Form 6-K

1934 Act Registration No. 1-14700

 

 

 

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

 

FORM 6-K

 

 

REPORT OF FOREIGN PRIVATE ISSUER

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

THE SECURITIES EXCHANGE ACT OF 1934

For the month of May 2014

 

 

Taiwan Semiconductor Manufacturing Company Ltd.

(Translation of Registrant’s Name Into English)

 

 

No. 8, Li-Hsin Rd. 6,

Hsinchu Science Park,

Taiwan

(Address of Principal Executive Offices)

 

 

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

Form 20-F  x            Form 40-F  ¨

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

Yes  ¨            No   x

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

 

 

 


SIGNATURES

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

 

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

/s/ Lora Ho

      Lora Ho
      Senior Vice President & Chief Financial Officer


  

 

 

 

Taiwan Semiconductor Manufacturing

Company Limited and Subsidiaries

 

Consolidated Financial Statements for the

Three Months Ended March 31, 2014 and 2013 and

Independent Accountants’ Review Report

  


INDEPENDENT ACCOUNTANTS’ REVIEW REPORT

The Board of Directors and Shareholders

Taiwan Semiconductor Manufacturing Company Limited

We have reviewed the accompanying consolidated balance sheets of Taiwan Semiconductor Manufacturing Company Limited and subsidiaries as of March 31, 2014 and 2013 and the related consolidated statements of comprehensive income, changes in equity and cash flows for the three months ended March 31, 2014 and 2013. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to issue a report on these consolidated financial statements based on our reviews.

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

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

May 13, 2014

Notice to Readers

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

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

 

- 1 -


Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED BALANCE SHEETS

(In Thousands of New Taiwan Dollars)

 

 

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

ASSETS

                             

CURRENT ASSETS

                             

Cash and cash equivalents (Note 6)

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

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

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

Available-for-sale financial assets (Note 8)

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

Held-to-maturity financial assets (Note 9)

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

Notes and accounts receivable, net (Note 11)

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

Receivables from related parties (Note 35)

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

Other receivables from related parties (Note 35)

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

Inventories (Note 12)

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

Other financial assets (Note 36)

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

Other current assets (Note 17)

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

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

 

Total current assets

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

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

 

NONCURRENT ASSETS

                             

Available-for-sale financial assets (Note 8)

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

Hedging derivative financial assets (Note 10)

       -           -           -           -           659,351           -   

Financial assets carried at cost (Note 13)

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

Investments accounted for using equity method (Note 14)

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

Property, plant and equipment (Note 15)

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

Intangible assets (Note 16)

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

Deferred income tax assets (Notes 4 and 30)

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

Refundable deposits (Note 35)

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

Other noncurrent assets (Note 17)

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

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

 

Total noncurrent assets

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

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

 

TOTAL

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

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

 

LIABILITIES AND EQUITY

                             

CURRENT LIABILITIES

                             

Short-term loans (Note 18)

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

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

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

Accounts payable

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

Payables to related parties (Note 35)

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

Salary and bonus payable

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

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

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

Payables to contractors and equipment suppliers

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

Income tax payable (Notes 4 and 30)

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

Provisions (Note 19)

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

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

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

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

       -           -           -           -           131,250           -   
    

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

 

Total current liabilities

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

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

 

NONCURRENT LIABILITIES

                             

Hedging derivative financial liabilities (Note 10)

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

Bonds payable (Note 20)

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

Long-term bank loans (Note 21)

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

Other long-term payables (Note 22)

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

Obligations under finance leases (Note 15)

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

Accrued pension cost (Note 4)

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

Others (Note 19)

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

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

 

Total noncurrent liabilities

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

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

 

Total liabilities

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

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

 

EQUITY ATTRIBUTABLE TO SHAREHOLDERS OF THE PARENT

                             

Capital stock (Note 23)

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

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

 

Capital surplus (Note 23)

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

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

 

Retained earnings (Note 23)

                             

Appropriated as legal capital reserve

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

Appropriated as special capital reserve

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

Unappropriated earnings

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

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

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

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

 

Others (Note 23)

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

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

 

Equity attributable to shareholders of the parent

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

NONCONTROLLING INTERESTS (Note 23)

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

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

 

Total equity

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

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

 

TOTAL

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

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

 

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

 

- 2 -


Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

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

(Reviewed, Not Audited)

 

 

              Three Months Ended March 31             
    2014   2013  
         Amount          %              Amount          %  

NET REVENUE (Notes 25, 35 and 40)

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

COST OF REVENUE (Notes 12, 32 and 35)

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

 

 

      

 

 

        

 

 

      

 

 

 

GROSS PROFIT BEFORE REALIZED GROSS PROFIT ON SALES TO ASSOCIATES

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

REALIZED GROSS PROFIT ON SALES TO ASSOCIATES

       21,017           -             3,540           -   
    

 

 

      

 

 

        

 

 

      

 

 

 

GROSS PROFIT

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

 

 

      

 

 

        

 

 

      

 

 

 

OPERATING EXPENSES (Notes 32 and 35)

                     

Research and development

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

General and administrative

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

Marketing

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

 

 

      

 

 

        

 

 

      

 

 

 

Total operating expenses

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

 

 

      

 

 

        

 

 

      

 

 

 

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

       (2,741        -             34,503           -   
    

 

 

      

 

 

        

 

 

      

 

 

 

INCOME FROM OPERATIONS (Note 40)

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

 

 

      

 

 

        

 

 

      

 

 

 

NON-OPERATING INCOME AND EXPENSES

                     

Share of profits of associates and joint venture

       955,380           1             654,153           -   

Other income (Note 27)

       613,699           -             346,321           -   

Foreign exchange loss, net

       (36,401        -             (192,914        -   

Finance costs (Note 28)

       (796,580        -             (493,998        -   

Other gains and losses (Note 29)

       43,384           -             1,006,343           1   
    

 

 

      

 

 

        

 

 

      

 

 

 

Total non-operating income and expenses

       779,482           1             1,319,905           1   
    

 

 

      

 

 

        

 

 

      

 

 

 

INCOME BEFORE INCOME TAX

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

INCOME TAX EXPENSE (Notes 4 and 30)

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

 

 

      

 

 

        

 

 

      

 

 

 

NET INCOME

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

 

 

      

 

 

        

 

 

      

 

 

 

 

(Continued)

 

- 3 -


Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

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

(Reviewed, Not Audited)

 

 

              Three Months Ended March 31             
    2014   2013  
         Amount          %              Amount          %  

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

                     

Exchange differences arising on translation of foreign operations

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

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

       (415,445        -             2,825,692           2   

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

       (4,747        -             135,123           -   

Income tax benefit related to components of other comprehensive income

       2,956           -             43,239           -   
    

 

 

      

 

 

        

 

 

      

 

 

 

Other comprehensive income for the period, net of income tax

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

 

 

      

 

 

        

 

 

      

 

 

 

TOTAL COMPREHENSIVE INCOME FOR THE PERIOD

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

 

 

      

 

 

        

 

 

      

 

 

 

NET INCOME (LOSS) ATTRIBUTABLE TO:

                     

Shareholders of the parent

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

Noncontrolling interests

       (24,967        -             (41,333        -   
    

 

 

      

 

 

        

 

 

      

 

 

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

 

 

      

 

 

        

 

 

      

 

 

 

TOTAL COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO:

                     

Shareholders of the parent

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

Noncontrolling interests

       (23,743        -             (12,036        -   
    

 

 

      

 

 

        

 

 

      

 

 

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

 

 

      

 

 

        

 

 

      

 

 

 

 

     2014    2013
    

  Income Attributable to  
Shareholders of

the Parent

  

  Income Attributable to  

Shareholders of

the Parent

EARNINGS PER SHARE (NT$, Note 31)

         

Basic earnings per share

     $     1.85        $     1.53  
    

 

 

      

 

 

 

Diluted earnings per share

     $ 1.85        $ 1.53  
    

 

 

      

 

 

 

 

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

 

- 4 -


Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(In Thousands of New Taiwan Dollars)

(Reviewed, Not Audited)

 

 

    Equity Attributable to Shareholders of the Parent              
                                              Others                    
                                             

Foreign

Currency

Translation

Reserve

   

Unrealized

Gain/Loss

from
Available-

for-sale

Financial
Assets

   

Cash Flow

Hedges
Reserve

   

Total

    Total    

Non-
controlling

Interests

   

Total

Equity

 
    Capital Stock -
Common Stock
          Retained Earnings                
   

Shares

(In

          Capital     Legal
Capital
    Special
Capital
   

Unappro-

priated

                     
    Thousands)     Amount     Surplus     Reserve     Reserve     Earnings     Total                

BALANCE, JANUARY 1, 2014

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

Net income for the three months ended March 31, 2014

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

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

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

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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

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

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Issuance of stock from exercise of employee stock options

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

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

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

Adjustments arising from changes in percentage of ownership in subsidiaries

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

Decrease in noncontrolling interests

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

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

BALANCE, MARCH 31, 2014

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

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

BALANCE, JANUARY 1, 2013

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

Net income for the three months ended March 31, 2013

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

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

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

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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

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

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Issuance of stock from exercise of employee stock options

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

Stock option compensation cost of subsidiary

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

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

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

Adjustments arising from changes in percentage of ownership in subsidiaries

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

Decrease in noncontrolling interests

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

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

BALANCE, MARCH 31, 2013

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

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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

 

- 5 -


Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands of New Taiwan Dollars)

(Reviewed, Not Audited)

 

 

    Three Months Ended March 31  
         2014     2013  

CASH FLOWS FROM OPERATING ACTIVITIES

      

Income before income tax

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

Adjustments for:

      

Depreciation expense

       40,985,942        35,964,677   

Amortization expense

       636,435        531,513   

Stock option compensation cost of subsidiary

       -        2,701   

Finance costs

       796,580        493,998   

Share of profits of associates and joint venture

       (955,380     (654,153

Interest income

       (613,699     (346,321

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

       (497     (28,710

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

       (20,987     (818,315

Gain on disposal of financial assets carried at cost, net

       (23,758     (2,105

Loss on disposal of investments in associates

       -        484   

Realized gross profit on sales to associates

       (21,017     (3,540

Loss on foreign exchange, net

       2,665,824        704,013   

Income from receipt of equity securities in settlement of trade receivables

       -        (8,565

Gain from hedging instruments

       (325,678     (649,991

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

       327,961        759,175   

Changes in operating assets and liabilities:

      

Derivative financial instruments

       233,713        9,946   

Notes and accounts receivable, net

       (2,124,198     (7,695,015

Receivables from related parties

       (267,262     (80,495

Other receivables from related parties

       4,415        9,252   

Inventories

       (5,986,376     (2,967

Other financial assets

       (28,952     66,064   

Other current assets

       615,697        (541,426

Accounts payable

       722,298        (2,065,468

Payables to related parties

       (358,406     69,794   

Salary and bonus payable

       (2,223,942     (2,459,987

Accrued profit sharing to employees and bonus to directors and supervisors

       3,279,960        2,678,344   

Accrued expenses and other current liabilities

       2,073,184        1,637,627   

Provisions

       2,359,196        306,904   

Accrued pension cost

       (12,724     (16,599
    

 

 

   

 

 

 

Cash generated from operations

       95,040,171        73,608,749   

Income taxes paid

       (179,230     (39,077
    

 

 

   

 

 

 

Net cash generated by operating activities

       94,860,941        73,569,672   
    

 

 

   

 

 

 

 

(Continued)

 

- 6 -


Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands of New Taiwan Dollars)

(Reviewed, Not Audited)

 

 

    Three Months Ended March 31  
         2014     2013  

CASH FLOWS FROM INVESTING ACTIVITIES

      

Acquisitions of:

      

Available-for-sale financial assets

     $ (5,181   $ (4,022

Financial assets carried at cost

       (3,782     (16,511

Held-to-maturity financial assets

       (1,396,723     -   

Property, plant and equipment

       (114,905,317     (80,418,491

Intangible assets

       (1,178,194     (951,989

Other assets

       -        (11,896

Proceeds from disposal or redemption of:

      

Available-for-sale financial assets

       62,843        915,865   

Held-to-maturity financial assets

       800,000        3,091,725   

Financial assets carried at cost

       28,533        9,564   

Property, plant and equipment

       55,255        12,531   

Cash refund from long-term receivables

       78,060        -   

Interest received

       596,277        315,163   

Refundable deposits paid

       (7,869     (5,693

Refundable deposits refunded

       16,506        30,841   
    

 

 

   

 

 

 

Net cash used in investing activities

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

 

 

   

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

      

Increase in short-term loans

       8,819,028        230,321   

Proceeds from issuance of bonds

       -        45,000,000   

Repayment of long-term bank loans

       -        (31,250

Interest paid

       (863,834     (331,695

Guarantee deposits received

       3,744        3,436   

Guarantee deposits refunded

       (1,443     (26,382

Proceeds from exercise of employee stock options

       22,303        107,354   

Decrease in noncontrolling interests

       (29,574     (12,464
    

 

 

   

 

 

 

Net cash generated by financing activities

       7,950,224        44,939,320   
    

 

 

   

 

 

 

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS

       2,050,275        1,142,131   
    

 

 

   

 

 

 

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

       (10,998,152     42,618,210   

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

       242,695,447        143,410,588   
    

 

 

   

 

 

 

CASH AND CASH EQUIVALENTS, END OF PERIOD

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

 

 

   

 

 

 

 

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

   (Concluded)

 

- 7 -


Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2014 and 2013

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

(Reviewed, Not Audited)

 

 

  1.

GENERAL

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

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

The address of its registered office and principal place of business is No. 8, Li-Hsin Rd. 6, Hsinchu Science Park, Taiwan. The principal operating activities and operating segments information of TSMC and its subsidiaries (collectively as the “Company”) are described in Notes 4 and 40.

 

  2.

THE AUTHORIZATION OF FINANCIAL STATEMENTS

The accompanying consolidated financial statements were reported to the Board of Directors and issued on May 13, 2014.

 

  3.

APPLICATION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS

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

 

  a.

The 2013 IFRSs version in issue but not yet effective

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

 

New, Revised or Amended Standards and Interpretations

  

Effective Date Issued
by IASB (Note)

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

  

January 1, 2009 or January 1, 2010

Amendment to IAS 39 Embedded Derivatives

  

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

 

(Continued)

 

- 8 -


New, Revised or Amended Standards and Interpretations

  

Effective Date Issued
by IASB (Note)

Improvements to IFRSs 2010

  

July 1, 2010 or January 1, 2011

Annual Improvements to IFRSs 2009 - 2011 Cycle

  

January 1, 2013

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

  

July 1, 2010

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

  

January 1, 2013

Amendment to IFRS 7 Disclosures - Transfers of Financial Assets

  

July 1, 2011

IFRS 10 Consolidated Financial Statements

  

January 1, 2013

IFRS 11 Joint Arrangements

  

January 1, 2013

IFRS 12 Disclosure of Interests in Other Entities

  

January 1, 2013

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

  

January 1, 2013

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

  

January 1, 2014

IFRS 13 Fair Value Measurement

  

January 1, 2013

Amendment to IAS 1 Presentation of Items of Other Comprehensive Income

  

July 1, 2012

Amendment to IAS 12 Deferred Tax: Recovery of Underlying Assets

  

January 1, 2012

Amendment to IAS 19 Employee Benefits

  

January 1, 2013

Amendment to IAS 27 Separate Financial Statements

  

January 1, 2013

Amendment to IAS 28 Investments in Associates and Joint Ventures

  

January 1, 2013

Amendment to IAS 32 Offsetting of Financial Assets and Financial Liabilities

  

January 1, 2014

(Concluded)

 

Note:

    

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

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

 

  1)

IFRS 12, “Disclosure of Interests in Other Entities”

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

 

- 9 -


  2)

IFRS 13, “Fair Value Measurement”

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

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

 

  3)

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

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

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

 

  4)

Amendments to IAS 19, “Employee Benefits”

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

According to the retrospective application of aforementioned amendments, as of March 31, 2014 and January 1, 2014, the primary impacts on the Company include the adjustment in accrued pension cost for a decrease of NT$796,305 thousand and NT$788,263 thousand, respectively, and the adjustment in retained earnings for an increase of NT$706,285 thousand and NT$698,762 thousand, respectively.

 

  b.

The IFRSs issued by IASB but not endorsed by FSC

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

 

- 10 -


New, Revised or Amended Standards and Interpretations

  

Effective Date Issued

by IASB (Note 1)

Annual Improvements to IFRSs 2010 - 2012 Cycle

  

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

Annual Improvements to IFRSs 2011 - 2013 Cycle

  

July 1, 2014

IFRS 9 Financial Instruments

  

Note 2

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

  

Note 2

Amendment to IAS 19 Defined Benefit Plans: Employee Contributions

  

July 1, 2014

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

  

January 1, 2014

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

  

January 1, 2014

 

Note 1:

  

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

Note 2:

  

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

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

 

  1)

IFRS 9, “Financial Instruments”

Under IFRS 9, all recognized financial assets currently in the scope of IAS 39, “Financial Instruments: Recognition and Measurement,” will be subsequently measured at either the amortized cost or the fair value. If the objective of the Company’s business model is to hold the financial asset to collect the contractual cash flows which are solely for payments of principal and interest on the principal amount outstanding, such assets are measured at the amortized cost. The other financial assets not met the aforementioned criteria must be measured at the fair value through profit or loss.

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

 

  2)

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

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

 

- 11 -


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

 

  4.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

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

Statement of Compliance

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

Basis of Consolidation

The basis for the consolidated financial statements

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

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

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

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

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

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

 

  a.

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

 

- 12 -


  b.

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

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

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

The subsidiaries in the consolidated financial statements

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

 

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

TSMC

  

TSMC North America

  

Selling and marketing of integrated circuits and semiconductor devices

  

San Jose, California, U.S.A.

   100%   100%   100%   -
  

TSMC Japan Limited (TSMC Japan)

  

Marketing activities

  

Yokohama, Japan

   100%   100%   100%   a)
  

TSMC Partners, Ltd. (TSMC Partners)

  

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

  

Tortola, British Virgin Islands

   100%   100%   100%   -
  

TSMC Korea Limited (TSMC Korea)

  

Customer service and technical supporting activities

  

Seoul, Korea

   100%   100%   100%   a)
  

TSMC Europe B.V. (TSMC Europe)

  

Marketing and engineering supporting activities

  

Amsterdam, the Netherlands

   100%   100%   100%   a)
  

TSMC Global, Ltd. (TSMC Global)

  

Investment activities

  

Tortola, British Virgin Islands

   100%   100%   100%   -
  

TSMC China Company Limited (TSMC China)

  

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

  

Shanghai, China

   100%   100%   100%   -
  

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

  

Investing in new start-up technology companies

  

Cayman Islands

     50%     50%     50%   -
  

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

  

Investing in new start-up technology companies

  

Cayman Islands

     98%     98%     98%   -
  

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

  

Investing in new start-up technology companies

  

Cayman Islands

   99.5%   99.5%   99.5%   a)
  

Xintec Inc. (Xintec)

  

Wafer level chip size packaging service

  

Taoyuan, Taiwan

         b)         b)     40%   -
  

TSMC Solid State Lighting Ltd. (TSMC SSL)

  

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

  

Hsin-Chu, Taiwan

     92%     92%     95%  

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

  

TSMC Solar Ltd. (TSMC Solar)

  

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

  

Tai-Chung, Taiwan

     99%     99%     99%  

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

  

TSMC Guang Neng Investment, Ltd. (TSMC GN)

  

Investment activities

  

Taipei, Taiwan

   100%   100%   100%   a)

TSMC Partners

  

TSMC Design Technology Canada Inc. (TSMC Canada)

  

Engineering support activities

  

Ontario, Canada

   100%   100%   100%   a)
  

TSMC Technology, Inc. (TSMC Technology)

  

Engineering support activities

  

Delaware, U.S.A.

   100%   100%   100%   a)
  

TSMC Development, Inc. (TSMC Development)

  

Investment activities

  

Delaware, U.S.A.

   100%   100%   100%   -
  

InveStar Semiconductor Development Fund, Inc. (ISDF)

  

Investing in new start-up technology companies

  

Cayman Islands

     97%     97%     97%   a)
  

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

  

Investing in new start-up technology companies

  

Cayman Islands

     97%     97%     97%   a)

TSMC Development

  

WaferTech, LLC (WaferTech)

  

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

  

Washington, U.S.A.

   100%   100%   100%   -

 

(Continued)

 

- 13 -


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

VTAF III

  

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

  

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

  

Taipei, Taiwan

     58%     58%     58%   a)
  

Growth Fund Limited (Growth Fund)

  

Investing in new start-up technology companies

  

Cayman Islands

   100%   100%   100%   a)

VTAF III, VTAF II and Emerging Alliance

  

VentureTech Alliance Holdings, LLC (VTA Holdings)

  

Investing in new start-up technology companies

  

Delaware, U.S.A.

   100%   100%   100%   a)

TSMC SSL

  

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

  

Selling and marketing of solid state lighting related products

  

Delaware, U.S.A.

   100%   100%   100%   a)

TSMC Solar

  

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

  

Selling and marketing of solar related products

  

Delaware, U.S.A.

   100%   100%   100%   a)
  

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

  

Investing in solar related business

  

Amsterdam, the Netherlands

   100%   100%   100%   a)
  

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

  

Investing in new start-up technology companies

  

Cayman Islands

     49%     49%     49%   -

TSMC Solar Europe

  

TSMC Solar Europe GmbH

  

Selling of solar related products and providing customer service

  

Hamburg, Germany

   100%   100%   100%   a)

(Concluded)

 

Note a:

  

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

Note b:

  

TSMC no longer has power to govern the financial and operating policies of Xintec starting June 2013 due to the loss of power to cast the majority of votes at meetings of the Board of Directors. As a result, Xintec is no longer consolidated and is accounted for using the equity method. Please refer to Note 33.

Retirement Benefits

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

Taxation

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

 

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

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

 

  6.

CASH AND CASH EQUIVALENTS

 

    

March 31,

2014

          December 31,
2013
         

March 31,

2013

 

Cash and deposits in banks

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

Repurchase agreements collateralized by corporate bonds

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

Repurchase agreements collateralized by short-term commercial paper

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

Repurchase agreements collateralized by government bonds

     922,097            475,879            510,476   

Commercial paper

     299,851            -            -   
  

 

 

       

 

 

       

 

 

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

 

 

       

 

 

       

 

 

 

 

- 14 -


  7.

FINANCIAL ASSETS AND LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS

 

    

March 31,

2014

   December 31,
2013
  

March 31,

2013

Derivative financial assets

              

Cross currency swap contracts

     $ 7,490        $ -        $ 8,613  

Forward exchange contracts

       3,935          90,353          9,593  
    

 

 

      

 

 

      

 

 

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

 

 

      

 

 

      

 

 

 

Derivative financial liabilities

              

Forward exchange contracts

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

Cross currency swap contracts

       2,430          4,177          415  
    

 

 

      

 

 

      

 

 

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

 

 

      

 

 

      

 

 

 

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

Outstanding forward exchange contracts consisted of the following:

 

     Maturity Date   

Contract Amount

(In Thousands)

March 31, 2014

     

Sell EUR/Buy US$

   April 2014    EUR1,030/ US$1,421

Sell NT$/Buy EUR

   April 2014    NT$419,405/EUR10,000

Sell NT$/Buy JPY

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

Sell NT$/Buy US$

   April 2014    NT$962,307/US$31,700

Sell US$/Buy EUR

   April 2014    US$266,577/EUR193,700

Sell US$/Buy JPY

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

Sell US$/Buy RMB

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

December 31, 2013

     

Sell NT$/Buy EUR

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

Sell NT$/Buy US$

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

Sell US$/Buy EUR

   January 2014    US$340,134/EUR248,000

Sell US$/Buy JPY

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

Sell US$/Buy RMB

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

March 31, 2013

     

Sell NT$/Buy US$

   April 2013    NT$810,124/US$27,200

Sell NT$/Buy JPY

   April 2013    NT$14,261/JPY45,000

Sell US$/Buy JPY

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

Sell US$/Buy NT$

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

Sell US$/Buy RMB

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

 

- 15 -


Outstanding cross currency swap contracts consisted of the following:

 

    Maturity Date   

Contract Amount

(In Thousands)

  

Range of

Interest Rates
Paid

  

Range of

Interest Rates
Received

March 31, 2014

        

April 2014

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

December 31, 2013

        

January 2014

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

March 31, 2013

        

April 2013

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

April 2013

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

 

  8.

AVAILABLE-FOR-SALE FINANCIAL ASSETS

 

    

March 31,

2014

   December 31,
2013
  

March 31,

2013

Publicly traded stocks

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

Money market funds

       6,431          1,183          2,246  
    

 

 

      

 

 

      

 

 

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

 

 

      

 

 

      

 

 

 

Current portion

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

Noncurrent portion

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

 

 

      

 

 

      

 

 

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

 

 

      

 

 

      

 

 

 

 

  9.

HELD-TO-MATURITY FINANCIAL ASSETS

 

    

      March 31,      

2014

   December 31,
2013
  

      March 31,      

2013

Current portion

              

Commercial paper

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

Corporate bonds

       -          -          2,044,822  
    

 

 

      

 

 

      

 

 

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

 

 

      

 

 

      

 

 

 

 

- 16 -


10.

HEDGING DERIVATIVE FINANCIAL INSTRUMENTS

 

    

March 31,

2014

   December 31,
2013
  

March 31,

2013

Financial assets - noncurrent

              

Fair value hedges

              

Stock forward contracts

     $ -        $ -        $   659,351  
    

 

 

      

 

 

      

 

 

 

Financial liabilities- noncurrent

              

Fair value hedges

              

Stock forward contracts

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

 

 

      

 

 

      

 

 

 

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

The outstanding stock forward contracts consisted of the following:

 

    

March 31,

2014

   December 31,
2013
  

March 31,

2013

Contract amount (US$ in thousands)

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

 

11.

NOTES AND ACCOUNTS RECEIVABLE, NET

 

    

March 31,

2014

    December 31,
2013
   

March 31,

2013

 

Notes and accounts receivable

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

Allowance for doubtful receivables

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

 

 

   

 

 

   

 

 

 

Notes and accounts receivable, net

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

 

 

   

 

 

   

 

 

 

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

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

 

- 17 -


Aging analysis of notes and accounts receivable, net

 

    

March 31,

2014

   December 31,
2013
  

March 31,

2013

Neither past due nor impaired

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

Past due but not impaired

              

Past due within 30 days

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

 

 

      

 

 

      

 

 

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

 

 

      

 

 

      

 

 

 

Movements of the allowance for doubtful receivables

 

       Individually
Assessed for
Impairment
   Collectively
Assessed for
Impairment
   Total

Balance at January 1, 2014

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

Provision

         -          21,147          21,147  

Reversal

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

Effect of exchange rate changes

         -          70          70  
      

 

 

      

 

 

      

 

 

 

Balance at March 31, 2014

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

 

 

      

 

 

      

 

 

 

Balance at January 1, 2013

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

Provision

         -          44,699          44,699  

Reversal

         (35,235 )        -          (35,235 )

Effect of exchange rate changes

         1,632          (1,560 )        72  
      

 

 

      

 

 

      

 

 

 

Balance at March 31, 2013

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

 

 

      

 

 

      

 

 

 

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

 

      

March 31,

2014

     December 31,
2013
    

March 31,

2013

Not past due

       $ -          $ 38          $ 97,405  

Past due 1-30 days

         -            276            1,867  

Past due 31-60 days

         -            80            521  

Past due 61-120 days

         321            158            783  

Past due over 121 days

         7,832            7,824            3,157  
      

 

 

        

 

 

        

 

 

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

 

 

        

 

 

        

 

 

 

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

 

- 18 -


12.

INVENTORIES

 

    

March 31,

2014

   December 31,
2013
  

March 31,

2013

Finished goods

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

Work in process

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

Raw materials

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

Supplies and spare parts

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

 

 

      

 

 

      

 

 

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

 

 

      

 

 

      

 

 

 

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

 

13.

FINANCIAL ASSETS CARRIED AT COST

 

    

March 31,

2014

     December 31,
2013
    

March 31,

2013

Non-publicly traded stocks

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

Mutual funds

       283,929            280,513            294,646  
    

 

 

        

 

 

        

 

 

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

 

 

        

 

 

        

 

 

 

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

 

14.

INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD

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

 

    

March 31,

2014

     December 31,
2013
    

March 31,

2013

 

Associates

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

Jointly controlled entities

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

 

 

    

 

 

    

 

 

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

 

 

    

 

 

    

 

 

 

 

- 19 -


  a.

Investments in associates

Associates consisted of the following:

 

Name of Associate

  

Principal Activities

  

Place of

Incorporation
and Operation

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

March 31,

2014

   December 31,
2013
  

March 31,

2013

  

March 31,

2014

   December 31,
2013
  

March 31,

2013

Vanguard International Semiconductor Corporation (VIS)

  

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

  

Hsinchu, Taiwan

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

Systems on Silicon Manufacturing Company Pte Ltd. (SSMC)

  

Fabrication and supply of integrated circuits

  

Singapore

       8,036,044          7,457,733          7,292,694          39%          39%          39%  

Motech Industries, Inc. (Motech)

  

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

  

Taipei, Taiwan

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

Xintec

  

Wafer level chip size packaging service

  

Taoyuan, Taiwan

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

Global Unichip Corporation (GUC)

  

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

  

Hsinchu, Taiwan

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

Mcube Inc. (Mcube)

  

Research, development, and sale of micro-semiconductor device

  

Delaware, U.S.A.

       -          -          -          -            -          25%  
          

 

 

      

 

 

      

 

 

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

 

 

      

 

 

      

 

 

                

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

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

TSMC no longer has power to govern the financial and operating policies of Xintec starting June 2013 due to the loss of power to cast the majority of votes at meetings of the Board of Directors. As a result, Xintec is no longer consolidated and is accounted for using the equity method. Please refer to Note 33.

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

 

- 20 -


  b.

Investments in jointly controlled entities

Jointly controlled entities consisted of the following:

 

Name of Jointly
Controlled Entity

  

Principal Activities

  

Place of

Incorporation
and Operation

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

March 31,

2014

   December 31,
2013
  

March 31,

2013

  

March 31,

2014

  December 31,
2013
 

March 31,

2013

VisEra Holding Company (VisEra Holding)

  

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

  

Cayman Islands

       $   3,552,814          $   3,492,453          $   3,176,342          49 %       49 %       49 %

 

15.

PROPERTY, PLANT AND EQUIPMENT

 

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

Cost

                                  

Balance at January 1, 2014

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

Additions

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

Disposals or retirements

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

Effect of exchange rate changes

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

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

 

Balance at March 31, 2014

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

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

 

Accumulated depreciation and impairment

                                  

Balance at January 1, 2014

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

Additions

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

Disposals or retirements

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

Effect of exchange rate changes

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

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

 

Balance at March 31, 2014

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

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

 

Carrying amounts at January 1, 2014

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

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

 

Carrying amounts at March 31, 2014

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

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

 

Cost

                                  

Balance at January 1, 2013

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

Additions

       3,212,000          1,653,205          10,143,673          1,157,523          -          68,238,002          84,404,403  

Disposals or retirements

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

Effect of exchange rate changes

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

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

 

Balance at March 31, 2013

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

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

 

Accumulated depreciation and impairment

                                  

Balance at January 1, 2013

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

Additions

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

Disposals or retirements

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

Effect of exchange rate changes

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

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

 

Balance at March 31, 2013

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

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

 

Carrying amounts at March 31, 2013

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

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

      

 

 

 

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

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

Future minimum lease gross payments were as follows:

 

    

March 31,

2014

  December 31,
2013
 

March 31,

2013

Minimum lease payments

            

Not later than 1 year

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

Later than 1 year and not later than 5 years

       853,104         850,703         110,488  

Later than five years

       -         -         745,222  
    

 

 

     

 

 

     

 

 

 
       881,560         879,079         883,332  

Less:    Future finance expenses

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

 

 

     

 

 

     

 

 

 

Present value of minimum lease payments

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

 

 

     

 

 

     

 

 

 

 

(Continued)

 

- 21 -


    

March 31,

2014

   December 31,
2013
  

March 31,

2013

Present value of minimum lease payments

              

Not later than 1 year

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

Later than 1 year and not later than 5 years

       764,402          757,355          107,803  

Later than five years

       -          -          642,602  
    

 

 

      

 

 

      

 

 

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

 

 

      

 

 

      

 

 

 

Current portion

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

Noncurrent portion

         783,275            776,230            768,935  
    

 

 

      

 

 

      

 

 

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

 

 

      

 

 

      

 

 

 

(Concluded)

There was no capitalization of borrowing costs for the three months ended March 31, 2014 and 2013.

 

16.

INTANGIBLE ASSETS

 

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

Cost

                            

Balance at January 1, 2014

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

Additions

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

Retirements

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

Effect of exchange rate changes

       93,047            (954 )        537          380            93,010  
    

 

 

        

 

 

      

 

 

      

 

 

        

 

 

 

Balance at March 31, 2014

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

 

 

        

 

 

      

 

 

      

 

 

        

 

 

 

Accumulated amortization

                            

Balance at January 1, 2014

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

Additions

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

Retirements

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

Effect of exchange rate changes

       -            (954 )        526          44            (384 )
    

 

 

        

 

 

      

 

 

      

 

 

        

 

 

 

Balance at March 31, 2014

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

 

 

        

 

 

      

 

 

      

 

 

        

 

 

 

Carrying amounts at January 1, 2014

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

 

 

        

 

 

      

 

 

      

 

 

        

 

 

 

Carrying amounts at March 31, 2014

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

 

 

        

 

 

      

 

 

      

 

 

        

 

 

 

Cost

                            

Balance at January 1, 2013

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

Additions

       -            -          763,917          200,815            964,732  

Retirements

       -            -          (700 )        -            (700 )

Reclassification

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

Effect of exchange rate changes

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

 

 

        

 

 

      

 

 

      

 

 

        

 

 

 

Balance at March 31, 2013

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

 

 

        

 

 

      

 

 

      

 

 

        

 

 

 

Accumulated amortization

                            

Balance at January 1, 2013

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

Additions

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

Retirements

       -            -          (428 )        -            (428 )

Effect of exchange rate changes

       -            441          2,164          403            3,008  
    

 

 

        

 

 

      

 

 

      

 

 

        

 

 

 

Balance at March 31, 2013

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

 

 

        

 

 

      

 

 

      

 

 

        

 

 

 

Carrying amounts at March 31, 2013

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

 

 

        

 

 

      

 

 

      

 

 

        

 

 

 

 

- 22 -


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

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

 

17.

OTHER ASSETS

 

    

March 31,

2014

   December 31,
2013
  

March 31,

2013

Tax receivable

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

Prepaid expenses

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

Long-term receivable

       754,020          820,000          764,200  

Others

       653,862          770,468          575,835  
    

 

 

      

 

 

      

 

 

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

 

 

      

 

 

      

 

 

 

Current portion

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

Noncurrent portion

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

 

 

      

 

 

      

 

 

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

 

 

      

 

 

      

 

 

 

 

18.

SHORT-TERM LOANS

 

    

March 31,

2014

   December 31,
2013
  

March 31,

2013

Unsecured loans

              

Amount

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

 

 

      

 

 

      

 

 

 

Original loan content

              

US$ (in thousands)

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

Annual interest rate

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

Maturity date

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

 

19.

PROVISIONS

 

    

March 31,

2014

     December 31,
2013
    

March 31,

2013

Sales returns and allowances

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

Warranties

       12,925            10,452            5,199  
    

 

 

        

 

 

        

 

 

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

 

 

        

 

 

        

 

 

 

 

(Continued)

 

- 23 -


    

March 31,

2014

   December 31,
2013
  

March 31,

2013

Current portion

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

Noncurrent portion (classified under other noncurrent liabilities)

       12,925          10,452          5,199  
    

 

 

      

 

 

      

 

 

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

 

 

      

 

 

      

 

 

 

(Concluded)

 

     Sales Returns
and Allowances
  Warranties   Total

Three months ended March 31, 2014

            

Balance, beginning of period

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

Provision

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

Payment

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

Effect of exchange rate changes

       4,362         131         4,493  
    

 

 

     

 

 

     

 

 

 

Balance, end of period

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

 

 

     

 

 

     

 

 

 

Three months ended March 31, 2013

            

Balance, beginning of period

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

Provision

       1,746,905         323         1,747,228  

Payment

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

Effect of exchange rate changes

       6,114         (15 )       6,099  
    

 

 

     

 

 

     

 

 

 

Balance, end of period

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

 

 

     

 

 

     

 

 

 

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

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

 

20.

BONDS PAYABLE

 

    

March 31,

2014

  December 31,
2013
 

March 31,

2013

Noncurrent portion

            

Domestic unsecured bonds

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

Overseas unsecured bonds

       45,724,500         44,700,000         -  
    

 

 

     

 

 

     

 

 

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

Less:    Discounts on bonds payable

       (126,399 )       (132,375 )       -  
    

 

 

     

 

 

     

 

 

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

 

 

     

 

 

     

 

 

 

 

- 24 -


The major terms of overseas unsecured bonds are as follows:

 

Issuance Period   

Total Amount
(US$

in Thousands)

     Coupon Rate   Repayment and Interest
Payment

April 2013 to April 2016

     $ 350,000           0.95%  

Bullet repayment; interest payable semi-annually

April 2013 to April 2018

         1,150,000           1.625%  

 

21.

LONG-TERM BANK LOANS

 

    

March 31,

2014

   December 31,
2013
  

March 31,

2013

Bank loans for working capital

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

 

 

      

 

 

      

 

 

 

Current portion

     $ -        $ -        $ 131,250  

Noncurrent portion

       40,000          40,000          1,325,000  
    

 

 

      

 

 

      

 

 

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

 

 

      

 

 

      

 

 

 

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

 

22.

OTHER LONG-TERM PAYABLES

 

    

March 31,

2014

     December 31,
2013
    

March 31,

2013

Payables for software and system design costs

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

Payables for acquisition of property, plant and equipment

       -            -            843,160  
    

 

 

        

 

 

        

 

 

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

 

 

        

 

 

        

 

 

 

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

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

Noncurrent portion

       36,000            36,000            54,000  
    

 

 

        

 

 

        

 

 

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

 

 

        

 

 

        

 

 

 

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

 

- 25 -


23.

EQUITY

 

  a.

Capital stock

 

    

March 31,

2014

   December 31,
2013
  

March 31,

2013

Authorized shares (in thousands)

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

 

 

      

 

 

      

 

 

 

Authorized capital

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

 

 

      

 

 

      

 

 

 

Issued and paid shares (in thousands)

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

 

 

      

 

 

      

 

 

 

Issued capital

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

 

 

      

 

 

      

 

 

 

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

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

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

 

  b.

Capital surplus

 

    

   March 31,   

2014

   December 31,
2013
  

   March 31,   

2013

Additional paid-in capital

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

From merger

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

From convertible bonds

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

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

       89,882          100,827          44,343  

From share of changes in equities of associates and joint venture

       13,388          43,024          16,826  

Donations

       55          55          55  
    

 

 

      

 

 

      

 

 

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

 

 

      

 

 

      

 

 

 

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

 

  c.

Retained earnings and dividend policy

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

 

  1)

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

 

  2)

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

 

- 26 -


  3)

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

 

  4)

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

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

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

TSMC accrued profit sharing to employees based on certain percentage of net income during the period, which amounted to NT$3,200,716 thousand and NT$2,660,482 thousand for the three months ended March 31, 2014 and 2013, respectively. Bonuses to members of the Board of Directors were expensed based on estimated amount payable. If the actual amounts subsequently approved by the shareholders differ from the amounts estimated, the differences are recorded in the year such bonuses are approved by the shareholders as a change in accounting estimate. If profit sharing approved for distribution to employees is in the form of common shares, the number of shares is determined by dividing the amount of profit sharing by the closing price (after considering the effect of dividends) of the shares on the day preceding the shareholders’ meeting.

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

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

The appropriations of 2013 and 2012 earnings have been approved by TSMC’s Board of Directors in its meeting held on February 18, 2014 and by TSMC’s shareholders in its meeting held on June 11, 2013, respectively. The appropriations and dividends per share were as follows:

 

     Appropriation of Earnings   Dividends Per Share
(NT$)
    

    For Fiscal    

Year 2013

    

    For Fiscal    

Year 2012

 

 For Fiscal 

Year 2013

    

 For Fiscal 

Year 2012

Legal capital reserve

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

Special capital reserve

       (2,785,741 )          (4,820,483 )             

Cash dividends to shareholders

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

 

 

        

 

 

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

 

 

        

 

 

            

 

- 27 -


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

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

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

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

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

 

  d.

Others

Changes in others were as follows:

 

     Three Months Ended March 31, 2014
     Foreign
Currency
    Translation    
Reserve
  Unrealized
Gain/Loss from
Available-for-
sale Financial
Assets
  Cash Flow
Hedges Reserve
  Total

Balance, beginning of period

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

Exchange differences arising on translation of foreign operations

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

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

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

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

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

Share of other comprehensive income of associates and joint venture

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

Income tax effect

       -         2,956         -         2,956  
    

 

 

     

 

 

     

 

 

     

 

 

 

Balance, end of period

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

 

 

     

 

 

     

 

 

     

 

 

 

 

- 28 -


     Three Months Ended March 31, 2013
     Foreign
Currency
    Translation    
Reserve
  Unrealized
Gain/Loss from
Available-for-
sale Financial
Assets
  Cash Flow
Hedges Reserve
   Total

Balance, beginning of period

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

Exchange differences arising on translation of foreign operations

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

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

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

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

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

Share of other comprehensive income of associates and joint venture

       134,653         (14 )       -          134,639  

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

       510         (26 )       -          484  

Income tax effect

       -         43,239         -          43,239  
    

 

 

     

 

 

     

 

 

      

 

 

 

Balance, end of period

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

 

 

     

 

 

     

 

 

      

 

 

 

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

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

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

 

- 29 -


  e.

Noncontrolling interests

 

       Three Months Ended March 31  
     2014   2013

Balance, beginning of period

     $ 266,830       $ 2,543,226  

Share of noncontrolling interests

        

Net loss

       (24,967 )       (41,333 )  

Exchange differences arising on translation of foreign operations

       627         32,232  

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

       838         (256 )

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

       (338 )       (2,679 )

Stock option compensation cost of subsidiary

       -         2,701  

Share of other comprehensive income of associates and joint venture

       97         -  

Adjustments arising from changes in percentage of ownership in subsidiaries

       10,945         (3,610 )

Decrease in noncontrolling interests

       (29,574 )       (12,464 )
    

 

 

     

 

 

 

Balance, end of period

     $ 224,458       $ 2,517,817  
    

 

 

     

 

 

 

 

24.

SHARE-BASED PAYMENT

The Company did not issue employee stock option plans for the three months ended March 31, 2014 and 2013. Information about TSMC’s outstanding employee stock options is described as follows:

 

  a.

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

 

    TSMC   

Number of
Stock

Options

(In Thousands)

 

Weighted-

average

Exercise Price

(NT$)

Three months ended March 31, 2014

        

Balance, beginning of period

       1,763         $45.9  

Options exercised

       (507 )       44.0  
    

 

 

     

Balance, end of period

       1,256         46.7  
    

 

 

     

Balance exercisable, end of period

       1,256         46.7  
    

 

 

     

Three months ended March 31, 2013

        

Balance, beginning of period

       5,945         $34.6  

Options exercised

           (3,797 )       28.3  
    

 

 

     

Balance, end of period

       2,148         45.7  
    

 

 

     

Balance exercisable, end of period

       2,148         45.7  
    

 

 

     

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

 

- 30 -


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

 

March 31, 2014

 

December 31, 2013

 

March 31, 2013

Range of
    Exercise Price    
(NT$)
    Weighted-average  
Remaining
Contractual Life
(Years)
  Range of
  Exercise Price  
(NT$)
    Weighted-average  
Remaining
Contractual Life
(Years)
  Range of
  Exercise Price  
(NT$)
    Weighted-average  
Remaining
Contractual Life
(Years)
$43.2-$47.2   1.0   $43.2-$47.2   1.0   $20.2-$28.3   0.2
        $38.0-$50.1   1.8

 

    Xintec

  

Number of
Options

(In Thousands)

  Weighted-
average
Exercise Price
(NT$)

Three months ended March 31, 2013

        

Balance, beginning of period

       515       $ 13.8  

Options exercised

       (58 )       14.7  
    

 

 

     

Balance, end of period

           457         13.7  
    

 

 

    &