Edgar Filing: TAIWAN SEMICONDUCTOR MANUFACTURING CO LTD

Form 6-K

1934 Act Registration No. 1-14700

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER

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

THE SECURITIES EXCHANGE ACT OF 1934

For the month of May 2015

Taiwan Semiconductor Manufacturing Company Ltd.

(Translation of Registrant’s Name Into English)

No. 8, Li-Hsin Rd. 6,

Hsinchu Science Park,

Taiwan

(Address of Principal Executive Offices)

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

Form 20-F x Form 40-F ¨

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

Yes ¨ No x

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

SIGNATURES

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


	Taiwan Semiconductor Manufacturing Company Ltd.

Date: May 15, 2015	By	/s/ Lora Ho
		Lora Ho
		Senior Vice President & Chief Financial Officer

Taiwan Semiconductor Manufacturing

Company Limited and Subsidiaries

Consolidated Financial Statements for the

Three Months Ended March 31, 2015 and 2014 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 (the “Company”) as of March 31, 2015 and 2014 and the related consolidated statements of comprehensive income, changes in equity and cash flows for the three months ended March 31, 2015 and 2014. 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.

April 24, 2015

Notice to Readers

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

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

- 1 -

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED BALANCE SHEETS

(In Thousands of New Taiwan Dollars)


	March 31, 2015 (Reviewed)				December 31, 2014 (Adjusted and Audited)				March 31, 2014 (Adjusted and Reviewed)				January 1, 2014 (Adjusted and Audited)
	(Note 3)				(Note 3)				(Note 3)				(Note 3)
	Amount		%		Amount		%		Amount		%		Amount		%
ASSETS
CURRENT ASSETS
Cash and cash equivalents (Note 6)	$	437,412,411		28	$	358,449,029		24	$	231,697,295		18	$	242,695,447		19
Financial assets at fair value through profit or loss (Note 7)		297,698		—		192,045		—		11,425		—		90,353		—
Available-for-sale financial assets (Note 8)		68,204,390		5		73,797,476		5		845,002		—		760,793		—
Held-to-maturity financial assets (Note 9)		13,060,038		1		4,485,593		—		2,394,178		—		1,795,949		—
Notes and accounts receivable, net (Note 11)		98,529,745		6		114,734,743		8		73,774,054		6		71,649,926		6
Receivables from related parties (Note 32)		592,021		—		312,955		—		558,970		—		291,708		—
Other receivables from related parties (Note 32)		162,908		—		178,625		—		162,444		—		221,576		—
Inventories (Note 12)		64,599,666		4		66,337,971		5		43,481,269		3		37,494,893		3
Noncurrent assets held for sale (Note 30)		—		—		944,208		—		—		—		—		—
Other financial assets (Note 33)		3,946,604		—		3,476,884		—		584,364		—		501,785		—
Other current assets (Note 17)		3,688,211		—		3,656,110		—		2,381,416		—		2,984,224		—

Total current assets		690,493,692		44		626,565,639		42		355,890,417		27		358,486,654		28

NONCURRENT ASSETS
Available-for-sale financial assets (Note 8)		—		—		—		—		59,284,283		5		58,721,959		5
Financial assets carried at cost (Note 13)		1,817,677		—		1,800,542		—		2,055,075		—		2,145,591		—
Investments accounted for using equity method (Note 14)		30,363,144		2		28,255,737		2		29,512,938		2		28,321,241		2
Property, plant and equipment (Note 15)		813,219,884		52		818,198,801		55		828,011,580		64		792,665,913		63
Intangible assets (Note 16)		13,138,963		1		13,531,510		1		12,113,629		1		11,490,383		1
Deferred income tax assets (Note 4)		6,246,031		1		5,138,782		—		7,799,443		1		7,145,004		1
Refundable deposits (Note 32)		442,633		—		356,069		—		2,560,988		—		2,519,031		—
Other noncurrent assets (Note 17)		1,173,031		—		1,202,006		—		1,422,102		—		1,469,577		—

Total noncurrent assets		866,401,363		56		868,483,447		58		942,760,038		73		904,478,699		72

TOTAL	$	1,556,895,055		100	$	1,495,049,086		100	$	1,298,650,455		100	$	1,262,965,353		100

LIABILITIES AND EQUITY
CURRENT LIABILITIES
Short-term loans (Note 18)	$	18,683,595		1	$	36,158,520		2	$	24,843,645		2	$	15,645,000		1
Financial liabilities at fair value through profit or loss (Note 7)		64,929		—		486,214		—		188,535		—		33,750		—
Hedging derivative financial liabilities (Note 10)		11,627,838		1		16,364,241		1		—		—		—		—
Accounts payable		18,595,310		1		21,878,934		2		15,380,651		1		14,670,260		1
Payables to related parties (Note 32)		1,609,613		—		1,491,490		—		1,330,050		—		1,688,456		—
Salary and bonus payable		8,032,667		1		10,573,922		1		6,107,014		1		8,330,956		1
Accrued profit sharing to employees and bonus to directors and supervisors (Note 22)		23,436,465		1		18,052,820		1		16,018,761		1		12,738,801		1
Payables to contractors and equipment suppliers		27,372,814		2		26,980,408		2		53,461,455		4		89,810,160		7
Income tax payable (Note 4)		38,954,401		2		28,616,574		2		28,433,542		2		22,563,286		2
Provisions (Note 19)		8,130,817		1		10,445,452		1		9,964,997		1		7,603,781		1
Liabilities directly associated with noncurrent assets held for sale (Note 30)		—		—		219,043		—		—		—		—		—
Accrued expenses and other current liabilities (Note 21)		31,056,696		2		29,746,011		2		18,668,514		2		16,693,484		1

Total current liabilities		187,565,145		12		201,013,629		14		174,397,164		14		189,777,934		15

NONCURRENT LIABILITIES
Hedging derivative financial liabilities (Note 10)		—		—		—		—		5,279,032		—		5,481,616		—
Bonds payable (Note 20)		213,208,771		14		213,673,818		14		211,798,101		16		210,767,625		17
Long-term bank loans		40,000		—		40,000		—		40,000		—		40,000		—
Deferred income tax liabilities (Note 4)		159,538		—		199,750		—		—		—		—		—
Obligations under finance leases		799,612		—		802,108		—		783,275		—		776,230		—
Net defined benefit liability (Note 4)		6,553,652		—		6,567,782		—		6,793,685		1		6,801,663		1
Guarantee deposits (Note 21)		23,715,049		2		25,538,475		2		154,505		—		151,660		—
Others (Note 19)		937,535		—		885,192		—		711,901		—		694,901		—

Total noncurrent liabilities		245,414,157		16		247,707,125		16		225,560,499		17		224,713,695		18

Total liabilities		432,979,302		28		448,720,754		30		399,957,663		31		414,491,629		33

EQUITY ATTRIBUTABLE TO SHAREHOLDERS OF THE PARENT
Capital stock (Note 22)		259,303,020		17		259,296,624		17		259,291,239		20		259,286,171		21

Capital surplus (Note 22)		56,274,436		4		55,989,922		4		55,835,280		4		55,858,626		4

Retained earnings (Note 22)
Appropriated as legal capital reserve		151,250,682		10		151,250,682		10		132,436,003		10		132,436,003		11
Appropriated as special capital reserve		—		—		—		—		2,785,741		1		2,785,741		—
Unappropriated earnings		632,904,503		40		553,914,592		37		431,536,961		33		383,670,168		30

		784,155,185		50		705,165,274		47		566,758,705		44		518,891,912		41

Others (Note 22)		24,110,858		1		25,749,291		2		16,583,227		1		14,170,306		1

Equity attributable to shareholders of the parent		1,123,843,499		72		1,046,201,111		70		898,468,451		69		848,207,015		67
NONCONTROLLING INTERESTS (Note 22)		72,254		—		127,221		—		224,341		—		266,709		—

Total equity		1,123,915,753		72		1,046,328,332		70		898,692,792		69		848,473,724		67

TOTAL	$	1,556,895,055		100	$	1,495,049,086		100	$	1,298,650,455		100	$	1,262,965,353		100

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

- 2 -

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

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

(Reviewed, Not Audited)


	Three Months Ended March 31
	2015 (Note 3)					2014 (Adjusted) (Note 3)
	Amount			%		Amount			%
NET REVENUE (Notes 24, 32 and 37)	$	222,034,144			100	$	148,215,172			100
COST OF REVENUE (Notes 12, 29 and 32)		112,585,333			51		77,839,185			53

GROSS PROFIT BEFORE REALIZED (UNREALIZED) GROSS PROFIT ON SALES TO ASSOCIATES		109,448,811			49		70,375,987			47
REALIZED (UNREALIZED) GROSS PROFIT ON SALES TO ASSOCIATES		(19,547	)		—		21,017			—

GROSS PROFIT		109,429,264			49		70,397,004			47

OPERATING EXPENSES (Notes 29 and 32)
Research and development		16,781,463			7		12,067,892			8
General and administrative		4,366,053			2		4,655,977			3
Marketing		1,390,996			1		1,152,780			1

Total operating expenses		22,538,512			10		17,876,649			12

OTHER OPERATING INCOME AND EXPENSES, NET (Note 29)		(264,629	)		—		(2,741	)		—

INCOME FROM OPERATIONS (Note 37)		86,626,123			39		52,517,614			35

NON-OPERATING INCOME AND EXPENSES
Share of profits of associates and joint venture		1,134,649			1		955,609			1
Other income		881,782			—		613,699			—
Foreign exchange gain (loss), net (Note 36)		48,183			—		(36,401	)		—
Finance costs (Note 25)		(793,942	)		—		(796,580	)		—
Other gains and losses (Note 26)		362,185			—		43,384			—

Total non-operating income and expenses		1,632,857			1		779,711			1

INCOME BEFORE INCOME TAX		88,258,980			40		53,297,325			36
INCOME TAX EXPENSE (Notes 4 and 27)		9,275,072			4		5,455,495			4

NET INCOME		78,983,908			36		47,841,830			32

(Continued)

- 3 -

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

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

(Reviewed, Not Audited)


	Three Months Ended March 31
	2015 (Note 3)						2014 (Adjusted) (Note 3)
	Amount			%			Amount			%
OTHER COMPREHENSIVE INCOME (LOSS) (Notes 22 and 27)
Items that may be reclassified subsequently to profit or loss
Exchange differences arising on translation of foreign operations	$	(2,279,138	)		(1	)	$	2,831,381			2
Changes in fair value of available-for-sale financial assets		(204,815	)		—			(415,445	)		—
Share of other comprehensive income (loss) of associates and joint venture		843,163			—			(4,747	)		—
Income tax benefit (expense) related to components of other comprehensive income that may be reclassified subsequently		(4,793	)		—			2,956			—

Other comprehensive income (loss) for the period, net of income tax		(1,645,583	)		(1	)		2,414,145			2

TOTAL COMPREHENSIVE INCOME FOR THE PERIOD	$	77,338,325			35		$	50,255,975			34

NET INCOME (LOSS) ATTRIBUTABLE TO:
Shareholders of the parent	$	78,989,911			36		$	47,866,793			32
Noncontrolling interests		(6,003	)		—			(24,963	)		—

	$	78,983,908			36		$	47,841,830			32

TOTAL COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO:
Shareholders of the parent	$	77,351,478			35		$	50,279,714			34
Noncontrolling interests		(13,153	)		—			(23,739	)		—

	$	77,338,325			35		$	50,255,975			34


	2015						2014
	Income Attributable to Shareholders of the Parent						Income Attributable to Shareholders of the Parent
EARNINGS PER SHARE (NT$, Note 28)
Basic earnings per share	$				3.05		$				1.85

Diluted earnings per share	$				3.05		$				1.85


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

- 4 -

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(In Thousands of New Taiwan Dollars)

(Reviewed, Not Audited)


	Equity Attributable to Shareholders of the Parent
																Others
																			Unrealized
																Foreign Currency Translation			Gain/Loss
	Capital Stock - Common Stock							Retained Earnings											from Available-
	Shares							Legal Capital		Special Capital		Unappropriated							for-sale			Cash Flow									Noncontrolling			Total
	(In Thousands)		Amount		Capital Surplus			Reserve		Reserve		Earnings		Total		Reserve			Financial Assets			Hedges Reserve			Total			Total			Interests			Equity
BALANCE, JANUARY 1, 2015		25,929,662	$	259,296,624	$	55,989,922		$	151,250,682	$	—	$	553,261,982	$	704,512,664	$	4,502,113		$	21,247,483		$	(305	)	$	25,749,291		$	1,045,548,501		$	127,246		$	1,045,675,747
Effect of retrospective application		—		—		—			—		—		652,610		652,610		—			—			—			—			652,610			(25	)		652,585

ADJUSTED BALANCE, JANUARY 1, 2015		25,929,662		259,296,624		55,989,922			151,250,682		—		553,914,592		705,165,274		4,502,113			21,247,483			(305	)		25,749,291			1,046,201,111			127,221			1,046,328,332
Net income for the three months ended March 31, 2015		—		—		—			—		—		78,989,911		78,989,911		—			—			—			—			78,989,911			(6,003	)		78,983,908
Other comprehensive income for the three months ended March 31, 2015, net of income tax		—		—		—			—		—		—		—		(2,258,112	)		619,879			(200	)		(1,638,433	)		(1,638,433	)		(7,150	)		(1,645,583	)

Total comprehensive income for the three months ended March 31, 2015		—		—		—			—		—		78,989,911		78,989,911		(2,258,112	)		619,879			(200	)		(1,638,433	)		77,351,478			(13,153	)		77,338,325

Issuance of stock from exercise of employee stock options		640		6,396		23,793			—		—		—		—		—			—			—			—			30,189			—			30,189
Adjustments to share of changes in equities of associates and joint venture		—		—		261,752			—		—		—		—		—			—			—			—			261,752			(26	)		261,726
From share of changes in equities of subsidiaries		—		—		(1,031	)		—		—		—		—		—			—			—			—			(1,031	)		1,031			—
Decrease in noncontrolling interests		—		—		—			—		—		—		—		—			—			—			—			—			(179	)		(179	)
Effect of disposal of subsidiary		—		—		—			—		—		—		—		—			—			—			—			—			(42,640	)		(42,640	)

BALANCE, MARCH 31, 2015		25,930,302	$	259,303,020	$	56,274,436		$	151,250,682	$	—	$	632,904,503	$	784,155,185	$	2,244,001		$	21,867,362		$	(505	)	$	24,110,858		$	1,123,843,499		$	72,254		$	1,123,915,753

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
Effect of retrospective application		—		—		—			—		—		698,760		698,760		—			—			—			—			698,760			(121	)		698,639

ADJUSTED BALANCE, JANUARY 1, 2014		25,928,617		259,286,171		55,858,626			132,436,003		2,785,741		383,670,168		518,891,912		(7,140,362	)		21,310,781			(113	)		14,170,306			848,207,015			266,709			848,473,724
Net income for the three months ended March 31, 2014		—		—		—			—		—		47,866,793		47,866,793		—			—			—			—			47,866,793			(24,963	)		47,841,830
Other comprehensive income for the three months ended March 31, 2014, net of income tax		—		—		—			—		—		—		—		2,807,924			(395,098	)		95			2,412,921			2,412,921			1,224			2,414,145

Total comprehensive income for the three months ended March 31, 2014		—		—		—			—		—		47,866,793		47,866,793		2,807,924			(395,098	)		95			2,412,921			50,279,714			(23,739	)		50,255,975

Issuance of stock from exercise of employee stock options		507		5,068		17,235			—		—		—		—		—			—			—			—			22,303			—			22,303
Adjustments to share of changes in equity of associates and joint venture		—		—		(29,636	)		—		—		—		—		—			—			—			—			(29,636	)		—			(29,636	)
From differences between equity purchase price and carrying amount arising from actual acquisition or disposal of subsidiaries		—		—		(10,945	)		—		—		—		—		—			—			—			—			(10,945	)		10,945			—
Decrease in noncontrolling interests		—		—		—			—		—		—		—		—			—			—			—			—			(29,574	)		(29,574	)

BALANCE, MARCH 31, 2014		25,929,124	$	259,291,239	$	55,835,280		$	132,436,003	$	2,785,741	$	431,536,961	$	566,758,705	$	(4,332,438	)	$	20,915,683		$	(18	)	$	16,583,227		$	898,468,451		$	224,341		$	898,692,792

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

- 5 -

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands of New Taiwan Dollars)

(Reviewed, Not Audited)


	Three Months Ended March 31
	2015			2014 (Adjusted)
CASH FLOWS FROM OPERATING ACTIVITIES
Income before income tax	$	88,258,980		$	53,297,325
Adjustments for:
Depreciation expense		54,706,227			40,985,942
Amortization expense		771,769			636,435
Finance costs		793,942			796,580
Share of profits of associates and joint venture		(1,134,649	)		(955,609	)
Interest income		(881,782	)		(613,699	)
Loss (gain) on disposal of property, plant and equipment and intangible assets, net		4,081			(497	)
Gain on disposal of available-for-sale financial assets, net		(2,961	)		(20,987	)
Gain on disposal of financial assets carried at cost, net		(42,243	)		(23,758	)
Unrealized (realized) gross profit on sales to associates		19,547			(21,017	)
Loss (gain) on foreign exchange, net		(1,054,551	)		2,665,824
Gain from hedging instruments		(4,592,076	)		(325,678	)
Loss arising from changes in fair value of available-for-sale financial assets in hedge effective portion		4,602,284			327,961
Changes in operating assets and liabilities:
Derivative financial instruments		(526,938	)		233,713
Notes and accounts receivable, net		16,205,075			(2,124,198	)
Receivables from related parties		(279,066	)		(267,262	)
Other receivables from related parties		15,717			4,415
Inventories		1,738,305			(5,986,376	)
Other financial assets		(425,720	)		(28,952	)
Other current assets		(32,060	)		615,697
Accounts payable		(2,573,738	)		722,298
Payables to related parties		118,123			(358,406	)
Salary and bonus payable		(2,541,255	)		(2,223,942	)
Accrued profit sharing to employees and bonus to directors and supervisors		5,383,645			3,279,960
Accrued expenses and other current liabilities		(82,857	)		2,073,184
Provisions		(2,314,512	)		2,359,196
Net defined benefit liability		(14,130	)		(7,978	)

Cash generated from operations		156,119,157			95,040,171
Income taxes paid		(118,496	)		(179,230	)

Net cash generated by operating activities		156,000,661			94,860,941

CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions of:
Available-for-sale financial assets		—			(5,181	)
Financial assets carried at cost		(31,533	)		(3,782	)
Held-to-maturity financial assets		(9,372,767	)		(1,396,723	)

(Continued)

- 6 -

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands of New Taiwan Dollars)

(Reviewed, Not Audited)


	Three Months Ended March 31
	2015			2014 (Adjusted)
Property, plant and equipment	$	(48,875,682	)	$	(114,905,317	)
Intangible assets		(1,151,372	)		(1,178,194	)
Proceeds from disposal or redemption of:
Available-for-sale financial assets		36,021			62,843
Held-to-maturity financial assets		800,000			800,000
Financial assets carried at cost		9,125			28,533
Property, plant and equipment		30,161			55,255
Cash received from other long-term receivables		—			78,060
Interest received		874,723			596,277
Refundable deposits paid		(189,442	)		(7,869	)
Refundable deposits refunded		101,714			16,506
Net cash inflow from disposal of subsidiary (Note 30)		601,047			—

Net cash used in investing activities		(57,168,005	)		(115,859,592	)

CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in short-term loans		(17,341,135	)		8,819,028
Interest paid		(861,616	)		(863,834	)
Guarantee deposits received		176,072			3,744
Guarantee deposits refunded		(174,920	)		(1,443	)
Proceeds from exercise of employee stock options		30,189			22,303
Decrease in noncontrolling interests		(179	)		(29,574	)

Net cash generated by (used in) financing activities		(18,171,589	)		7,950,224

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS		(1,779,163	)		2,050,275

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		78,881,904			(10,998,152	)
CASH AND CASH EQUIVALENTS INCLUDED IN NONCURRENT ASSETS HELD FOR SALE, BEGINNING OF PERIOD		81,478			—
CASH AND CASH EQUIVALENT ON CONSOLIDATED BALANCE SHEET, BEGINNING OF PERIOD		358,449,029			242,695,447

CASH AND CASH EQUIVALENTS, END OF PERIOD	$	437,412,411		$	231,697,295


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

- 7 -

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2015 and 2014

(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 April 24, 2015.

3.	APPLICATION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS

Initial application of the amendments to the Guidelines Governing the Preparation of Financial Reports by Securities Issuers and the 2013 version of the International Financial Reporting Standards, International Accounting Standards (IASs), Interpretations of International Financial Reporting Standards (IFRIC), and Interpretations of IASs (SIC) (collectively, “IFRSs”) endorsed by the Financial Supervisory Commission (FSC) (collectively, “2013 Taiwan-IFRSs version”)

According to Rule No. 1030029342 and Rule No. 1030010325 issued by the FSC, the 2013 Taiwan-IFRSs version and the related amendments to the Guidelines Governing the Preparation of Financial Reports by Securities Issuers should be adopted by the Company starting 2015.

The Company believes that as a result of the adoption of aforementioned 2013 Taiwan-IFRSs version and the related amendments to the Guidelines Governing the Preparation of Financial Reports by Securities Issuers, the following items have impacted the Company’s consolidated financial statements.

IFRS 12, “Disclosure of Interests in Other Entities”

IFRS 12 is a new disclosure standard and is applicable to entities that have interests in subsidiaries, joint arrangements, associates and/or unconsolidated structured entities. In general, the disclosure requirements in IFRS 12 for the Company’s annual consolidated financial statements are more extensive than in the previous standards.

- 8 -

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 are extended by IFRS 13 to cover all assets and liabilities within its scope.

The measurement requirements of IFRS 13 shall be applied prospectively from January 1, 2015. Please refer to Note 31 for related disclosures.

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 may not be reclassified subsequently to profit or loss; and (b) items that may 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 items that may not be reclassified subsequently to profit or loss 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 may be reclassified subsequently to profit or loss 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.

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, require 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.

The impact on the current period is summarized as follows:


Impact on Assets, Liabilities and Equity	March 31, 2015
Increase in investments accounted for using equity method	$	167
Increase in deferred income tax assets		687

Increase in assets	$	854

(Continued)

- 9 -


Impact on Assets, Liabilities and Equity	March 31, 2015
Increase in net defined benefit liability	$	5,723

Increase in liabilities	$	5,723

Decrease in retained earnings	$	(4,869	)

Decrease in equity	$	(4,869	)

(Concluded)


Impact on Total Comprehensive Income	Three Months Ended March 31, 2015
Increase in cost of revenue	$	(3,687	)
Increase in operating expense		(2,036	)
Increase in share of profit of associate and joint venture		167
Decrease in income tax expense		687

Decrease in net income and other comprehensive income attributable to shareholders of the parent	$	(4,869	)

The impact on the prior reporting periods is summarized as follows:


Impact on Assets, Liabilities and Equity	As Originally Stated		Adjustments Arising from Initial Application			Adjusted
December 31, 2014
Noncurrent assets held for sale	$	945,356	$	(1,148	)	$	944,208
Investments accounted for using equity method		28,251,002		4,735			28,255,737
Deferred income tax assets		5,227,128		(88,346	)		5,138,782

Total effect on assets			$	(84,759	)

Liabilities directly associated with noncurrent assets held for sale		220,191	$	(1,148	)		219,043
Net defined benefit liability		7,303,978		(736,196	)		6,567,782

Total effect on liabilities			$	(737,344	)

Retained earnings		704,512,664	$	652,610			705,165,274
Noncontrolling interests		127,246		(25	)		127,221

Total effect on equity			$	652,585

(Continued)

- 10 -


Impact on Assets, Liabilities and Equity	As Originally Stated			Adjustments Arising from Initial Application			Adjusted
March 31, 2014
Investments accounted for using the equity method	$	29,507,728		$	5,210		$	29,512,938
Deferred income tax assets		7,893,479			(94,036	)		7,799,443

Total effect on assets				$	(88,826	)

Net defined benefit liability		7,577,202		$	(783,517	)		6,793,685

Total effect on liabilities				$	(783,517	)

Retained earnings		566,063,897		$	694,808			566,758,705
Noncontrolling interests		224,458			(117	)		224,341

Total effect on equity				$	694,691

January 1, 2014
Investments accounted for using the equity method		28,316,260		$	4,981			28,321,241
Deferred income tax assets		7,239,609			(94,605	)		7,145,004

Total effect on assets				$	(89,624	)

Net defined benefit liability		7,589,926		$	(788,263	)		6,801,663

Total effect on liabilities				$	(788,263	)

Retained earnings		518,193,152		$	698,760			518,891,912
Noncontrolling interests		266,830			(121	)		266,709

Total effect on equity				$	698,639

Three months ended March 31, 2014
Cost of revenue		(77,836,093	)	$	(3,092	)		(77,839,185	)
Operating expense		(17,874,995	)		(1,654	)		(17,876,649	)
Share of the profit or loss of associates and joint ventures		955,380			229			955,609
Income tax expense		(5,456,064	)		569			(5,455,495	)

Impact on net income for the period				$	(3,948	)

(Continued)

- 11 -


Impact on Total Comprehensive Income	As Originally Stated			Adjustments Arising from Initial Application			Adjusted
Impact on net income attributable to:
Shareholders of the parent	$	47,870,745		$	(3,952	)	$	47,866,793
Noncontrolling interests		(24,967	)		4			(24,963	)

	$	47,845,778		$	(3,948	)	$	47,841,830

Impact on total comprehensive income attributable to:
Shareholders of the parent	$	50,283,666		$	(3,952	)	$	50,279,714
Noncontrolling interests		(23,743	)		4			(23,739	)

	$	50,259,923		$	(3,948	)	$	50,255,975

(Concluded)

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 1)
Annual Improvements to IFRSs 2010 - 2012 Cycle				July 1, 2014 or transactions on or after July 1, 2014
Annual Improvements to IFRSs 2011 - 2013 Cycle				July 1, 2014
Annual Improvements to IFRSs 2012 - 2014 Cycle				January 1, 2016 (Note 2)
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
Amendments to IFRS 10 and IAS 28 Sale or Contribution of Assets between an Investor and its Associate or Joint Venture				Prospectively applicable to transactions beginning on or after January 1, 2016
Amendments to IFRS 10, IFRS 12 and IAS 28 Investment Entities: Applying the Consolidation Exception				January 1, 2016
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
Amendment to IAS 1 Disclosure Initiative				January 1, 2016
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 27 Equity Method in Separate Financial Statements				January 1, 2016
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

- 12 -

Note 1:

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

Note 2:

The amendment to IFRS 5 is applied prospectively to changes in a method of disposal that occur in annual periods beginning on or after January 1, 2016; the remaining amendments are effective for annual periods beginning on or after January 1, 2016.

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:

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:

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 or reversal of impairment loss should be recognized in profit and loss.

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 and are continuously assessed for impairment. Interest revenue should be recognized in profit or loss by using the effective interest method. 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. When such financial asset is derecognized or reclassified, the cumulative gain or loss previously recognized in other comprehensive income is reclassified from equity to profit or loss.

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, and the cumulative gain or loss previously recognized in other comprehensive income cannot be reclassified from equity to profit or loss.

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 and is not deemed to be a low credit risk, 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.

- 13 -

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.

IFRS 15, “Revenue from Contracts with Customers”

IFRS 15 establishes principles for recognizing revenue that apply to all contracts with customers, and will supersede 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.

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 issued, 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, 2014.

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.

- 14 -

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, 2014.

The subsidiaries in the consolidated financial statements

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


			Establishment and Operating Location	Percentage of Ownership
Name of Investor	Name of Investee	Main Businesses and Products	Establishment and Operating Location	March 31, 2015			December 31, 2014			March 31, 2014			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	%	a)
	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	%		98	%		50	%	a), b)
	VentureTech Alliance Fund II, L.P. (VTAF II)	Investing in new start-up technology companies	Cayman Islands		98	%		98	%		98	%	a)
	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	%	c)
	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 99% controlling interest of in TSMC Solar.
	TSMC Guang Neng Investment, Ltd. (TSMC GN)	Investment activities	Taipei, Taiwan		100	%		100	%		100	%	a)
TSMC Partners	TSMC Design Technology Canada Inc. (TSMC Canada)	Engineering support activities	Ontario, Canada		100	%		100	%		100	%	a)
	TSMC Technology, Inc. (TSMC Technology)	Engineering support activities	Delaware, U.S.A.		100	%		100	%		100	%	a)
	TSMC Development, Inc. (TSMC Development)	Investment activities	Delaware, U.S.A.		100	%		100	%		100	%	—
	InveStar Semiconductor Development Fund, Inc. (ISDF)	Investing in new start-up technology companies	Cayman Islands		97	%		97	%		97	%	a)
	InveStar Semiconductor Development Fund, Inc. (II) LDC. (ISDF II)	Investing in new start-up technology companies	Cayman Islands		97	%		97	%		97	%	a)

(Continued)

- 15 -


			Establishment and Operating Location	Percentage of Ownership
Name of Investor	Name of Investee	Main Businesses and Products	Establishment and Operating Location	March 31, 2015			December 31, 2014			March 31, 2014			Note
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	New 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	%	a), d)
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), e)
	VentureTech Alliance Fund III, L.P. (VTAF III)	Investing in new start-up technology companies	Cayman Islands		—			—			49	%	b)
TSMC Solar Europe	TSMC Solar Europe GmbH	Selling of solar related products and providing customer service	Hamburg, Germany		100	%		100	%		100	%	a), e)

(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:

TSMC and TSMC GN aggregately have a controlling interest of 94% in TSMC SSL as of December 31, 2014 and March 31, 2014. TSMC and TSMC GN have completed the disposal of TSMC SSL in February 2015. Please refer to Note 30.

Note d:

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 has been completed in the third quarter of 2014.

Note e:

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. TSMC Solar Europe GmbH started their liquidation procedure in the third quarter of 2014.

Retirement Benefits

Defined benefit costs (including service cost, net interest and remeasurement) under the defined benefit retirement benefit plans are determined using the Projected Unit Credit Method. Service cost (including current service cost), and net interest on the net defined benefit liability (asset) are recognized as employee benefits expense in the period they occur. Remeasurement, comprising actuarial gains and losses and the return on plan assets (excluding interest), is recognized in other comprehensive income in the period in which they occur. Remeasurement recognized in other comprehensive income is reflected immediately in retained earnings and will not be reclassified to profit or loss.

Net defined benefit liability (asset) represents the actual deficit (surplus) in the Company’s defined benefit plan. Any surplus resulting from this calculation is limited to the present value of any refunds from the plans or reductions in future contributions to the plans.

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.

- 16 -

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, 2014.

6.	CASH AND CASH EQUIVALENTS


	March 31, 2015		December 31, 2014		March 31, 2014
Cash and deposits in banks	$	432,069,913	$	352,761,240	$	224,475,625
Repurchase agreements collateralized by corporate bonds		3,629,594		3,920,562		3,071,910
Commercial paper		999,530		1,159,325		299,851
Repurchase agreements collateralized by short-term commercial paper		448,784		449,180		2,927,812
Repurchase agreements collateralized by government bonds		264,590		158,722		922,097

	$	437,412,411	$	358,449,029	$	231,697,295

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

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


	March 31, 2015		December 31, 2014		March 31, 2014
Derivative financial assets
Forward exchange contracts	$	297,698	$	73,117	$	3,935
Cross currency swap contracts		—		118,928		7,490

	$	297,698	$	192,045	$	11,425

Derivative financial liabilities
Forward exchange contracts	$	64,601	$	126,607	$	186,105
Cross currency swap contracts		328		359,607		2,430

	$	64,929	$	486,214	$	188,535

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.

- 17 -

Outstanding forward exchange contracts consisted of the following:


		Contract Amount
	Maturity Date	(In Thousands)
March 31, 2015
Sell EUR/Buy US$	April 2015	EUR5,420/US$5,794
Sell NT$/Buy US$	June 2015	NT$1,777,048/US$56,000
Sell US$/Buy EUR	April 2015	US$20,640/EUR19,000
Sell US$/Buy JPY	April 2015	US$2,000/JPY240,130
Sell US$/Buy NT$	April 2015 to June 2015	US$1,965,000/NT$61,740,851
Sell US$/Buy RMB	April 2015	US$177,000/RMB1,103,996
December 31, 2014
Sell EUR/Buy US$	January 2015	EUR4,550/US$5,561
Sell NT$/Buy US$	January 2015	NT$1,632,401/US$51,900
Sell US$/Buy EUR	January 2015	US$29,450/EUR24,100
Sell US$/Buy JPY	January 2015	US$226,003/JPY27,150,983
Sell US$/Buy NT$	January 2015	US$170,000/NT$5,276,500
Sell US$/Buy RMB	January 2015	US$181,000/RMB1,129,243
March 31, 2014
Sell EUR/Buy US$	April 2014	EUR1,030/US$1,421
Sell NT$/Buy EUR	April 2014	NT$419,405/EUR10,000
Sell NT$/Buy JPY	April 2014	NT$941,573/JPY3,150,000
Sell NT$/Buy US$	April 2014	NT$962,307/US$31,700
Sell US$/Buy EUR	April 2014	US$266,577/EUR193,700
Sell US$/Buy JPY	April 2014	US$498,716/JPY50,938,160
Sell US$/Buy RMB	April 2014 to June 2014	US$86,000/RMB525,831

Outstanding cross currency swap contracts consisted of the following:


Maturity Date	Contract Amount (In Thousands)	Range of Interest Rates Paid	Range of Interest Rates Received
March 31, 2015
April 2015	NT$2,758,469/US$88,130	—	0.02%
December 31, 2014
January 2015	NT$2,511,905/US$80,080	—	0.05%-0.13%
January 2015	US$1,460,000/NT$45,974,755	0.16%-1.92%	—
March 31, 2014
April 2014	NT$2,222,031/US$73,080	—	0.45%-0.76%

- 18 -

8.	AVAILABLE-FOR-SALE FINANCIAL ASSETS


	March 31, 2015		December 31, 2014		March 31, 2014
Publicly traded stocks	$	68,204,002	$	73,797,085	$	60,122,854
Money market funds		388		391		6,431

	$	68,204,390	$	73,797,476	$	60,129,285

Current portion	$	68,204,390	$	73,797,476	$	845,002
Noncurrent portion		—		—		59,284,283

	$	68,204,390	$	73,797,476	$	60,129,285

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


	March 31, 2015		December 31, 2014		March 31, 2014
Current portion
Commercial paper	$	13,060,038	$	4,485,593	$	2,394,178

10.

HEDGING DERIVATIVE FINANCIAL INSTRUMENTS


	March 31, 2015		December 31, 2014		March 31, 2014
Financial liabilities - current
Fair value hedges
Stock forward contracts	$	11,627,838	$	16,364,241	$	—

Financial liabilities - noncurrent
Fair value hedges
Stock forward contracts	$	—	$	—	$	5,279,032

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.

- 19 -

The outstanding stock forward contracts consisted of the following:


	March 31, 2015			December 31, 2014			March 31, 2014
Contract amount (US$ in thousands)	$	55,611,164		$	56,172,570		$	50,253,432
		(US$1,771,000	)		(US$1,771,000	)		(US$1,648,572	)

11.

NOTES AND ACCOUNTS RECEIVABLE, NET


	March 31, 2015			December 31, 2014			March 31, 2014
Notes and accounts receivable	$	99,016,398		$	115,221,473		$	74,260,712
Allowance for doubtful receivables		(486,653	)		(486,730	)		(486,658	)

Notes and accounts receivable, net	$	98,529,745		$	114,734,743		$	73,774,054

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


	March 31, 2015		December 31, 2014		March 31, 2014
Neither past due nor impaired	$	89,431,546	$	102,692,871	$	66,347,383
Past due but not impaired
Past due within 30 days		8,299,658		12,041,872		7,426,671
Past due 31-60 days		798,541		—		—

	$	98,529,745	$	114,734,743	$	73,774,054

Movements of the allowance for doubtful receivables


	Individually Assessed for Impairment			Collectively Assessed for Impairment			Total
Balance at January 1, 2015	$	8,093		$	478,637		$	486,730
Provision		—			290			290
Reversal		(81	)		(209	)		(290	)
Effect of exchange rate changes		—			(77	)		(77	)

Balance at March 31, 2015	$	8,012		$	478,641		$	486,653

(Continued)

- 20 -


	Individually Assessed for Impairment			Collectively Assessed for Impairment			Total
Balance at January 1, 2014	$	8,058		$	478,530		$	486,588
Provision		—			21,147			21,147
Reversal		(230	)		(20,917	)		(21,147	)
Effect of exchange rate changes		—			70			70

Balance at March 31, 2014	$	7,828		$	478,830		$	486,658

(Concluded)

Aging analysis of accounts receivable that is individually determined as impaired


	March 31, 2015		December 31, 2014		March 31, 2014
Past due 61-120 days	$	—	$	—	$	321
Past due over 121 days		8,012		8,093		7,832

	$	8,012	$	8,093	$	8,153

The Company held bank guarantees and other credit enhancements as collateral for certain impaired accounts receivables. As of March 31, 2015, December 31, 2014 and March 31, 2014, the amount of the bank guarantee and other credit enhancements were nil, nil and NT$325 thousand (US$11 thousand), respectively.

12.

INVENTORIES


	March 31, 2015		December 31, 2014		March 31, 2014
Finished goods	$	10,960,937	$	9,972,024	$	7,332,318
Work in process		47,725,273		51,027,892		31,895,019
Raw materials		3,742,818		3,222,523		2,444,274
Supplies and spare parts		2,170,638		2,115,532		1,809,658

	$	64,599,666	$	66,337,971	$	43,481,269

Write-down of inventories to net realizable value in the amount of NT$1,769,358 thousand and NT$590,034 thousand, respectively, were included in the cost of revenue for the three months ended March 31, 2015 and 2014.

13.

FINANCIAL ASSETS CARRIED AT COST


	March 31, 2015		December 31, 2014		March 31, 2014
Non-publicly traded stocks	$	1,593,978	$	1,606,659	$	1,771,146
Mutual funds		223,699		193,883		283,929

	$	1,817,677	$	1,800,542	$	2,055,075

- 21 -

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

The common stock of Alchip Technologies, Ltd. was listed on the Taiwan Stock Exchange Corporation in October 2014. Thus, the Company reclassified the aforementioned investments from financial assets carried at cost to available-for-sale financial assets.

14.

INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD

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


	March 31, 2015		December 31, 2014		March 31, 2014
Associates	$	26,209,636	$	24,968,071	$	25,960,124
Joint venture		4,153,508		3,287,666		3,552,814

	$	30,363,144	$	28,255,737	$	29,512,938

Investments in associates

Associates consisted of the following:


	Principal Activities	Place of Incorporation and Operation	Carrying Amount						% of Ownership and Voting Rights Held by the Company
Name of Associate	Principal Activities	Place of Incorporation and Operation	March 31, 2015		December 31, 2014		March 31, 2014		March 31, 2015			December 31, 2014			March 31, 2014
Vanguard International Semiconductor Corporation (VIS)	Research, design, development, manufacture, packaging, testing and sale of memory integrated circuits, LSI, VLSI and related parts	Hsinchu, Taiwan	$	10,560,974	$	10,105,485	$	11,078,910		33	%		33	%		39	%
Systems on Silicon Manufacturing Company Pte Ltd. (SSMC)	Fabrication and supply of integrated circuits	Singapore		8,919,391		8,296,955		8,036,044		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		3,247,436		3,408,945		3,855,061		20	%		20	%		20	%
Xintec Inc. (Xintec)	Wafer level chip size packaging service	Taoyuan, Taiwan		2,360,234		2,053,982		1,863,049		35	%		40	%		40	%
Global Unichip Corporation (GUC)	Researching, developing, manufacturing, testing and marketing of integrated circuits	Hsinchu, Taiwan		1,121,601		1,102,704		1,127,060		35	%		35	%		35	%

			$	26,209,636	$	24,968,071	$	25,960,124

In March 2015, Xintec listed its shares on the R.O.C. Over-the-Counter (Taipei Exchange). Consequently, TSMC’s percentage of ownership over Xintec was diluted to approximately 35.4%. In April 2015, TSMC sold 2,172 thousand common shares of Xintec and recognized a disposal gain of NT$43,017 thousand in the second quarter of 2015. After the sale, TSMC owned approximately 34.6% of the equity interest in Xintec.

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.

The market prices of the investments accounted for using the equity method in publicly traded stocks calculated by the closing price at the end of the reporting period are summarized as follow. The closing price represents the quoted price in active markets, the level 1 fair value measurement.

- 22 -


Name of Associate	March 31, 2015		December 31, 2014		March 31, 2014
VIS	$	29,059,090	$	28,567,489	$	28,521,347

Motech	$	3,704,769	$	4,242,769	$	4,688,916

GUC	$	3,875,092	$	4,327,965	$	4,136,544

Xintec	$	5,602,050

Investments in joint venture

Joint venture consisted of the following:


	Principal Activities	Place of Incorporation and Operation	Carrying Amount						% of Ownership and Voting Rights Held by the Company
Name of Joint Venture	Principal Activities	Place of Incorporation and Operation	March 31, 2015		December 31, 2014		March 31, 2014		March 31, 2015			December 31, 2014			March 31, 2014
VisEra Holding Company (VisEra Holding)	Investing in companies involved in the design, manufacturing and other related businesses in the semiconductor industry	Cayman Islands	$	4,153,508	$	3,287,666	$	3,552,814		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, 2015	$	4,036,785		$	269,163,850		$	1,754,170,227		$	27,960,835		$	841,154		$	109,334,736		$	2,165,507,587
Additions		—			3,562,755			22,835,366			978,950			—			22,555,321			49,932,392
Disposals or retirements		—			—			(462,676	)		(305,318	)		—			—			(767,994	)
Effect of exchange rate changes		(8,244	)		(218,806	)		(719,097	)		(35,173	)		(7,820	)		(31,166	)		(1,020,306	)

Balance at March 31, 2015	$	4,028,541		$	272,507,799		$	1,775,823,820		$	28,599,294		$	833,334		$	131,858,891		$	2,213,651,679

Accumulated depreciation and impairment
Balance at January 1, 2015	$	459,140		$	141,245,913		$	1,188,388,402		$	16,767,934		$	447,397		$	—		$	1,347,308,786
Additions		7,191			3,907,238			49,864,675			916,304			10,819			—			54,706,227
Disposals or retirements		—			—			(428,452	)		(305,300	)		—			—			(733,752	)
Effect of exchange rate changes		(4,619	)		(155,227	)		(656,474	)		(29,001	)		(4,145	)		—			(849,466	)

Balance at March 31, 2015	$	461,712		$	144,997,924		$	1,237,168,151		$	17,349,937		$	454,071		$	—		$	1,400,431,795

Carrying amounts at January 1, 2015	$	3,577,645		$	127,917,937		$	565,781,825		$	11,192,901		$	393,757		$	109,334,736		$	818,198,801

Carrying amounts at March 31, 2015	$	3,566,829		$	127,509,875		$	538,655,669		$	11,249,357		$	379,263		$	131,858,891		$	813,219,884

Cost
Balance at January 1, 2014	$	3,986,909		$	229,182,736		$	1,413,919,794		$	22,062,032		$	804,430		$	272,173,793		$	1,942,129,694
Additions		—			2,519,647			9,108,620			606,260			—			63,974,216			76,208,743
Disposals or retirements		—			—			(223,116	)		(318,888	)		—			—			(542,004	)
Effect of exchange rate changes		17,761			198,335			959,428			32,285			2,400			3,217			1,213,426

Balance at March 31, 2014	$	4,004,670		$	231,900,718		$	1,423,764,726		$	22,381,689		$	806,830		$	336,151,226		$	2,019,009,859

Accumulated depreciation and impairment
Balance at January 1, 2014	$	404,192		$	125,234,166		$	1,009,213,689		$	14,225,771		$	385,963		$	—		$	1,149,463,781
Additions		6,898			3,584,230			36,724,579			659,617			10,618			—			40,985,942
Disposals or retirements		—			—			(223,075	)		(318,888	)		—			—			(541,963	)
Effect of exchange rate changes		9,318			144,311			909,022			26,776			1,092			—			1,090,519

Balance at March 31, 2014	$	420,408		$	128,962,707		$	1,046,624,215		$	14,593,276		$	397,673		$	—		$	1,190,998,279

Carrying amounts at March 31, 2014	$	3,584,262		$	102,938,011		$	377,140,511		$	7,788,413		$	409,157		$	336,151,226		$	828,011,580

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.

- 23 -

16.

INTANGIBLE ASSETS


	Goodwill			Technology License Fees			Software and System Design Costs			Patent and Others			Total
Cost
Balance at January 1, 2015	$	5,888,813		$	6,350,253		$	18,697,098		$	4,292,555		$	35,228,719
Additions		—			78,496			199,110			145,880			423,486
Retirements		—			—			(42,737	)		—			(42,737	)
Effect of exchange rate changes		(43,186	)		(6,053	)		(1,425	)		(1,305	)		(51,969	)

Balance at March 31, 2015	$	5,845,627		$	6,422,696		$	18,852,046		$	4,437,130		$	35,557,499

Accumulated amortization
Balance at January 1, 2015	$	—		$	3,778,912		$	14,861,146		$	3,057,151		$	21,697,209
Additions		—			212,239			421,365			138,165			771,769
Retirements		—			—			(42,737	)		—			(42,737	)
Effect of exchange rate changes		—			(6,053	)		(1,349	)		(303	)		(7,705	)

Balance at March 31, 2015	$	—		$	3,985,098		$	15,238,425		$	3,195,013		$	22,418,536

Carrying amounts at January 1, 2015	$	5,888,813		$	2,571,341		$	3,835,952		$	1,235,404		$	13,531,510

Carrying amounts at March 31, 2015	$	5,845,627		$	2,437,598		$	3,613,621		$	1,242,117		$	13,138,963

Cost
Balance at January 1, 2014	$	5,627,517		$	4,444,828		$	17,086,805		$	3,729,396		$	30,888,546
Additions		—			371,030			269,160			526,097			1,166,287
Retirements		—			—			(20,353	)		—			(20,353	)
Effect of exchange rate changes		93,047			(954	)		537			380			93,010

Balance at March 31, 2014	$	5,720,564		$	4,814,904		$	17,336,149		$	4,255,873		$	32,127,490

Accumulated amortization
Balance at January 1, 2014	$	—		$	3,341,667		$	13,439,135		$	2,617,361		$	19,398,163
Additions		—			123,690			359,025			153,720			636,435
Retirements		—			—			(20,353	)		—			(20,353	)
Effect of exchange rate changes		—			(954	)		526			44			(384	)

Balance at March 31, 2014	$	—		$	3,464,403		$	13,778,333		$	2,771,125		$	20,013,861

Carrying amounts at March 31, 2014	$	5,720,564		$	1,350,501		$	3,557,816		$	1,484,748		$	12,113,629

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 8.40% and 8.50% in its test of impairment as of December 31, 2014 and 2013, respectively, to reflect the relevant specific risk in the cash-generating unit.

17.

OTHER ASSETS


	March 31, 2015		December 31, 2014		March 31, 2014
Tax receivable	$	2,069,072	$	2,187,136	$	1,327,531
Prepaid expenses		1,598,404		1,399,810		1,068,105
Long-term receivable		341,100		385,700		754,020
Others		852,666		885,470		653,862

	$	4,861,242	$	4,858,116	$	3,803,518

Current portion	$	3,688,211	$	3,656,110	$	2,381,416
Noncurrent portion		1,173,031		1,202,006		1,422,102

	$	4,861,242	$	4,858,116	$	3,803,518

- 24 -

18.

SHORT-TERM LOANS


	March 31, 2015		December 31, 2014		March 31, 2014
Unsecured loans Amount	$	18,683,595	$	36,158,520	$	24,843,645

Original loan content
US$ (in thousands)	$	595,000	$	1,140,000	$	815,000
Annual interest rate		0.38%-0.47%		0.38%-0.50%		0.38%-0.50%
Maturity date		Due in April 2015		Due in January 2015		Due in April 2014

19.

PROVISIONS


	March 31, 2015		December 31, 2014		March 31, 2014
Sales returns and allowances	$	8,130,817	$	10,445,452	$	9,964,997
Warranties		14,853		19,828		12,925

	$	8,145,670	$	10,465,280	$	9,977,922

Current portion	$	8,130,817	$	10,445,452	$	9,964,997
Noncurrent portion (classified under other noncurrent liabilities)		14,853		19,828		12,925

	$	8,145,670	$	10,465,280	$	9,977,922


	Sales Returns and Allowances			Warranties			Total
Three months ended March 31, 2015
Balance, beginning of period	$	10,445,452		$	19,828		$	10,465,280
Provision		1,427,900			2,809			1,430,709
Reversal		—			(5,793	)		(5,793	)
Payment		(3,738,087	)		(1,340	)		(3,739,427	)
Effect of exchange rate changes		(4,448	)		(651	)		(5,099	)

Balance, end of period	$	8,130,817		$	14,853		$	8,145,670

Three months ended March 31, 2014
Balance, beginning of period	$	7,603,781		$	10,452		$	7,614,233
Provision		4,354,104			3,064			4,357,168
Payment		(1,997,250	)		(722	)		(1,997,972	)
Effect of exchange rate changes		4,362			131			4,493

Balance, end of period	$	9,964,997		$	12,925		$	9,977,922

- 25 -

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

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

20.

BONDS PAYABLE


	March 31, 2015			December 31, 2014			March 31, 2014
Noncurrent portion
Domestic unsecured bonds	$	166,200,000		$	166,200,000		$	166,200,000
Overseas unsecured bonds		47,101,500			47,577,000			45,724,500

		213,301,500			213,777,000			211,924,500
Less: Discounts on bonds payable		(92,729	)		(103,182	)		(126,399	)

	$	213,208,771		$	213,673,818		$	211,798,101

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

21.

GUARANTEE DEPOSITS


	March 31, 2015		December 31, 2014		March 31, 2014
Capacity guarantee	$	29,830,950	$	30,132,100	$	—
Others		164,299		164,075		154,505

	$	29,995,249	$	30,296,175	$	154,505

Current portion (classified under accrued expenses and other current liabilities)	$	6,280,200	$	4,757,700	$	—
Noncurrent portion		23,715,049		25,538,475		154,505

	$	29,995,249	$	30,296,175	$	154,505

- 26 -

22.

EQUITY

Capital stock


	March 31, 2015		December 31, 2014		March 31, 2014
Authorized shares (in thousands)		28,050,000		28,050,000		28,050,000

Authorized capital	$	280,500,000	$	280,500,000	$	280,500,000

Issued and paid shares (in thousands)		25,930,302		25,929,662		25,929,124

Issued capital	$	259,303,020	$	259,296,624	$	259,291,239

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

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

As of March 31, 2015, 1,073,353 thousand ADSs of TSMC were traded on the NYSE. The number of common shares represented by the ADSs was 5,366,767 thousand shares (one ADS represents five common shares).

Capital surplus


	March 31, 2015		December 31, 2014		March 31, 2014
Additional paid-in capital	$	24,077,758	$	24,053,965	$	24,034,598
From merger		22,804,510		22,804,510		22,804,510
From convertible bonds		8,892,847		8,892,847		8,892,847
From differences between equity purchase price and carrying amount arising from actual acquisition or disposal of subsidiaries		—		—		89,882
From share of changes in equities of subsidiaries		103,304		104,335		—
From share of changes in equities of associates and joint venture		395,962		134,210		13,388
Donations		55		55		55

	$	56,274,436	$	55,989,922	$	55,835,280

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

Retained earnings and dividend policy

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

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

- 27 -

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

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

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

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

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

TSMC accrued profit sharing to employees based on certain percentage of net income during the period, which amounted to NT$5,282,686 thousand and NT$3,200,716 thousand for the three months ended March 31, 2015 and 2014, respectively. Bonuses to members of the Board of Directors were expensed based on estimated amount payable. If the actual amounts subsequently approved by the shareholders differ from the amounts estimated, the differences are recorded in the year such bonuses are approved by the shareholders as a change in accounting estimate. If profit sharing approved for distribution to employees is in the form of common shares, the number of shares is determined by dividing the amount of profit sharing by the closing price (after considering the effect of dividends) of the shares on the day preceding the shareholders’ meeting.

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

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

The appropriations of 2014 and 2013 earnings have been approved by TSMC’s Board of Directors in its meeting held on February 10, 2015 and by TSMC’s shareholders in its meeting held on June 24, 2014, respectively. The appropriations and dividends per share were as follows:


	Appropriation of Earnings					Dividends Per Share (NT$)
	For Fiscal		For Fiscal			For Fiscal		For Fiscal
	Year 2014		Year 2013			Year 2014		Year 2013
Legal capital reserve	$	26,389,879	$	18,814,679
Special capital reserve		—		(2,785,741	)
Cash dividends to shareholders		116,683,481		77,785,851		$	4.50	$	3.00

	$	143,073,360	$	93,814,789

The Board of Directors of TSMC also approved on February 10, 2015 the profit sharing to employees and bonus to members of the Board of Directors in the amounts of NT$17,645,966 thousand and NT$406,854 thousand in cash for 2014, respectively. There is no significant difference between the aforementioned approved amounts and the amounts charged against earnings of 2014.

- 28 -

The appropriations of earnings, profit sharing to employees and bonus to members of the Board of Directors for 2014 are to be presented for approval in the TSMC’s shareholders’ meeting to be held on June 9, 2015 (expected).

TSMC’s profit sharing to employees and bonus to members of Board of Directors in the amounts of NT$12,634,665 thousand and NT$104,136 thousand in cash for 2013, respectively, had been approved by the shareholders in its meeting held on June 24, 2014. The aforementioned approved amount had no difference with the one approved by the Board of Directors in its meetings held on February 18, 2014 and the same amount had been charged against earnings of 2013.

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

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

Others

Changes in others were as follows:


	Three Months Ended March 31, 2015
	Foreign Currency Translation Reserve			Unrealized Gain/Loss from Available-for- sale Financial Assets			Cash Flow Hedges Reserve			Total
Balance, beginning of period	$	4,502,113		$	21,247,483		$	(305	)	$	25,749,291
Exchange differences arising on translation of foreign operations		(2,278,865	)		—			—			(2,278,865	)
Changes in fair value of available-for-sale financial assets		—			(195,085	)		—			(195,085	)
Cumulative (gain)/loss reclassified to profit or loss upon disposal of available-for-sale financial assets		—			(2,902	)		—			(2,902	)
Share of other comprehensive income of associates and joint venture		20,753			822,659			(200	)		843,212
Income tax effect		—			(4,793	)		—			(4,793	)

Balance, end of period	$	2,244,001		$	21,867,362		$	(505	)	$	24,110,858

- 29 -


	Three Months Ended March 31, 2014
	Foreign Currency Translation Reserve			Unrealized Gain/Loss from Available-for- sale Financial Assets			Cash Flow Hedges Reserve			Total
Balance, beginning of period	$	(7,140,362	)	$	21,310,781		$	(113	)	$	14,170,306
Exchange differences arising on translation of foreign operations		2,830,754			—			—			2,830,754
Changes in fair value of available-for-sale financial assets		—			(395,296	)		—			(395,296	)
Cumulative (gain)/loss reclassified to profit or loss upon disposal of available-for-sale financial assets		—			(20,649	)		—			(20,649	)
Share of other comprehensive income of associates and joint venture		(22,830	)		17,891			95			(4,844	)
Income tax effect		—			2,956			—			2,956

Balance, end of period	$	(4,332,438	)	$	20,915,683		$	(18	)	$	16,583,227

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

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

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

Noncontrolling interests


	Three Months Ended March 31
	2015			2014
Balance, beginning of period	$	127,221		$	266,709
Share of noncontrolling interests
Net loss		(6,003	)		(24,963	)
Exchange differences arising on translation of foreign operations		(273	)		627
Changes in fair value of available-for-sale financial assets		(6,769	)		838
Cumulative (gain)/loss reclassified to profit or loss upon disposal of available-for-sale financial assets		(59	)		(338	)
Share of other comprehensive income of associates and joint venture		(49	)		97

(Continued)

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	Three Months Ended March 31
	2015			2014
Adjustments to share of changes in equities of associates and joint venture	$	(26	)	$	—
From differences between equity purchase price and carrying amount arising from actual acquisition or disposal of subsidiaries		—			10,945
From share of changes in equities of subsidiaries		1,031			—
Decrease in noncontrolling interests		(179	)		(29,574	)
Effect of disposal of subsidiary		(42,640	)		—

Balance, end of period	$	72,254		$	224,341

(Concluded)

23.

SHARE-BASED PAYMENT

The Company did not issue employee stock option plans for three months ended March 31, 2015 and 2014. TSMC elected to take the optional exemption for its issued employee stock options from applying IFRS 2 “Share-based Payment.” The related information is as follows:


	Number of Stock Options (In Thousands)			Weighted- average Exercise Price (NT$)
Three months ended March 31, 2015
Balance, beginning of period		718		$	47.2
Options exercised		(640	)		47.2

Balance, end of period		78			47.2

Balance exercisable, end of period		78			47.2

Three months ended March 31, 2014
Balance, beginning of period		1,763		$	45.9
Options exercised		(507	)		44.0

Balance, end of period		1,256			46.7

Balance exercisable, end of period		1,256			46.7

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

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


March 31, 2015		December 31, 2014		March 31, 2014
	Weighted-average		Weighted-average		Weighted-average
Range of Exercise Price	Remaining Contractual Life	Range of Exercise Price	Remaining Contractual Life	Range of Exercise Price	Remaining Contractual Life
(NT$)	(Years)	(NT$)	(Years)	(NT$)	(Years)
$47.2	0.1	$47.2	0.4	$43.2-$47.2	1.0

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24.

NET REVENUE

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


	Three Months Ended March 31
	2015		2014
Net revenue from sale of goods	$	221,899,524	$	147,997,622
Net revenue from royalties		134,620		217,550

	$	222,034,144	$	148,215,172

25.

FINANCE COSTS


	Three Months Ended March 31
	2015		2014
Interest expense
Corporate bonds	$	763,918	$	769,977
Bank loans		24,955		21,628
Finance leases		5,007		4,969
Others		62		6

	$	793,942	$	796,580

26.

OTHER GAINS AND LOSSES


	Three Months Ended March 31
	2015			2014
Gain on disposal of financial assets, net
Available-for-sale financial assets	$	2,961		$	20,987
Financial assets carried at cost		42,243			23,758
Other gains		16,169			47,613
Net gain on financial instruments at FVTPL
Held for trading		317,555			104,110
Fair value hedges
Gain from hedging instruments		4,592,076			325,678
Loss arising from changes in fair value of available-for-sale financial assets in hedge effective portion		(4,602,284	)		(327,961	)
Other losses		(6,535	)		(150,801	)

	$	362,185		$	43,384

- 32 -

27.

INCOME TAX

Income tax expense recognized in profit or loss

Income tax expense consisted of the following:


	Three Months Ended March 31
	2015			2014
Current income tax expense
Current tax expense recognized in the current period	$	10,403,960		$	6,019,953
Other income tax adjustments		42,039			26,996

		10,445,999			6,046,949

Deferred income tax expense (benefit)
The origination and reversal of temporary differences		(183,268	)		(674,439	)
Investment tax credits and operating loss carryforward		(987,659	)		82,985

		(1,170,927	)		(591,454	)

Income tax expense recognized in profit or loss	$	9,275,072		$	5,455,495

Income tax expense recognized in other comprehensive income


	Three Months Ended March 31
	2015		2014
Deferred income tax expense (benefit)
Related to unrealized gain/loss on available-for-sale financial assets	$	4,793	$	(2,956	)

Integrated income tax information


	March 31, 2015		December 31, 2014		March 31, 2014
Balance of the Imputation
Credit Account - TSMC	$	35,353,150	$	35,353,150	$	15,242,724

The estimated creditable ratio for distribution of TSMC’s earnings of 2014 was 11.29%; however, effective from January 1, 2015, the creditable ratio for individual shareholders residing in the Republic of China will be half of the original creditable ratio according to the revised Article 66-6 of the Income Tax Law.

The actual creditable ratio for distribution of TSMC’s earnings of 2013 was 9.78%, which is calculated based on the Rule No.10204562810 issued by the Ministry of Finance to include the adjustments to retained earnings from the effect of transition to Taiwan-IFRSs in the accumulated unappropriated earnings in the year of first-time adoption of Taiwan-IFRSs.

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

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

- 33 -

Income tax examination

The tax authorities have examined income tax returns of TSMC through 2011. All investment tax credit adjustments assessed by the tax authorities have been recognized accordingly.

28.

EARNINGS PER SHARE


	Three Months Ended March 31
	2015		2014
Basic EPS	$	3.05	$	1.85

Diluted EPS	$	3.05	$	1.85

EPS is computed as follows:


	Amounts (Numerator)		Number of Shares (Denominator) (In Thousands)		EPS (NT$)
Three months ended March 31, 2015
Basic EPS
Net income available to common shareholders of the parent	$	78,989,911		25,930,011	$	3.05

Effect of dilutive potential common shares		—		344

Diluted EPS
Net income available to common shareholders of the parent (including effect of dilutive potential common shares)	$	78,989,911		25,930,355	$	3.05

Three months ended March 31, 2014
Basic EPS
Net income available to common shareholders of the parent	$	47,866,793		25,928,848	$	1.85

Effect of dilutive potential common shares		—		992

Diluted EPS
Net income available to common shareholders of the parent (including effect of dilutive potential common shares)	$	47,866,793		25,929,840	$	1.85

If the Company may settle the obligation by cash, by issuing shares, or in combination of both cash and shares, profit sharing to employees which will be settled in shares should be included in the weighted average number of shares outstanding in calculation of diluted EPS, if the shares have a dilutive effect. The number of shares is estimated by dividing the amount of profit sharing to employees in stock by the closing price (after considering the dilutive effect of dividends) of the common shares at the end of the reporting period. Such dilutive effect of the potential shares needs to be included in the calculation of diluted EPS until profit sharing to employees to be settled in the form of common stocks are approved by the shareholders in the following year.

- 34 -

29.

ADDITIONAL INFORMATION OF EXPENSES BY NATURE


	Three Months Ended March 31
	2015		2014
a. Depreciation of property, plant and equipment
Recognized in cost of revenue	$	51,041,714	$	37,457,425
Recognized in operating expenses		3,658,291		3,522,295
Recognized in other operating income and expenses		6,222		6,222

	$	54,706,227	$	40,985,942

b. Amortization of intangible assets
Recognized in cost of revenue	$	407,750	$	333,467
Recognized in operating expenses		364,019		302,968

	$	771,769	$	636,435

c. Research and development costs expensed as incurred	$	16,781,463	$	12,067,892

d. Employee benefits expenses
Post-employment benefits
Defined contribution plans	$	475,826	$	412,452
Defined benefit plans		68,128		89,042

		543,954		501,494
Other employee benefits		22,244,739		16,830,516

	$	22,788,693	$	17,332,010

Employee benefits expense summarized by function
Recognized in cost of revenue	$	13,294,494	$	10,412,071
Recognized in operating expenses		9,494,199		6,919,939

	$	22,788,693	$	17,332,010

30.

DISPOSAL OF SUBSIDIARY

In January 2015, the Board of Directors of TSMC approved a sale of TSMC SSL common shares of 565,480 thousand held by TSMC and TSMC Guang Neng to Epistar Corp. Accordingly, the Company reclassified TSMC SSL as a disposal group held for sale in its consolidated balance sheet as of December 31, 2014. The expected fair value less costs to sell is substantially lower than the carrying amount of the related net assets of TSMC SSL; as such, impairment losses of NT$734,467 thousand were recognized under other operating gains and losses in the Company’s consolidated statement of comprehensive income for the year ended December 31, 2014. The transaction was completed in February 2015. For the major classes of assets and liabilities classified as held for sale, please refer to Note 13 to the consolidated financial statements for the year ended December 31, 2014.

Consideration received from the disposal


Total consideration received	$	825,000
Expenditure associated with consideration received		(142,475	)

Net consideration received	$	682,525

- 35 -

Analysis of assets and liabilities over which the control was lost


Assets
Cash and cash equivalents	$	81,478
Inventories		28,519
Other current assets		91,331
Property, plant and equipment		643,699
Intangible assets		47,373
Others		51,808
Liabilities
Salary and bonus payable		(38,151	)
Accrued expenses and other current liabilities		(68,132	)
Net defined benefit liability		(35,845	)
Others		(76,915	)

Net assets disposed of	$	725,165

Gain/loss on disposal of subsidiary


Net consideration received	$	682,525
Net assets disposed of		(725,165	)
Noncontrolling interests		42,640

Gain/loss on disposal of subsidiary	$	—

Net cash outflow arising from disposal of subsidiary


Net consideration received	$	682,525
Less: balance of cash and cash equivalents disposed of		81,478

	$	601,047

31.

FINANCIAL INSTRUMENTS

Categories of financial instruments


	Note			March 31, 2015		December 31, 2014		March 31, 2014
Financial assets
FVTPL
Held for trading derivatives		a	)	$	297,698	$	200,364	$	11,425
Available-for-sale financial assets		b	)		70,022,067		75,598,018		62,184,360
Held-to-maturity financial assets		—			13,060,038		4,485,593		2,394,178
Loans and receivables
Cash and cash equivalents		a	)		437,412,411		358,530,507		231,697,295
Notes and accounts receivables (including related parties)		a	)		99,121,766		115,057,965		74,333,024
Other receivables		a	)		4,450,612		4,051,452		1,377,629
Refundable deposits		a	)		442,633		356,582		2,560,988

				$	624,807,225	$	558,280,481	$	374,558,899

(Continued)

- 36 -


	Note			March 31, 2015		December 31, 2014		March 31, 2014
Financial liabilities
FVTPL
Held for trading derivatives		a	)	$	64,929	$	486,614	$	188,535
Derivative financial instruments in designated hedge accounting relationships		—			11,627,838		16,364,241		5,279,032
Amortized cost
Short-term loans		—			18,683,595		36,158,520		24,843,645
Accounts payable (including related parties)		a	)		20,204,923		23,379,762		16,710,701
Payables to contractors and equipment suppliers		a	)		27,372,814		26,983,424		53,461,455
Accrued expenses and other current liabilities		a	)		21,517,261		22,248,135		15,528,728
Bonds payable		—			213,208,771		213,673,818		211,798,101
Long-term bank loans		—			40,000		40,000		40,000
Other long-term payables (classified under accrued expenses and other current liabilities and other noncurrent liabilities)		—			18,000		36,000		54,000
Guarantee deposits (including those classified under accrued expense and other current liabilities)		a	)		29,995,249		30,297,600		154,505

				$	342,733,380	$	369,668,114	$	328,058,702

(Concluded)

Note a:

Including those classified to noncurrent assets held for sale or liabilities directly associated with noncurrent assets held for sale as of December 31, 2014.

Note b:

Including financial assets carried at cost.

Financial risk management objectives

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

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

Market risk

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

- 37 -

Foreign currency risk

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

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

The Company’s sensitivity analysis to foreign currency risk mainly focuses on the foreign currency monetary items at the end of the reporting period. Assuming an unfavorable 10% movement in the levels of foreign exchanges against the New Taiwan dollar, the net income for the three months ended March 31, 2015 and 2014 would have decreased by NT$211,761 thousand and NT$306,019 thousand, respectively, after taking into consideration of the hedging contracts and the hedged items.

Interest rate risk

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

Assuming the amount of floating interest rate bank loans at the end of the reporting period had been outstanding for the entire period and all other variables were held constant, a hypothetical increase in interest rates of 100 basis point (1%) would have resulted in an increase in the interest expense, net of tax, by approximately NT$83 thousand for both three months ended March 31, 2015 and 2014.

Other price risk

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

Assuming a hypothetical decrease of 5% in equity prices of the equity investments at the end of the reporting period, the net income for the three months ended March 31, 2015 and 2014 would have been unaffected as they were classified as available-for-sale; however, the other comprehensive income for the three months ended March 31, 2015 and 2014 would have decreased by NT$135,041 thousand and NT$326,779 thousand, respectively.

Credit risk management

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Company. The Company is exposed to credit risk from operating activities, primarily trade receivables, and from financing activities, primarily deposits, fixed-income investments and other financial instruments with banks. Credit risk is managed separately for business related and financial related exposures. As of the end of the reporting period, the Company’s maximum credit risk exposure is mainly from the carrying amount of financial assets recognized in the consolidated balance sheet.

- 38 -

Business related credit risk

The Company has considerable trade receivables outstanding with its customers worldwide. A substantial majority of the Company’s outstanding trade receivables are not covered by collateral or credit insurance. While the Company has procedures to monitor and limit exposure to credit risk on trade receivables, there can be no assurance such procedures will effectively limit its credit risk and avoid losses. This risk is heightened during periods when economic conditions worsen.

As of March 31, 2015, December 31, 2014 and March 31, 2014, the Company’s ten largest customers accounted for 68%, 76% and 66% of accounts receivable, respectively. The Company believes the concentration of credit risk is insignificant for the remaining accounts receivable.

Financial credit risk

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

Liquidity risk management

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

As of March 31, 2015, December 31, 2014 and March 31, 2014, the unused of financing facilities of the Company amounted to NT$93,399,467 thousand, NT$73,534,805 thousand and NT$72,980,416 thousand, respectively.

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


	Less Than 1 Year			2-3 Years		4-5 Years		5+ Years		Total
March 31, 2015
Non-derivative financial liabilities
Short-term loans	$	18,685,301		$	—	$	—	$	—	$	18,685,301
Accounts payable (including related parties)		20,204,923			—		—		—		20,204,923
Payables to contractors and equipment suppliers		27,372,814			—		—		—		27,372,814
Accrued expenses and other current liabilities		21,517,261			—		—		—		21,517,261
Bonds payable		3,072,885			83,163,353		102,525,541		36,555,015		225,316,794
Long-term bank loans		1,450			22,115		20,665		—		44,230
Other long-term payables (classified under accrued expenses and other current liabilities and other noncurrent liabilities)		—			18,000		—		—		18,000
Obligations under finance leases		29,392			58,784		792,972		—		881,148
Guarantee deposits (including those classified under accrued expense and other current liabilities)		6,280,200			12,724,699		10,990,350		—		29,995,249

		97,164,226			95,986,951		114,329,528		36,555,015		344,035,720

Derivative financial instruments
Forward exchange contracts
Outflows		67,083,597			—		—		—		67,083,597
Inflows		(67,143,691	)		—		—		—		(67,143,691	)

		(60,094	)		—		—		—		(60,094	)

(Continued)

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	Less Than 1 Year			2-3 Years		4-5 Years		5+ Years		Total
Cross currency swap contracts
Outflows	$	2,758,469		$	—	$	—	$	—	$	2,758,469
Inflows		(2,767,416	)		—		—		—		(2,767,416	)

		(8,947	)		—		—		—		(8,947	)

Stock forward contracts
Outflows		55,611,164			—		—		—		55,611,164
Inflows		(55,611,164	)		—		—		—		(55,611,164	)

		—			—		—		—		—

	$	97,095,185		$	95,986,951	$	114,329,528	$	36,555,015	$	343,966,679

December 31, 2014
Non-derivative financial liabilities
Short-term loans	$	36,164,316		$	—	$	—	$	—	$	36,164,316
Accounts payable (including related parties)		23,370,424			—		—		—		23,370,424
Payables to contractors and equipment suppliers		26,980,408			—		—		—		26,980,408
Accrued expenses and other current liabilities		22,177,901			—		—		—		22,177,901
Bonds payable		3,079,862			66,720,514		98,460,598		58,320,169		226,581,143
Long-term bank loans		1,450			19,792		20,846		2,504		44,592
Other long-term payables (classified under accrued expenses and other current liabilities and other noncurrent liabilities)		18,000			18,000		—		—		36,000
Obligations under finance leases		29,667			59,335		800,409		—		889,411
Guarantee deposits (including those classified under accrued expense and other current liabilities)		4,757,700			12,851,275		12,687,200		—		30,296,175

		116,579,728			79,668,916		111,969,053		58,322,673		366,540,370

Derivative financial instruments
Forward exchange contracts
Outflows		17,327,250			—		—		—		17,327,250
Inflows		(17,283,079	)		—		—		—		(17,283,079	)

		44,171			—		—		—		44,171

Cross currency swap contracts
Outflows		47,291,943			—		—		—		47,291,943
Inflows		(46,970,942	)		—		—		—		(46,970,942	)

		321,001			—		—		—		321,001

Stock forward contracts
Outflows		56,172,570			—		—		—		56,172,570
Inflows		(56,172,570	)		—		—		—		(56,172,570	)

		—			—		—		—		—

	$	116,944,900		$	79,668,916	$	111,969,053	$	58,322,673	$	366,905,542

March 31, 2014
Non-derivative financial liabilities
Short-term loans	$	24,847,820		$	—	$	—	$	—	$	24,847,820
Accounts payable (including related parties)		16,710,701			—		—		—		16,710,701
Payables to contractors and equipment suppliers		53,461,455			—		—		—		53,461,455
Accrued expenses and other current liabilities		15,528,728			—		—		—		15,528,728
Bonds payable		3,051,998			38,560,734		99,689,272		85,635,101		226,937,105
Long-term bank loans		1,450			12,689		21,390		10,151		45,680
Other long-term payables (classified under accrued expenses and other current liabilities and other noncurrent liabilities)		18,000			36,000		—		—		54,000
Obligations under finance leases		28,456			56,913		796,191		—		881,560
Guarantee deposits		—			154,505		—		—		154,505

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

(Continued)

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	Less Than 1 Year			2-3 Years		4-5 Years		5+ Years		Total
Derivative financial instruments
Forward exchange contracts
Outflows	$	28,316,400		$	—	$	—	$	—	$	28,316,400
Inflows		(28,118,463	)		— &