Form 6-K

1934 Act Registration No. 1-14700

 

 

 

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

 

FORM 6-K

 

 

REPORT OF FOREIGN PRIVATE ISSUER

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

OF THE SECURITIES EXCHANGE ACT OF 1934

For the month of August 2014

 

 

Taiwan Semiconductor Manufacturing Company Ltd.

(Translation of Registrant’s Name Into English)

 

 

No. 8, Li-Hsin Rd. 6,

Hsinchu Science Park,

Taiwan

(Address of Principal Executive Offices)

 

 

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

Form 20-F  x            Form 40-F  ¨

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

Yes  ¨            No   x

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

 

 

 


SIGNATURES

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

 

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

/s/ Lora Ho

      Lora Ho
      Senior Vice President & Chief Financial Officer


  

Taiwan Semiconductor Manufacturing

Company Limited and Subsidiaries

 

Consolidated Financial Statements for the

Six Months Ended June 30, 2014 and 2013 and

Independent Accountants’ Review Report

  


INDEPENDENT ACCOUNTANTS’ REVIEW REPORT

The Board of Directors and Shareholders

Taiwan Semiconductor Manufacturing Company Limited

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

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

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

 

 

August 12, 2014

Notice to Readers

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

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

 

- 1 -


Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED BALANCE SHEETS

(In Thousands of New Taiwan Dollars)

 

 

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

CURRENT ASSETS

                       

Cash and cash equivalents (Note 6)

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

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

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

Available-for-sale financial assets (Note 8)

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

Held-to-maturity financial assets (Note 9)

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

Notes and accounts receivable, net (Note 11)

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

Receivables from related parties (Note 32)

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

Other receivables from related parties (Note 32)

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

Inventories (Note 12)

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

Other financial assets (Note 33)

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

Other current assets (Note 17)

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

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

Total current assets

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

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

NONCURRENT ASSETS

                       

Available-for-sale financial assets (Note 8)

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

Financial assets carried at cost (Note 13)

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

Investments accounted for using equity method (Note 14)

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

Property, plant and equipment (Note 15)

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

Intangible assets (Note 16)

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

Deferred income tax assets (Notes 4 and 27)

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

Refundable deposits (Note 32)

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

Other noncurrent assets (Note 17)

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

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

Total noncurrent assets

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

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

TOTAL

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

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

LIABILITIES AND EQUITY

                       

CURRENT LIABILITIES

                       

Short-term loans (Note 18)

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

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

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

Hedging derivative financial liabilities (Note 10)

      4,282,501         -         -         -         -         -  

Accounts payable

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

Payables to related parties (Note 32)

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

Salary and bonus payable

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

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

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

Payables to contractors and equipment suppliers

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

Cash dividends payable (Note 22)

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

Income tax payable (Notes 4 and 27)

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

Provisions (Note 19)

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

Accrued expenses and other current liabilities (Note 21)

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

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

Total current liabilities

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

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

NONCURRENT LIABILITIES

                       

Hedging derivative financial liabilities (Note 10)

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

Bonds payable (Note 20)

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

Long-term bank loans

      40,000         -         40,000         -         -         -  

Other long-term payables (Note 21)

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

Obligations under finance leases

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

Accrued pension cost (Note 4)

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

Others (Note 19)

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

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

Total noncurrent liabilities

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

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

Total liabilities

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

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

EQUITY ATTRIBUTABLE TO SHAREHOLDERS OF THE PARENT

                       

Capital stock (Note 22)

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

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

Capital surplus (Note 22)

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

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

Retained earnings (Note 22)

                       

Appropriated as legal capital reserve

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

Appropriated as special capital reserve

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

Unappropriated earnings

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

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

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

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

Others (Note 22)

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

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

Equity attributable to shareholders of the parent

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

NONCONTROLLING INTERESTS (Note 22)

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

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

Total equity

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

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

TOTAL

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

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

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

 

- 2 -


Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

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

(Reviewed, Not Audited)

 

 

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

NET REVENUE (Notes 24, 32 and 37)

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

COST OF REVENUE (Notes 12, 29 and 32)

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

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

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

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

REALIZED (UNREALIZED) GROSS PROFIT ON SALES TO ASSOCIATES

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

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

GROSS PROFIT

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

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

OPERATING EXPENSES (Notes 29 and 32)

                               

Research and development

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

General and administrative

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

Marketing

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

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

Total operating expenses

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

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

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

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

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

INCOME FROM OPERATIONS (Note 37)

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

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

NON-OPERATING INCOME AND EXPENSES

                               

Share of profits of associates and joint venture

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

Other income

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

Foreign exchange gain (loss), net

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

Finance costs (Note 25)

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

Other gains and losses (Note 26)

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

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

Total non-operating income and expenses

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

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

INCOME BEFORE INCOME TAX

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

INCOME TAX EXPENSE (Notes 4 and 27)

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

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

NET INCOME

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

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

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

                               

Exchange differences arising on translation of foreign operations

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

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

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

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

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

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

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

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

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

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

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

TOTAL COMPREHENSIVE INCOME FOR THE PERIOD

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

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

NET INCOME (LOSS) ATTRIBUTABLE TO:

                               

Shareholders of the parent

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

Noncontrolling interests

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

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

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

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

TOTAL COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO:

                               

Shareholders of the parent

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

Noncontrolling interests

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

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

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

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

 

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

    Income Attributable to    
Shareholders of

the Parent

 

    Income Attributable to    
Shareholders of

the Parent

 

    Income Attributable to    
Shareholders of

the Parent

 

    Income Attributable to    

Shareholders of

the Parent

EARNINGS PER SHARE (NT$, Note 28)

               

Basic earnings per share

    $       2.30       $       2.00       $       4.15       $       3.52  
   

 

 

     

 

 

     

 

 

     

 

 

 

Diluted earnings per share

    $       2.30       $       2.00       $       4.15       $       3.52  
   

 

 

     

 

 

     

 

 

     

 

 

 

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

 

- 3 -


Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

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

(Reviewed, Not Audited)

 

 

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

 

Retained Earnings

 

Foreign

Currency

Translation
Reserve

 

Unrealized
Gain/Loss

from
Available-

for-sale
Financial
Assets

 

Cash
Flow
Hedges
Reserve

               
   

Shares

(In
Thousands)

  Amount   Capital
Surplus
 

Legal

Capital
Reserve

  Special
Capital
Reserve
  Unappropriated
Earnings
  Total         Total   Total   Noncontrolling
Interests
 

Total

Equity

BALANCE, JANUARY 1, 2014

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

Appropriations of prior year’s earnings

                                                       

Legal capital reserve

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

Reversal of special capital reserve

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

Cash dividends to shareholders - NT$3.00 per share

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

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

Total

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

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

Net income for the six months ended June 30, 2014

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

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

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

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

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

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

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

Issuance of stock from exercise of employee stock options

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

Disposal of investments accounted for using equity method

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

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

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

From share of changes in equities of subsidiaries

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

Decrease in noncontrolling interests

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

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

BALANCE, JUNE 30, 2014

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

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

BALANCE, JANUARY 1, 2013

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

Appropriations of prior year’s earnings

                                                       

Legal capital reserve

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

Reversal of special capital reserve

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

Cash dividends to shareholders - NT$3.00 per share

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

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

Total

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

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

Net income for the six months ended June 30, 2013

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

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

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

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

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

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

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

Issuance of stock from exercise of employee stock options

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

Stock option compensation cost of subsidiary

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

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

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

Adjustments arising from changes in percentage of ownership in subsidiaries

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

Increase in noncontrolling interests

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

Effect of deconsolidation of subsidiary

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

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

BALANCE, JUNE 30, 2013

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

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

     

 

 

 

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

 

- 4 -


Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands of New Taiwan Dollars)

(Reviewed, Not Audited)

 

 

     Six Months Ended June 30   
    2014     2013  

CASH FLOWS FROM OPERATING ACTIVITIES

   

Income before income tax

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

Adjustments for:

   

Depreciation expense

    86,338,443        73,519,241   

Amortization expense

    1,263,048        1,071,590   

Stock option compensation cost of subsidiary

    -        5,312   

Finance costs

    1,598,030        1,129,338   

Share of profits of associates and joint venture

    (2,003,006     (1,713,657

Interest income

    (1,292,325     (852,693

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

    (15,325     (29,365

Impairment loss of property, plant and equipment

    239,864        -   

Impairment loss of financial assets

    -        45,716   

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

    (134,020     (990,713

Gain on disposal of financial assets carried at cost, net

    (52,694     (4,573

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

    (2,028,643     731   

Gain on deconsolidation of subsidiary

    -        (293,578

Realized gross profit on sales to associates

    (16,648     (6,926

Loss on foreign exchange, net

    1,646,248        446,110   

Dividend income

    (637,957     (502,692

Income from receipt of equity securities in settlement of trade receivables

    (1,211     (9,590

Loss from hedging instruments

    589,243        1,937,366   

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

    (78,109     (1,657,824

Changes in operating assets and liabilities:

   

Derivative financial instruments

    (82,244     140,919   

Notes and accounts receivable, net

    (14,774,504     (22,223,842

Receivables from related parties

    (171,024     (510,193

Other receivables from related parties

    13,258        (19,275

Inventories

    (13,459,372     (997,563

Other financial assets

    (389,931     (64,259

Other current assets

    70,323        (90,235

Accounts payable

    5,331,172        281,081   

Payables to related parties

    (6,675     (27,167

Salary and bonus payable

    (524,021     (311,632

Accrued profit sharing to employees and bonus to directors and supervisors

    7,362,054        6,180,213   

Accrued expenses and other current liabilities

    2,915,319        2,647,510   

Provisions

    113,564        280,544   

Accrued pension cost

    (383     (1,194
 

 

 

   

 

 

 

 

(Continued)

 

- 5 -


Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands of New Taiwan Dollars)

(Reviewed, Not Audited)

 

 

    Six Months Ended June 30  
    2014     2013  

Cash generated from operations

  $ 199,212,436      $ 163,143,293   

Income taxes paid

    (22,602,632     (14,334,965
 

 

 

   

 

 

 

Net cash generated by operating activities

    176,609,804        148,808,328   
 

 

 

   

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES

   

Acquisitions of:

   

Available-for-sale financial assets

    (91,592     (10,102

Financial assets carried at cost

    (3,773     (16,616

Held-to-maturity financial assets

    (1,396,723     -   

Property, plant and equipment

    (188,233,322     (158,818,884

Intangible assets

    (1,204,154     (1,477,481

Other assets

    -        (30,721

Proceeds from disposal or redemption of:

   

Available-for-sale financial assets

    473,520        2,032,100   

Held-to-maturity financial assets

    2,900,000        4,445,850   

Financial assets carried at cost

    62,445        11,696   

Investments accounted for using equity method

    3,471,883        -   

Property, plant and equipment

    114,987        111,008   

Cash refund from other long-term receivables

    161,900        -   

Costs from entering into hedging transactions

    (520,856     (143,982

Interest received

    1,248,110        689,878   

Other dividends received

    629,843        493,557   

Refundable deposits paid

    (25,460     (23,124

Refundable deposits refunded

    59,041        52,333   

Net cash outflow from deconsolidation of subsidiary (Note 30)

    -        (979,910
 

 

 

   

 

 

 

Net cash used in investing activities

    (182,354,151     (153,664,398
 

 

 

   

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

   

Increase (decrease) in short-term loans

    19,220,278        (4,087,493

Proceeds from issuance of bonds

    -        89,644,821   

Increase in long-term bank loans

    -        650,000   

Repayment of long-term bank loans

    -        (62,500

Interest paid

    (889,467     (374,202

Guarantee deposits received

    10,374        12,114   

Guarantee deposits refunded

    (3,742     (53,881

Decrease in obligations under finance leases

    (28,426     (27,796

Proceeds from exercise of employee stock options

    33,487        110,175   

Increase (decrease) in noncontrolling interests

    (45,527     217,860   
 

 

 

   

 

 

 

Net cash generated by financing activities

    18,296,977        86,029,098   
 

 

 

   

 

 

 

 

(Continued)

 

- 6 -


Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands of New Taiwan Dollars)

(Reviewed, Not Audited)

 

 

    Six Months Ended June 30  
    2014     2013  

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS

  $ (194,504   $ 1,249,030   
 

 

 

   

 

 

 

NET INCREASE IN CASH AND CASH EQUIVALENTS

    12,358,126        82,422,058   

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

    242,695,447        143,410,588   
 

 

 

   

 

 

 

CASH AND CASH EQUIVALENTS, END OF PERIOD

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

 

 

   

 

 

 

 

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

   (Concluded)

 

- 7 -


Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED June 30, 2014 and 2013

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

(Reviewed, Not Audited)

 

 

  1. GENERAL

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

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

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

 

  2. THE AUTHORIZATION OF FINANCIAL STATEMENTS

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

 

  3. APPLICATION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS

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

 

  a.

The 2013 IFRSs version in issue but not yet effective

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

 

New, Revised or Amended Standards and Interpretations

 

     Effective Date Issued     

by IASB (Note)

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

 

January 1, 2009 or January 1, 2010

Amendment to IAS 39 Embedded Derivatives

 

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

 

(Continued)

 

- 8 -


New, Revised or Amended Standards and Interpretations

 

     Effective Date Issued     

by IASB (Note)

Improvements to IFRSs 2010

 

July 1, 2010 or January 1, 2011

Annual Improvements to IFRSs 2009 - 2011 Cycle

 

January 1, 2013

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

 

July 1, 2010

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

 

January 1, 2013

Amendment to IFRS 7 Disclosures - Transfers of Financial Assets

 

July 1, 2011

IFRS 10 Consolidated Financial Statements

 

January 1, 2013

IFRS 11 Joint Arrangements

 

January 1, 2013

IFRS 12 Disclosure of Interests in Other Entities

 

January 1, 2013

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

 

January 1, 2013

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

 

January 1, 2014

IFRS 13 Fair Value Measurement

 

January 1, 2013

Amendment to IAS 1 Presentation of Items of Other Comprehensive Income

 

July 1, 2012

Amendment to IAS 12 Deferred Tax: Recovery of Underlying Assets

 

January 1, 2012

Amendment to IAS 19 Employee Benefits

 

January 1, 2013

Amendment to IAS 27 Separate Financial Statements

 

January 1, 2013

Amendment to IAS 28 Investments in Associates and Joint Ventures

 

January 1, 2013

Amendment to IAS 32 Offsetting of Financial Assets and Financial Liabilities

 

January 1, 2014

(Concluded)

 

  Note:

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

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

 

  1)

IFRS 12, “Disclosure of Interests in Other Entities”

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

 

  2)

IFRS 13, “Fair Value Measurement”

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

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

 

- 9 -


  3)

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

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

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

 

  4)

Amendments to IAS 19, “Employee Benefits”

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

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

 

  b.

The IFRSs issued by IASB but not endorsed by FSC

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

 

New, Revised or Amended Standards and Interpretations

 

     Effective Date Issued     

by IASB (Note)

Annual Improvements to IFRSs 2010 - 2012 Cycle

 

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

Annual Improvements to IFRSs 2011 - 2013 Cycle

 

July 1, 2014

IFRS 9 Financial Instruments

 

January 1, 2018

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

 

January 1, 2018

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

 

January 1, 2016

IFRS 15 Revenue from Contracts with Customers

 

January 1, 2017

 

(Continued)

 

- 10 -


New, Revised or Amended Standards and Interpretations

 

     Effective Date Issued     

by IASB (Note)

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

 

January 1, 2016

Amendment to IAS 19 Defined Benefit Plans: Employee Contributions

 

July 1, 2014

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

 

January 1, 2014

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

 

January 1, 2014

(Concluded)

 

  Note:

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

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

 

  1)

IFRS 9, “Financial Instruments”

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

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

 

  a)

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

 

  b)

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

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

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

 

- 11 -


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

 

  2)

IFRS 15, “Revenue from Contracts with Customers”

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

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

 

   

Identify the contract with the customer;

   

Identify the performance obligations in the contract;

   

Determine the transaction price;

   

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

   

Recognize revenue when the entity satisfies a performance obligation.

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

 

  3)

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

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

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

 

  4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

 

- 12 -


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

Statement of Compliance

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

Basis of Consolidation

The basis for the consolidated financial statements

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

The subsidiaries in the consolidated financial statements

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

 

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

and Operating

Location

 

    June 30,

2014

    December 31,
2013
   

June 30,    

2013    

    Note

TSMC

 

TSMC North America

 

Selling and marketing of integrated circuits and semiconductor devices

 

San Jose, California, U.S.A.

    100%            100%               100%            -
 

TSMC Japan Limited (TSMC Japan)

 

Marketing activities

 

Yokohama, Japan

    100%            100%               100%            a)
 

TSMC Partners, Ltd. (TSMC Partners)

 

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

 

Tortola, British Virgin Islands

    100%            100%               100%            -
 

TSMC Korea Limited (TSMC Korea)

 

Customer service and technical supporting activities

 

Seoul, Korea

    100%            100%               100%            a)
 

TSMC Europe B.V. (TSMC Europe)

 

Marketing and engineering supporting activities

 

Amsterdam, the Netherlands

    100%            100%               100%            a)
 

TSMC Global, Ltd. (TSMC Global)

 

Investment activities

 

Tortola, British Virgin Islands

    100%            100%               100%            -
 

TSMC China Company Limited (TSMC China)

 

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

 

Shanghai, China

    100%            100%               100%            -
 

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

 

Investing in new start-up technology companies

 

Cayman Islands

    98%            50%               50%            b)
 

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

 

Investing in new start-up technology companies

 

Cayman Islands

    98%            98%               98%            -
 

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

 

Investing in new start-up technology companies

 

Cayman Islands

    99.5%            99.5%               99.5%            a)
 

TSMC Solid State Lighting Ltd. (TSMC SSL)

 

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

 

Hsin-Chu, Taiwan

    92%            92%               92%           

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

 

TSMC Solar Ltd. (TSMC Solar)

 

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

 

Tai-Chung, Taiwan

    99%            99%               99%           

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

 

TSMC Guang Neng Investment, Ltd. (TSMC GN)

 

Investment activities

 

Taipei, Taiwan

    100%            100%               100%            a)

TSMC Partners

 

TSMC Design Technology Canada Inc. (TSMC Canada)

 

Engineering support activities

 

Ontario, Canada

    100%            100%               100%            a)
 

TSMC Technology, Inc. (TSMC Technology)

 

Engineering support activities

 

Delaware, U.S.A.

    100%            100%               100%            a)
 

TSMC Development, Inc. (TSMC Development)

 

Investment activities

 

Delaware, U.S.A.

    100%            100%               100%            -

 

(Continued)

 

- 13 -


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

and Operating

Location

 

    June 30,

2014

    December 31,
2013
   

June 30,    

2013    

    Note

TSMC Partners

 

InveStar Semiconductor Development Fund, Inc. (ISDF)

 

Investing in new start-up technology companies

 

Cayman Islands

    97%            97%              97%            a)
 

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

 

Investing in new start-up technology companies

 

Cayman Islands

    97%            97%              97%            a)

TSMC Development

 

WaferTech, LLC (WaferTech)

 

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

 

Washington, U.S.A.

    100%            100%              100%            -

VTAF III

 

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

 

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

 

Taipei, Taiwan

    58%            58%              58%            a)
 

Growth Fund Limited (Growth Fund)

 

Investing in new start-up technology companies

 

Cayman Islands

    100%            100%              100%            a)

VTAF III, VTAF II and Emerging Alliance

 

VentureTech Alliance Holdings, LLC (VTA Holdings)

 

Investing in new start-up technology companies

 

Delaware, U.S.A.

    100%            100%              100%            a)

TSMC SSL

 

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

 

Selling and marketing of solid state lighting related products

 

Delaware, U.S.A.

    100%            100%              100%            a), c)

TSMC Solar

 

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

 

Selling and marketing of solar related products

 

Delaware, U.S.A.

    100%            100%              100%            a)
 

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

 

Investing in solar related business

 

Amsterdam, the Netherlands

    100%            100%              100%            a), d)
 

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

 

Investing in new start-up technology companies

 

Cayman Islands

    -            49%              49%            b)

TSMC Solar Europe

 

TSMC Solar Europe GmbH

 

Selling of solar related products and providing customer service

 

Hamburg, Germany

    100%            100%              100%            a), d)

(Concluded)

 

  Note a:

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

 

  Note b:

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

 

  Note c:

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

 

  Note d:

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

Retirement Benefits

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

Taxation

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

 

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

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

 

- 14 -


  6. CASH AND CASH EQUIVALENTS

 

   

June 30,

2014

        December 31,
2013
       

June 30,

2013

 

Cash and deposits in banks

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

Commercial paper

    5,036,633          -          -   

Repurchase agreements collateralized by corporate bonds

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

Repurchase agreements collateralized by short-term commercial paper

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

Repurchase agreements collateralized by government bonds

    1,056,695          475,879          188,380   
 

 

 

     

 

 

     

 

 

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

 

 

     

 

 

     

 

 

 

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

 

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

 

   

June 30,

2014

 

       

December 31,
2013

 

     

June 30,

2013

 

      

Derivative financial assets

                

 

Cross currency swap contracts

  $ 94,358          $ -          $ 2,758      

Forward exchange contracts

    63,907            90,353            17,252      
 

 

 

       

 

 

       

 

 

    
  $     158,265         

 

$

 

90,353

 

  

      $ 20,010      
 

 

 

       

 

 

       

 

 

    

 

Derivative financial liabilities

                

 

Cross currency swap contracts

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

Forward exchange contracts

    8,667            29,573            135,184      
 

 

 

       

 

 

       

 

 

    
  $ 19,418         

 

$

 

     33,750

 

  

      $    136,515      
 

 

 

       

 

 

       

 

 

    

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

Outstanding forward exchange contracts consisted of the following:

     Maturity Date   

Contract Amount

(In Thousands)

June 30, 2014

     

Sell EUR/Buy US$

   July 2014    EUR2,130/ US$2,900

Sell NT$/Buy JPY

   July 2014    NT$190,637/JPY650,000

Sell NT$/Buy US$

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

Sell US$/Buy EUR

   July 2014    US$81,794/EUR60,000

Sell US$/Buy JPY

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

Sell US$/Buy NT$

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

Sell US$/Buy RMB

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

 

(Continued)

 

- 15 -


     Maturity Date   

Contract Amount

(In Thousands)

December 31, 2013

     

Sell NT$/Buy EUR

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

Sell NT$/Buy US$

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

Sell US$/Buy EUR

   January 2014    US$340,134/EUR248,000

Sell US$/Buy JPY

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

Sell US$/Buy RMB

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

June 30, 2013

     

Sell NT$/Buy US$

   July 2013    NT$534,830/US$17,800

Sell US$/Buy EUR

   July 2013    US$386,201/EUR296,000

Sell US$/Buy JPY

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

Sell US$/Buy NT$

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

Sell US$/Buy RMB

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

(Concluded)

Outstanding cross currency swap contracts consisted of the following:

 

Maturity Date   

Contract Amount

(In Thousands)

  

Range of

Interest Rates
Paid

  

Range of

Interest Rates
Received

June 30, 2014

        

July 2014

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

July 2014 to August 2014

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

December 31, 2013

        

January 2014

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

June 30, 2013

        

July 2013

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

 

  8. AVAILABLE-FOR-SALE FINANCIAL ASSETS

 

    

June 30,

2014

     December 31,
2013
    

June 30,

2013

 

Publicly traded stocks

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

Money market funds

     367         1,183         8,417   
  

 

 

    

 

 

    

 

 

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

 

 

    

 

 

    

 

 

 

Current portion

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

Noncurrent portion

     -         58,721,959         49,581,219   
  

 

 

    

 

 

    

 

 

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

 

 

    

 

 

    

 

 

 

 

- 16 -


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

 

  9. HELD-TO-MATURITY FINANCIAL ASSETS

 

    

June 30,

2014

          December 31,
2013
         

June 30,

2013

 

Current portion

                 

Commercial paper

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

Corporate bonds

     -               -            700,576   
  

 

 

          

 

 

       

 

 

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

 

 

          

 

 

       

 

 

 

 

10. HEDGING DERIVATIVE FINANCIAL INSTRUMENTS

 

    

June 30,

2014

          December 31,
2013
         

June 30,

2013

 

Financial liabilities- current

                 

Fair value hedges

                 

Stock forward contracts

   $ 4,282,501             $ -          $ -   
  

 

 

          

 

 

       

 

 

 

Financial liabilities- noncurrent

                 

Fair value hedges

                 

Stock forward contracts

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

 

 

          

 

 

       

 

 

 

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

The outstanding stock forward contracts consisted of the following:

 

    

June 30,

2014

     December 31,
2013
    

June 30,

2013

 

Contract amount (US$ in thousands)

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

 

11. NOTES AND ACCOUNTS RECEIVABLE, NET

 

    

June 30,

2014

     December 31,
2013
    

June 30,

2013

 

Notes and accounts receivable

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

Allowance for doubtful receivables

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

 

 

    

 

 

    

 

 

 

Notes and accounts receivable, net

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

 

 

    

 

 

    

 

 

 

 

- 17 -


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

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

Aging analysis of notes and accounts receivable, net

 

         

June 30,

2014

                December 31,
2013
           

June 30,

2013

 

Neither past due nor impaired

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

Past due but not impaired

                   

Past due within 30 days

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

 

 

         

 

 

       

 

 

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

 

 

         

 

 

       

 

 

 

 

Movements of the allowance for doubtful receivables

 

  

     Individually
Assessed for
Impairment
      Collectively
Assessed for
Impairment
      Total  

Balance at January 1, 2014

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

Provision

        17,220              4,495            21,715   

Reversal

        -              (21,715         (21,715

Effect of exchange rate changes

        -              2            2   
     

 

 

         

 

 

       

 

 

 

Balance at June 30, 2014

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

 

 

         

 

 

       

 

 

 

Balance at January 1, 2013

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

Provision

        -              117,018            117,018   

Reversal

        (107,433           (121         (107,554

Effect of deconsolidation of subsidiary

        (3,157           -            (3,157

Effect of exchange rate changes

        1,660              (1,570         90   
     

 

 

         

 

 

       

 

 

 

Balance at June 30, 2013

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

 

 

         

 

 

       

 

 

 

 

Aging analysis of accounts receivable that is individually determined as impaired

 

  

    

June 30,

2014

      December 31,
2013
     

June 30,

2013

 

Not past due

      $             -            $          38          $ 30,724   

Past due 1-30 days

        17,326              276            3,780   

Past due 31-60 days

        334              80            -   

Past due 61-120 days

        -              158            -   

Past due over 121 days

        7,618              7,824            -   
     

 

 

         

 

 

       

 

 

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

 

 

         

 

 

       

 

 

 

 

- 18 -


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

 

12. INVENTORIES

 

                                                                 
    

June 30,

2014

       December 31,
2013
      

June 30,

2013

 

Finished goods

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

Work in process

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

Raw materials

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

Supplies and spare parts

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

 

 

      

 

 

      

 

 

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

 

 

      

 

 

      

 

 

 

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

 

       Three Months Ended June 30           Six Months Ended June 30  
  

 

 

 

          2014        2013                2014        2013      

Inventory losses

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

 

 

      

 

 

          

 

 

      

 

 

   

 

13. FINANCIAL ASSETS CARRIED AT COST

 

                                                                 
    

June 30,

2014

       December 31,
2013
      

June 30,

2013

 

Non-publicly traded stocks

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

Mutual funds

     280,794           280,513           295,141   
  

 

 

      

 

 

      

 

 

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

 

 

      

 

 

      

 

 

 

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

 

14. INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD

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

 

                                                                 
    

June 30,

2014

       December 31,
2013
      

June 30,

2013

 

Associates

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

Jointly controlled entities

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

 

 

      

 

 

      

 

 

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

 

 

      

 

 

      

 

 

 

 

- 19 -


  a.

Investments in associates

Associates consisted of the following:

 

        

Place of

Incorporation
and Operation

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

 

 

  

 

 

 
Name of Associate   Principal Activities      

June 30,

2014

     December 31,
2013
    

June 30,

2013

        

June 30,

2014

     December 31,
2013
    

June 30,

2013

 

Vanguard International Semiconductor Corporation (VIS)

 

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

  

Hsinchu, Taiwan

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

Systems on Silicon Manufacturing Company Pte Ltd. (SSMC)

 

Fabrication and supply of integrated circuits

  

Singapore

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

Motech Industries, Inc. (Motech)

 

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

  

New Taipei, Taiwan

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

Xintec Inc. (Xintec)

 

Wafer level chip size packaging service

  

Taoyuan, Taiwan

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

Global Unichip Corporation (GUC)

 

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

  

Hsinchu, Taiwan

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

Mcube Inc. (Mcube)

 

Research, development, and sale of micro- semiconductor device

  

Delaware, U.S.A.

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

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

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

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

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

 

- 20 -


  b.

Investments in jointly controlled entities

Jointly controlled entities consisted of the following:

 

        

Place of

Incorporation

and Operation

   Carrying Amount         

    % of Ownership and Voting Rights    

Held by the Company

 
       

 

 

  

 

 

 

Name of Jointly

Controlled Entity

  Principal Activities      

June 30,

2014

     December 31,
2013
    

June 30,

2013

        

June 30,

2014

     December 31,
2013
    

June 30,

2013

 

VisEra Holding Company (VisEra Holding)

 

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

  

Cayman Islands

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

 

15. PROPERTY, PLANT AND EQUIPMENT

 

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

Cost

              

Balance at January 1, 2014

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

Additions

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

Disposals or retirements

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

Reclassification

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

Effect of exchange rate changes

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

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at June 30, 2014

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

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Accumulated depreciation and impairment

              

Balance at January 1, 2014

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

Additions

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

Disposals or retirements

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

Impairment

     -        -        239,864        -        -        -        239,864   

Reclassification

     -        (532  )      532        -        -        -        -   

Effect of exchange rate changes

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

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at June 30, 2014

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

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Carrying amounts at January 1, 2014

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

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Carrying amounts at June 30, 2014

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

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cost

              

Balance at January 1, 2013

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

Additions

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

Disposals or retirements

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

Reclassification

     -        3,797        -        -        -        -        3,797   

Effect of deconsolidation of subsidiary

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

Effect of exchange rate changes

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

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at June 30, 2013

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

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Accumulated depreciation and impairment

              

Balance at January 1, 2013

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

Additions

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

Disposals or retirements

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

Effect of deconsolidation of subsidiary

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

Effect of exchange rate changes

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

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at June 30, 2013

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

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Carrying amounts at June 30, 2013

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

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

- 21 -


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

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

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

 

16. INTANGIBLE ASSETS

 

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

Cost

           

Balance at January 1, 2014

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

Additions

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

Retirements

     -         -        (23,315     -        (23,315

Effect of exchange rate changes

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

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Balance at June 30, 2014

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

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Accumulated amortization

           

Balance at January 1, 2014

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

Additions

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

Retirements

     -         -        (23,315     -        (23,315

Effect of exchange rate changes

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

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Balance at June 30, 2014

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

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Carrying amounts at January 1, 2014

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

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Carrying amounts at June 30, 2014

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

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Cost

           

Balance at January 1, 2013

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

Additions

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

Retirements

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

Reclassification

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

Effect of deconsolidation of subsidiary

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

Effect of exchange rate changes

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

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Balance at June 30, 2013

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

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Accumulated amortization

           

Balance at January 1, 2013

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

Additions

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

Retirements

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

Effect of deconsolidation of subsidiary

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

Effect of exchange rate changes

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

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Balance at June 30, 2013

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

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Carrying amounts at June 30, 2013

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

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

 

- 22 -


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

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

 

17. OTHER ASSETS

 

         

June 30,

2014

               December 31,
2013
              

June 30,

2013

      

Tax receivable

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

Prepaid expenses

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

Long-term receivable

        652,000               820,000               781,600      

Others

        707,729               770,468               549,515      
     

 

 

          

 

 

          

 

 

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

 

 

          

 

 

          

 

 

    

Current portion

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

Noncurrent portion

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

 

 

          

 

 

          

 

 

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

 

 

          

 

 

          

 

 

    

 

18. SHORT-TERM LOANS

 

         

June 30,

2014

               December 31,
2013
              

June 30,

2013

      

Unsecured loans

                          

Amount

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

 

 

          

 

 

          

 

 

    

Original loan content

                          

US$ (in thousands)

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

EUR (in thousands)

        45,000               -               -      

Annual interest rate

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

Maturity date

   Due by August   2014          
 
Due in January  
2014  
       

 

Due in July  

2013  

 

19. PROVISIONS

 

         

June 30,

2014

               December 31,
2013
              

June 30,

2013

      

Sales returns and allowances

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

Warranties

        14,741               10,452               6,623      
     

 

 

          

 

 

          

 

 

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

 

 

          

 

 

          

 

 

    

Current portion

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

Noncurrent portion (classified under other noncurrent liabilities)

        14,741               10,452               6,623      
     

 

 

          

 

 

          

 

 

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

 

 

          

 

 

          

 

 

    

 

- 23 -


    Sales Returns
and Allowances
       Warranties     Total      
             

Six months ended June 30, 2014

             

    

             

Balance, beginning of period

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

Provision

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

Payment

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

Effect of exchange rate changes

       (3,795        (66     (3,861  
    

 

 

      

 

 

   

 

 

   

    

             

Balance, end of period

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

 

 

      

 

 

   

 

 

   

    

             

Six months ended June 30, 2013

             

    

             

Balance, beginning of period

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

Provision

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

Payment

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

Effect of deconsolidation of subsidiary

       (37,748        -        (37,748  

Effect of exchange rate changes

       9,996           54        10,050     
    

 

 

      

 

 

   

 

 

   

    

             

Balance, end of period

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

 

 

      

 

 

   

 

 

   

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

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

 

20. BONDS PAYABLE

 

    

June 30,

2014

  December 31,
2013
 

June 30,

2013

Noncurrent portion

            

Domestic unsecured bonds

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

Overseas unsecured bonds

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

 

 

     

 

 

     

 

 

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

Less: Discounts on bonds payable

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

 

 

     

 

 

     

 

 

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

 

 

     

 

 

     

 

 

 

The major terms of overseas unsecured bonds are as follows:

 

Issuance Period             

Total Amount
(US$

in Thousands)

     Coupon Rate  

Repayment and Interest

Payment

April 2013 to April 2016

    $ 350,000         0.95%  

Bullet repayment; interest payable semi-annually

April 2013 to April 2018

     1,150,000         1.625%  

The same as above

 

- 24 -


21. OTHER LONG-TERM PAYABLES

 

    

June 30,

2014

   December 31,
2013
  

June 30,

2013

   

    

                

Payables for software and system design costs

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

Payables for acquisition of property, plant and equipment

       -          -          859,102    
    

 

 

      

 

 

      

 

 

   

    

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

 

 

      

 

 

      

 

 

   

    

                

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

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

Noncurrent portion

       18,000          36,000          36,000    
    

 

 

      

 

 

      

 

 

   

    

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

 

 

      

 

 

      

 

 

   

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

 

22. EQUITY

 

  a.

Capital stock

 

    

June 30,

2014

   December 31,
2013
  

June 30,

2013

   
                

Authorized shares (in thousands)

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