Edgar Filing: TAIWAN SEMICONDUCTOR MANUFACTURING CO LTD

Taiwan Semiconductor Manufacturing Company Ltd.

Date: August 14, 2015

/s/ Lora Ho

Senior Vice President & Chief Financial Officer

Form 6-K

1934 Act Registration No. 1-14700

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER

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

OF THE SECURITIES EXCHANGE ACT OF 1934

For the month of August 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 Limited and Subsidiaries

Consolidated Financial Statements for the

Six months Ended June 30, 2015 and 2014 and

Independent Accountants’ Review Report

LOGO

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 June 30, 2015 and 2014 and the related consolidated statements of comprehensive income for the three months ended June 30, 2015 and 2014 and for the six months ended June 30, 2015 and 2014, as well as the consolidated statements of changes in equity and cash flows for the six months ended June 30, 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.

LOGO

August 11, 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.

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- 1 -

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED BALANCE SHEETS

(In Thousands of New Taiwan Dollars)


	June 30, 2015 (Reviewed)				December 31, 2014 (Adjusted and Audited)				June 30, 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)	$	528,895,107		33	$	358,449,029		24	$	255,053,573		19	$	242,695,447		19
Financial assets at fair value through profit or loss (Note 7)		58,535		—		192,045		—		158,265		—		90,353		—
Available-for-sale financial assets (Note 8)		14,216,874		1		73,797,476		5		59,082,482		4		760,793		—
Held-to-maturity financial assets (Note 9)		7,180,351		—		4,485,593		—		299,230		—		1,795,949		—
Notes and accounts receivable, net (Note 11)		98,992,354		6		114,734,743		8		86,424,428		7		71,649,926		6
Receivables from related parties (Note 32)		744,707		—		312,955		—		462,732		—		291,708		—
Other receivables from related parties (Note 32)		3,565,341		—		178,625		—		2,875,842		—		221,576		—
Inventories (Note 12)		66,278,597		4		66,337,971		5		50,954,265		4		37,494,893		3
Noncurrent assets held for sale (Note 30)		—		—		944,208		—		—		—		—		—
Other financial assets (Note 33)		8,408,233		1		3,476,884		—		957,366		—		501,785		—
Other current assets (Note 17)		3,028,691		—		3,656,110		—		2,931,372		—		2,984,224		—


Total current assets		731,368,790		45		626,565,639		42		459,199,555		34		358,486,654		28


NONCURRENT ASSETS
Available-for-sale financial assets (Note 8)		—		—		—		—		—		—		58,721,959		5
Financial assets carried at cost (Note 13)		1,858,376		—		1,800,542		—		2,017,528		—		2,145,591		—
Investments accounted for using equity method (Note 14)		25,915,208		2		28,255,737		2		26,361,220		2		28,321,241		2
Property, plant and equipment (Note 15)		829,703,176		52		818,198,801		55		837,167,426		63		792,665,913		63
Intangible assets (Note 16)		12,938,507		1		13,531,510		1		11,433,307		1		11,490,383		1
Deferred income tax assets (Note 4)		5,342,444		—		5,138,782		—		4,915,991		—		7,145,004		1
Refundable deposits (Note 32)		408,585		—		356,069		—		2,476,534		—		2,519,031		—
Other noncurrent assets (Note 17)		1,317,980		—		1,202,006		—		1,385,149		—		1,469,577		—


Total noncurrent assets		877,484,276		55		868,483,447		58		885,757,155		66		904,478,699		72


TOTAL	$	1,608,853,066		100	$	1,495,049,086		100	$	1,344,956,710		100	$	1,262,965,353		100


LIABILITIES AND EQUITY
CURRENT LIABILITIES
Short-term loans (Note 18)	$	5,592,600		—	$	36,158,520		2	$	34,705,206		3	$	15,645,000		1
Financial liabilities at fair value through profit or loss (Note 7)		780,721		—		486,214		—		19,418		—		33,750		—
Hedging derivative financial liabilities (Note 10)		2,625,763		—		16,364,241		1		4,282,501		—		—		—
Accounts payable		19,773,550		1		21,878,934		2		20,015,515		1		14,670,260		1
Payables to related parties (Note 32)		1,327,345		—		1,491,490		—		1,681,781		—		1,688,456		—
Salary and bonus payable		9,116,649		1		10,573,922		1		7,806,935		1		8,330,956		1
Accrued profit sharing to employees and bonus to directors and supervisors (Notes 22 and 29)		28,834,956		2		18,052,820		1		20,100,855		1		12,738,801		1
Payables to contractors and equipment suppliers		43,610,962		3		26,980,408		2		34,657,746		3		89,810,160		7
Cash dividends payable (Note 22)		116,683,481		7		—		—		77,785,851		6		—		—
Income tax payable (Note 4)		30,335,340		2		28,616,574		2		17,585,111		1		22,563,286		2
Provisions (Note 19)		8,593,075		1		10,445,452		1		7,709,195		1		7,603,781		1
Liabilities directly associated with noncurrent assets held for sale (Note 30)		—		—		219,043		—		—		—		—		—
Long-term liabilities - current portion (Note 20)		10,868,322		1		—		—		—		—		—		—
Accrued expenses and other current liabilities (Note 21)		31,236,977		2		29,746,011		2		20,284,963		1		16,693,484		1


Total current liabilities		309,379,741		20		201,013,629		14		246,635,077		18		189,777,934		15


NONCURRENT LIABILITIES
Hedging derivative financial liabilities (Note 10)		—		—		—		—		1,277,058		—		5,481,616		—
Bonds payable (Note 20)		201,856,784		13		213,673,818		14		210,869,059		16		210,767,625		17
Long-term bank loans		37,500		—		40,000		—		40,000		—		40,000		—
Deferred income tax liabilities (Note 4)		232,340		—		199,750		—		—		—		—		—
Obligations under finance leases		766,836		—		802,108		—		745,391		—		776,230		—
Net defined benefit liability (Note 4)		6,585,747		—		6,567,782		—		6,810,773		1		6,801,663		1
Guarantee deposits (Note 21)		21,916,587		1		25,538,475		2		157,011		—		151,660		—
Others (Note 19)		1,449,976		—		885,192		—		771,334		—		694,901		—


Total noncurrent liabilities		232,845,770		14		247,707,125		16		220,670,626		17		224,713,695		18


Total liabilities		542,225,511		34		448,720,754		30		467,305,703		35		414,491,629		33


EQUITY ATTRIBUTABLE TO SHAREHOLDERS OF THE PARENT
Capital stock (Note 22)		259,303,805		16		259,296,624		17		259,293,750		19		259,286,171		21

Capital surplus (Note 22)		56,532,959		4		55,989,922		4		56,026,837		4		55,858,626		4

Retained earnings (Notes 22 and 29)
Appropriated as legal capital reserve		177,640,561		11		151,250,682		10		151,250,682		11		132,436,003		11
Appropriated as special capital reserve		—		—		—		—		—		—		2,785,741		—
Unappropriated earnings		569,248,657		35		553,914,592		37		397,420,475		30		383,670,168		30

		746,889,218		46		705,165,274		47		548,671,157		41		518,891,912		41

Others (Note 22)		3,854,399		—		25,749,291		2		13,485,597		1		14,170,306		1


Equity attributable to shareholders of the parent		1,066,580,381		66		1,046,201,111		70		877,477,341		65		848,207,015		67

NONCONTROLLING INTERESTS (Note 22)		47,174		—		127,221		—		173,666		—		266,709		—


Total equity		1,066,627,555		66		1,046,328,332		70		877,651,007		65		848,473,724		67


TOTAL	$	1,608,853,066		100	$	1,495,049,086		100	$	1,344,956,710		100	$	1,262,965,353		100

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

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Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

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

(Reviewed, Not Audited)


	For the Three Months Ended June 30												For the Six Months Ended June 30
	2015 (Note 3)						2014 (Adjusted) (Note 3)						2015 (Note 3)						2014 (Adjusted) (Note 3)
	Amount			%			Amount			%			Amount			%			Amount			%

NET REVENUE (Notes 24, 32 and 37)	$	205,439,752			100		$	183,020,484			100		$	427,473,896			100		$	331,235,656			100

COST OF REVENUE (Notes 12, 29 and 32)		105,735,807			51			91,826,284			50			218,321,140			51			169,665,469			51


GROSS PROFIT BEFORE REALIZED (UNREALIZED) GROSS PROFIT ON SALES TO ASSOCIATES		99,703,945			49			91,194,200			50			209,152,756			49			161,570,187			49

REALIZED (UNREALIZED) GROSS PROFIT ON SALES TO ASSOCIATES		1,011			—			(4,369	)		—			(18,536	)		—			16,648			—


GROSS PROFIT		99,704,956			49			91,189,831			50			209,134,220			49			161,586,835			49


OPERATING EXPENSES (Notes 29 and 32)
Research and development		16,612,213			8			13,610,337			7			33,393,676			8			25,678,229			8
General and administrative		4,463,580			2			5,408,174			3			8,829,633			2			10,064,151			3
Marketing		1,479,419			1			1,234,897			1			2,870,415			1			2,387,677			1


Total operating expenses		22,555,212			11			20,253,408			11			45,093,724			11			38,130,057			12


OTHER OPERATING INCOME AND EXPENSES, NET (Note 29)		(80,686	)		—			(227,251	)		—			(345,315	)		—			(229,992	)		—


INCOME FROM OPERATIONS (Note 37)		77,069,058			38			70,709,172			39			163,695,181			38			123,226,786			37


NON-OPERATING INCOME AND EXPENSES
Share of profits of associates and joint venture		815,749			—			1,047,825			—			1,950,398			—			2,003,434			—
Other income		1,544,750			1			1,316,583			1			2,426,532			1			1,930,282			—
Foreign exchange loss, net (Note 36)		(292,295	)		—			(355,207	)		—			(244,112	)		—			(391,608	)		—
Finance costs (Note 25)		(783,401	)		—			(801,450	)		—			(1,577,343	)		—			(1,598,030	)		—
Other gains and losses (Note 26)		19,777,822			9			2,176,649			1			20,140,007			5			2,220,033			1


Total non-operating income and expenses		21,062,625			10			3,384,400			2			22,695,482			6			4,164,111			1


INCOME BEFORE INCOME TAX		98,131,683			48			74,093,572			41			186,390,663			44			127,390,897			38

INCOME TAX EXPENSE (Notes 4 and 27)		18,718,779			9			14,437,693			8			27,993,851			7			19,893,188			6


NET INCOME		79,412,904			39			59,655,879			33			158,396,812			37			107,497,709			32


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		(3,368,788	)		(2	)		(3,052,142	)		(2	)		(5,647,926	)		(1	)		(220,761	)		—
Changes in fair value of available-for-sale financial assets		(16,627,929	)		(8	)		(31,156	)		—			(16,832,744	)		(4	)		(446,601	)		—
Share of other comprehensive income (loss) of associates and joint venture		(249,353	)		—			(1,274	)		—			593,810			—			(6,021	)		—
Income tax expense related to components of other comprehensive income that may be reclassified subsequently		(13,311	)		—			(14,079	)		—			(18,104	)		—			(11,123	)		—


Other comprehensive loss for the period, net of income tax		(20,259,381	)		(10	)		(3,098,651	)		(2	)		(21,904,964	)		(5	)		(684,506	)		—


TOTAL COMPREHENSIVE INCOME FOR THE PERIOD	$	59,153,523			29		$	56,557,228			31		$	136,491,848			32		$	106,813,203			32


NET INCOME (LOSS) ATTRIBUTABLE TO:
Shareholders of the parent	$	79,417,514			39		$	59,698,303			33		$	158,407,425			37		$	107,565,096			32
Noncontrolling interests		(4,610	)		—			(42,424	)		—			(10,613	)		—			(67,387	)		—


	$	79,412,904			39		$	59,655,879			33		$	158,396,812			37		$	107,497,709			32


TOTAL COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO:
Shareholders of the parent	$	59,161,055			29		$	56,600,673			31		$	136,512,533			32		$	106,880,387			32
Noncontrolling interests		(7,532	)		—			(43,445	)		—			(20,685	)		—			(67,184	)		—


	$	59,153,523			29		$	56,557,228			31		$	136,491,848			32		$	106,813,203			32


	For the Three Months Ended June 30				For the Six Months Ended June 30
	2015		2014		2015		2014
	Income Attributable to Shareholders of the Parent		Income Attributable to Shareholders of the Parent		Income Attributable to Shareholders of the Parent		Income Attributable to Shareholders of the Parent

EARNINGS PER SHARE (NT$, Note 28)
Basic earnings per share	$	3.06	$	2.30	$	6.11	$	4.15

Diluted earnings per share	$	3.06	$	2.30	$	6.11	$	4.15

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

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Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

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

(Reviewed, Not Audited)


	Equity Attributable to Shareholders of the Parent
																			Others
	Capital Stock - Common Stock							Retained Earnings											Foreign Currency Translation Reserve			Unrealized Gain/Loss from Available- for-sale Financial Assets			Cash Flow Hedges Reserve			Total			Total			Noncontrolling Interests			Total Equity
	Shares (In Thousands)		Amount		Capital Surplus			Legal Capital Reserve		Special Capital Reserve			Unappropriated Earnings			Total
	Shares (In Thousands)		Amount		Capital Surplus			Legal Capital Reserve		Special Capital Reserve			Unappropriated Earnings			Total
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


Appropriations of prior year’s earnings
Legal capital reserve		—		—		—			26,389,879		—			(26,389,879	)		—			—			—			—			—			—			—			—
Cash dividends to shareholders - NT$4.50 per share		—		—		—			—		—			(116,683,481	)		(116,683,481	)		—			—			—			—			(116,683,481	)		—			(116,683,481	)

Total		—		—		—			26,389,879		—			(143,073,360	)		(116,683,481	)		—			—			—			—			(116,683,481	)		—			(116,683,481	)


Net income for the six months ended June 30, 2015		—		—		—			—		—			158,407,425			158,407,425			—			—			—			—			158,407,425			(10,613	)		158,396,812

Other comprehensive income for the six months ended June 30, 2015, net of income tax		—		—		—			—		—			—			—			(5,599,519	)		(16,295,209	)		(164	)		(21,894,892	)		(21,894,892	)		(10,072	)		(21,904,964	)


Total comprehensive income for the six months ended June 30, 2015		—		—		—			—		—			158,407,425			158,407,425			(5,599,519	)		(16,295,209	)		(164	)		(21,894,892	)		136,512,533			(20,685	)		136,491,848


Issuance of stock from exercise of employee stock options		718		7,181		130,974			—		—			—			—			—			—			—			—			138,155			—			138,155

Disposal of investments accounted for using equity method		—		—		(26,537	)		—		—			—			—			—			—			—			—			(26,537	)		—			(26,537	)

Adjustments to share of changes in equities of associates and joint venture		—		—		464,471			—		—			—			—			—			—			—			—			464,471			126			464,597

From share of changes in equities of subsidiaries		—		—		(25,871	)		—		—			—			—			—			—			—			—			(25,871	)		25,871			—

Decrease in noncontrolling interests		—		—		—			—		—			—			—			—			—			—			—			—			(42,719	)		(42,719	)

Effect of disposal of subsidiary		—		—		—			—		—			—			—			—			—			—			—			—			(42,640	)		(42,640	)


BALANCE, JUNE 30, 2015		25,930,380	$	259,303,805	$	56,532,959		$	177,640,561	$	—		$	569,248,657		$	746,889,218		$	(1,097,406	)	$	4,952,274		$	(469	)	$	3,854,399		$	1,066,580,381		$	47,174		$	1,066,627,555


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


Appropriations of prior year’s earnings
Legal capital reserve		—		—		—			18,814,679		—			(18,814,679	)		—			—			—			—			—			—			—			—
Reversal of special capital reserve		—		—		—			—		(2,785,741	)		2,785,741			—			—			—			—			—			—			—			—
Cash dividends to shareholders - NT$3.00 per share		—		—		—			—		—			(77,785,851	)		(77,785,851	)		—			—			—			—			(77,785,851	)		—			(77,785,851	)

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


Net income for the six months ended June 30, 2014		—		—		—			—		—			107,565,096			107,565,096			—			—			—			—			107,565,096			(67,387	)		107,497,709

Other comprehensive income for the six months ended June 30, 2014, net of income tax		—		—		—			—		—			—			—			(223,663	)		(461,136	)		90			(684,709	)		(684,709	)		203			(684,506	)


Total comprehensive income for the six months ended June 30, 2014		—		—		—			—		—			107,565,096			107,565,096			(223,663	)		(461,136	)		90			(684,709	)		106,880,387			(67,184	)		106,813,203


Issuance of stock from exercise of employee stock options		758		7,579		25,908			—		—			—			—			—			—			—			—			33,487			—			33,487

Disposal of investments accounted for using equity method		—		—		(2,273	)		—		—			—			—			—			—			—			—			(2,273	)		—			(2,273	)

Adjustments to share of changes in equity of associates and joint venture		—		—		164,310			—		—			—			—			—			—			—			—			164,310			(66	)		164,244

From share of changes in equities of subsidiaries		—		—		(19,734	)		—		—			—			—			—			—			—			—			(19,734	)		19,734			—

Decrease in noncontrolling interests		—		—		—			—		—			—			—			—			—			—			—			—			(45,527	)		(45,527	)


BALANCE, JUNE 30, 2014		25,929,375	$	259,293,750	$	56,026,837		$	151,250,682	$	—		$	397,420,475		$	548,671,157		$	(7,364,025	)	$	20,849,645		$	(23	)	$	13,485,597		$	877,477,341		$	173,666		$	877,651,007

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

- 4 -

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands of New Taiwan Dollars)

(Reviewed, Not Audited)


	Six months Ended June 30
	2015			2014 (Adjusted)
CASH FLOWS FROM OPERATING ACTIVITIES
Income before income tax	$	186,390,663		$	127,390,897
Adjustments for:
Depreciation expense		108,544,796			86,338,443
Amortization expense		1,556,307			1,263,048
Finance costs		1,577,343			1,598,030
Share of profits of associates and joint venture		(1,950,398	)		(2,003,434	)
Interest income		(1,817,825	)		(1,292,325	)
Loss (gain) on disposal of property, plant and equipment and intangible assets, net		50,368			(15,325	)
Impairment loss on property, plant and equipment		31,305			239,864
Gain on disposal of available-for-sale financial assets, net		(17,642,367	)		(134,020	)
Gain on disposal of financial assets carried at cost, net		(70,597	)		(52,694	)
Gain on disposal of investments accounted for using equity method		(2,305,323	)		(2,028,643	)
Unrealized (realized) gross profit on sales to associates		18,536			(16,648	)
Loss (gain) on foreign exchange, net		(2,014,106	)		1,646,248
Dividend income		(608,707	)		(637,957	)
Income from receipt of equity securities in settlement of trade receivables		—			(1,211	)
Loss from hedging instruments		737,305			589,243
Gain arising from changes in fair value of available-for-sale financial assets in hedge effective portion		(299,191	)		(78,109	)
Changes in operating assets and liabilities:
Derivative financial instruments		428,017			(82,244	)
Notes and accounts receivable, net		14,569,490			(14,774,504	)
Receivables from related parties		(431,752	)		(171,024	)
Other receivables from related parties		17,984			13,258
Inventories		59,374			(13,459,372	)
Other financial assets		499,150			(389,931	)
Other current assets		731,724			70,323
Accounts payable		(1,587,537	)		5,331,172
Payables to related parties		(164,145	)		(6,675	)
Salary and bonus payable		(1,457,273	)		(524,021	)
Accrued profit sharing to employees and bonus to directors and supervisors		10,782,136			7,362,054
Accrued expenses and other current liabilities		(232,268	)		2,915,319
Provisions		(1,844,746	)		113,564
Net defined benefit liability		17,965			9,110

Cash generated from operations		293,586,228			199,212,436
Income taxes paid		(26,518,415	)		(22,602,632	)


Net cash generated by operating activities		267,067,813			176,609,804

(Continued)

- 5 -

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands of New Taiwan Dollars)

(Reviewed, Not Audited)


	Six months Ended June 30
	2015			2014 (Adjusted)
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions of:
Available-for-sale financial assets	$	(3,628	)	$	(91,592	)
Financial assets carried at cost		(87,321	)		(3,773	)
Held-to-maturity financial assets		(11,766,723	)		(1,396,723	)
Property, plant and equipment		(102,689,656	)		(188,233,322	)
Intangible assets		(1,589,831	)		(1,204,154	)
Proceeds from disposal or redemption of:
Available-for-sale financial assets		39,269,616			473,520
Held-to-maturity financial assets		9,100,000			2,900,000
Financial assets carried at cost		86,756			62,445
Investments accounted for using equity method		3,962,848			3,471,883
Property, plant and equipment		30,462			114,987
Cash received from other long-term receivables		—			161,900
Costs from entering into hedging transactions		(495,348	)		(520,856	)
Interest received		1,764,337			1,248,110
Other dividends received		595,980			629,843
Refundable deposits paid		(218,253	)		(25,460	)
Refundable deposits refunded		161,583			59,041
Net cash inflow from disposal of subsidiary (Note 30)		601,047			—


Net cash used in investing activities		(61,278,131	)		(182,354,151	)


CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in short-term loans		(30,334,110	)		19,220,278
Interest paid		(1,212,515	)		(889,467	)
Guarantee deposits received		454,190			10,374
Guarantee deposits refunded		(443,769	)		(3,742	)
Decrease in obligations under finance leases		(29,098	)		(28,426	)
Proceeds from exercise of employee stock options		33,891			33,487
Decrease in noncontrolling interests		(42,719	)		(45,527	)


Net cash generated by (used in) financing activities		(31,574,130	)		18,296,977


EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS		(3,850,952	)		(194,504	)

(Continued)

- 6 -

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands of New Taiwan Dollars)

(Reviewed, Not Audited)


	Six months Ended June 30
	2015		2014 (Adjusted)
NET INCREASE IN CASH AND CASH EQUIVALENTS	$	170,364,600	$	12,358,126

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	$	528,895,107	$	255,053,573


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

- 7 -

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 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 August 11, 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	June 30, 2015
Increase in investments accounted for using equity method	$	327
Increase in deferred income tax assets		1,374

Increase in assets	$	1,701

Increase in net defined benefit liability	$	11,446

Increase in liabilities	$	11,446

Decrease in retained earnings	$	(9,745	)

Decrease in equity	$	(9,745	)

- 9 -


Impact on Total Comprehensive Income			Three Months Ended June 30, 2015			Six Months Ended June 30, 2015
Increase in cost of revenue			$	(3,676	)	$	(7,363	)
Increase in operating expense				(2,047	)		(4,083	)
Increase in share of profit of associate and joint venture				160			327
Decrease in income tax expense				687			1,374


Decrease in net income and other comprehensive income attributable to shareholders of the parent			$	(4,876	)	$	(9,745	)


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


June 30, 2014

Investments accounted for using the equity method		26,355,811	$	5,409			26,361,220
Deferred income tax assets		5,009,457		(93,466	)		4,915,991


Total effect on assets			$	(88,057	)


Net defined benefit liability		7,589,543	$	(778,770	)		6,810,773


Total effect on liabilities			$	(778,770	)


Retained earnings		547,980,330	$	690,827			548,671,157
Noncontrolling interests		173,780		(114	)		173,666


Total effect on equity			$	690,713

(Continued)

- 10 -


Impact on Assets, Liabilities and Equity	As Originally Stated			Adjustments Arising from Initial Application			Adjusted
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


(Concluded)

Impact on Total Comprehensive Income	As Originally Stated			Adjustments Arising from Initial Application			Adjusted
Three months ended June 30, 2014
Cost of revenue	$	(91,823,190	)	$	(3,094	)	$	(91,826,284	)
Operating expense		(20,251,755	)		(1,653	)		(20,253,408	)
Share of the profit or loss of associates and joint ventures		1,047,626			199			1,047,825
Income tax expense		(14,438,263	)		570			(14,437,693	)

Impact on net income for the period				$	(3,978	)


Impact on net income attributable to:
Shareholders of the parent	$	59,702,284		$	(3,981	)	$	59,698,303
Noncontrolling interests		(42,427	)		3			(42,424	)


	$	59,659,857		$	(3,978	)	$	59,655,879


Impact on total comprehensive income attributable to:
Shareholders of the parent	$	56,604,654		$	(3,981	)	$	56,600,673
Noncontrolling interests		(43,448	)		3			(43,445	)


	$	56,561,206		$	(3,978	)	$	56,557,228

(Continued)

- 11 -


Impact on Total Comprehensive Income	As Originally Stated			Adjustments Arising from Initial Application			Adjusted
Six months ended June 30, 2014
Cost of revenue	$	(169,659,283	)	$	(6,186	)	$	(169,665,469	)
Operating expense		(38,126,750	)		(3,307	)		(38,130,057	)
Share of the profit or loss of associates and joint ventures		2,003,006			428			2,003,434
Income tax expense		(19,894,327	)		1,139			(19,893,188	)

Impact on net income for the period				$	(7,926	)

Impact on net income attributable to:
Shareholders of the parent	$	107,573,029		$	(7,933	)	$	107,565,096
Noncontrolling interests		(67,394	)		7			(67,387	)

	$	107,505,635		$	(7,926	)	$	107,497,709

Impact on total comprehensive income attributable to:
Shareholders of the parent	$	106,888,320		$	(7,933	)	$	106,880,387
Noncontrolling interests		(67,191	)		7			(67,184	)

	$	106,821,129		$	(7,926	)	$	106,813,203

(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

(Continued)

- 12 -


New, Revised or Amended Standards and Interpretations		Effective Date Issued by IASB (Note 1)

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

(Concluded)

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.

- 13 -

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.

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.

- 14 -

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.

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	Percentage of Ownership
Name of Investor	Name of Investee	Main Businesses and Products	and Operating Location	June 30, 2015			December 31, 2014			June 30, 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	%		98	%	a)
	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	%	b)

(Continued)

- 15 -


			Establishment	Percentage of Ownership
Name of Investor	Name of Investee	Main Businesses and Products	and Operating Location	June 30, 2015			December 31, 2014			June 30, 2014			Note
TSMC	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 99.8% 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)
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), c)
TSMC Solar	TSMC Solar North America, Inc. (TSMC Solar NA)	Selling and marketing of solar related products	Delaware, U.S.A.		100	%		100	%		100	%	a)
	TSMC Solar Europe B.V. (TSMC Solar Europe)	Investing in solar related business	Amsterdam, the Netherlands		—			100	%		100	%	a), d)
	TSMC Solar Europe GmbH	Selling of solar related products and providing customer service	Hamburg, Germany		100	%		—			—		a), d)
TSMC Solar Europe	TSMC Solar Europe GmbH	Selling of solar related products and providing customer service	Hamburg, Germany		—			100	%		100	%	a), d)

(Concluded)

Note a:

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

Note b:

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

Note c:

To simplify overseas investment structure, in the second quarter of 2014, the Board of Directors of TSMC SSL approved to file for the liquidation of TSMC Lighting NA. The liquidation procedure has been completed in the third quarter of 2014.

Note d:

To simplify overseas investments structure, in the second quarter of 2014, the Board of Directors of TSMC Solar approved to file for the liquidation of TSMC Solar Europe After the liquidation, TSMC Solar Europe GmbH, the 100% owned subsidiary of TSMC Solar Europe, will be held directly by TSMC Solar. The liquidation procedure has been completed in the second quarter of 2015.

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.

- 16 -

Taxation

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

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

The same critical accounting judgments and key sources of estimates and uncertainty have been followed in these consolidated financial statements as were applied in the preparation of the Company’s consolidated financial statements for the year ended December 31, 2014.

6.	CASH AND CASH EQUIVALENTS


	June 30, 2015		December 31, 2014		June 30, 2014
Cash and deposits in banks	$	522,994,073	$	352,761,240	$	243,638,487
Repurchase agreements collateralized by corporate bonds		4,155,782		3,920,562		3,613,365
Repurchase agreements collateralized by short-term commercial paper		898,859		449,180		1,708,393
Repurchase agreements collateralized by government bonds		546,526		158,722		1,056,695
Commercial paper		299,867		1,159,325		5,036,633


	$	528,895,107	$	358,449,029	$	255,053,573

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


	June 30, 2015		December 31, 2014		June 30, 2014
Derivative financial assets

Forward exchange contracts	$	31,580	$	73,117	$	63,907
Cross currency swap contracts		26,955		118,928		94,358


	$	58,535	$	192,045	$	158,265


Derivative financial liabilities

Forward exchange contracts	$	780,721	$	126,607	$	8,667
Cross currency swap contracts		—		359,607		10,751


	$	780,721	$	486,214	$	19,418

- 17 -

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

Outstanding forward exchange contracts consisted of the following:


		Contract Amount
	Maturity Date	(In Thousands)
June 30, 2015
Sell EUR/Buy US$	July 2015	EUR3,400/US$3,834
Sell NT$/Buy US$	July 2015	NT$1,868,845/US$60,500
Sell US$/Buy EUR	July 2015	US$10,153/EUR9,079
Sell US$/Buy JPY	July 2015	US$40,000/JPY4,947,990
Sell US$/Buy NT$	July 2015 to August 2015	US$2,345,000/NT$72,072,355
Sell US$/Buy RMB	July 2015	US$90,000/RMB559,832

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

June 30, 2014

Sell EUR/Buy US$	July 2014	EUR2,130/ US$2,900
Sell NT$/Buy JPY	July 2014	NT$190,637/JPY650,000
Sell NT$/Buy US$	July 2014	NT$1,291,583/ US$43,100
Sell US$/Buy EUR	July 2014	US$81,794/EUR60,000
Sell US$/Buy JPY	July 2014	US$407,388/JPY41,429,419
Sell US$/Buy NT$	July 2014	US$60,000/NT$1,801,440
Sell US$/Buy RMB	July 2014 to August 2014	US$132,000/RMB823,267

Outstanding cross currency swap contracts consisted of the following:


Maturity Date	Contract Amount (In Thousands)	Range of Interest Rates Paid	Range of Interest Rates Received
June 30, 2015

July 2015	NT$3,033,613/US$98,500	—	0.10%

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%	—

June 30, 2014

July 2014	NT$2,461,848/US$82,080	—	0.20%-0.48%
July 2014 to August 2014	US$870,000/NT$26,093,255	0.25%-1.92%	—

- 18 -

8.	AVAILABLE-FOR-SALE FINANCIAL ASSETS


	June 30, 2015		December 31, 2014		June 30, 2014
Publicly traded stocks	$	14,216,491	$	73,797,085	$	59,082,115
Money market funds		383		391		367


	$	14,216,874	$	73,797,476	$	59,082,482

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

9.	HELD-TO-MATURITY FINANCIAL ASSETS


	June 30, 2015		December 31, 2014		June 30, 2014
Commercial paper	$	7,180,351	$	4,485,593	$	299,230

10.

HEDGING DERIVATIVE FINANCIAL INSTRUMENTS


	June 30, 2015		December 31, 2014		June 30, 2014
Financial liabilities- current

Fair value hedges
Stock forward contracts	$	2,625,763	$	16,364,241	$	4,282,501


Financial liabilities- noncurrent

Fair value hedges
Stock forward contracts	$	—	$	—	$	1,277,058

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

The outstanding stock forward contracts consisted of the following:


	June 30, 2015			December 31, 2014			June 30, 2014
Contract amount (US$ in thousands)	$	10,575,328		$	56,172,570		$	52,874,969
	(US$	340,371	)	(US$	1,771,000	)	(US$	1,771,000	)

- 19 -

11.

NOTES AND ACCOUNTS RECEIVABLE, NET


	June 30, 2015			December 31, 2014			June 30, 2014
Notes and accounts receivable	$	99,479,058		$	115,221,473		$	86,911,018
Allowance for doubtful receivables		(486,704	)		(486,730	)		(486,590	)


Notes and accounts receivable, net	$	98,992,354		$	114,734,743		$	86,424,428

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

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

Aging analysis of notes and accounts receivable, net


	June 30, 2015		December 31, 2014		June 30, 2014
Neither past due nor impaired	$	84,924,664	$	102,692,871	$	78,140,966
Past due but not impaired
Past due within 30 days		12,393,941		12,041,872		8,283,462
Past due 31-60 days		1,466,102		—		—
Past due 61-120 days		207,647		—		—


	$	98,992,354	$	114,734,743	$	86,424,428

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		10,861		597			11,458
Reversal		—		(11,383	)		(11,383	)
Effect of exchange rate changes		—		(101	)		(101	)


Balance at June 30, 2015	$	18,954	$	467,750		$	486,704


Balance at January 1, 2014	$	8,058	$	478,530		$	486,588
Provision		17,220		4,495			21,715
Reversal		—		(21,715	)		(21,715	)
Effect of exchange rate changes		—		2			2


Balance at June 30, 2014	$	25,278	$	461,312		$	486,590

- 20 -

Aging analysis of accounts receivable that is individually determined as impaired


	June 30, 2015		December 31, 2014		June 30, 2014
Not past due	$	4,984	$	—	$	—
Past due 1-30 days		4,387		—		17,326
Past due 31-60 days		1,656		—		334
Past due over 121 days		7,927		8,093		7,618


	$	18,954	$	8,093	$	25,278

12.

INVENTORIES


	June 30, 2015		December 31, 2014		June 30, 2014
Finished goods	$	14,418,570	$	9,972,024	$	5,379,673
Work in process		45,538,445		51,027,892		40,510,250
Raw materials		4,146,095		3,222,523		3,152,079
Supplies and spare parts		2,175,487		2,115,532		1,912,263


	$	66,278,597	$	66,337,971	$	50,954,265

Write-down of inventories to net realizable value or reversal of the reserve for inventory write-downs resulting from the increase in net realizable value was included in the cost of revenue, which were as follows:


	Three Months Ended June 30					Six Months Ended June 30
	2015			2014		2015		2014
Inventory losses	$	(401,637	)	$	933,574	$	1,367,721	$	1,523,608

13.

FINANCIAL ASSETS CARRIED AT COST


	June 30, 2015		December 31, 2014		June 30, 2014
Non-publicly traded stocks	$	1,580,737	$	1,606,659	$	1,736,734
Mutual funds		277,639		193,883		280,794


	$	1,858,376	$	1,800,542	$	2,017,528

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.

- 21 -

14.

INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD

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


	June 30, 2015		December 31, 2014		June 30, 2014
Associates	$	22,446,195	$	24,968,071	$	22,790,705
Joint venture		3,469,013		3,287,666		3,570,515


	$	25,915,208	$	28,255,737	$	26,361,220

Investments in associates

Associates consisted of the following:


		Place of Incorporation and Operation	Carrying Amount						% of Ownership and Voting Rights Held by the Company
Name of Associate	Principal Activities	Place of Incorporation and Operation	June 30, 2015		December 31, 2014		June 30, 2014		June 30, 2015			December 31, 2014			June 30, 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	$	8,196,482	$	10,105,485	$	9,210,729		28	%		33	%		33	%
Systems on Silicon Manufacturing Company Pte Ltd. (SSMC)	Fabrication and supply of integrated circuits	Singapore		7,831,408		8,296,955		6,940,820		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		3,154,231		3,408,945		3,741,837		18	%		20	%		20	%
Xintec Inc. (Xintec)	Wafer level chip size packaging service	Taoyuan, Taiwan		2,250,809		2,053,982		1,875,214		35	%		40	%		40	%
Global Unichip Corporation (GUC)	Researching, developing, manufacturing, testing and marketing of integrated circuits	Hsinchu, Taiwan		1,013,265		1,102,704		1,022,105		35	%		35	%		35	%


			$	22,446,195	$	24,968,071	$	22,790,705

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 both of the second quarters of 2015 and 2014, the Company sold 82,000 thousand common shares of VIS and respectively recognized a disposal gain of NT$2,263,539 thousand and NT$2,028,643 thousand. After the sale, the Company owned approximately 28.3% and 33.7% of the equity interest in VIS.

In June 2015, Motech merged with Tpcell Solar International Co., Ltd (TSi) with exchange of shares. As a result, the Company’s percentage of ownership over Motech decreased to 18.0%. Motech continues to be accounted for using equity method as the Company still retains significant influence over Motech.

- 22 -

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.


Name of Associate	June 30, 2015		December 31, 2014		June 30, 2014
VIS	$	22,932,641	$	28,567,489	$	26,191,416

Motech	$	3,201,760	$	4,242,769	$	4,172,786

GUC	$	3,571,621	$	4,327,965	$	4,341,971

Xintec	$	4,082,245

Investments in joint venture

Joint venture consisted of the following:


		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	June 30, 2015		December 31, 2014		June 30, 2014		June 30, 2015			December 31, 2014			June 30, 2014
VisEra Holding Company (VisEra Holding)	Investing in companies involved in the design, manufacturing and other related businesses in the semiconductor industry	Cayman Islands	$	3,469,013		$ 3,287,666	$	3,570,515		49	%		49	%		49	%

In August 2015, the Board of Directors of TSMC approved the acquisition of OmniVision Technologies, Inc.’s (“OVT’s”) 49.1% ownership in VisEra Holding and 100% ownership in Taiwan OmniVision Investment Holding Co. Inc., at an amount not more than US$126 million. The acquisition of shares is conditional on related governments (including the Unites States) approving a Chinese consortium’s acquisition of OVT.

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		—			4,968,013			77,365,235			1,628,622			—			36,568,389			120,530,259
Disposals or retirements		—			—			(949,684	)		(709,966	)		—			—			(1,659,650	)
Effect of exchange rate changes		(16,849	)		(460,203	)		(1,096,526	)		(58,461	)		(16,785	)		(69,523	)		(1,718,347	)


Balance at June 30, 2015	$	4,019,936		$	273,671,660		$	1,829,489,252		$	28,821,030		$	824,369		$	145,833,602		$	2,282,659,849


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		14,224			7,833,137			98,831,428			1,844,552			21,455			—			108,544,796
Disposals or retirements		—			—			(912,589	)		(666,231	)		—			—			(1,578,820	)
Impairment		—			—			31,305			—			—			—			31,305
Effect of exchange rate changes		(9,433	)		(325,663	)		(957,574	)		(47,778	)		(8,946	)		—			(1,349,394	)


Balance at June 30, 2015	$	463,931		$	148,753,387		$	1,285,380,972		$	17,898,477		$	459,906		$	—		$	1,452,956,673


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 June 30, 2015	$	3,556,005		$	124,918,273		$	544,108,280		$	10,922,553		$	364,463		$	145,833,602		$	829,703,176


Cost

Balance at January 1, 2014	$	3,986,909		$	229,182,736		$	1,413,919,794		$	22,062,032		$	804,430		$	272,173,793		$	1,942,129,694
Additions		—			21,992,818			243,696,287			4,269,496			—			(138,669,929	)		131,288,672
Disposals or retirements		—			—			(739,238	)		(426,337	)		—			—			(1,165,575	)
Reclassification		—			(1,996	)		1,996			—			—			—			—
Effect of exchange rate changes		1,457			(224,902	)		(395,235	)		(8,766	)		(12,782	)		(2,013	)		(642,241	)


Balance at June 30, 2014	$	3,988,366		$	250,948,656		$	1,656,483,604		$	25,896,425		$	791,648		$	133,501,851		$	2,071,610,550


Accumulated depreciation and impairment

Balance at January 1, 2014	$	404,192		$	125,234,166		$	1,009,213,689		$	14,225,771		$	385,963		$	—		$	1,149,463,781
Additions		13,767			7,328,768			77,587,232			1,387,716			20,960			—			86,338,443
Disposals or retirements		—			—			(680,321	)		(426,259	)		—			—			(1,106,580	)
Impairment		—			—			239,864			—			—			—			239,864
Reclassification		—			(532	)		532			—			—			—			—
Effect of exchange rate changes		610			(135,642	)		(343,389	)		(7,518	)		(6,445	)		—			(492,384	)


Balance at June 30, 2014	$	418,569		$	132,426,760		$	1,086,017,607		$	15,179,710		$	400,478		$	—		$	1,234,443,124


Carrying amounts at June 30, 2014	$	3,569,797		$	118,521,896		$	570,465,997		$	10,716,715		$	391,170		$	133,501,851		$	837,167,426

- 23 -

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

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

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		—			540,027			202,818			311,139			1,053,984
Retirements		—			—			(91,578	)		—			(91,578	)
Effect of exchange rate changes		(88,279	)		(5,354	)		(3,165	)		(2,802	)		(99,600	)


Balance at June 30, 2015	$	5,800,534		$	6,884,926		$	18,805,173		$	4,600,892		$	36,091,525


Accumulated amortization

Balance at January 1, 2015	$	—		$	3,778,912		$	14,861,146		$	3,057,151		$	21,697,209
Additions		—			445,742			830,478			280,087			1,556,307
Retirements		—			—			(91,578	)		—			(91,578	)
Effect of exchange rate changes		—			(5,354	)		(2,978	)		(588	)		(8,920	)


Balance at June 30, 2015	$	—		$	4,219,300		$	15,597,068		$	3,336,650		$	23,153,018


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

Carrying amounts at June 30, 2015	$	5,800,534		$	2,665,626		$	3,208,105		$	1,264,242		$	12,938,507


Cost

Balance at January 1, 2014	$	5,627,517		$	4,444,828		$	17,086,805		$	3,729,396		$	30,888,546
Additions		—			501,134			74,638			624,465			1,200,237
Retirements		—			—			(23,315	)		—			(23,315	)
Effect of exchange rate changes		7,629			—			(2,070	)		(2,153	)		3,406


Balance at June 30, 2014	$	5,635,146		$	4,945,962		$	17,136,058		$	4,351,708		$	32,068,874


Accumulated amortization

Balance at January 1, 2014	$	—		$	3,341,667		$	13,439,135		$	2,617,361		$	19,398,163
Additions		—			207,843			731,718			323,487			1,263,048
Retirements		—			—			(23,315	)		—			(23,315	)
Effect of exchange rate changes		—			—			(1,922	)		(407	)		(2,329	)


Balance at June 30, 2014	$	—		$	3,549,510		$	14,145,616		$	2,940,441		$	20,635,567


Carrying amounts at June 30, 2014	$	5,635,146		$	1,396,452		$	2,990,442		$	1,411,267		$	11,433,307

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.

- 24 -

17.

OTHER ASSETS


	June 30, 2015		December 31, 2014		June 30, 2014
Tax receivable	$	1,795,457	$	2,187,136	$	1,835,877
Prepaid expenses		1,171,189		1,399,810		1,120,915
Long-term receivable		347,000		385,700		652,000
Others		1,033,025		885,470		707,729


	$	4,346,671	$	4,858,116	$	4,316,521


Current portion	$	3,028,691	$	3,656,110	$	2,931,372
Noncurrent portion		1,317,980		1,202,006		1,385,149


	$	4,346,671	$	4,858,116	$	4,316,521

18.

SHORT-TERM LOANS


	June 30, 2015		December 31, 2014		June 30, 2014
Unsecured loans
Amount	$	5,592,600	$	36,158,520	$	34,705,206


Original loan content
US$ (in thousands)	$	180,000	$	1,140,000	$	1,101,000
EUR (in thousands)		—		—		45,000
Annual interest rate		0.38%-0.44%		0.38%-0.50%		0.38%-0.51%
Maturity date		Due in July 2015		Due in January 2015		Due by August 2014

19.

PROVISIONS


	June 30, 2015		December 31, 2014		June 30, 2014
Sales returns and allowances	$	8,593,075	$	10,445,452	$	7,709,195
Warranties		16,756		19,828		14,741


	$	8,609,831	$	10,465,280	$	7,723,936


Current portion	$	8,593,075	$	10,445,452	$	7,709,195
Noncurrent portion (classified under other noncurrent liabilities)		16,756		19,828		14,741


	$	8,609,831	$	10,465,280	$	7,723,936

- 25 -


	Sales Returns and Allowances			Warranties			Total
Six months ended June 30, 2015

Balance, beginning of period	$	10,445,452		$	19,828		$	10,465,280
Provision		6,353,637			6,071			6,359,708
Payment		(8,196,055	)		(8,399	)		(8,204,454	)
Effect of exchange rate changes		(9,959	)		(744	)		(10,703	)


Balance, end of period	$	8,593,075		$	16,756		$	8,609,831


Six months ended June 30, 2014

Balance, beginning of period	$	7,603,781		$	10,452		$	7,614,233
Provision		3,504,209			5,549			3,509,758
Payment		(3,395,000	)		(1,194	)		(3,396,194	)
Effect of exchange rate changes		(3,795	)		(66	)		(3,861	)


Balance, end of period	$	7,709,195		$	14,741		$	7,723,936

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

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

20.

BONDS PAYABLE


	June 30, 2015			December 31, 2014			June 30, 2014
Domestic unsecured bonds	$	166,200,000		$	166,200,000		$	166,200,000
Overseas unsecured bonds		46,605,000			47,577,000			44,784,000

		212,805,000			213,777,000			210,984,000
Less: Discounts on bonds payable		(82,394	)		(103,182	)		(114,941	)
Less: Current portion		(10,865,822	)		—			—


	$	201,856,784		$	213,673,818		$	210,869,059

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

- 26 -

21.

GUARANTEE DEPOSITS


	June 30, 2015		December 31, 2014		June 30, 2014
Capacity guarantee	$	28,351,375	$	30,132,100	$	—
Others		167,587		164,075		157,011


	$	28,518,962	$	30,296,175	$	157,011


Current portion (classified under accrued expenses and other current liabilities)	$	6,602,375	$	4,757,700	$	—
Noncurrent portion		21,916,587		25,538,475		157,011


	$	28,518,962	$	30,296,175	$	157,011

Some of guarantee deposits were refunded to customers by offsetting related accounts receivable during the three months ended June 30, 2015.

22.

EQUITY

Capital stock


	June 30, 2015		December 31, 2014		June 30, 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)		25,930,380		25,929,662		25,929,375

Issued capital	$	259,303,805	$	259,296,624	$	259,293,750

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 June 30, 2015, 1,073,071 thousand ADSs of TSMC were traded on the NYSE. The number of common shares represented by the ADSs was 5,365,357 thousand shares (one ADS represents five common shares).

Capital surplus


	June 30, 2015		December 31, 2014		June 30, 2014
Additional paid-in capital	$	24,184,939	$	24,053,965	$	24,043,271
From merger		22,804,510		22,804,510		22,804,510
From convertible bonds		8,892,847		8,892,847		8,892,847
From share of changes in equities of subsidiaries		78,464		104,335		81,093
From share of changes in equities of associates and joint venture		572,144		134,210		205,061
Donations		55		55		55


	$	56,532,959	$	55,989,922	$	56,026,837

- 27 -

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;

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.

In accordance with the amendments to the Company Act in May 2015, the recipients of dividends and bonuses are limited to shareholders and do not include employees. Accordingly, the Company expects to make amendments to the Company’s Articles of Incorporation to be approved during the 2016 annual shareholders’ meeting. For information about the accrual basis of employee remuneration or profit sharing to employees and bonus to directors for the three months ended June 30, 2015 and 2014, and the six months ended June 30, 2015 and 2014, and the actual appropriations for the years ended December 31, 2014 and 2013, please refer to Employee benefits expense in Note 29.

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.

- 28 -

The appropriations of 2014 and 2013 earnings have been approved by TSMC’s shareholders in its meeting held on June 9, 2015 and 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

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:


	Six months Ended June 30, 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		(4,654,336	)		—			—			(4,654,336	)
Changes in fair value of available-for-sale financial assets		—			(174,880	)		—			(174,880	)
Cumulative (gain)/loss reclassified to profit or loss upon disposal of available-for-sale financial assets		(993,026	)		(16,649,252	)		—			(17,642,278	)
Share of other comprehensive income of associates and joint venture		43,487			544,976			(175	)		588,288
The proportionate share of other comprehensive income/losses reclassified to profit or loss upon partial disposal of associates		4,356			2,051			11			6,418
Income tax effect		—			(18,104	)		—			(18,104	)


Balance, end of period	$	(1,097,406	)	$	4,952,274		$	(469	)	$	3,854,399

- 29 -


	Six months Ended June 30, 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		(220,808	)		—			—			(220,808	)
Changes in fair value of available-for-sale financial assets		—			(313,697	)		—			(313,697	)
Cumulative (gain)/loss reclassified to profit or loss upon disposal of available-for-sale financial assets		—			(133,160	)		—			(133,160	)
Share of other comprehensive income of associates and joint venture		(5,872	)		(236	)		90			(6,018	)
The proportionate share of other comprehensive income/losses reclassified to profit or loss upon partial disposal of associates		3,017			(2,920	)		—			97
Income tax effect		—			(11,123	)		—			(11,123	)


Balance, end of period	$	(7,364,025	)	$	20,849,645		$	(23	)	$	13,485,597

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.

- 30 -

Noncontrolling interests


	Six months Ended June 30
	2015			2014
Balance, beginning of period	$	127,221		$	266,709
Share of noncontrolling interests
Net loss		(10,613	)		(67,387	)
Exchange differences arising on translation of foreign operations		(564	)		47
Changes in fair value of available-for-sale financial assets		(8,523	)		1,116
Cumulative (gain)/loss reclassified to profit or loss upon disposal of available-for-sale financial assets		(89	)		(860	)
Share of other comprehensive income of associates and joint venture		(899	)		(100	)
The proportionate share of other comprehensive income/losses reclassified to profit or loss upon partial disposal of associates		3			—
Adjustments to share of changes in equities of associates and joint venture		126			(66	)
From share of changes in equities of subsidiaries		25,871			19,734
Decrease in noncontrolling interests		(42,719	)		(45,527	)
Effect of disposal of subsidiary		(42,640	)		—


Balance, end of period	$	47,174		$	173,666

23.

SHARE-BASED PAYMENT

The Company did not issue employee stock option plans for six months ended June 30, 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$)
Six months ended June 30, 2015

Balance, beginning of period		718		$	47.2
Options exercised		(718	)		47.2


Balance, end of period		—			—

Balance exercisable, end of period		—			—


Six months ended June 30, 2014

Balance, beginning of period		1,763		$	45.9
Options exercised		(758	)		44.2


Balance, end of period		1,005			47.2

Balance exercisable, end of period		1,005			47.2

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.

- 31 -

The employee stock options have been fully exercised in the second quarter of 2015.

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


December 31, 2014				June 30, 2014
Range of Exercise Price (NT$)		Weighted-average Remaining Contractual Life (Years)		Range of Exercise Price (NT$)		Weighted-average Remaining Contractual Life (Years)

$	47.2		0.4	$	47.2		0.9

24.

NET REVENUE

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


	Three Months Ended June 30				Six Months Ended June 30
	2015		2014		2015		2014
Net revenue from sale of goods	$	205,306,861	$	182,882,159	$	427,206,385	$	330,879,781
Net revenue from royalties		132,891		138,325		267,511		355,875


	$	205,439,752	$	183,020,484	$	427,473,896	$	331,235,656

25.

FINANCE COSTS

Three Months Ended June 30

Six Months Ended June 30

2015

2014

2015

2014

Interest expense