account

  Maximum
Balance for the
Period (US$ in
Thousands)
(Note 3)
    Ending Balance
(US$ in
Thousands)
(Note 3)
    Amount
Actually
Drawn

(US$ in
Thousands)
    Interest
Rate
   

Nature for Financing

  Transaction
Amounts
   

Reason for Financing

  Allowance
for
Bad Debt
   

 

Collateral

    Financing
Limits for
Each
Borrowing
Company
    Financing
Company’s
Total
Financing
Amount
Limits

(Note 2)
 
                           Item     Value      

1

  

TSMC Partners

   TSMC China   

Other receivables from related parties

  $

(US$

3,844,230

130,000

  

  $ —        $ —          —       

The need for short-term financing

  $ —        Purchase equipment   $ —          —        $ —        $

 

41,185,682

(Note 1

  

  $ 41,185,682   
      TSMC Solar   

Other receivables from related parties

   

(US$

2,661,390

90,000

  

   

(US$

2,661,390

90,000

  

   

(US$

1,936,901

65,500

  

    0.3805  

The need for short-term financing

    —        Operating capital     —          —          —         

 

16,474,273

(Note 1

  

    41,185,682   
      TSMC SSL   

Other receivables from related parties

   

(US$

1,774,260

60,000

  

   

(US$

1,774,260

60,000

  

    —          —       

The need for short-term financing

    —        Operating capital     —          —          —         

 

16,474,273

(Note 1

  

    41,185,682   

2

  

TSMC Development

   TSMC Solar   

Other receivables from related parties

   

(US$

2,365,680

80,000

  

    —          —          —       

The need for short-term financing

    —        Operating capital     —          —          —         

 
 

5,942,311

(Notes 1
and 4

  

  

   

 

14,855,778

(Note 4

  

      TSMC SSL   

Other receivables from related parties

   

(US$

2,661,390

90,000

  

    —          —          —       

The need for short-term financing

    —        Operating capital     —          —          —         

 
 

5,942,311

(Notes 1
and 4

  

  

   

 

14,855,778

(Note 4

  

 

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 and TSMC Development, respectively. In addition, the total amount lendable to any one borrower shall be no more than thirty percent (30%) of the borrower’s net worth. The above restriction does not apply to the offshore subsidiaries whose voting shares are 100% owned, directly or indirectly, by TSMC (offshore 100% owned subsidiaries) or the subsidiaries whose voting shares are 90% and up owned, directly or indirectly, by TSMC (90% and up owned subsidiaries). However, the respective lending limit for offshore 100% owned subsidiaries shall not exceed the net worth of TSMC Partners and TSMC Development, respectively, and the aggregate amounts lendable to 90% and up owned subsidiaries and the total amount lendable to one such borrower in 90% and up owned subsidiaries shall not exceed forty percent (40%) of the net worth of TSMC Partners and TSMC Development, respectively.

 

Note 2: The total amount available for lending purpose shall not exceed the net worth of TSMC Partners and TSMC Development, respectively.

 

Note 3: The maximum balance for the period and ending balance represents the amounts approved by the Board of Directors.

 

Note 4: The amount was determined based on the reviewed financial statements in accordance with local accounting principles.

 

- 69 -


TABLE 2

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

ENDORSEMENTS/GUARANTEES PROVIDED

FOR THE NINE MONTHS ENDED SEPTEMBER 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

    

Maximum

Balance

for the Period

   

Ending

Balance

    Amount Actually    

Amount of

Endorsement/

Guarantee

    

Ratio of

Accumulated

Endorsement/

Guarantee to
Net

Equity per
Latest

   

Maximum

Endorsement/

Guarantee

Amount

 
     

Name

  

Nature of

Relationship

   Guaranteed Party
(Notes 1 and 2)
     (US$ in Thousands)
(Note 3)
    (US$ in Thousands)
(Note 3)
    Drawn
(US$ in Thousands)
    Collateralized by
Properties
     Financial
Statements
    Allowable
(Note 2)
 

0

   TSMC    TSMC Global    Subsidiary    $ 200,969,250       $

(US$

44,356,500

1,500,000

  

  $

(US$

44,356,500

1,500,000

  

  $

(US$

44,356,500

1,500,000

  

  $ —           5.5   $ 200,969,250   

 

Note 1: The total amount of the guarantee provided by TSMC to any individual entity shall not exceed ten percent (10%) of TSMC’s net worth, or the net worth of such entity. However, subsidiaries whose voting shares are 100% owned, directly or indirectly, by TSMC are not subject to the above restrictions after the approval of the Board of Directors.

 

Note 2: The total amount of guarantee shall not exceed twenty-five percent (25%) of TSMC’s net worth.

 

Note 3: The maximum balance for the period and ending balance represent the amounts approved by the Board of Directors.

 

- 70 -


TABLE 3

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

MARKETABLE SECURITIES HELD

SEPTEMBER 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

   September 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

     —         $ 549,989         N/A       $ 551,136      
  

China Steel Corporation

  

—  

  

     —           150,296         N/A         150,553      
  

Stock

                    
  

Semiconductor Manufacturing International Corporation

  

—  

  

Available-for-sale financial assets

     275,957         270,921         1         546,726       Notes 1 and 2
  

TSMC Global

  

Subsidiary

  

Investments accounted for using equity method

     1         66,623,434         100         66,623,434      
  

TSMC Partners

  

Subsidiary

  

     988,268         41,185,282         100         41,185,682      
  

VIS

  

Investee accounted for using equity method

  

     628,223         10,107,307         39         20,323,030      
  

SSMC

  

Investee accounted for using equity method

  

     314         6,870,266         39         6,656,282      
  

TSMC Solar

  

Subsidiary

  

     1,118,000         3,640,710         99         3,613,746      
  

TSMC North America

  

Subsidiary

  

     11,000         3,415,950         100         3,415,950      
  

TSMC SSL

  

Subsidiary

  

     554,674         2,583,242         92         2,583,242      
  

Xintec

  

Investee accounted for using equity method

  

     94,950         1,785,184         40         1,587,934      
  

GUC

  

Investee accounted for using equity method

  

     46,688         983,702         35         4,066,513      
  

TSMC Europe

  

Subsidiary

  

     —           273,016         100         273,016      
  

TSMC Japan

  

Subsidiary

  

     6         132,129         100         132,129      
  

TSMC Korea

  

Subsidiary

  

     80         28,573         100         28,573      
  

United Industrial Gases Co., Ltd.

  

—  

  

Financial assets carried at cost

     21,230         193,584         10         402,735      
  

Shin-Etsu Handotai Taiwan Co., Ltd.

  

—  

  

     10,500         105,000         7         337,396      
  

W.K. Technology Fund IV

  

—  

  

     4,000         39,280         2         33,232      
  

Fund

                    
  

Horizon Ventures Fund

  

—  

  

Financial assets carried at cost

     —           78,303         12         78,303      
  

Crimson Asia Capital

  

—  

  

     —           53,879         1         53,879      
  

Capital

                    
  

TSMC China

  

Subsidiary

  

Investments accounted for using equity method

     —           22,019,781         100         22,139,659      
  

VTAF III

  

Subsidiary

  

     —           870,860         50         848,642      
  

VTAF II

  

Subsidiary

  

     —           439,556         98         433,310      
  

Emerging Alliance

  

Subsidiary

  

     —           144,670         99         144,670      
  

TSMC GN

  

Subsidiary

  

     —           90,306         100         90,306      

TSMC Solar

  

Stock

                    
  

Motech

  

Investee accounted for using equity method

  

Investments accounted for using equity method

     87,480         2,713,227         20         4,435,225       Note 3
  

TSMC Solar Europe

  

Subsidiary

  

     —           106,215         100         106,215      
  

TSMC Solar NA

  

Subsidiary

  

     1         16,707         100         16,707      
  

Capital

                    
  

VTAF III

  

Investee accounted for using equity method

  

Investments accounted for using equity method

     —           1,707         49         1,707      

(Continued)

 

- 71 -


Held Company Name

  

Marketable Securities Type and Name

  

Relationship with the Company

  

Financial Statement Account

   September 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       $ 2,881         100       $ 2,881      

TSMC GN

  

Stock

                    
  

TSMC Solar

  

Investee accounted for using equity method

  

Investments accounted for using equity method

     4,783         15,396         —           15,396      
  

TSMC SSL

  

Investee accounted for using equity method

  

     5,091         23,784         1         23,784      

TSMC Partners

  

Stock

                    
  

TSMC Development

  

Subsidiary

  

Investments accounted for using equity method

     —         US$ 648,501         100       US$ 648,501      
  

VisEra Holding Company

  

Investee accounted for using equity method

  

     43,000       US$ 116,473         49       US$ 116,473      
  

TSMC Technology

  

Subsidiary

  

     —         US$ 12,804         100       US$ 12,804      
  

ISDF II

  

Subsidiary

  

     14,153       US$ 10,852         97       US$ 10,852      
  

ISDF

  

Subsidiary

  

     787       US$ 8,413         97       US$ 8,413      
  

TSMC Canada

  

Subsidiary

  

     2,300       US$ 4,797         100       US$ 4,797      
  

Mcube Inc.

  

—  

  

Financial assets carried at cost

     6,333         —           18         —         Note 4
  

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$ 2,749       Note 1

TSMC Development

  

Stock

                    
  

WaferTech

  

Subsidiary

  

Investments accounted for using equity method

     293,637       US$ 255,451         100       US$ 265,809      

Emerging Alliance

  

Common stock

                    
  

Global Investment Holding Inc.

  

—  

  

Financial assets carried at cost

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

RichWave Technology Corp.

  

—  

  

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

Preferred stock

                    
  

Next IO, Inc.

  

—  

  

Financial assets carried at cost

     8         —           —           —         Note 5
  

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)

 

- 72 -


Held Company Name

  

Marketable Securities Type and Name

  

Relationship with the Company

  

Financial Statement Account

   September 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         —           1         —         Note 6
   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$ 1,328         58       US$ 882      
   Accton Wireless Broadband Corp.    —     

Financial assets carried at cost

     2,249       US$ 315         6       US$ 315      
  

Preferred stock

                    
   BridgeLux, Inc.    —     

Financial assets carried at cost

     7,522       US$ 9,379         3       US$ 9,379      
   GTBF, Inc.    —     

     1,154       US$ 1,500         N/A       US$ 1,500      
   LiquidLeds Lighting Corp.    —     

     1,600       US$ 800         11       US$ 800      
   Neoconix, Inc.    —     

     4,147       US$ 170         —         US$ 170       Note 7
   Powervation, Ltd.    —     

     509       US$ 7,938         16       US$ 7,938      
   Stion Corp.    —     

     8,152         —           15         —         Note 8
   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$ 335         100       US$ 335      
   VTA Holdings    Subsidiary   

     —           —           62         —        

ISDF

   Common stock                     
   Integrated Memory Logic, Inc.    —     

Available-for-sale financial assets

     408       US$ 87         —         US$ 998       Note 1
  

Preferred stock

                    
   Sonics, Inc.    —     

Financial assets carried at cost

     230       US$ 497         2       US$ 497      

ISDF II

   Common stock                     
   Alchip Technologies Limited    —     

Financial assets carried at cost

     7,520       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)

 

- 73 -


Held Company Name

  

Marketable Securities Type and Name

  

Relationship with the Company

  

Financial Statement Account

   September 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 2,585         100       EUR 2,585      

TSMC Global

   Stock                     
   ASML    —     

Available-for-sale financial assets

     20,993       US$  1,085,474         5       US$  2,067,739       Notes 1 and 9
  

Money market fund

                    
   Ssga Cash Mgmt Global Offshore    —     

Available-for-sale financial assets

     495       US$  495         N/A       US$ 495       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: Since TSMC did not participate in Mcube’s issuance of new shares in the third quarter of 2013, the Company’s percentage of ownership in Mcube decreased to 18%. As a result, after reassessment, the Company did not exercise significant influence over Mcube and therefore, Mcube is no longer accounted for using the equity method. Further, such investment was reclassified to financial assets carried at cost.

 

Note 5: The carrying value includes the impairment loss in the amount of US$500 thousand.

 

Note 6: The carrying value includes the impairment loss in the amount of US$1,219 thousand.

 

Note 7: The carrying value includes the impairment loss in the amount of US$4,672 thousand.

 

Note 8: The carrying value includes the impairment loss in the amount of US$55,474 thousand.

 

Note 9: 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)

 

- 74 -


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 NINE MONTHS ENDED SEPTEMBER 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 1)  
          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      $ 546,726   
 

TSMC SSL

 

Investments accounted for using equity method

  —     Subsidiary     430,400        2,389,541        124,274        1,242,744        —          —          —          —          554,674        2,583,242   
 

Capital

                         
 

VTAF II

 

Investments accounted for using equity method

  —     Subsidiary     —          563,056        —          —          —          —          122,511        Note 2        —          439,556   

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        —          —          —     

ISDF

  Stock                          
 

Memsic, Inc.

 

Available-for-sale financial assets

  —     —       1,286      US$ 4,294        —          —          1,286      US$ 5,431      US$ 1,414      US$ 4,017        —          —     

ISDF II

  Stock                          
 

Memsic, Inc.

 

Available-for-sale financial assets

  —     —       1,072      US$ 3,581        —          —          1,072      US$ 4,529      US$ 1,461      US$ 3,068        —          —     

TSMC

  Stock                          

    Development

  WaferTech  

Investments accounted for using equity method

  —     Subsidiary     293,637      US$ 262,053        —          —          —          —        US$ 50,000        Note 2        293,637      US$ 255,451   

 

Note 1: 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.

 

Note 2: The disposal is primarily consisted of capital return, which is not applicable in recognizing any gain or loss.

 

- 75 -


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 NINE MONTHS ENDED SEPTEMBER 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 September 26, 2013

     2,889,647      

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 September 26, 2013

     441,244      

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 September 26, 2013

     380,439      

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 September 26, 2013

     134,529      

By the construction progress

   Mandartech Interiors Inc.      —         N/A    N/A    N/A    N/A    Public bidding   

Manufacturing purpose

   None
  

Fab

  

January 28, 2013 to August 19, 2013

     2,385,135      

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 July 30, 2013

     931,045      

By the construction progress

   China Steel Structure Co., Ltd.      —         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
  

Fab

  

July 26, 2013 to September 26, 2013

     271,668      

By the construction progress

   Evergreen Steel Corp.      —         N/A    N/A    N/A    N/A    Public bidding   

Manufacturing purpose

   None

 

- 76 -


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 NINE MONTHS ENDED SEPTEMBER 30, 2013

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

 

               Transaction Details    Abnormal
Transaction
     Notes/Accounts Payable or
Receivable
      

Company Name

  

Related Party

  

Nature of Relationships

   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
     Note

TSMC

  

TSMC North America

  

Subsidiary

   Sales    $ 308,572,239        69      

Net 30 days after invoice date

     —           —         $ 57,435,875        72      
  

GUC

  

Investee accounted for using equity method

   Sales      1,533,394        1      

Net 30 days after monthly closing

     —           —           378,840        —        
  

VIS

  

Investee accounted for using equity method

   Sales      162,966        —        

Net 30 days after monthly closing

     —           —           —          —        
  

Mcube

  

Note 2

   Sales      119,067        —        

Net 30 days after invoice date

     —           —           Note 2        —        
  

TSMC China

  

Subsidiary

   Purchases      12,305,204        27      

Net 30 days after monthly closing

     —           —           (1,440,521     9      
  

WaferTech

  

Indirect subsidiary

   Purchases      6,529,044        14      

Net 30 days after monthly closing

     —           —           (613,223     4      
  

VIS

  

Investee accounted for using equity method

   Purchases      4,889,938        11      

Net 30 days after monthly closing

     —           —           (691,974     4      
  

SSMC

  

Investee accounted for using equity method

   Purchases      2,090,638        5      

Net 30 days after monthly closing

     —           —           (327,944     2      

TSMC North America

  

GUC

  

Investee accounted for using equity method by TSMC

   Sales     

(US$

1,258,998

42,363

  

    —        

Net 30 days after invoice date

     —           —          

(US$

448,483

15,166

  

    1      

 

Note 1: 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.

 

Note 2: Starting the third quarter of 2013, the Company did not exercise significant influence over Mcube and therefore, Mcube is no longer a related party to the Company.

 

- 77 -


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

SEPTEMBER 30, 2013

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

 

              

Ending Balance

(Foreign Currencies

    Turnover Days   Overdue      Amounts Received
in Subsequent
    Allowance for  

Company Name

  

Related Party

  

Nature of Relationships

   in Thousands)     (Note 1)   Amount     Action Taken      Period     Bad Debts  

TSMC

   TSMC North America   

Subsidiary

   $ 57,612,301      44   $ 18,858,653        —         $ 21,582,692      $ —     
   GUC   

Investee accounted for using equity method

     378,840      55     —          —           —          —     
   VIS   

Investee accounted for using equity method

     131,090      (Note 2)     —          —           —          —     

TSMC Partners

   TSMC Solar   

The same parent company

    

(US$

1,937,044

65,505

  

  (Note 2)     —          —           —          —     

TSMC China

   TSMC   

Parent company

    

(RMB

1,440,521

294,868

  

  31     —          —           —          —     

TSMC Technology

   TSMC   

Parent company

    

(US$

187,203

6,331

  

  66     —          —           —          —     

WaferTech

   TSMC   

Parent company

    

(US$

613,223

20,737

  

  25     —          —           —          —     

TSMC North America

   GUC   

Investee accounted for using equity method by TSMC

    

(US$

448,483

15,166

  

  53    

(US$

139,603

4,721

  

    —          

(US$

341,694

11,555

  

    —     

 

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.

 

- 78 -


TABLE 8

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

INTERCOMPANY RELATIONSHIPS AND SIGNIFICANT INTERCOMPANY TRANSACTIONS

FOR THE NINE MONTHS ENDED SEPTEMBER 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   $ 308,572,239        —          68
        Receivables from related parties     57,435,875        —          5
        Other receivables from related parties     176,426        —          —     
        Payables to related parties     31,284        —          —     
   

TSMC China

  1   Net revenue from the sale of goods     6,440        —          —     
        Purchases     12,305,204        —          3
        Marketing expenses—commission     64,348        —          —     
        Disposal of property, plant and equipment     63,778        —          —     
       

Loss on disposal of property, plant and equipment

    9,827        —          —     
        Purchases of property, plant and equipment     89,990        —          —     
        Other receivables from related parties     26,466        —          —     
        Payables to related parties     1,440,521        —          —     
   

TSMC Japan

  1   Marketing expenses—commission     181,896        —          —     
        Payables to related parties     20,044        —          —     
   

TSMC Europe

  1   Marketing expenses—commission     278,878        —          —     
        Research and development expenses     43,670        —          —     
        Payables to related parties     42,083        —          —     
   

TSMC Korea

  1   Marketing expenses—commission     16,450        —          —     
        Payables to related parties     1,409        —          —     
   

TSMC Technology

  1   Research and development expenses     614,999        —          —     
        Payables to related parties     187,203        —          —     
   

WaferTech

  1   Net revenue from the sale of goods     9,792        —          —     
        Purchases     6,529,044        —          1
        Other receivables from related parties     1,822        —          —     
        Payables to related parties     613,223        —          —     
   

TSMC Canada

  1   Research and development expenses     162,780        —          —     
        Payables to related parties     18,041        —          —     
   

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     6,525        —          —     
        Other receivables from related parties     2,025        —          —     
        Payables to related parties     9,386        —          —     
        Purchases of property, plant and equipment     7,437        —          —     
        Manufacturing expenses     1,682        —          —     
   

TSMC Solar

  1   Manufacturing expenses     2,822        —          —     
        General and administrative expenses     2,257        —          —     
        Purchases of property, plant and equipment     5,660        —          —     

(Continued)

 

- 79 -


No.

 

Company Name

 

Counter Party

  Nature of
Relationship

(Note 1)
 

Intercompany Transactions

 
       

Financial Statements Item

  Amount     Terms
(Note 2)
    Percentage of
Consolidated Net Revenue
or Total Assets
 

0

  TSMC   TSMC Solar   1   Other gains and losses   $ 7,677        —          —     
        Other receivables from related parties     2,409        —          —     

1

  TSMC Partners   TSMC China   3   Other income     2,792        —          —     

2

  TSMC Development   WaferTech   1   Other receivables from related parties     32,240        —          —     

3

  TSMC North America   TSMC Technology   3   Other receivables from related parties     5,131        —          —     

4

  TSMC Solar   TSMC Solar Europe GmbH   1   Net revenue from the sale of goods     70,061        —          —     
        Receivables from related parties     10,078        —          —     
    TSMC Development   3   Finance costs     2,613        —          —     
    TSMC Partners   3   Other payables to related parties     1,937,044        —          —     

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)

 

- 80 -


TABLE 9

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

NAMES, LOCATIONS, AND RELATED INFORMATION OF INVESTEES OVER WHICH THE COMPANY EXERCISES SIGNIFICANT INFLUENCE

FOR THE NINE MONTHS ENDED SEPTEMBER 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 September 30, 2013     Net Income     Share of
Profits/
Losses
   

Note

        September 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)
    (Losses) of
the Investee
(Foreign
Currencies in
Thousands)
    of Investee
(Note 1)
(Foreign
Currencies in
Thousands)
   

TSMC

  TSMC Global  

Tortola, British

Virgin Islands

 

Investment activities

  $ 42,327,245      $ 42,327,245        1        100      $ 66,623,434      $ 29,488      $ 29,488     

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        41,185,282        2,114,741        2,114,822     

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        22,019,781        3,685,251        3,627,216     

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        10,107,307        3,241,736        1,283,219     

Investee accounted for using equity method

  SSMC   Singapore  

Fabrication and supply of integrated circuits

    5,120,028        5,120,028        314        39        6,870,266        3,669,415        1,423,366     

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        3,640,710        (2,466,942     (2,428,223  

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        3,415,950        179,361        179,361     

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        2,583,242        (1,196,037     (1,119,623  

Subsidiary

  Xintec   Taoyuan, Taiwan  

Wafer level chip size packaging service

    1,357,890        1,357,890        94,950        40        1,785,184        130,864        (42,676  

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        983,702        146,274        50,468     

Investee accounted for using equity method

  VTAF III   Cayman Islands  

Investing in new start-up technology companies

    1,882,556        1,896,914        —          50        870,860        (1,497,510     (138,614  

Subsidiary

  VTAF II   Cayman Islands  

Investing in new start-up technology companies

    593,616        704,447        —          98        439,556        473        464     

Subsidiary

  TSMC Europe   Amsterdam, the Netherlands  

Marketing and engineering supporting activities

    15,749        15,749        —          100        273,016        28,095        28,095     

Subsidiary

  Emerging Alliance   Cayman Islands  

Investing in new start-up technology companies

    841,757        852,258        —          99        144,670        (9,954     (9,904  

Subsidiary

  TSMC Japan   Yokohama, Japan  

Marketing activities

    83,760        83,760        6        100        132,129        4,107        4,107     

Subsidiary

  TSMC GN   Taipei, Taiwan  

Investment activities

    150,000        100,000        —          100        90,306        (21,691     (21,691  

Subsidiary

  TSMC Korea   Seoul, Korea  

Customer service and technical supporting activities

    13,656        13,656        80        100        28,573        1,116        1,116     

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        2,713,227        (149,906     Note 2     

Investee accounted for using equity method

  VTAF III   Cayman Islands  

Investing in new start-up technology companies

    1,806,693        1,801,918        —          49        1,707        (1,497,510     Note 2     

Investee accounted for using equity method

  TSMC Solar Europe   Amsterdam, the Netherlands  

Investing in solar related business

    504,107        504,107        —          100        106,215        (73,876     Note 2     

Subsidiary

  TSMC Solar NA   Delaware, U.S.A.  

Selling and marketing of solar related products

    205,772        205,772        1        100        16,707        (28,608     Note 2     

Subsidiary

(Continued)

 

- 81 -


Investor
Company

 

Investee Company

 

Location

 

Main Businesses and
Products

  Original Investment Amount     Balance as of September 30, 2013     Net Income     Share of
Profits/
Losses
   

Note

        September 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)
    (Losses) of
the Investee
(Foreign
Currencies in
Thousands)
    of Investee
(Note 1)
(Foreign
Currencies in
Thousands)
   

TSMC SSL

  TSMC Lighting NA   Delaware, U.S.A.  

Selling and marketing of solid state lighting related products

    3,133        3,133        1        100        2,881        (36     Note 2     

Subsidiary

TSMC Partners

  TSMC Development   Delaware, U.S.A.  

Investment activities

  $

(US$

0.03

0.001

  

  $

(US$

0.03

0.001

  

    —          100      $

(US$

19,176,812

648,501

  

  $

(US$

1,311,604

44,134

  

    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$

1,271,553

43,000

  

   

(US$

1,271,553

43,000

  

    43,000        49       

(US$

3,444,234

116,473

  

   

(US$

827,363

27,840

  

    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$

378,624

12,804

  

   

(US$

32,174

1,083

  

    Note 2     

Subsidiary

 

ISDF II

  Cayman Islands  

Investing in new start-up technology companies

   

(US$

418,518

14,153

  

   

(US$

418,518

14,153

  

    14,153        97       

(US$

320,900

10,852

  

   

(US$

74,175

2,496

  

    Note 2     

Subsidiary

 

ISDF

  Cayman Islands  

Investing in new start-up technology companies

   

(US$

23,272

787

  

   

(US$

23,272

787

  

    787        97       

(US$

248,779

8,413

  

   

(US$

169,952

5,719

  

    Note 2     

Subsidiary

 

TSMC Canada

  Ontario, Canada  

Engineering support activities

   

(US$

68,013

2,300

  

   

(US$

68,013

2,300

  

    2,300        100       

(US$

141,854

4,797

  

   

(US$

11,018

371

  

    Note 2     

Subsidiary

 

Mcube Inc.

  Delaware, U.S.A.  

Research, development, and sale of micro-semiconductor device

   

(US$

53,228

1,800

  

   

(US$

53,228

1,800

  

    6,333        18        —         

(US$

(210,622

(7,106


)) 

    Note 2     

Note 3

TSMC Development

  WaferTech   Washington, U.S.A.  

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

   

(US$

3,844,230

130,000

  

   

(US$

8,279,880

280,000

  

    293,637        100       

(US$

7,553,943

255,451

  

   

(US$

1,290,557

43,425

  

    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$

154,124

5,212

  

   

(US$

154,124

5,212

  

    15,643        58       

(US$

39,280

1,328

  

   

(US$

(14,022

(472


)) 

    Note 2     

Subsidiary

 

Growth Fund

  Cayman Islands  

Investing in new start-up technology companies

   

(US$

54,115

1,830

  

   

(US$

54,115

1,830

  

    —          100       

(US$

9,921

335

  

   

(US$

(982

(33


)) 

    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

493,768

12,400

  

   

(EUR

493,768

12,400

  

    —          100       

(EUR

102,948

2,585

  

   

(EUR

(74,028

(1,884


)) 

    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

    47,830        42,945        4,783        —          15,396        (2,466,942     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

    50,910        34,266        5,091        1        23,784        (1,196,037     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.

 

Note 3: Since TSMC did not participate in Mcube’s issuance of new shares in the third quarter of 2013, the Company’s percentage of ownership in Mcube decreased to 18%. As a result, after reassessment, the Company did not exercise significant influence over Mcube and therefore, Mcube is no longer accounted for using the equity method. Further, such investment was reclassified to financial assets carried at cost.

(Concluded)

 

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TABLE 10

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

INFORMATION ON INVESTMENT IN MAINLAND CHINA

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2013

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

 

 

Investee   Main Businesses and  

Total Amount
of Paid-in
Capital

(Foreign
Currencies in

    Method of    

Accumulated
Outflow of
Investment
from Taiwan
as of
January 1,
2013

(US$ in

    Investment
Flows
   

Accumulated
Outflow of
Investment
from Taiwan
as of

September 30,
2013

(US$ in

    Percentage of     Share of    

Carrying
Amount

as of

September 30,
2013

(US$ in

   

Accumulated
Inward
Remittance of
Earnings as of

September 30,

 

Company

 

Products

  Thousands)     Investment     Thousands)     Outflow     Inflow     Thousands)     Ownership     Profits/Losses     Thousands)     2013  

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   $

 

3,627,216

(Note 3

  

  $ 22,019,781      $ —     

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$

147,855

5,000

  

    —     

 

Accumulated Investment in Mainland
China

as of September 30, 2013

(US$ in Thousands)

     Investment Amounts Authorized by
Investment Commission, MOEA
(US$ in Thousands)
    Upper Limit on Investment
(US$ in Thousands)
 
$

(US$

19,087,152

601,000)

  

  

   $

(US$

19,087,152

601,000

  

  $

(US$

19,087,152

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.

 

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