Edgar Filing: TAIWAN SEMICONDUCTOR MANUFACTURING CO LTD

Taiwan Semiconductor Manufacturing Company Ltd.

Date: November 13, 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 November 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 Nine months Ended September 30, 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 September 30, 2015 and 2014 and the related consolidated statements of comprehensive income for the three months ended September 30, 2015 and 2014 and for the nine months ended September 30, 2015 and 2014, as well as the consolidated statements of changes in equity and cash flows for the nine months ended September 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.

November 10, 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)


	September 30, 2015 (Reviewed)				December 31, 2014 (Adjusted and Audited)				September 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)	$	515,731,398		33	$	358,449,029		24	$	225,884,318		17	$	242,695,447		19
Financial assets at fair value through profit or loss (Note 7)		98,835		—		192,045		—		69,164		—		90,353		—
Available-for-sale financial assets (Note 8)		1,597,602		—		73,797,476		5		64,391,337		5		760,793		—
Held-to-maturity financial assets (Note 9)		7,362,003		1		4,485,593		—		—		—		1,795,949		—
Hedging derivative financial assets (Note 10)		96,153		—		—		—		—		—		—		—
Notes and accounts receivable, net (Note 11)		96,611,632		6		114,734,743		8		113,999,433		8		71,649,926		6
Receivables from related parties (Note 32)		511,008		—		312,955		—		532,767		—		291,708		—
Other receivables from related parties (Note 32)		128,490		—		178,625		—		161,962		—		221,576		—
Inventories (Note 12)		65,066,214		4		66,337,971		5		65,336,989		5		37,494,893		3
Noncurrent assets held for sale (Note 30)		—		—		944,208		—		—		—		—		—
Other financial assets (Note 33)		3,613,680		—		3,476,884		—		2,989,824		—		501,785		—
Other current assets (Note 17)		2,844,481		—		3,656,110		—		2,864,405		—		2,984,224		—


Total current assets		693,661,496		44		626,565,639		42		476,230,199		35		358,486,654		28


NONCURRENT ASSETS
Available-for-sale financial assets (Note 8)		—		—		—		—		—		—		58,721,959		5
Held-to-maturity financial assets (Note 9)		2,571,357		—		—		—		—		—		—		—
Financial assets carried at cost (Notes 13 and 31)		1,507,749		—		1,800,542		—		1,866,008		—		2,145,591		—
Investments accounted for using equity method (Note 14)		26,935,985		2		28,255,737		2		26,985,165		2		28,321,241		2
Property, plant and equipment (Note 15)		830,825,109		53		818,198,801		55		824,309,879		61		792,665,913		63
Intangible assets (Note 16)		13,196,292		1		13,531,510		1		11,942,249		1		11,490,383		1
Deferred income tax assets (Note 4)		5,743,803		—		5,138,782		—		4,940,633		1		7,145,004		1
Refundable deposits (Note 32)		400,263		—		356,069		—		2,359,756		—		2,519,031		—
Other noncurrent assets (Note 17)		1,376,756		—		1,202,006		—		1,273,661		—		1,469,577		—


Total noncurrent assets		882,557,314		56		868,483,447		58		873,677,351		65		904,478,699		72


TOTAL	$	1,576,218,810		100	$	1,495,049,086		100	$	1,349,907,550		100	$	1,262,965,353		100


LIABILITIES AND EQUITY

CURRENT LIABILITIES
Short-term loans (Note 18)	$	33,564,120		2	$	36,158,520		2	$	35,883,358		3	$	15,645,000		1
Financial liabilities at fair value through profit or loss (Note 7)		179,363		—		486,214		—		691,062		—		33,750		—
Hedging derivative financial liabilities (Note 10)		—		—		16,364,241		1		9,769,897		1		—		—
Accounts payable		18,057,750		1		21,878,934		2		20,418,733		1		14,670,260		1
Payables to related parties (Note 32)		1,128,121		—		1,491,490		—		1,290,677		—		1,688,456		—
Salary and bonus payable		10,428,126		1		10,573,922		1		9,505,689		1		8,330,956		1
Accrued compensation/profit sharing to employees and bonus to directors and supervisors (Notes 22 and 29)		16,105,423		1		18,052,820		1		12,959,725		1		12,738,801		1
Payables to contractors and equipment suppliers		34,338,079		2		26,980,408		2		28,683,936		2		89,810,160		7
Income tax payable (Note 4)		24,464,158		2		28,616,574		2		19,412,953		1		22,563,286		2
Provisions (Note 19)		9,898,270		1		10,445,452		1		7,677,524		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)		23,515,931		1		—		—		—		—		—		—
Accrued expenses and other current liabilities (Note 21)		30,010,029		2		29,746,011		2		25,954,613		2		16,693,484		1


Total current liabilities		201,689,370		13		201,013,629		14		172,248,167		13		189,777,934		15


NONCURRENT LIABILITIES
Hedging derivative financial liabilities (Note 10)		—		—		—		—		5,821		—		5,481,616		—
Bonds payable (Note 20)		191,970,754		12		213,673,818		14		211,796,805		15		210,767,625		17
Long-term bank loans		35,000		—		40,000		—		40,000		—		40,000		—
Deferred income tax liabilities (Note 4)		153,932		—		199,750		—		—		—		—		—
Obligations under finance leases (Note 15)		—		—		802,108		—		773,743		—		776,230		—
Net defined benefit liability (Note 4)		6,611,531		—		6,567,782		—		6,838,838		1		6,801,663		1
Guarantee deposits (Note 21)		23,208,034		2		25,538,475		2		160,419		—		151,660		—
Others (Note 19)		1,555,245		—		885,192		—		798,772		—		694,901		—


Total noncurrent liabilities		223,534,496		14		247,707,125		16		220,414,398		16		224,713,695		18


Total liabilities		425,223,866		27		448,720,754		30		392,662,565		29		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)		56,298,728		4		55,989,922		4		55,944,799		4		55,858,626		4

Retained earnings (Note 22)
Appropriated as legal capital reserve		177,640,561		11		151,250,682		10		151,250,682		12		132,436,003		11
Appropriated as special capital reserve		—		—		—		—		—		—		2,785,741		—
Unappropriated earnings		644,577,881		41		553,914,592		37		473,751,730		35		383,670,168		30

		822,218,442		52		705,165,274		47		625,002,412		47		518,891,912		41

Others (Note 22)		13,138,191		1		25,749,291		2		16,865,491		1		14,170,306		1


Equity attributable to shareholders of the parent		1,150,959,166		73		1,046,201,111		70		957,106,452		71		848,207,015		67

NONCONTROLLING INTERESTS (Note 22)		35,778		—		127,221		—		138,533		—		266,709		—


Total equity		1,150,994,944		73		1,046,328,332		70		957,244,985		71		848,473,724		67


TOTAL	$	1,576,218,810		100	$	1,495,049,086		100	$	1,349,907,550		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)


	For the Three Months Ended September 30											For the Nine Months Ended September 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)	$	212,504,909			100		$	209,049,734			100	$	639,978,805			100		$	540,285,390			100

COST OF REVENUE (Notes 12, 29 and 32)		110,188,424			52			103,471,256			49		328,509,564			51			273,136,725			51


GROSS PROFIT BEFORE REALIZED (UNREALIZED) GROSS PROFIT ON SALES TO ASSOCIATES		102,316,485			48			105,578,478			51		311,469,241			49			267,148,665			49

REALIZED (UNREALIZED) GROSS PROFIT ON SALES TO ASSOCIATES		19,271			—			(3,206	)		—		735			—			13,442			—


GROSS PROFIT		102,335,756			48			105,575,272			51		311,469,976			49			267,162,107			49


OPERATING EXPENSES (Notes 29 and 32)
Research and development		16,486,365			8			15,207,282			8		49,880,041			8			40,885,511			7
General and administrative		4,296,668			2			4,612,193			2		13,126,301			2			14,676,344			3
Marketing		1,377,131			1			1,323,259			1		4,247,546			1			3,710,936			1


Total operating expenses		22,160,164			11			21,142,734			11		67,253,888			11			59,272,791			11


OTHER OPERATING INCOME AND EXPENSES, NET (Notes 15,16 and 29)		(1,786,668	)		—			(5,300	)		—		(2,131,983	)		—			(235,292	)		—


INCOME FROM OPERATIONS (Note 37)		78,388,924			37			84,427,238			40		242,084,105			38			207,654,024			38


NON-OPERATING INCOME AND EXPENSES
Share of profits of associates and joint venture		925,854			—			1,036,725			—		2,876,252			—			3,040,159			1
Other income		1,066,001			—			688,325			—		3,492,533			1			2,618,607			—
Foreign exchange gain, net (Note 36)		2,571,011			1			1,150,993			1		2,326,899			—			759,385			—
Finance costs (Note 25)		(792,941	)		—			(816,054	)		—		(2,370,284	)		—			(2,414,084	)		—
Other gains and losses (Note 26)		1,235,770			1			(1,110,583	)		—		21,375,777			3			1,109,450			—


Total non-operating income and expenses		5,005,695			2			949,406			1		27,701,177			4			5,113,517			1


INCOME BEFORE INCOME TAX		83,394,619			39			85,376,644			41		269,785,282			42			212,767,541			39

INCOME TAX EXPENSE (Notes 4 and 27)		8,077,319			4			9,076,017			4		36,071,170			5			28,969,205			5


NET INCOME		75,317,300			35			76,300,627			37		233,714,112			37			183,798,336			34


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		13,245,566			6			3,410,878			1		7,597,640			1			3,190,117			1
Changes in fair value of available-for-sale financial assets		(3,622,659	)		(1	)		8,120			—		(20,455,403	)		(3	)		(438,481	)		—
Share of other comprehensive income (loss) of associates and joint venture		(354,145	)		—			(36,019	)		—		239,665			—			(42,040	)		—
Income tax benefit (expense) related to components of other comprehensive income that may be reclassified subsequently		15,553			—			(2,622	)		—		(2,551	)		—			(13,745	)		—


Other comprehensive income (loss) for the period, net of income tax		9,284,315			5			3,380,357			1		(12,620,649	)		(2	)		2,695,851			1


TOTAL COMPREHENSIVE INCOME FOR THE PERIOD	$	84,601,615			40		$	79,680,984			38	$	221,093,463			35		$	186,494,187			35


NET INCOME (LOSS) ATTRIBUTABLE TO:
Shareholders of the parent	$	75,329,224			35		$	76,331,255			37	$	233,736,649			37		$	183,896,351			34
Noncontrolling interests		(11,924	)		—			(30,628	)		—		(22,537	)		—			(98,015	)		—


	$	75,317,300			35		$	76,300,627			37	$	233,714,112			37		$	183,798,336			34


TOTAL COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO:
Shareholders of the parent	$	84,613,016			40		$	79,711,149			38	$	221,125,549			35		$	186,591,536			35
Noncontrolling interests		(11,401	)		—			(30,165	)		—		(32,086	)		—			(97,349	)		—


	$	84,601,615			40		$	79,680,984			38	$	221,093,463			35		$	186,494,187			35


	For the Three Months Ended September 30											For the Nine Months Ended September 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	$				2.91		$				2.94	$				9.01		$				7.09

Diluted earnings per share	$				2.91		$				2.94	$				9.01		$				7.09

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

- 3 -

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

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

(Reviewed, Not Audited)


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


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 nine months ended September 30, 2015		—		—		—			—		—			233,736,649			233,736,649			—			—			—			—			233,736,649			(22,537	)		233,714,112

Other comprehensive income for the nine months ended September 30, 2015, net of income tax		—		—		—			—		—			—			—			7,507,537			(20,118,301	)		(336	)		(12,611,100	)		(12,611,100	)		(9,549	)		(12,620,649	)


Total comprehensive income for the nine months ended September 30, 2015		—		—		—			—		—			233,736,649			233,736,649			7,507,537			(20,118,301	)		(336	)		(12,611,100	)		221,125,549			(32,086	)		221,093,463


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		—		—		230,222			—		—			—			—			—			—			—			—			230,222			149			230,371

From share of changes in equities of subsidiaries		—		—		(25,853	)		—		—			—			—			—			—			—			—			(25,853	)		25,853			—

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

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


BALANCE, September 30, 2015		25,930,380	$	259,303,805	$	56,298,728		$	177,640,561	$	—		$	644,577,881		$	822,218,442		$	12,009,650		$	1,129,182		$	(641	)	$	13,138,191		$	1,150,959,166		$	35,778		$	1,150,994,944


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 nine months ended September 30, 2014		—		—		—			—		—			183,896,351			183,896,351			—			—			—			—			183,896,351			(98,015	)		183,798,336

Other comprehensive income for the nine months ended September 30, 2014, net of income tax		—		—		—			—		—			—			—			3,150,962			(455,751	)		(26	)		2,695,185			2,695,185			666			2,695,851


Total comprehensive income for the nine months ended September 30, 2014		—		—		—			—		—			183,896,351			183,896,351			3,150,962			(455,751	)		(26	)		2,695,185			186,591,536			(97,349	)		186,494,187


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 equities of associates and joint venture		—		—		90,327			—		—			—			—			—			—			—			—			90,327			(45	)		90,282

From share of changes in equities of subsidiaries		—		—		(27,789	)		—		—			—			—			—			—			—			—			(27,789	)		27,789			—

Decrease in noncontrolling interests		—		—		—			—		—			—			—			—			—			—			—			—			(58,571	)		(58,571	)


BALANCE, September 30, 2014		25,929,375	$	259,293,750	$	55,944,799		$	151,250,682	$	—		$	473,751,730		$	625,002,412		$	(3,989,400	)	$	20,855,030		$	(139	)	$	16,865,491		$	957,106,452		$	138,533		$	957,244,985

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)


	Nine Months Ended September 30
	2015			2014 (Adjusted)

CASH FLOWS FROM OPERATING ACTIVITIES
Income before income tax	$	269,785,282		$	212,767,541
Adjustments for:
Depreciation expense		163,884,425			141,919,819
Amortization expense		2,365,320			1,914,239
Finance costs		2,370,284			2,414,084
Share of profits of associates and joint venture		(2,876,252	)		(3,040,159	)
Interest income		(2,875,858	)		(1,974,366	)
Loss (gain) on disposal of property, plant and equipment and intangible assets, net		49,503			(13,482	)
Impairment loss on property, plant and equipment		2,317,424			239,864
Impairment loss on intangible assets		58,514			—
Impairment loss on financial assets		132,015			176,920
Gain on disposal of available-for-sale financial assets, net		(21,482,011	)		(260,908	)
Gain on disposal of financial assets carried at cost, net		(82,128	)		(65,819	)
Gain on disposal of investments accounted for using equity method		(2,305,323	)		(2,028,643	)
Loss from liquidation of subsidiaries		—			90
Realized gross profit on sales to associates		(735	)		(13,442	)
Loss on foreign exchange, net		2,492,659			1,200,859
Dividend income		(616,675	)		(644,241	)
Income from receipt of equity securities in settlement of trade receivables		—			(1,211	)
Loss from hedging instruments		137,124			4,643,145
Loss (gain) arising from changes in fair value of available-for-sale financial assets in hedge effective portion		298,751			(4,163,555	)
Gain from lease agreement modification		(428,388	)		—
Changes in operating assets and liabilities:
Derivative financial instruments		(213,641	)		678,501
Notes and accounts receivable, net		15,780,788			(42,349,537	)
Receivables from related parties		(198,053	)		(241,059	)
Other receivables from related parties		51,115			4,897
Inventories		1,271,757			(27,842,096	)
Other financial assets		1,049,004			(2,244,906	)
Other current assets		925,665			137,831
Accounts payable		(3,106,992	)		5,726,261
Payables to related parties		(363,369	)		(397,779	)
Salary and bonus payable		(145,796	)		1,174,733
Accrued compensation/profit sharing to employees and bonus to directors and supervisors		(1,947,397	)		220,924
Accrued expenses and other current liabilities		198,533			9,654,733
Provisions		(540,919	)		73,286
Net defined benefit liability		43,749			37,175

(Continued)

- 5 -

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands of New Taiwan Dollars)

(Reviewed, Not Audited)


	Nine Months Ended September 30
	2015			2014 (Adjusted)

Cash generated from operations	$	426,028,375		$	297,703,699
Income taxes paid		(40,821,123	)		(29,848,815	)


Net cash generated by operating activities		385,207,252			267,854,884


CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions of:
Available-for-sale financial assets		(3,628	)		(91,405	)
Financial assets carried at cost		(87,970	)		(3,765	)
Held-to-maturity financial assets		(19,301,111	)		(1,396,723	)
Property, plant and equipment		(172,993,344	)		(236,115,030	)
Intangible assets		(2,657,499	)		(2,268,872	)
Proceeds from disposal or redemption of:
Available-for-sale financial assets		53,990,941			663,433
Held-to-maturity financial assets		13,900,000			3,200,000
Financial assets carried at cost		357,993			68,919
Investments accounted for using equity method		3,962,848			3,471,883
Property, plant and equipment		70,433			163,250
Cash received from other long-term receivables		—			83,840
Costs from entering into hedging transactions		(495,348	)		(520,856	)
Interest received		2,606,926			1,874,722
Other dividends received		616,675			644,241
Dividends received from investments accounted for using equity method		3,407,126			3,223,090
Refundable deposits paid		(267,994	)		(49,868	)
Refundable deposits refunded		227,253			73,851
Net cash inflow from disposal of subsidiary (Note 30)		601,047			—


Net cash used in investing activities		(116,065,652	)		(226,979,290	)


CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in short-term loans		(2,628,330	)		20,610,319
Interest paid		(2,704,853	)		(2,743,513	)
Guarantee deposits received		557,639			13,213
Guarantee deposits refunded		(552,993	)		(4,981	)
Decrease in obligations under finance leases		(29,098	)		(28,426	)
Proceeds from exercise of employee stock options		33,891			33,487
Cash dividends		(116,683,481	)		(77,785,851	)
Decrease in noncontrolling interests		(42,719	)		(58,571	)


Net cash used in financing activities		(122,049,944	)		(59,964,323	)

(Continued)

- 6 -

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands of New Taiwan Dollars)

(Reviewed, Not Audited)


	Nine Months Ended September 30
	2015		2014 (Adjusted)

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS	$	10,109,235	$	2,277,600


NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		157,200,891		(16,811,129	)

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	$	515,731,398	$	225,884,318


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 NINE MONTHS ENDED SEPTEMBER 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 November 10, 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	September 30, 2015

Increase in investments accounted for using equity method	$	471
Increase in deferred income tax assets		2,060


Increase in assets	$	2,531


Increase in net defined benefit liability	$	17,169


Increase in liabilities	$	17,169


Decrease in retained earnings	$	(14,638	)


Decrease in equity	$	(14,638	)

- 9 -


Impact on Total Comprehensive Income	Three Months Ended September 30, 2015			Nine Months Ended September 30, 2015

Increase in cost of revenue	$	(3,658	)	$	(11,021	)
Increase in operating expense		(2,065	)		(6,148	)
Increase in share of profit of associate and joint venture		144			471
Decrease in income tax expense		686			2,060


Decrease in net income and other comprehensive income attributable to shareholders of the parent	$	(4,893	)	$	(14,638	)

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


September 30, 2014
Investments accounted for using the equity method		26,979,558	$	5,607			26,985,165
Deferred income tax assets		5,033,530		(92,897	)		4,940,633


Total effect on assets			$	(87,290	)

Net defined benefit liability		7,612,862	$	(774,024	)		6,838,838


Total effect on liabilities			$	(774,024	)

Retained earnings		624,315,567	$	686,845			625,002,412
Noncontrolling interests		138,644		(111	)		138,533


Total effect on equity			$	686,734

(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 September 30, 2014
Cost of revenue	$	(103,468,164	)	$	(3,092	)	$	(103,471,256	)
Operating expense		(21,141,080	)		(1,654	)		(21,142,734	)
Share of the profit or loss of associates and joint ventures		1,036,527			198			1,036,725
Income tax expense		(9,076,586	)		569			(9,076,017	)


Impact on net income for the period				$	(3,979	)


Impact on net income attributable to:
Shareholders of the parent	$	76,335,237		$	(3,982	)	$	76,331,255
Noncontrolling interests		(30,631	)		3			(30,628	)

	$	76,304,606		$	(3,979	)	$	76,300,627


Impact on total comprehensive income attributable to:
Shareholders of the parent	$	79,715,131		$	(3,982	)	$	79,711,149
Noncontrolling interests		(30,168	)		3			(30,165	)

	$	79,684,963		$	(3,979	)	$	79,680,984

(Continued)

- 11 -


Impact on Total Comprehensive Income	As Originally Stated			Adjustments Arising from Initial Application			Adjusted

Nine months ended September 30, 2014
Cost of revenue	$	(273,127,447	)	$	(9,278	)	$	(273,136,725	)
Operating expense		(59,267,830	)		(4,961	)		(59,272,791	)
Share of the profit or loss of associates and joint ventures		3,039,533			626			3,040,159
Income tax expense		(28,970,913	)		1,708			(28,969,205	)


Impact on net income for the period				$	(11,905	)


Impact on net income attributable to:
Shareholders of the parent	$	183,908,266		$	(11,915	)	$	183,896,351
Noncontrolling interests		(98,025	)		10			(98,015	)


	$	183,810,241		$	(11,905	)	$	183,798,336


Impact on total comprehensive income attributable to:
Shareholders of the parent	$	186,603,451		$	(11,915	)	$	186,591,536
Noncontrolling interests		(97,359	)		10			(97,349	)


	$	186,506,092		$	(11,905	)	$	186,494,187

(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, 2018
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 and Operating Location	Percentage of Ownership
Name of Investor	Name of Investee	Main Businesses and Products	Establishment and Operating Location	September 30, 2015			December 31, 2014			September 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 and Operating Location	Percentage of Ownership
Name of Investor	Name of Investee	Main Businesses and Products	Establishment and Operating Location	September 30, 2015			December 31, 2014			September 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. c)
	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 Solar	TSMC Solar North America, Inc. (TSMC Solar NA)	Selling and marketing of solar related products	Delaware, U.S.A.		100	%		100	%		100	%	a), c)
	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), c), 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 had a controlling interest of 94% in TSMC SSL as of December 31, 2014 and September 30, 2014. TSMC and TSMC GN completed the disposal of TSMC SSL in February 2015. Please refer to Note 30.

Note c:

In August 2015, TSMC Solar ceased its manufacturing operations. In November 2015, the Board of Directors of TSMC approved that TSMC Solar will be incorporated into TSMC.

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. The liquidation procedure was completed in the second quarter of 2015 and TSMC Solar Europe GmbH, the 100% owned subsidiary of TSMC Solar Europe, is held directly by TSMC Solar.

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


	September 30, 2015		December 31, 2014		September 30, 2014

Cash and deposits in banks	$	510,693,940	$	352,761,240	$	222,381,793
Repurchase agreements collateralized by corporate bonds		3,961,517		3,920,562		2,680,979
Repurchase agreements collateralized by government bonds		576,463		158,722		321,802
Repurchase agreements collateralized by short-term commercial paper		499,478		449,180		—
Commercial paper		—		1,159,325		499,744


	$	515,731,398	$	358,449,029	$	225,884,318

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


	September 30, 2015		December 31, 2014		September 30, 2014

Derivative financial assets

Forward exchange contracts	$	73,638	$	73,117	$	31,324
Cross currency swap contracts		25,197		118,928		37,840


	$	98,835	$	192,045	$	69,164


Derivative financial liabilities

Forward exchange contracts	$	179,363	$	126,607	$	77,315
Cross currency swap contracts		—		359,607		613,747


	$	179,363	$	486,214	$	691,062

- 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)

September 30, 2015

Sell EUR/Buy US$	October 2015	EUR3,400/US$3,810
Sell NT$/Buy US$	October 2015	NT$1,828,624/US$56,000
Sell US$/Buy EUR	October 2015	US$25,692/EUR23,000
Sell US$/Buy NT$	October 2015 to November 2015	US$845,000/NT$27,667,518
Sell US$/Buy RMB	October 2015 to November 2015	US$188,000/RMB1,199,447

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

September 30, 2014

Sell EUR/Buy US$	October 2014	EUR3,580/US$4,568
Sell NT$/Buy JPY	October 2014	NT$55,560/JPY200,000
Sell NT$/Buy US$	October 2014	NT$1,613,044/US$53,600
Sell US$/Buy EUR	October 2014	US$20,060/EUR15,800
Sell US$/Buy JPY	October 2014	US$291,612/JPY31,673,300
Sell US$/Buy NT$	October 2014	US$90,000/NT$2,713,420
Sell US$/Buy RMB	October 2014 to November 2014	US$152,000/RMB936,402

Outstanding cross currency swap contracts consisted of the following:


Maturity Date	Contract Amount (In Thousands)	Range of Interest Rates Paid	Range of Interest Rates Received

September 30, 2015

October 2015	NT$3,216,025/US$98,500	—	0.18%

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%	—

September 30, 2014

October 2014	NT$2,947,561/US$98,080	—	0.20%-0.33%
October 2014 to November 2014	US$1,800,000/NT$54,200,290	0.19%-1.91%	—

- 18 -

8.	AVAILABLE-FOR-SALE FINANCIAL ASSETS


	September 30, 2015		December 31, 2014		September 30, 2014

Publicly traded stocks	$	1,597,196	$	73,797,085	$	64,390,960
Money market funds		406		391		377


	$	1,597,602	$	73,797,476	$	64,391,337

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 ended within a year.

9.	HELD-TO-MATURITY FINANCIAL ASSETS


	September 30, 2015		December 31, 2014		September 30, 2014

Corporate bonds/Bank debentures	$	7,539,404	$	—	$	—
Commercial paper		2,393,956		4,485,593		—


	$	9,933,360	$	4,485,593	$	—


Current portion	$	7,362,003	$	4,485,593	$	—
Noncurrent portion		2,571,357		—		—


	$	9,933,360	$	4,485,593	$	—

10.

HEDGING DERIVATIVE FINANCIAL INSTRUMENTS


	September 30, 2015		December 31, 2014		September 30, 2014

Financial assets- current

Fair value hedges
Stock forward contracts	$	96,153	$	—	$	—


Financial liabilities- current

Fair value hedges
Stock forward contracts	$	—	$	16,364,241	$	9,769,897


Financial liabilities- noncurrent


Fair value hedges
Stock forward contracts	$	—	$	—	$	5,821

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:


	September 30, 2015			December 31, 2014			September 30, 2014

Contract amount (US$ in thousands)	$	814,135		$	56,172,570		$	53,962,363
	(US$	24,741	)	(US$	1,771,000	)	(US$	1,771,000	)

11.

NOTES AND ACCOUNTS RECEIVABLE, NET


	September 30, 2015			December 31, 2014			September 30, 2014

Notes and accounts receivable	$	97,115,658		$	115,221,473		$	114,486,051
Allowance for doubtful receivables		(504,026	)		(486,730	)		(486,618	)


Notes and accounts receivable, net	$	96,611,632		$	114,734,743		$	113,999,433

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


	September 30, 2015		December 31, 2014		September 30, 2014

Neither past due nor impaired	$	87,742,721	$	102,692,871	$	103,429,104
Past due but not impaired
Past due within 30 days		8,585,713		12,041,872		10,570,329
Past due 31-60 days		283,198		—		—


	$	96,611,632	$	114,734,743	$	113,999,433

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		28,593		20,670			49,263
Reversal		—		(32,832	)		(32,832	)
Effect of exchange rate changes		775		90			865


Balance at September 30, 2015	$	37,461	$	466,565		$	504,026

(Continued)

- 20 -


	Individually Assessed for Impairment			Collectively Assessed for Impairment			Total

Balance at January 1, 2014	$	8,058		$	478,530		$	486,588
Provision		—			22,071			22,071
Reversal		(284	)		(21,787	)		(22,071	)
Effect of exchange rate changes		—			30			30


Balance at September 30, 2014	$	7,774		$	478,844		$	486,618

(Concluded)

Aging analysis of accounts receivable that is individually determined as impaired


	September 30, 2015		December 31, 2014		September 30, 2014

Not past due	$	1,136	$	—	$	—
Past due 1-30 days		3,327		—		—
Past due 31-60 days		4,207		—		—
Past due 61-120 days		3,264		—		—
Past due over 121 days		25,527		8,093		7,774


	$	37,461	$	8,093	$	7,774

12.

INVENTORIES


	September 30, 2015		December 31, 2014		September 30, 2014

Finished goods	$	10,138,370	$	9,972,024	$	5,043,513
Work in process		49,216,582		51,027,892		55,142,160
Raw materials		3,422,366		3,222,523		3,160,203
Supplies and spare parts		2,288,896		2,115,532		1,991,113


	$	65,066,214	$	66,337,971	$	65,336,989

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


	Three Months Ended September 30				Nine Months Ended September 30
	2015		2014		2015		2014

Inventory losses	$	97,971	$	691,557	$	1,465,692	$	2,215,165

- 21 -

13.

FINANCIAL ASSETS CARRIED AT COST


	September 30, 2015		December 31, 2014		September 30, 2014

Non-publicly traded stocks	$	1,215,789	$	1,606,659	$	1,678,365
Mutual funds		291,960		193,883		187,643


	$	1,507,749	$	1,800,542	$	1,866,008

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:


	September 30, 2015		December 31, 2014		September 30, 2014

Associates	$	23,585,244	$	24,968,071	$	23,805,190
Joint venture		3,350,741		3,287,666		3,179,975


	$	26,935,985	$	28,255,737	$	26,985,165

Investments in associates

Associates consisted of the following:


		Place of	Carrying Amount						% of Ownership and Voting Rights Held by the Company
Name of Associate	Principal Activities	Incorporation and Operation	September 30, 2015		December 31, 2014		September 30, 2014		September 30, 2015			December 31, 2014			September 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	$	8,201,681	$	10,105,485	$	9,642,010		28	%		33	%		33	%
Systems on Silicon Manufacturing Company Pte Ltd. (SSMC)	Fabrication and supply of integrated circuits	Singapore		8,961,566		8,296,955		7,606,755		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		3,102,751		3,408,945		3,571,283		18	%		20	%		20	%
Xintec Inc. (Xintec)	Wafer level chip size packaging service	Taoyuan, Taiwan		2,240,223		2,053,982		1,932,853		35	%		40	%		40	%
Global Unichip Corporation (GUC)	Researching, developing, manufacturing, testing and marketing of integrated circuits	Hsinchu, Taiwan		1,079,023		1,102,704		1,052,289		35	%		35	%		35	%


			$	23,585,244	$	24,968,071	$	23,805,190

- 22 -

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.

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	September 30, 2015		December 31, 2014		September 30, 2014

VIS	$	17,315,536	$	28,567,489	$	24,361,568

Motech	$	3,179,890	$	4,242,769	$	3,525,435

GUC	$	2,712,565	$	4,327,965	$	4,267,270

Xintec	$	3,256,518

Investments in joint venture

Joint venture consisted of the following:


		Place of	Carrying Amount						% of Ownership and Voting Rights Held by the Company
Name of Joint Venture	Principal Activities	Incorporation and Operation	September 30, 2015		December 31, 2014		September 30, 2014		September 30, 2015			December 31, 2014			September 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	$	3,350,741	$	3,287,666	$	3,179,975		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 pending upon the regulatory approval from related governments.

- 23 -

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		—		24,150,678			123,991,559			2,406,587			—			28,365,554			178,914,378
Disposals or retirements		—		(6,180	)		(1,908,608	)		(880,917	)		—			—			(2,795,705	)
Lease agreement modification		—		—			—			—			(820,963	)		—			(820,963	)
Effect of exchange rate changes		30,892		471,030			2,593,902			53,458			(13,076	)		26,861			3,163,067


Balance at September 30, 2015	$	4,067,677	$	293,779,378		$	1,878,847,080		$	29,539,963		$	7,115		$	137,727,151		$	2,343,968,364


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		21,494		11,968,771			149,087,602			2,781,445			25,113			—			163,884,425
Disposals or retirements		—		(5,313	)		(1,832,675	)		(836,801	)		—			—			(2,674,789	)
Lease agreement modification		—		—			—			—			(458,612	)		—			(458,612	)
Impairment		—		278,057			2,028,627			10,740			—			—			2,317,424
Effect of exchange rate changes		18,215		380,506			2,339,517			34,566			(6,783	)		—			2,766,021


Balance at September 30, 2015	$	498,849	$	153,867,934		$	1,340,011,473		$	18,757,884		$	7,115		$	—		$	1,513,143,255


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 September 30, 2015	$	3,568,828	$	139,911,444		$	538,835,607		$	10,782,079		$	—		$	137,727,151		$	830,825,109


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		—		36,959,513			315,209,803			5,289,730			—			(183,863,766	)		173,595,280
Disposals or retirements		—		(1,140	)		(978,661	)		(576,042	)		—			—			(1,555,843	)
Reclassification		—		(1,996	)		1,996			—			—			—			—
Effect of exchange rate changes		17,423		373,621			1,403,525			35,457			12,041			13,347			1,855,414


Balance at September 30, 2014	$	4,004,332	$	266,512,734		$	1,729,556,457		$	26,811,177		$	816,471		$	88,323,374		$	2,116,024,545


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		20,608		11,526,796			128,094,234			2,246,814			31,367			—			141,919,819
Disposals or retirements		—		(418	)		(884,428	)		(575,946	)		—			—			(1,460,792	)
Impairment		—		—			239,864			—			—			—			239,864
Reclassification		—		(532	)		532			—			—			—			—
Effect of exchange rate changes		9,325		261,933			1,239,751			34,697			6,288			—			1,551,994


Balance at September 30, 2014	$	434,125	$	137,021,945		$	1,137,903,642		$	15,931,336		$	423,618		$	—		$	1,291,714,666


Carrying amounts at September 30, 2014	$	3,570,207	$	129,490,789		$	591,652,815		$	10,879,841		$	392,853		$	88,323,374			824,309,879

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 August 2015, TSMC Solar ceased its manufacturing operations. The Company recognized an impairment loss of NT$2,286,016 thousand since the carrying amounts of some of machinery and equipment, office equipment and mechanical and electrical power equipment were expected to be unrecoverable. Such impairment loss was included in other operating income and expenses for the nine months ended September 30, 2015.

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.

The Company had a building lease agreement with leasing terms from December 2003 to November 2018 and such lease was accounted for as a finance lease. In August 2015, the lease was determined to be an operating lease due to a modification on lease conditions; as such, the Company recognized a gain of NT$428,388 thousand from the modification. Such gain was included in other operating income and expenses for the nine months ended September 30, 2015.

- 24 -

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		—		1,068,240			416,977			440,090		1,925,307
Retirements		—		—			(100,272	)		—		(100,272	)
Effect of exchange rate changes		161,845		(6,542	)		2,281			1,753		159,337


Balance at September 30, 2015	$	6,050,658	$	7,411,951		$	19,016,084		$	4,734,398	$	37,213,091


Accumulated amortization

Balance at January 1, 2015	$	—	$	3,778,912		$	14,861,146		$	3,057,151	$	21,697,209
Additions		—		693,671			1,245,215			426,434		2,365,320
Retirements		—		—			(100,272	)		—		(100,272	)
Impairment		—		58,130			384			—		58,514
Effect of exchange rate changes		—		(6,542	)		2,073			497		(3,972	)


Balance at September 30, 2015	$	—	$	4,524,171		$	16,008,546		$	3,484,082	$	24,016,799


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

Carrying amounts at September 30, 2015	$	6,050,658	$	2,887,780		$	3,007,538		$	1,250,316	$	13,196,292


Cost

Balance at January 1, 2014	$	5,627,517	$	4,444,828		$	17,086,805		$	3,729,396	$	30,888,546
Additions		—		875,891			711,811			685,382		2,273,084
Retirements		—		—			(51,405	)		—		(51,405	)
Effect of exchange rate changes		91,276		(1,491	)		2,019			2,003		93,807


Balance at September 30, 2014	$	5,718,793	$	5,319,228		$	17,749,230		$	4,416,781	$	33,204,032


Accumulated amortization

Balance at January 1, 2014	$	—	$	3,341,667		$	13,439,135		$	2,617,361	$	19,398,163
Additions		—		314,529			1,102,788			496,922		1,914,239
Retirements		—		—			(51,405	)		—		(51,405	)
Effect of exchange rate changes		—		(1,491	)		1,879			398		786


Balance at September 30, 2014	$	—	$	3,654,705		$	14,492,397		$	3,114,681	$	21,261,783


Carrying amounts at September 30, 2014	$	5,718,793	$	1,664,523		$	3,256,833		$	1,302,100	$	11,942,249

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.

In August 2015, TSMC Solar ceased its manufacturing operation and the Company recognized an impairment loss of NT$58,514 thousand since the carrying amounts of technology license fees, software and system design costs were expected to be unrecoverable. Such impairment loss was included in other operating income and expenses for the nine months ended September 30, 2015.

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17.

OTHER ASSETS


	September 30, 2015		December 31, 2014		September 30, 2014

Tax receivable	$	1,671,508	$	2,187,136	$	1,787,749
Prepaid expenses		1,079,711		1,399,810		1,070,833
Long-term receivable		369,500		385,700		537,880
Others		1,100,518		885,470		741,604


	$	4,221,237	$	4,858,116	$	4,138,066


Current portion	$	2,844,481	$	3,656,110	$	2,864,405
Noncurrent portion		1,376,756		1,202,006		1,273,661


	$	4,221,237	$	4,858,116	$	4,138,066

18.

SHORT-TERM LOANS


	September 30, 2015		December 31, 2014		September 30, 2014

Unsecured loans Amount	$	33,564,120	$	36,158,520	$	35,883,358


Original loan content
US$ (in thousands)	$	1,020,000	$	1,140,000	$	1,147,400
EUR (in thousands)		—		—		24,000
Annual interest rate		0.38%-0.47%		0.38%-0.50%		0.35%-0.51%
Maturity date		Due in October 2015		Due in January 2015		Due by November 2014

19.

PROVISIONS


	September 30, 2015		December 31, 2014		September 30, 2014

Sales returns and allowances	$	9,898,270	$	10,445,452	$	7,677,524
Warranties		46,805		19,828		16,148


	$	9,945,075	$	10,465,280	$	7,693,672


Current portion	$	9,898,270	$	10,445,452	$	7,677,524
Noncurrent portion (classified under other noncurrent liabilities)		46,805		19,828		16,148


	$	9,945,075	$	10,465,280	$	7,693,672

- 26 -


	Sales Returns and Allowances			Warranties			Total

Nine months ended September 30, 2015

Balance, beginning of period	$	10,445,452		$	19,828		$	10,465,280
Provision		11,957,512			39,353			11,996,865
Payment		(12,526,015	)		(11,769	)		(12,537,784	)
Effect of exchange rate changes		21,321			(607	)		20,714


Balance, end of period	$	9,898,270		$	46,805		$	9,945,075


Nine months ended September 30, 2014

Balance, beginning of period	$	7,603,781		$	10,452		$	7,614,233
Provision		5,747,340			7,416			5,754,756
Payment		(5,680,243	)		(1,227	)		(5,681,470	)
Effect of exchange rate changes		6,646			(493	)		6,153


Balance, end of period	$	7,677,524		$	16,148		$	7,693,672

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


	September 30, 2015			December 31, 2014			September 30, 2014

Domestic unsecured bonds	$	166,200,000		$	166,200,000		$	166,200,000
Overseas unsecured bonds		49,359,000			47,577,000			45,705,000

		215,559,000			213,777,000			211,905,000
Less: Discounts on bonds payable		(77,315	)		(103,182	)		(108,195	)
Less: Current portion		(23,510,931	)		—			—


	$	191,970,754		$	213,673,818		$	211,796,805

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

- 27 -

21.

GUARANTEE DEPOSITS


	September 30, 2015		December 31, 2014		September 30, 2014

Capacity guarantee	$	28,792,750	$	30,132,100	$	—
Others		173,834		164,075		160,419


	$	28,966,584	$	30,296,175	$	160,419


Current portion (classified under accrued expenses and other current liabilities)	$	5,758,550	$	4,757,700	$	—
Noncurrent portion		23,208,034		25,538,475		160,419


	$	28,966,584	$	30,296,175	$	160,419

Starting from the second quarter of 2015, some of guarantee deposits were refunded to customers by offsetting related accounts receivable.

22.

EQUITY

Capital stock


	September 30, 2015		December 31, 2014		September 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 September 30, 2015, 1,072,645 thousand ADSs of TSMC were traded on the NYSE. The number of common shares represented by the ADSs was 5,363,225 thousand shares (one ADS represents five common shares).

Capital surplus


	September 30, 2015		December 31, 2014		September 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		78,482		104,335		73,038
From share of changes in equities of associates and joint venture		337,895		134,210		131,078
Donations		55		55		55


	$	56,298,728	$	55,989,922	$	55,944,799

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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 employees’ compensation or profit sharing to employees and bonus to directors for the three months ended September 30, 2015 and 2014, and the nine months ended September 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.

- 29 -

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:


	Nine Months Ended September 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		8,955,736			—			—			8,955,736
Changes in fair value of available-for-sale financial assets		—			(322,039	)		—			(322,039	)
Cumulative (gain)/loss reclassified to profit or loss upon disposal of available-for-sale financial assets		(1,358,840	)		(20,123,082	)		—			(21,481,922	)
Share of other comprehensive income of associates and joint venture		(93,715	)		327,320			(347	)		233,258
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		—			(2,551	)		—			(2,551	)


Balance, end of period	$	12,009,650		$	1,129,182		$	(641	)	$	13,138,191

- 30 -


	Nine Months Ended September 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		3,189,480			—			—			3,189,480
Other comprehensive income/losses reclassified to profit or loss upon disposal of subsidiaries		84			—			—			84
Changes in fair value of available-for-sale financial assets		—			(178,550	)		—			(178,550	)
Cumulative (gain)/loss reclassified to profit or loss upon disposal of available-for-sale financial assets		—			(260,050	)		—			(260,050	)
Share of other comprehensive income of associates and joint venture		(41,619	)		(486	)		(26	)		(42,131	)
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		—			(13,745	)		—			(13,745	)


Balance, end of period	$	(3,989,400	)	$	20,855,030		$	(139	)	$	16,865,491

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.

- 31 -

e.	Noncontrolling interests


	Nine Months Ended September 30
	2015			2014
Balance, beginning of period	$	127,221		$	266,709
Share of noncontrolling interests
Net loss		(22,537	)		(98,015	)
Exchange differences arising on translation of foreign operations		744			547
Other comprehensive income/losses reclassified to profit or loss upon disposal of subsidiaries		—			6
Changes in fair value of available-for-sale financial assets		(10,193	)		977
Cumulative (gain)/loss reclassified to profit or loss upon disposal of available-for-sale financial assets		(89	)		(858	)
Share of other comprehensive income of associates and joint venture		(14	)		(6	)
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		149			(45	)
From share of changes in equities of subsidiaries		25,853			27,789
Decrease in noncontrolling interests		(42,719	)		(58,571	)
Effect of disposal of subsidiary		(42,640	)		—


Balance, end of period	$	35,778		$	138,533

23.

SHARE-BASED PAYMENT

The Company did not issue employee stock option plans for nine months ended September 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$)
Nine months ended September 30, 2015
Balance, beginning of period		718		$	47.2
Options exercised		(718	)		47.2


Balance, end of period		—			—

Balance exercisable, end of period		—			—


Nine months ended September 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

- 32 -

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.

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

Informatio