Edgar Filing: TAIWAN SEMICONDUCTOR MANUFACTURING CO LTD

Taiwan Semiconductor Manufacturing Company Ltd.

Date: August 16, 2013

/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 2013

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, 2013 and 2012 and

Independent Accountants’ Review Report

INDEPENDENT ACCOUNTANTS’ REVIEW REPORT

The Board of Directors and Shareholders

Taiwan Semiconductor Manufacturing Company Limited

We have reviewed the accompanying consolidated balance sheets of Taiwan Semiconductor Manufacturing Company Limited and subsidiaries as of June 30, 2013, December 31, 2012, June 30, 2012 and January 1, 2012 and the related consolidated statements of comprehensive income for the three months ended June 30, 2013 and 2012 and for the six months ended June 30, 2013 and 2012, as well as the consolidated statements of changes in equity and cash flows for the six months ended June 30, 2013 and 2012. 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, International Financial Reporting Standard 1, “First-time adoption of International Financial Reporting Standards,” and International Accounting Standard 34, “Interim Financial Reporting,” endorsed by the Financial Supervisory Commission of the Republic of China.

August 13, 2013

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)

(Reviewed, Not Audited)


	June 30, 2013				December 31, 2012				June 30, 2012				January 1, 2012
	Amount		%		Amount		%		Amount		%		Amount		%
ASSETS
CURRENT ASSETS
Cash and cash equivalents (Note 6)	$	225,832,646		20	$	143,410,588		15	$	178,440,559		20	$	143,472,277		18
Financial assets at fair value through profit or loss (Note 7)		20,010		—		39,554		—		23,734		—		15,360		—
Available-for-sale financial assets (Note 8)		1,070,537		—		2,410,635		—		2,477,046		—		3,308,770		—
Held-to-maturity financial assets (Note 9)		700,576		—		5,056,973		1		7,424,976		1		3,825,680		1
Notes and accounts receivable, net (Note 11)		79,742,708		7		57,777,586		6		60,610,432		7		45,830,288		6
Receivables from related parties (Note 37)		597,623		—		353,811		—		837,245		—		185,764		—
Other receivables from related parties (Note 37)		2,433,325		—		185,550		—		981,263		—		122,292		—
Inventories (Notes 5 and 12)		38,614,928		3		37,830,498		4		30,780,466		4		24,840,582		3
Other current assets (Note 17)		2,739,259		—		2,786,408		—		2,404,358		—		2,174,014		—
Other financial assets (Note 38)		710,741		—		473,833		—		603,940		—		617,142		—

Total current assets		352,462,353		30		250,325,436		26		284,584,019		32		224,392,169		28

NONCURRENT ASSETS
Available-for-sale financial assets (Note 8)		49,581,219		4		38,751,245		4		—		—		—		—
Held-to-maturity financial assets (Note 9)		—		—		—		—		701,723		—		5,243,167		1
Financial assets carried at cost (Note 13)		3,667,697		1		3,605,077		—		4,084,014		—		4,315,005		1
Investments accounted for using equity method
(Notes 5 and 14)		25,012,840		2		23,360,918		3		23,320,630		3		24,886,931		3
Property, plant and equipment (Notes 5 and 15)		715,595,036		61		617,562,188		64		548,184,474		62		490,422,153		63
Intangible assets (Notes 5 and 16)		11,142,323		1		10,959,569		1		10,860,551		1		10,861,563		1
Deferred income tax assets (Notes 5 and 31)		8,667,948		1		13,128,219		2		13,376,990		2		13,604,218		2
Refundable deposits (Note 37)		2,412,290		—		2,426,712		—		4,296,083		—		4,518,863		1
Other noncurrent assets (Notes 17 and 37)		1,343,748		—		1,235,144		—		1,181,680		—		1,306,746		—

Total noncurrent assets		817,423,101		70		711,029,072		74		606,006,145		68		555,158,646		72

TOTAL	$	1,169,885,454		100	$	961,354,508		100	$	890,590,164		100	$	779,550,815		100


	June 30, 2013				December 31, 2012					June 30, 2012						January 1, 2012
	Amount		%		Amount			%		Amount			%			Amount			%
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Short-term loans (Note 18)	$	31,466,400		3	$	34,714,929			4	$	30,772,585			3		$	25,926,528			3
Financial liabilities at fair value through profit or loss (Note 7)		136,515		—		15,625			—		35,166			—			13,742			—
Hedging derivative financial liabilities (Note 10)		—		—		—			—		69			—			232			—
Accounts payable		14,391,539		1		14,490,429			2		14,126,994			1			10,530,487			1
Payables to related parties (Note 37)		811,195		—		748,613			—		1,309,966			—			1,328,521			—
Salary and bonus payable		7,135,399		1		7,535,296			1		5,518,151			1			6,148,499			1
Accrued profit sharing to employees and bonus to directors and supervisors (Note 24)		17,366,804		1		11,186,591			1		14,152,148			2			9,081,293			1
Payables to contractors and equipment suppliers		60,883,767		5		44,831,798			5		45,039,813			5			35,540,526			5
Cash dividends payable (Note 24)		77,773,307		7		—			—		77,762,637			9			—			—
Income tax payable (Note 31)		11,125,990		1		15,635,594			2		6,787,548			1			10,656,124			1
Provisions (Notes 5 and 19)		6,289,117		1		6,038,003			—		6,508,185			1			5,068,263			1
Accrued expenses and other current liabilities (Notes 15 and 22)		16,251,434		1		13,148,944			1		16,216,838			2			13,218,235			2
Current portion of bonds payable and long-term bank loans (Notes 20 and 21)		—		—		128,125			—		125,000			—			4,562,500			1

Total current liabilities		243,631,467		21		148,473,947			16		218,355,100			25			122,074,950			16

NONCURRENT LIABILITIES
Hedging derivative financial liabilities (Note 10)		1,813,291		—		—			—		—			—			—			—
Bonds payable (Note 20)		169,801,262		14		80,000,000			8		35,000,000			4			18,000,000			3
Long-term bank loans (Note 21)		—		—		1,359,375			—		1,525,000			—			1,587,500			—
Provisions (Note 19)		6,623		—		4,891			—		3,398			—			2,889			—
Other long-term payables (Note 22)		36,000		—		54,000			—		113,770			—			—			—
Obligations under finance leases (Note 15)		760,186		—		748,115			—		749,794			—			870,993			—
Accrued pension cost (Note 23)		6,917,104		1		6,921,234			1		6,226,758			1			6,241,024			1
Guarantee deposits		166,112		—		203,890			—		253,346			—			443,983			—
Others (Note 37)		517,138		—		495,150			—		425,744			—			400,831			—

Total noncurrent liabilities		180,017,716		15		89,786,655			9		44,297,810			5			27,547,220			4

Total liabilities		423,649,183		36		238,260,602			25		262,652,910			30			149,622,170			20

EQUITY ATTRIBUTABLE TO SHAREHOLDERS OF THE PARENT
Capital stock (Note 24)		259,283,058		22		259,244,357			27		259,207,094			29			259,162,226			33

Capital surplus (Note 24)		55,828,587		5		55,675,340			6		55,596,476			6			55,471,662			7

Retained earnings (Note 24)
Appropriated as legal capital reserve		132,436,003		11		115,820,123			12		115,820,123			13			102,399,995			13
Appropriated as special capital reserve		2,785,741		—		7,606,224			1		7,606,224			1			6,433,874			1
Unappropriated earnings		286,801,018		25		284,985,121			29		194,624,285			22			211,630,458			27

		422,022,762		36		408,411,468			42		318,050,632			36			320,464,327			41

Others (Note 24)		8,777,348		1		(2,780,485	)		—		(7,496,233	)		(1	)		(7,606,219	)		(1	)

Equity attributable to shareholders of the parent		745,911,755		64		720,550,680			75		625,357,969			70			627,491,996			80
NONCONTROLLING INTERESTS (Note 24)		324,516		—		2,543,226			—		2,579,285			—			2,436,649			—

Total equity		746,236,271		64		723,093,906			75		627,937,254			70			629,928,645			80

TOTAL	$	1,169,885,454		100	$	961,354,508			100	$	890,590,164			100		$	779,550,815			100

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

- 2 -

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

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

(Reviewed, Not Audited)


	For the Three Months Ended June 30												For the Six Months Ended June 30
	2013						2012						2013					2012
	Amount			%			Amount			%			Amount			%		Amount			%
NET REVENUE (Notes 5, 26, 37 and 42)	$	155,886,320			100		$	128,186,331			100		$	288,641,316			100	$	233,801,162			100
COST OF REVENUE (Notes 12, 33 and 37)		79,467,520			51			65,579,011			51			151,456,246			52		120,789,358			52

GROSS PROFIT BEFORE ASSOCIATES ELIMINATION		76,418,800			49			62,607,320			49			137,185,070			48		113,011,804			48
REALIZED (UNREALIZED) GROSS PROFIT ON SALES TO ASSOCIATES		3,386			—			(213,979	)		—			6,926			—		(139,950	)		—

GROSS PROFIT		76,422,186			49			62,393,341			49			137,191,996			48		112,871,854			48

OPERATING EXPENSES (Notes 5, 33 and 37)
Research and development		11,941,871			8			10,068,390			8			22,592,856			8		19,226,242			8
General and administrative		5,685,570			3			4,364,938			3			10,381,090			4		9,021,942			4
Marketing		1,164,693			1			1,104,741			1			2,194,492			1		2,205,176			1

Total operating expenses		18,792,134			12			15,538,069			12			35,168,438			13		30,453,360			13

OTHER OPERATING INCOME AND EXPENSES, NET (Notes 27 and 33)		(970	)		—			16,816			—			33,533			—		(429,093	)		—

INCOME FROM OPERATIONS (Note 42)		57,629,082			37			46,872,088			37			102,057,091			35		81,989,401			35

NON-OPERATING INCOME AND EXPENSES
Share of profits of associates and joint venture (Note 14)		1,059,504			1			603,871			—			1,713,657			1		626,075			—
Other income (Note 28)		1,009,064			1			510,441			—			1,355,385			1		1,011,677			1
Foreign exchange gain (loss), net		640,998			—			(64,433	)		—			448,084			—		365,310			—
Finance costs (Notes 10 and 29)		(635,340	)		(1	)		(197,348	)		—			(1,129,338	)		—		(415,039	)		—
Other gains and losses (Note 30)		313,371			—			(1,767,688	)		(1	)		1,319,714			—		(1,947,439	)		(1	)

Total non-operating income and expenses		2,387,597			1			(915,157	)		(1	)		3,707,502			2		(359,416	)		—

INCOME BEFORE INCOME TAX		60,016,679			38			45,956,931			36			105,764,593			37		81,629,985			35
INCOME TAX EXPENSE (Note 31)		8,255,176			5			4,157,315			3			14,467,547			5		6,447,433			3

NET INCOME		51,761,503			33			41,799,616			33			91,297,046			32		75,182,552			32

OTHER COMPREHENSIVE INCOME (LOSS) (Notes 10, 14, 24 and 31)
Exchange differences arising on translation of foreign operations		1,172,141			1			1,236,890			1			4,075,894			1		(1,387,883	)		(1	)
Changes in fair value of available-for-sale financial assets		4,669,793			3			1,542,651			1			7,495,485			3		1,822,823			1
Cash flow hedges		—			—			66			—			—			—		163			—
Share of other comprehensive income of associates and joint venture		(191,994	)		—			(22,321	)		—			(56,871	)		—		20,387			—
Income tax benefit (expense) related to components of other comprehensive income		(29	)		—			(308,777	)		—			43,210			—		(308,929	)		—

Other comprehensive income (loss) for the period, net of income tax		5,649,911			4			2,448,509			2			11,557,718			4		146,561			—

TOTAL COMPREHENSIVE INCOME FOR THE PERIOD	$	57,411,414			37		$	44,248,125			35		$	102,854,764			36	$	75,329,113			32

NET INCOME (LOSS) ATTRIBUTABLE TO:
Shareholders of the parent	$	51,807,725			33		$	41,843,339			33		$	91,384,601			32	$	75,334,973			32
Noncontrolling interests		(46,222	)		—			(43,723	)		—			(87,555	)		—		(152,421	)		—

	$	51,761,503			33		$	41,799,616			33		$	91,297,046			32	$	75,182,552			32

TOTAL COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO:
Shareholders of the parent	$	57,487,048			37		$	44,294,525			35		$	102,942,434			36	$	75,444,959			32
Noncontrolling interests		(75,634	)		—			(46,400	)		—			(87,670	)		—		(115,846	)		—

	$	57,411,414			37		$	44,248,125			35		$	102,854,764			36	$	75,329,113			32


	For the Three Months Ended June 30				For the Six Months Ended June 30
	2013		2012		2013		2012
	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 32)
Basic earnings per share	$	2.00	$	1.61	$	3.52	$	2.91

Diluted earnings per share	$	2.00	$	1.61	$	3.52	$	2.91

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
																		Foreign Currency Translation			Unrealized Gain (loss) from Available- for-sale
	Capital Stock - Common Stock						Retained Earnings
	Shares						Legal Capital		Special Capital			Unappropriated												Cash Flow									Noncontrolling			Total
	(In Thousands)		Amount		Capital Surplus		Reserve		Reserve			Earnings			Total			Reserve			Financial Assets			Hedges Reserve			Total			Total			Interests			Equity
BALANCE, JANUARY 1, 2013		25,924,435	$	259,244,357	$	55,675,340	$	115,820,123	$	7,606,224		$	284,985,121		$	408,411,468		$	(10,753,806	)	$	7,973,321		$	—		$	(2,780,485	)	$	720,550,680		$	2,543,226		$	723,093,906
Appropriations of prior year’s earnings
Legal capital reserve		—		—		—		16,615,880		—			(16,615,880	)		—			—			—			—			—			—			—			—
Reversal of special capital reserve		—		—		—		—		(4,820,483	)		4,820,483			—			—			—			—			—			—			—			—
Cash dividends to shareholders—NT$3.00 per share		—		—		—		—		—			(77,773,307	)		(77,773,307	)		—			—			—			—			(77,773,307	)		—			(77,773,307	)

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

Net income for the six months ended June 30, 2013		—		—		—		—		—			91,384,601			91,384,601			—			—			—			—			91,384,601			(87,555	)		91,297,046
Other comprehensive income for the six months ended June 30, 2013, net of income tax		—		—		—		—		—			—			—			4,017,456			7,540,377			—			11,557,833			11,557,833			(115	)		11,557,718

Total comprehensive income for the six months ended June 30, 2013		—		—		—		—		—			91,384,601			91,384,601			4,017,456			7,540,377			—			11,557,833			102,942,434			(87,670	)		102,854,764

Issuance of stock from exercise of employee stock options		3,870		38,701		71,474		—		—			—			—			—			—			—			—			110,175			—			110,175
Stock option compensation cost of subsidiary		—		—		—		—		—			—			—			—			—			—			—			—			5,312			5,312
Adjustments to share of changes in equity of associates and joint venture		—		—		14,845		—		—			—			—			—			—			—			—			14,845			—			14,845
Adjustments arising from changes in percentage of ownership in subsidiaries		—		—		66,928		—		—			—			—			—			—			—			—			66,928			(66,928	)		—
Increase in noncontrolling interests		—		—		—		—		—			—			—			—			—			—			—			—			203,729			203,729
Effect of deconsolidation of subsidiary		—		—		—		—		—			—			—			—			—			—			—			—			(2,273,153	)		(2,273,153	)

BALANCE, JUNE 30, 2013		25,928,305	$	259,283,058	$	55,828,587	$	132,436,003	$	2,785,741		$	286,801,018		$	422,022,762		$	(6,736,350	)	$	15,513,698		$	—		$	8,777,348		$	745,911,755		$	324,516		$	746,236,271

BALANCE, JANUARY 1, 2012		25,916,222	$	259,162,226	$	55,471,662	$	102,399,995	$	6,433,874		$	211,630,458		$	320,464,327		$	(6,433,364	)	$	(1,172,762	)	$	(93	)	$	(7,606,219	)	$	627,491,996		$	2,436,649		$	629,928,645
Appropriations of prior year’s earnings
Legal capital reserve		—		—		—		13,420,128		—			(13,420,128	)		—			—			—			—			—			—			—			—
Special capital reserve		—		—		—		—		1,172,350			(1,172,350	)		—			—			—			—			—			—			—			—
Cash dividends to shareholders—NT$3.00 per share		—		—		—		—		—			(77,748,668	)		(77,748,668	)		—			—			—			—			(77,748,668	)		—			(77,748,668	)

Total		—		—		—		13,420,128		1,172,350			(92,341,146	)		(77,748,668	)		—			—			—			—			(77,748,668	)		—			(77,748,668	)

Net income for the six months ended June 30, 2012		—		—		—		—		—			75,334,973			75,334,973			—			—			—			—			75,334,973			(152,421	)		75,182,552
Other comprehensive income for the six months ended June 30, 2012, net of income tax		—		—		—		—		—			—			—			(1,397,520	)		1,507,441			65			109,986			109,986			36,575			146,561

Total comprehensive income for the six months ended June 30, 2012		—		—		—		—		—			75,334,973			75,334,973			(1,397,520	)		1,507,441			65			109,986			75,444,959			(115,846	)		75,329,113

Issuance of stock from exercise of employee stock options		4,487		44,868		94,838		—		—			—			—			—			—			—			—			139,706			—			139,706
Adjustments arising from changes in percentage of ownership in subsidiaries		—		—		29,976		—		—			—			—			—			—			—			—			29,976			(29,976	)		—
Increase in noncontrolling interests		—		—		—		—		—			—			—			—			—			—			—			—			288,458			288,458

BALANCE, JUNE 30, 2012		25,920,709	$	259,207,094	$	55,596,476	$	115,820,123	$	7,606,224		$	194,624,285		$	318,050,632		$	(7,830,884	)	$	334,679		$	(28	)	$	(7,496,233	)	$	625,357,969		$	2,579,285		$	627,937,254

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)


	For the Six Months Ended June 30
	2013			2012
CASH FLOWS FROM OPERATING ACTIVITIES
Income before income tax	$	105,764,593		$	81,629,985
Adjustments for:
Depreciation expense		73,519,241			59,377,352
Amortization expense		1,071,590			1,088,886
Stock option compensation cost of subsidiary		5,312			—
Finance costs		1,129,338			415,039
Share of profits of associates and joint venture		(1,713,657	)		(626,075	)
Interest income		(852,693	)		(941,732	)
Loss (gain) on disposal of property, plant and equipment and intangible assets, net		(29,365	)		4,126
Impairment loss on property, plant and equipment		—			422,323
Impairment loss of financial assets		45,716			2,748,456
Gain on disposal of available-for-sale financial assets, net		(990,713	)		(231,622	)
Gain on disposal of financial assets carried at cost, net		(4,573	)		(134,109	)
Loss on disposal of investments in associates		731			—
Gain on deconsolidation of subsidiary		(293,578	)		—
Unrealized (realized) gross profit on sales to associates		(6,926	)		139,950
Loss (gain) on foreign exchange, net		446,110			(859,032	)
Dividend income		(502,692	)		(69,945	)
Settlement income from receiving equity securities		(9,590	)		(642	)
Loss on hedging instruments		1,937,366			—
Gain arising from changes in fair value of available-for-sale financial assets in hedge effective portion		(1,657,824	)		—
Changes in operating assets and liabilities:
Derivative financial instruments		140,919			13,050
Receivables from related parties		(510,193	)		(651,481	)
Notes and accounts receivable, net		(22,223,842	)		(14,780,109	)
Other receivables from related parties		(19,275	)		(43,115	)
Inventories		(997,563	)		(5,939,884	)
Other current assets		(90,235	)		(302,386	)
Other financial assets		(64,259	)		92,707
Accounts payable		281,081			3,596,507
Payables to related parties		(27,167	)		(18,555	)
Salary and bonus payable		(311,632	)		(630,348	)
Accrued profit sharing to employees and bonus to directors and supervisors		6,180,213			5,070,855
Accrued expenses and other current liabilities		2,647,510			4,296,285
Provisions		280,544			1,442,181
Accrued pension cost		(1,194	)		(14,266	)

Cash generated from operations		163,143,293			135,094,401
Income taxes paid		(14,334,965	)		(10,325,668	)

Net cash generated by operating activities		148,808,328			124,768,733

(Continued)

- 5 -

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands of New Taiwan Dollars)

(Reviewed, Not Audited)


	For the Six Months Ended June 30
	2013			2012
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions of:
Available-for-sale financial assets	$	(10,102	)	$	(2,950	)
Financial assets carried at cost		(16,616	)		(21,557	)
Property, plant and equipment		(158,818,884	)		(108,038,091	)
Intangible assets		(1,477,481	)		(806,248	)
Other assets		(30,721	)		(22,442	)
Proceeds from disposal or redemption of:
Available-for-sale financial assets		2,032,100			241,531
Held-to-maturity financial assets		4,445,850			830,368
Financial assets carried at cost		11,696			205,100
Property, plant and equipment		111,008			113,668
Costs from entering into hedging transactions		(143,982	)		—
Interest received		689,878			885,497
Other dividends received		493,557			69,945
Dividends received from associates		—			1,285,480
Refundable deposits paid		(23,124	)		(77,866	)
Refundable deposits refunded		52,333			300,646
Net cash outflow from deconsolidation of subsidiary (Note 34)		(979,910	)		—

Net cash used in investing activities		(153,664,398	)		(105,036,919	)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of bonds		89,644,821			17,000,000
Repayment of bonds		—			(4,500,000	)
Increase (decrease) in short-term loans		(4,087,493	)		5,150,666
Increase in long-term bank loans		650,000			—
Repayment of long-term bank loans		(62,500	)		—
Repayment of other long-term payables		—			(1,434,277	)
Interest paid		(374,202	)		(292,797	)
Guarantee deposits received		12,114			10,257
Guarantee deposits refunded		(53,881	)		(200,894	)
Decrease in obligations under finance leases		(27,796	)		(86,328	)
Proceeds from exercise of employee stock options		110,175			139,706
Increase in noncontrolling interests		217,860			302,427

Net cash generated by financing activities		86,029,098			16,088,760

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS		1,249,030			(852,292	)

NET INCREASE IN CASH AND CASH EQUIVALENTS		82,422,058			34,968,282
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		143,410,588			143,472,277

CASH AND CASH EQUIVALENTS, END OF PERIOD	$	225,832,646		$	178,440,559


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

- 6 -

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2013 AND 2012

(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. Beginning in 2010, TSMC also engages in the researching, developing, designing, manufacturing and selling of solid state lighting devices and related applications products and systems, and renewable energy and efficiency related technologies and products.

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 of TSMC and its subsidiaries (collectively as the “Company”) are described in Notes 4 and 42.

2.	THE AUTHORIZATION OF FINANCIAL STATEMENTS

The consolidated financial statements were reported to the Board of Directors and issued on August 13, 2013.

3.	APPLICATION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRSs)

On May 14, 2009, the Financial Supervisory Commission (FSC) announced the roadmap of IFRSs adoption for R.O.C. companies. Accordingly, starting 2013, companies with shares listed on the TWSE or traded on the Taiwan GreTai Securities Market or Emerging Stock Market should prepare the consolidated financial statements in accordance with the Guidelines Governing the Preparation of Financial Reports by Securities Issuers, the IFRSs, International Accounting Standards (IASs), interpretations as well as related guidance translated by Accounting Research and Development Foundation (ARDF) endorsed by the FSC with the effective dates (collectively, “Taiwan-IFRSs”).

The new, revised or amended IFRSs, IASs, interpretations and related guidance in issue but not yet adopted by the Company as well as the effective dates issued by the International Accounting Standards Board (IASB), are stated as follows; however, the initial adoption to the following new, revised or amended standards and interpretations is still subject to the effective date to be published by the FSC.

- 7 -


New, Revised or Amended Standards and Interpretations		Effective Date Issued by IASB (Note)
Endorsed by the FSC but the effective dates have not yet been determined by the FSC

Amendments to IFRSs	Improvements to IFRSs 2009—Amendment to IAS 39	January 1, 2009 or January 1, 2010

IFRS 9 (2009)	Financial Instruments	January 1, 2015

Amendment to IAS 39	Embedded Derivatives	Effective in fiscal year beginning on or after June 30, 2009

Not yet endorsed by the FSC

Amendments to IFRSs	Improvements to IFRSs 2010—Amendment to IAS 39	July 1, 2010 or January 1, 2011

Amendments to IFRSs	Annual Improvements to IFRSs 2009—2011 Cycle	January 1, 2013

Amendments to IFRS 1	Limited Exemption from Comparative IFRS 7 Disclosures for First-time Adopters	July 1, 2010

Amendments to IFRS 1	Government Loans	January 1, 2013

Amendments to IFRS 1	Severe Hyperinflation and Removal of Fixed Dates for First-time Adopters	July 1, 2011

Amendment to IFRS 7	Disclosures-offsetting Financial Assets and Financial Liabilities	January 1, 2013

Amendments to IFRS 9 and IFRS 7	Mandatory Effective Date and Transition Disclosure	January 1, 2015

Amendment to IFRS 7	Disclosures—Transfers of Financial Assets	July 1, 2011

Amendment to IFRS 9	Financial Instruments	January 1, 2015

Amendment to IFRS 10	Consolidated Financial Statements	January 1, 2013

Amendment to IFRS 11	Joint Arrangements	January 1, 2013

Amendment to IFRS 12	Disclosure of Interests in Other Entities	January 1, 2013

Amendments to IFRS 10, IFRS 11 and IFRS 12	Consolidated financial Statements, Joint Arrangements, and Disclosure of Interests in Other Entities: Transition Guidance	January 1, 2013

Amendments to IFRS 10, IFRS 12 and IFRS 27	Investment Entities	January 1, 2014

Amendment to IFRS 13	Fair Value Measurement	January 1, 2013

Amendment to IAS 1	Presentation of Items of Other Comprehensive Income	July 1, 2012

Amendment to IAS 12	Deferred Tax: Recovery of Underlying Assets	January 1, 2012

Amendment to IAS 19	Employee Benefits	January 1, 2013

Amendment to IAS 27	Separate Financial Statements	January 1, 2013

Amendment to IAS 28	Investments in Associates and Joint Ventures	January 1, 2013

Amendment to IAS 32	Offsetting of Financial Assets and Financial Liabilities	January 1, 2014

Amendment to IAS 36	Recoverable Amount Disclosures for Non-Financial Assets	January 1, 2014

(Continued)

- 8 -


New, Revised or Amended Standards and Interpretations		Effective Date Issued by IASB (Note)
Amendment to IAS 39	Novation of Derivatives and Continuation of Hedge Accounting	January 1, 2014

Amendment to IFRIC 20	Stripping Costs in the Production Phase of A Surface Mine	January 1, 2013

Amendment to IFRIC 21	Levies	January 1, 2014

(Concluded)

Note:

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

Except for the following items, the Company believes that the adoption of aforementioned new, revised or amended standards or interpretations will not have a significant effect on the Company’s accounting policies.

IFRS 9, “Financial Instruments”

Under IFRS 9, all recognized financial assets currently in the scope of IAS 39, “Financial Instruments: Recognition and Measurement,” will be subsequently measured at either the amortized cost or the fair value. If the objective of the Company’s business model is to hold the financial asset to collect the contractual cash flows which are solely for payments of principal and interest on the principal amount outstanding, such assets are measured at the amortized cost. All other financial assets must be measured at the fair value through profit or loss as of the balance sheet date.

IFRS 12, “Disclosure of Interests in Other Entities”

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

IFRS 13, “Fair Value Measurement”

IFRS 13 establishes a single source of guidance for fair value measurements and disclosures about fair value measurements.

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

The amendments to IAS 1 introduce a new disclosure terminology for other comprehensive income, which require additional disclosures in other comprehensive income. The items of other comprehensive income will be grouped into two categories: (a) items that will not be reclassified subsequently to profit or loss; and (b) items that will be reclassified subsequently to profit or loss when specific conditions are met. In addition, income tax on items of other comprehensive income is also required to be allocated on the same basis. The Company expects the aforementioned amendments will change the Company’s presentation on the statement of comprehensive income.

- 9 -

Amendments to IAS 19, “Employee Benefits”

The amendments to IAS 19 change the accounting for defined benefit plans, which require the Company to recognize changes in defined benefit obligations or assets, to disclose the components of the defined benefit costs, to eliminate the corridor approach and to accelerate the recognition of past service cost. According to the amendments, all actuarial gains and losses will be recognized 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 amendment also requires a broader disclosure in defined benefit plans.

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.

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

4.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The consolidated financial statements are the Taiwan-IFRSs interim consolidated financial statements for part of the period covered by the Taiwan-IFRSs annual consolidated financial statements prepared for the year ended December 31, 2013. The Company’s date of transition to Taiwan-IFRSs is January 1, 2012, and the effect of the transition to Taiwan-IFRSs is disclosed in Note 43.

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.

Significant accounting policies are summarized as follows:

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 IFRS 1, “First-time adoption of International Financial Reporting Standards,” (IFRS 1) and IAS 34, “Interim Financial Reporting,” endorsed by the FSC. The consolidated financial statements do not present all the disclosures required for a complete set of annual consolidated financial statements prepared under
Taiwan-IFRSs.

Basis of Consolidation

The basis for the consolidated financial statements

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

- 10 -

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

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

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

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

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

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

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

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

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

The subsidiaries in the consolidated financial statements

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


			Establishment	Percentage of Ownership
Name of Investor	Name of Investee	Main Businesses and Products	and Operating Location	June 30, 2013			December 31, 2012			June 30, 2012			January 1, 2012			Note
TSMC	TSMC North America	Selling and marketing of integrated circuits and semiconductor devices	San Jose, California, U.S.A.		100	%		100	%		100	%		100	%		—
	TSMC Japan Limited (TSMC Japan)	Marketing activities	Yokohama, Japan		100	%		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	%		100	%		—
	TSMC Korea Limited (TSMC Korea)	Customer service and technical supporting activities	Seoul, Korea		100	%		100	%		100	%		100	%		a	)
	TSMC Europe B.V. (TSMC Europe)	Marketing and engineering supporting activities	Amsterdam, the Netherlands		100	%		100	%		100	%		100	%		a	)
	TSMC Global, Ltd. (TSMC Global)	Investment activities	Tortola, British Virgin Islands		100	%		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	%		100	%		—
	VentureTech Alliance Fund III, L.P. (VTAF III)	Investing in new start-up technology companies	Cayman Islands		50	%		50	%		52	%		53	%		—
	VentureTech Alliance Fund II, L.P. (VTAF II)	Investing in new start-up technology companies	Cayman Islands		98	%		98	%		98	%		98	%		—
	Emerging Alliance Fund, L.P. (Emerging Alliance)	Investing in new start-up technology companies	Cayman Islands		99.5	%		99.5	%		99.5	%		99.5	%		a	)
	Xintec Inc. (Xintec)	Wafer level chip size packaging service	Taoyuan, Taiwan		b	)		40	%		40	%		40	%		—

(Continued)

- 11 -


			Establishment	Percentage of Ownership
Name of Investor	Name of Investee	Main Businesses and Products	and Operating Location	June 30, 2013			December 31, 2012			June 30, 2012			January 1, 2012			Note
TSMC	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	%		95	%		95	%		100	%	TSMC and TSMC GN aggregately have a controlling interest of 93% in TSMC SSL
	TSMC Solar Ltd. (TSMC Solar)	Engaged in researching, developing, designing, manufacturing and selling renewable energy and saving related technologies and products	Tai-Chung, Taiwan		99	%		99	%		99	%		100	%	TSMC and TSMC GN aggregately have a controlling interest of 99% in TSMC Solar
	TSMC Guang Neng Investment, Ltd. (TSMC GN)	Investment activities	Taipei, Taiwan		100	%		100	%		100	%		—		—
TSMC Partners	TSMC Design Technology Canada Inc. (TSMC Canada)	Engineering support activities	Ontario, Canada		100	%		100	%		100	%		100	%	a)
	TSMC Technology, Inc. (TSMC Technology)	Engineering support activities	Delaware, U.S.A.		100	%		100	%		100	%		100	%	a)
	TSMC Development, Inc. (TSMC Development)	Investment activities	Delaware, U.S.A.		100	%		100	%		100	%		100	%	—
	InveStar Semiconductor Development Fund, Inc. (ISDF)	Investing in new start-up technology companies	Cayman Islands		97	%		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	%		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	%		100	%	—
VTAF III	Mutual-Pak Technology Co., Ltd. (Mutual-Pak)	Manufacturing and selling of electronic parts and researching, developing, and testing of RFID	Taipei, Taiwan		58	%		58	%		58	%		57	%	a)
	Growth Fund Limited (Growth Fund)	Investing in new start-up technology companies	Cayman Islands		100	%		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	%		100	%	a)
TSMC SSL	TSMC Lighting North America, Inc. (TSMC Lighting NA)	Selling and marketing of solid state lighting related products	Delaware, U.S.A.		100	%		100	%		100	%		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	%		100	%	a)
	TSMC Solar Europe B.V. (TSMC Solar Europe)	Investing in solar related business	Amsterdam, the Netherlands		100	%		100	%		100	%		100	%	a)
	VentureTech Alliance Fund III, L.P. (VTAF III)	Investing in new start-up technology companies	Cayman Islands		49	%		49	%		47	%		46	%	—
TSMC Solar Europe	TSMC Solar Europe GmbH	Selling of solar related products and providing customer service	Hamburg, Germany		100	%		100	%		100	%		100	%	a)

(Concluded)

Note a:

This is an insignificant subsidiary for which the financial statements are not reviewed by the Company’s independent accountants. The Company’s management believes the investment in such subsidiary has no material effect on the Company’s consolidated financial statements.

Note b:

TSMC has no power to govern the financial and operating policies of Xintec starting June 2013 for the loss of power to cast the majority of votes at meetings of the Board of Directors. As a result, Xintec is no longer consolidated and is accounted for using the equity method. Please refer to Note 34.

Other Significant Accounting Policies

The same accounting policies have been followed in this consolidated financial statements as were applied in the preparation of the Company’s consolidated financial statements for the three months ended March 31, 2013. For the summary of other significant accounting policies, please refer to Note 4 to the consolidated financial statements for the three months ended March 31, 2013.

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 three months ended March 31, 2013. For the related information, please refer to Note 5 to the consolidated financial statements for the three months ended March 31, 2013.

- 12 -

6.	CASH AND CASH EQUIVALENTS


	June 30, 2013		December 31, 2012		June 30, 2012		January 1, 2012
Cash and deposits in banks	$	223,809,009	$	140,072,294	$	169,621,809	$	139,637,363
Repurchase agreements collateralized by corporate bonds		1,635,358		2,691,042		3,620,337		—
Repurchase agreements collateralized by short-term commercial paper		199,899		349,341		1,038,952		—
Repurchase agreements collateralized by government bonds		188,380		297,911		4,159,461		3,834,914

	$	225,832,646	$	143,410,588	$	178,440,559	$	143,472,277

Deposits in banks, for the purpose of meeting short-term cash commitments, consisted of highly liquid time deposits that were readily convertible to known amounts of cash and which were subject to an insignificant risk of changes in value.

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


	June 30, 2013		December 31, 2012		June 30, 2012		January 1, 2012
Derivative financial assets
Forward exchange contracts	$	17,252	$	38,607	$	23,576	$	15,360
Cross currency swap contracts		2,758		947		158		—

	$	20,010	$	39,554	$	23,734	$	15,360

Derivative financial liabilities
Forward exchange contracts	$	135,184	$	12,174	$	33,883	$	13,623
Cross currency swap contracts		1,331		3,451		1,283		119

	$	136,515	$	15,625	$	35,166	$	13,742

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, 2013
Sell NT$/Buy US$	July 2013	NT$534,830/US$17,800
Sell US$/Buy EUR	July 2013	US$386,201/EUR296,000
Sell US$/Buy JPY	July 2013	US$308,877/JPY30,237,970
Sell US$/Buy NT$	July 2013	US$75,000/NT$2,252,825
Sell US$/Buy RMB	July 2013 to August 2013	US$99,000/RMB610,816

(Continued)

- 13 -


		Contract Amount
	Maturity Date	(In Thousands)
December 31, 2012
Sell NT$/Buy EUR	January 2013	NT$9,417,062/EUR246,000
Sell NT$/Buy US$	January 2013	NT$590,403/US$20,400
Sell NT$/Buy JPY	January 2013	NT$44,110/JPY130,000
Sell US$/Buy NT$	January 2013 to March 2013	US$13,700/NT$398,239
Sell US$/Buy RMB	January 2013	US$20,000/RMB124,735
June 30, 2012
Sell NT$/Buy EUR	July 2012	NT$11,297/EUR300
Sell NT$/Buy JPY	July 2012	NT$1,238,195/JPY3,293,000
Sell NT$/Buy US$	July 2012 to August 2012	NT$507,764/US$17,000
Sell RMB/Buy US$	July 2012	RMB1,258,088/US$199,000
Sell US$/Buy EUR	July 2012	US$49,634/EUR39,579
Sell US$/Buy JPY	July 2012 to August 2012	US$217,791/JPY17,317,277
Sell US$/Buy NT$	July 2012 to September 2012	US$16,400/NT$486,689
January 1, 2012
Sell EUR/Buy NT$	January 2012	EUR38,600/NT$1,528,206
Sell NT$/Buy US$	January 2012 to February 2012	NT$163,491/US$5,400
Sell RMB/Buy US$	January 2012	RMB1,118,705/US$177,000
Sell US$/Buy EUR	January 2012	US$2,082/EUR1,591
Sell US$/Buy JPY	January 2012	US$3,335/JPY259,830
Sell US$/Buy NT$	January 2012 to February 2012	US$16,900/NT$510,122

(Concluded)

Outstanding cross currency swap contracts consisted of the following:


Maturity Date	Contract Amount (In Thousands)	Range of Interest Rates Paid	Range of Interest Rates Received
June 30, 2013
July 2013	NT$1,200,176/US$40,080	—	0.24%-0.35%
December 31, 2012
January 2013	NT$1,083,139/US$37,280	—	0.06%
January 2013	US$275,000/NT$7,986,190	0.14%-0.17%	—
June 30, 2012
July 2012	NT$676,922/US$22,630	—	0.15%-0.20%
July 2012	US$2,650/NT$79,200	0.30%-0.32%	—
January 1, 2012
January 2012	NT$420,431/US$13,880	—	0.48%

- 14 -

8.	AVAILABLE-FOR-SALE FINANCIAL ASSETS


	June 30, 2013		December 31, 2012		June 30, 2012		January 1, 2012
Publicly traded stocks	$	50,643,339	$	41,160,437	$	2,476,537	$	3,306,248
Money market funds		8,417		1,443		509		2,522

	$	50,651,756	$	41,161,880	$	2,477,046	$	3,308,770

Current portion	$	1,070,537	$	2,410,635	$	2,477,046	$	3,308,770
Noncurrent portion		49,581,219		38,751,245		—		—

	$	50,651,756	$	41,161,880	$	2,477,046	$	3,308,770

In October 2012, the Company acquired 5% of the outstanding equity of ASML Holding N.V. (ASML) for EUR837,816 thousand with a lock-up period of 2.5 years starting from the acquisition date. (Note 40f)

In the second quarter of 2012, the Company recognized an impairment loss on some of the overseas publicly traded stocks in the amount of NT$2,677,529 thousand due to the significant decline in fair value.

9.	HELD-TO-MATURITY FINANCIAL ASSETS


	June 30, 2013		December 31, 2012		June 30, 2012		January 1, 2012
Corporate bonds	$	700,576	$	5,056,973	$	7,678,424	$	8,614,527
Government bonds		—		—		448,275		454,320

	$	700,576	$	5,056,973	$	8,126,699	$	9,068,847

Current portion	$	700,576	$	5,056,973	$	7,424,976	$	3,825,680
Noncurrent portion		—		—		701,723		5,243,167

	$	700,576	$	5,056,973	$	8,126,699	$	9,068,847

10.

HEDGING DERIVATIVE FINANCIAL INSTRUMENTS


	June 30, 2013		December 31, 2012		June 30, 2012		January 1, 2012
Financial liabilities—current
Cash flow hedges
Interest rate swap contracts	$	—	$	—	$	69	$	232

Financial liabilities—noncurrent
Fair value hedges
Stock forward contracts	$	1,813,291	$	—	$	—	$	—

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

- 15 -

The outstanding stock forward contracts consisted of the following:


Contract Shares (In Thousands)	Maturity Date	Contract Price
June 30, 2013
7,000	May 2015 to July 2015	Determined by the specific percentage of spot price on the trade date

In addition, the Company’s long-term bank loans bear floating interest rates; therefore, changes in the market interest rate may cause future cash flows to be volatile. Accordingly, the Company entered into an interest rate swap contract in order to hedge cash flow risk caused by floating interest rates.

The outstanding interest rate swap contract consisted of the following:


Contract Amount (In Thousands)	Maturity Date		Range of Interest Rates Paid		Range of Interest Rates Received
June 30, 2012
NT$56,000		August 31, 2012		1.38%	0.86%-0.87%
January 1, 2012
NT$80,000		August 31, 2012		1.38%	0.63%-0.86%

For the three months and the six months ended June 30, 2012, the amount recognized in other comprehensive income and accumulated under the heading of cash flow hedges reserve from the above interest rate swap contract amounted to a net loss of NT$16 thousand and NT$17 thousand, respectively; the amount reclassified from equity and recognized as a loss from the above interest rate swap contract amounted to a net loss of NT$82 thousand and NT$180 thousand, respectively, which were included under finance costs in the consolidated statements of comprehensive income.

11.

NOTES AND ACCOUNTS RECEIVABLE, NET


	June 30, 2013			December 31, 2012			June 30, 2012			January 1, 2012
Notes and accounts receivable	$	80,229,317		$	58,257,798		$	61,101,346		$	46,321,240
Allowance for doubtful receivables		(486,609	)		(480,212	)		(490,914	)		(490,952	)

Notes and accounts receivable, net	$	79,742,708		$	57,777,586		$	60,610,432		$	45,830,288

The Company’s sales agreements typically provide that the payment is due 30 days from the invoice date for a majority of the costumers and 30 to 45 days after the end of the month in which sales occur for some customers. 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 an 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.

- 16 -

Aging analysis of notes and accounts receivable, net


	June 30, 2013		December 31, 2012		June 30, 2012		January 1, 2012
Neither past due nor impaired	$	71,025,800	$	47,528,952	$	53,751,066	$	39,362,390
Past due but not impaired
Past due within 30 days		8,716,908		10,248,634		6,859,366		6,467,898

	$	79,742,708	$	57,777,586	$	60,610,432	$	45,830,288

Movements of the allowance for doubtful receivables


	Six Months Ended June 30
	2013			2012
Balance, beginning of the period	$	480,212		$	490,952
Provision (reversal)		9,464			(3	)
Effect of deconsolidation of subsidiary		(3,157	)		—
Effect of exchange rate changes		90			(35	)

Balance, end of the period	$	486,609		$	490,914

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


	June 30, 2013		December 31, 2012		June 30, 2012		January 1, 2012
Not past due	$	30,724	$	160,354	$	285,368	$	81,017
Past due 1-30 days		3,780		2,863		20,248		24,351
Past due 31-60 days		—		—		—		4,684
Past due 61-120 days		—		—		—		—
Past due over 120 days		—		3,157		3,292		9,769

	$	34,504	$	166,374	$	308,908	$	119,821

The Company held bank guarantees and other credit enhancements as collateral for certain impaired accounts receivables. As of June 30, 2013, December 31, 2012, June 30, 2012 and January 1, 2012, the amount of the bank guarantee and other credit enhancements were US$203 thousand, US$1,000 thousand, nil and US$2,962 thousand, respectively.

12.

INVENTORIES


	June 30, 2013		December 31, 2012		June 30, 2012		January 1, 2012
Finished goods	$	4,603,940	$	6,244,824	$	3,770,934	$	3,347,849
Work in process		28,701,406		25,713,217		22,889,353		17,940,960
Raw materials		3,474,178		3,864,105		2,375,668		1,808,615
Supplies and spare parts		1,835,404		2,008,352		1,744,511		1,743,158

	$	38,614,928	$	37,830,498	$	30,780,466	$	24,840,582

- 17 -

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


	Three Months Ended June 30				Six Months Ended June 30
	2013		2012		2013		2012
Inventory losses	$	332,110	$	399,336	$	237,169	$	1,041,643

13.

FINANCIAL ASSETS CARRIED AT COST


	June 30, 2013		December 31, 2012		June 30, 2012		January 1, 2012
Non-publicly traded stocks	$	3,372,556	$	3,314,713	$	3,775,338	$	4,004,314
Mutual funds		295,141		290,364		308,676		310,691

	$	3,667,697	$	3,605,077	$	4,084,014	$	4,315,005

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

14.

INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD

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


	June 30, 2013		December 31, 2012		June 30, 2012		January 1, 2012
Investments in associates	$	21,706,316	$	20,325,277	$	20,551,894	$	22,033,567
Investments in jointly controlled entities		3,306,524		3,035,641		2,768,736		2,853,364

	$	25,012,840	$	23,360,918	$	23,320,630	$	24,886,931

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	June 30, 2013		December 31, 2012		June 30, 2012		January 1, 2012		June 30, 2013			December 31, 2012			June 30, 2012			January 1, 2012
Vanguard International Semiconductor Corporation (VIS)	Research, design, development, manufacture, packaging, testing and sale of memory integrated circuits, LSI, VLSI and related parts	Hsinchu, Taiwan	$	9,619,243	$	9,406,597	$	8,816,718	$	8,985,340		39	%		40	%		41	%		39	%
Systems on Silicon Manufacturing Company Pte Ltd. (SSMC)	Fabrication and supply of integrated circuits	Singapore		6,441,982		6,710,956		5,935,087		6,289,429		39	%		39	%		39	%		39	%
Motech Industries, Inc. (Motech)	Manufacturing and sales of solar cells, crystalline silicon solar cell, and test and measurement instruments and design and construction of solar power systems	Taipei, Taiwan		2,714,439		2,992,899		4,697,083		5,609,002		20	%		20	%		20	%		20	%

(Continued)

- 18 -


		Place of	Carrying Amount								% of Ownership and Voting Rights Held by the Company
Name of Associate	Principal Activities	Incorporation and Operation	June 30, 2013		December 31, 2012		June 30, 2012		January 1, 2012		June 30, 2013			December 31, 2012			June 30, 2012			January 1, 2012
Xintec	Wafer level chip size packaging service	Taoyuan, Taiwan	$	1,816,848	$	—	$	—	$	—		40	%		—			—			—
Global Unichip Corporation (GUC)	Researching, developing, manufacturing, testing and marketing of integrated circuits	Hsinchu, Taiwan		1,113,804		1,214,825		1,103,006		1,149,796		35	%		35	%		35	%		35	%
Mcube Inc. (Mcube)	Research, development, and sale of micro-semiconductor device	Delaware, U.S.A.		—		—		—		—		25	%		25	%		25	%		25	%

			$	21,706,316	$	20,325,277	$	20,551,894	$	22,033,567

(Concluded)

In February 2010, the Company acquired 75,316 thousand shares of Motech through a private placement for NT$6,228,661 thousand; following such acquisition, the Company’s percentage of ownership in Motech was 20%. Transfer of the aforementioned common shares within three years from the acquisition date is prohibited unless permitted by other related regulations.

In the fourth quarter of 2012, the Company recognized an impairment loss in the amount of NT$1,186,674 thousand, due to the lower estimated recoverable amount compared with the carrying amount of its investments in stocks traded on the Taiwan GreTai Securities Market.

Financial information of the Company’s associates was summarized as follows:


	June 30, 2013			December 31, 2012			June 30, 2012			January 1, 2012
Total assets	$	91,617,431		$	76,889,298		$	77,955,249		$	79,721,042
Total liabilities		(33,211,301	)		(21,683,504	)		(24,668,372	)		(20,948,855	)

Net assets	$	58,406,130		$	55,205,794		$	53,286,877		$	58,772,187

The Company’s share of net assets of associates	$	21,706,316		$	20,325,277		$	20,551,894		$	22,033,567


	Three Months Ended June 30						Six Months Ended June 30
	2013			2012			2013		2012
Net revenue	$	16,877,787		$	14,797,853		$	28,790,849	$	26,803,897

Net income (loss)	$	2,482,695		$	(126,751	)	$	3,698,332	$	(60,581	)

The Company’s share of profits of associates	$	919,470		$	276,414		$	1,451,087	$	294,521

The Company’s share of other comprehensive income (loss) of associates	$	(177,411	)	$	9,853		$	27,184	$	(9,797	)

The market prices of the investment accounted for using the equity method in publicly traded stocks calculated by the closing price at the balance sheet date are summarized as follows:


Name of Associate	June 30, 2013		December 31, 2012		June 30, 2012		January 1, 2012
VIS	$	21,359,599	$	12,658,703	$	8,732,307	$	6,627,758

Motech	$	3,311,110	$	2,383,824	$	3,586,671	$	4,645,176

GUC	$	4,533,391	$	4,692,130	$	4,855,537	$	4,645,442

- 19 -

Investments in jointly controlled entities


		Place of	Carrying Amount								% of Ownership and Voting Rights Held by the Company
Name of Jointly Controlled Entity	Principal Activities	Incorporation and Operation	June 30, 2013		December 31, 2012		June 30, 2012		January 1, 2012		June 30, 2013			December 31, 2012			June 30, 2012			January 1, 2012
VisEra Holding Company (VisEra Holding)	Investing in companies involved in the design, manufacturing and other related businesses in the semiconductor industry	Cayman Islands	$	3,306,524	$	3,035,641	$	2,768,736	$	2,853,364		49	%		49	%		49	%		49	%

Financial information of the Company’s jointly controlled entities was summarized as follows:


	June 30, 2013		December 31, 2012		June 30, 2012		January 1, 2012
Current assets	$	2,640,049	$	1,887,122	$	2,110,664	$	1,616,916

Noncurrent assets	$	1,709,301	$	1,780,903	$	1,864,819	$	1,732,247

Current liabilities	$	1,042,360	$	631,803	$	1,205,999	$	495,066

Noncurrent liabilities	$	466	$	581	$	748	$	733


	Three Months Ended June 30						Six Months Ended June 30
	2013			2012			2013			2012
Net revenue	$	513,229		$	481,230		$	981,086		$	704,769

Cost of revenue	$	306,586		$	313,929		$	593,818		$	521,469

Operating expenses	$	33,199		$	32,074		$	65,461		$	60,591

Non-operating income, net	$	3,078		$	183,689		$	7,614		$	190,209

Income tax benefit (expense)	$	(36,488	)	$	8,541		$	(66,851	)	$	18,636

The Company’s share of profits of joint venture	$	140,034		$	327,457		$	262,570		$	331,554

The Company’s share of other comprehensive income (loss) of joint venture	$	(14,583	)	$	(32,174	)	$	(84,055	)	$	30,184

15.

PROPERTY, PLANT AND EQUIPMENT


	June 30, 2013		December 31, 2012		June 30, 2012		January 1, 2012
Land and land improvements	$	3,598,476	$	1,159,755	$	1,184,695	$	1,185,573
Buildings		102,813,918		85,610,120		83,519,214		71,915,740
Machinery and equipment		422,956,875		404,382,298		375,866,592		294,814,381
Office equipment		7,446,328		6,907,376		6,294,029		5,148,538
Assets under finance leases		435,797		438,663		465,491		493,945
Advance payments and construction in progress		178,343,642		119,063,976		80,854,453		116,863,976

	$	715,595,036	$	617,562,188	$	548,184,474	$	490,422,153

- 20 -


	Six Months Ended June 30, 2013
	Balance, Beginning of Period		Additions			Disposals			Reclassification		Effect of Deconsolidation of Subsidiary			Effect of Exchange Rate Changes			Balance, End of Period
Cost
Land and land improvements	$	1,527,124	$	3,212,000		$	—		$	—	$	(772,029	)	$	24,183		$	3,991,278
Buildings		197,411,851		23,769,868			—			3,797		(986,205	)		797,936			220,997,247
Machinery and equipment		1,279,893,177		86,321,847			(1,652,721	)		—		(5,630,854	)		2,409,161			1,361,340,610
Office equipment		20,067,943		2,151,385			(364,434	)		—		(1,055,809	)		50,718			20,849,803
Assets under finance leases		766,732		—			—			—		—			31,207			797,939

		1,499,666,827	$	115,455,100		$	(2,017,155	)	$	3,797	$	(8,444,897	)	$	3,313,205			1,607,976,877

Accumulated depreciation and impairment
Land improvements		367,369	$	13,518		$	—		$	—	$	—		$	11,915			392,802
Buildings		111,801,731		6,168,796			—			—		(226,908	)		439,710			118,183,329
Machinery and equipment		875,510,879		66,150,063			(1,572,265	)		—		(3,656,326	)		1,951,384			938,383,735
Office equipment		13,160,567		1,166,369			(364,197	)		—		(599,483	)		40,219			13,403,475
Assets under finance leases		328,069		20,495			—			—		—			13,578			362,142

		1,001,168,615	$	73,519,241		$	(1,936,462	)	$	—	$	(4,482,717	)	$	2,456,806			1,070,725,483

Advance payments and construction in progress		119,063,976	$	60,904,636		$	—		$	—	$	(1,632,860	)	$	7,890			178,343,642

	$	617,562,188															$	715,595,036


	Six Months Ended June 30, 2012
	Balance, Beginning of Period		Additions (Deductions)			Disposals			Impairment		Reclassification			Effect of Exchange Rate Changes			Balance, End of Period
Cost
Land and land improvements	$	1,541,128	$	18,500		$	—		$	—	$	—		$	(10,479	)	$	1,549,149
Buildings		172,997,391		17,169,279			(53,088	)		—		—			(309,666	)		189,803,916
Machinery and equipment		1,057,926,529		134,779,209			(990,637	)		—		—			(907,517	)		1,190,807,584
Office equipment		17,041,306		2,030,616			(356,399	)		—		—			(34,136	)		18,681,387
Assets under finance leases		791,480		—			—			—		—			(13,142	)		778,338

		1,250,297,834	$	153,997,604		$	(1,400,124	)	$	—	$	—		$	(1,274,940	)		1,401,620,374

Accumulated depreciation and impairment
Land improvements		355,555	$	13,526		$	—		$	—	$	—		$	(4,627	)		364,454
Buildings		101,081,651		5,398,508			(42,988	)		—		—			(152,469	)		106,284,702
Machinery and equipment		763,112,148		53,074,414			(891,975	)		422,323		—			(775,918	)		814,940,992
Office equipment		11,892,768		870,836			(348,528	)		—		—			(27,718	)		12,387,358
Assets under finance leases		297,535		20,068			—			—		—			(4,756	)		312,847

		876,739,657	$	59,377,352		$	(1,283,491	)	$	422,323	$	—		$	(965,488	)		934,290,353

Advance payments and construction in progress		116,863,976	$	(35,905,734	)	$	—		$	—	$	(248	)	$	(103,541	)		80,854,453

	$	490,422,153															$	548,184,474

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 first quarter of 2012, the Company recognized impairment losses of NT$442,312 thousand related to property, plant and equipment of the foundry reportable segment since the carrying amount of some of property, plant and equipment is expected to be unrecoverable. Further, in the second quarter of 2012, the Company reversed the impairment losses of NT$19,989 thousand according to the result of impairment evaluation.

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

Future minimum lease gross payments were as follows:


	June 30, 2013		December 31, 2012		June 30, 2012		January 1, 2012
Minimum lease payments
Not later than 1 year	$	28,144	$	27,042	$	27,448	$	—
Later than 1 year and not later than 5 years		112,577		108,168		109,792		223,296
Later than five years		731,168		729,566		740,525		780,962

		871,889		864,776		877,765		1,004,258
Less: Future finance expenses		103,072		108,471		119,759		133,265

Present value of minimum lease payments	$	768,817	$	756,305	$	758,006	$	870,993

(Continued)

- 21 -


	June 30, 2013		December 31, 2012		June 30, 2012		January 1, 2012
Present value of minimum lease payments
Not later than 1 year	$	27,458	$	26,382	$	26,778	$	—
Later than 1 year and not later than 5 years		103,295		100,821		100,739		213,411
Later than five years		638,064		629,102		630,489		657,582

	$	768,817	$	756,305	$	758,006	$	870,993

Current portion	$	8,631	$	8,190	$	8,212	$	—
Noncurrent portion		760,186		748,115		749,794		870,993

	$	768,817	$	756,305	$	758,006	$	870,993

(Concluded)

There was no capitalization of interest for the six months ended June 30, 2013. During the three months and six months ended June 30, 2012, the Company capitalized the borrowing costs directly attributable to the acquisition or construction of property, plant and equipment. Information about capitalized interest was as follows:


	Three Months Ended June 30, 2012			Six Months Ended June 30, 2012
	Interest		Rate	Interest		Rate
Capitalized interest	$	3,268	1.08%-1.20%	$	6,442	1.08%-1.20%

16.

INTANGIBLE ASSETS


	June 30, 2013		December 31, 2012		June 30, 2012		January 1, 2012
Goodwill	$	5,650,404	$	5,523,707	$	5,639,097	$	5,693,999
Technology license fees		1,245,415		1,461,893		1,778,918		1,682,892
Software and system design costs		3,335,179		2,968,942		2,138,070		2,366,483
Patent and others		911,325		1,005,027		1,304,466		1,118,189

	$	11,142,323	$	10,959,569	$	10,860,551	$	10,861,563


	Six Months Ended June 30, 2013
	Balance, Beginning of Period		Additions		Disposals			Reclassification			Effect of Deconsolidation of Subsidiary			Effect of Exchange Rate Changes			Balance, End of Period
Cost
Goodwill	$	5,523,707	$	—	$	—		$	—		$	—		$	126,697		$	5,650,404
Technology license fees		4,590,548		—		—			(29,565	)		(113,340	)		(1,281	)		4,446,362
Software and system design costs		15,095,421		1,029,276		(16,573	)		(3,797	)		(25,335	)		4,628			16,083,620
Patent and others		3,094,664		204,019		(23,549	)		—			(42,089	)		4,642			3,237,687

		28,304,340	$	1,233,295	$	(40,122	)	$	(33,362	)	$	(180,764	)	$	134,686			29,418,073

Accumulated amortization
Technology license fees		3,128,655	$	140,160	$	—		$	—		$	(66,587	)	$	(1,281	)		3,200,947
Software and system design costs		12,126,479		646,735		(16,301	)		—			(12,661	)		4,189			12,748,441
Patent and others		2,089,637		284,695		(23,549	)		—			(25,195	)		774			2,326,362

		17,344,771	$	1.071,590	$	(39,850	)	$	—		$	(104,443	)	$	3,682			18,275,750

	$	10,959,569															$	11,142,323

- 22 -


	Six Months Ended June 30, 2012
	Balance, Beginning of Period		Additions		Disposals			Reclassification			Effect of Exchange Rate Changes			Balance, End of Period
Cost
Goodwill	$	5,693,999	$	—	$	—		$	—		$	(54,902	)	$	5,639,097
Technology license fees		4,370,173		147,825		—			191,580			(2,576	)		4,707,002
Software and system design costs		13,438,579		387,106		(26,931	)		(93,742	)		(2,285	)		13,702,727
Patent and others		2,670,031		419,142		—			93,990			(1,954	)		3,181,209

		26,172,782	$	954,073	$	(26,931	)	$	191,828		$	(61,717	)		27,230,035

Accumulated amortization
Technology license fees		2,687,281	$	242,179	$	—		$	—		$	(1,376	)		2,928,084
Software and system design costs		11,072,096		558,088		(26,931	)		(36,552	)		(2,044	)		11,564,657
Patent and others		1,551,842		288,619		—			36,552			(270	)		1,876,743

		15,311,219	$	1,088,886	$	(26,931	)	$	—		$	(3,690	)		16,369,484

	$	10,861,563												$	10,860,551

The recoverable amount of the Company’s goodwill has been tested for impairment at the end of the annual reporting period and was determined based on the value in use. The value in use was calculated based on the cash flow forecast from the financial budgets covering future five-year period, and the Company used annual discount rate of 9.00% and 9.68% in its test of impairment as of December 31, 2012 and 2011, respectively, to reflect the relevant specific risk in the cash-generating unit.

For the six months ended June 30, 2013 and 2012, the Company did not recognize any impairment loss on goodwill.

17.

OTHER ASSETS


	June 30, 2013		December 31, 2012		June 30, 2012		January 1, 2012
Tax receivable	$	1,411,504	$	1,565,104	$	1,186,737	$	708,891
Prepaid expenses		1,340,388		1,080,236		1,082,026		1,436,416
Long-term receivable		781,600		767,800		754,600		785,400
Others		549,515		608,412		562,675		550,053

	$	4,083,007	$	4,021,552	$	3,586,038	$	3,480,760

Current portion	$	2,739,259	$	2,786,408	$	2,404,358	$	2,174,014
Noncurrent portion		1,343,748		1,235,144		1,181,680		1,306,746

	$	4,083,007	$	4,021,552	$	3,586,038	$	3,480,760

18.

SHORT-TERM LOANS


	June 30, 2013	December 31, 2012	June 30, 2012	January 1, 2012
Unsecured loans
Amount	$31,466,400	$34,714,929	$30,772,585	$25,926,528

US$ (in thousands)	$ 1,050,000	$ 1,195,500	$ 1,029,700	$ 856,000
Annual interest rate	0.39%-0.42%	0.39%-0.58%	0.53%-0.77%	0.45%-1.00%
Maturity date	Due in July 2013	Due in January 2013	Due by August 2012	Due by February 2012

- 23 -

19.

PROVISIONS


	June 30, 2013		December 31, 2012		June 30, 2012		January 1, 2012
Sales returns and allowances	$	6,289,117	$	6,038,003	$	6,508,185	$	5,068,263
Warranties		6,623		4,891		3,398		2,889

	$	6,295,740	$	6,042,894	$	6,511,583	$	5,071,152

Current portion	$	6,289,117	$	6,038,003	$	6,508,185	$	5,068,263
Noncurrent portion		6,623		4,891		3,398		2,889

	$	6,295,740	$	6,042,894	$	6,511,583	$	5,071,152


	Sales Returns and Allowances			Warranties			Total
Six months ended June 30, 2013
Balance, beginning of period	$	6,038,003		$	4,891		$	6,042,894
Provision		2,421,262			1,678			2,422,940
Payment		(2,142,396	)		—			(2,142,396	)
Effect of deconsolidation of subsidiary		(37,748	)		—			(37,748	)
Effect of exchange rate changes		9,996			54			10,050

Balance, end of period	$	6,289,117		$	6,623		$	6,295,740

Six months ended June 30, 2012
Balance, beginning of period	$	5,068,263		$	2,889		$	5,071,152
Provision		3,859,417			611			3,860,028
Payment		(2,417,745	)		—			(2,417,745	)
Effect of exchange rate changes		(1,750	)		(102	)		(1,852	)

Balance, end of period	$	6,508,185		$	3,398		$	6,511,583

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.

- 24 -

20.

BONDS PAYABLE


	June 30, 2013		December 31, 2012		June 30, 2012		January 1, 2012
Domestic unsecured bonds:
Issued in September 2011 and repayable in September 2016, 1.40% interest payable annually	$	10,500,000	$	10,500,000	$	10,500,000	$	10,500,000
Issued in September 2011 and repayable in September 2018, 1.63% interest payable annually		7,500,000		7,500,000		7,500,000		7,500,000
Issued in January 2012 and repayable in January 2017, 1.29% interest payable annually		10,000,000		10,000,000		10,000,000		—
Issued in January 2012 and repayable in January 2019, 1.46% interest payable annually		7,000,000		7,000,000		7,000,000		—
Issued in August 2012 and repayable in August 2017, 1.28% interest payable annually		9,900,000		9,900,000		—		—
Issued in August 2012 and repayable in August 2019, 1.40% interest payable annually		9,000,000		9,000,000		—		—
Issued in September 2012 and repayable in September 2017, 1.28% interest payable annually		12,700,000		12,700,000		—		—
Issued in September 2012 and repayable in September 2019, 1.39% interest payable annually		9,000,000		9,000,000		—		—
Issued in October 2012 and repayable in October 2022, 1.53% interest payable annually		4,400,000		4,400,000		—		—
Issued in January 2013 and repayable in January 2018, 1.23% interest payable annually		10,600,000		—		—		—
Issued in January 2013 and repayable in January 2020, 1.35% interest payable annually		10,000,000		—		—		—
Issued in January 2013 and repayable in January 2023, 1.49% interest payable annually		3,000,000		—		—		—
Issued in February 2013 and repayable in February 2018, 1.23% interest payable annually		6,200,000		—		—		—
Issued in February 2013 and repayable in February 2020, 1.38% interest payable annually		11,600,000		—		—		—
Issued in February 2013 and repayable in February 2023, 1.50% interest payable annually		3,600,000		—		—		—
Issued in January 2002 and repayable in January 2012, 3.00% interest payable annually		—		—		—		4,500,000

		125,000,000		80,000,000		35,000,000		22,500,000

(Continued)

- 25 -


	June 30, 2013			December 31, 2012		June 30, 2012		January 1, 2012
Overseas bonds:
Overseas unsecured corporate bonds of US$350,000 thousand
Issued in April 2013 and repayable in April 2016, annual coupon interest at 0.95% and payable semi-annually	$	10,488,800		$	—	$	—	$	—
Overseas unsecured corporate bonds of US$1,150,000 thousand
Issued in April 2013 and repayable in April 2018, annual coupon interest at 1.625% and payable semi-annually		34,463,200			—		—		—
Less: Discounts on bonds payable		(150,738	)		—		—		—

		44,801,262			—		—		—

	$	169,801,262		$	80,000,000	$	35,000,000	$	22,500,000

Current portion	$	—		$	—	$	—	$	4,500,000
Noncurrent portion		169,801,262			80,000,000		35,000,000		18,000,000

	$	169,801,262		$	80,000,000	$	35,000,000	$	22,500,000

(Concluded)

With the approval from the FSC, the Company issued domestic unsecured bonds in the amount of NT$13,700,000 thousand and NT$12,500,000 thousand in July 2013 and August 2013, respectively.

21.

LONG-TERM BANK LOANS


	December 31, 2012		June 30, 2012		January 1, 2012
Bank loans for working capital:
Repayable in full in one lump sum payment in June 2016 but repaid earlier of NT$100,000 thousand in September 2012, annual interest at 1.21% in 2013 and 1.08%-1.21% in 2012	$	550,000	$	650,000	$	650,000
Repayable in full in one lump sum payment in March 2015 but repaid earlier of NT$50,000 thousand in August 2012, annual interest at 1.18%-1.37% in 2013 and 1.16%-1.18% in 2012		450,000		500,000		500,000
Repayable from July 2012 in 16 quarterly installments, annual interest at 1.24% in 2013 and 1.21%-1.24% in 2012		262,500		300,000		300,000

(Continued)

- 26 -


	December 31, 2012		June 30, 2012		January 1, 2012
Repayable from September 2012 in 16 quarterly installments, annual interest at 1.24% in 2013 and 1.21%-1.24% in 2012	$	175,000	$	200,000	$	200,000
Repayable from October 2013 in 16 quarterly installments, annual interest at 1.24%-1.25% in 2013 and 1.23%-1.24% in 2012		50,000		—		—

	$	1,487,500	$	1,650,000	$	1,650,000

Current portion	$	128,125	$	125,000	$	62,500
Noncurrent portion		1,359,375		1,525,000		1,587,500

	$	1,487,500	$	1,650,000	$	1,650,000

(Concluded)

As of June 30, 2013, the long-term bank loans were amounted to nil as a result of deconsolidation of Xintec (refer to Note 34).

22.

OTHER LONG-TERM PAYABLES


	June 30, 2013		December 31, 2012		June 30, 2012		January 1, 2012
Payables for acquisition of property, plant and equipment	$	859,102	$	825,447	$	1,777,394	$	3,399,855
Payables for software and system design costs		54,000		113,000		113,000		—
Payables for technology transfer		—		29,038		149,425		—

	$	913,102	$	967,485	$	2,039,819	$	3,399,855

Current portion (classified under accrued expenses and other current liabilities)	$	877,102	$	913,485	$	1,926,049	$	3,399,855
Noncurrent portion		36,000		54,000		113,770		—

	$	913,102	$	967,485	$	2,039,819	$	3,399,855

TSMC entered into an agreement with a counterparty in 2003 whereby TSMC China is obligated to purchase certain property, plant and equipment at the agreed-upon price within the contract period. If the purchase is not completed, TSMC China is obligated to compensate the counterparty for the loss incurred. The property, plant and equipment have been in use by TSMC China since 2004 and are being depreciated over their estimated service lives.

- 27 -

23.

RETIREMENT BENEFIT PLANS

Defined contribution plans

The pension mechanism under the Labor Pension Act (the “Act”) is deemed a defined contribution plan. Pursuant to the Act, TSMC, Xintec, Mutual-Pak, TSMC SSL and TSMC Solar have made monthly contributions equal to 6% of each employee’s monthly salary to employees’ pension accounts. Furthermore, TSMC North America, TSMC China, TSMC Europe, TSMC Canada, TSMC Solar NA and TSMC Solar Europe GmbH also make monthly contributions at certain percentages of the basic salary of their employees. Accordingly, the Company recognized expenses of NT$403,779 thousand and NT$336,114 thousand in the consolidated statements of comprehensive income for the three months ended June 30, 2013 and 2012, respectively; and of NT$788,237 thousand and NT$666,655 thousand in the consolidated statements of comprehensive income for the six months ended June 30, 2013 and 2012, respectively.

Defined benefit plans

TSMC, Xintec, TSMC SSL and TSMC Solar have defined benefit plans under the Labor Standards Law that provide benefits based on an employee’s length of service and average monthly salary for the six-month period prior to retirement. The aforementioned companies contribute an amount equal to 2% of salaries paid each month to their respective pension funds (the Funds), which are administered by the Labor Pension Fund Supervisory Committee (the Committee) and deposited in the Committee’s name in the Bank of Taiwan.

The Company adopted projected unit credit method to measure the present value of the defined benefit obligation, current service costs and prior service costs.

The Company adopted the pension cost rate from the actuarial valuation as of December 31, 2012 and January 1, 2012 to determine and recognize pension expenses of NT$60,697 thousand and NT$54,669 thousand in the consolidated statements of comprehensive income for the three months ended June 30, 2013 and 2012, respectively; and of NT$121,387 thousand and NT$109,328 thousand in the consolidated statements of comprehensive income for the six months ended June 30, 2013 and 2012, respectively. For the information of the defined benefit plans as of December 31, 2012 and January 1, 2012, please refer to Note 23 to the consolidated financial statements for the three months ended March 31, 2013.

The pension costs information of the defined benefit plans was as follows:


	Three Months Ended June 30				Six Months Ended June 30
	2013		2012		2013		2012
Cost of revenue	$	39,557	$	35,038	$	78,256	$	67,556
Research and development expenses		15,627		14,324		31,065		28,915
General and administrative expenses		4,394		4,173		9,815		10,581
Marketing expenses		1,119		1,134		2,251		2,276

	$	60,697	$	54,669	$	121,387	$	109,328

24.

EQUITY

Capital stock


	June 30, 2013		December 31, 2012		June 30, 2012		January 1, 2012
Authorized shares (in thousand)		28,050,000		28,050,000		28,050,000		28,050,000

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

Issued and paid shares (in thousand)		25,928,305		25,924,435		25,920,709		25,916,222

Issued capital	$	259,283,058	$	259,244,357	$	259,207,094	$	259,162,226

- 28 -

Issued common shares with par value of $10 per share entitled the right to vote and to receive dividends.

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

As of June 30, 2013, 1,091,351 thousand ADSs of TSMC were traded on the NYSE. The number of common shares represented by the ADSs was 5,456,755 thousand (one ADS represents five common shares).

Capital surplus


	June 30, 2013		December 31, 2012		June 30, 2012		January 1, 2012
Additional paid-in capital	$	24,006,081	$	23,934,607	$	23,869,088	$	23,774,250
From merger		22,804,510		22,804,510		22,804,510		22,804,510
From convertible bonds		8,892,847		8,892,847		8,892,847		8,892,847
From differences between equity purchase price and carrying amount arising from acquisition or disposal of subsidiaries		107,661		40,733		29,976		—
From share of changes in equities of associates and joint venture		17,433		2,588		—		—
Donations		55		55		55		55

	$	55,828,587	$	55,675,340	$	55,596,476	$	55,471,662

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

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.

- 29 -

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

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

TSMC accrued profit sharing to employees based on certain percentage of net income during the period, which amounted to NT$3,483,909 thousand and NT$2,807,399 thousand for the three months ended June 30, 2013 and 2012, respectively; and NT$6,144,391 thousand and NT$5,043,952 thousand for the six months ended June 30, 2013 and 2012, respectively. Bonuses to directors were expensed based on estimated amount of payment. If the actual amounts subsequently approved by the shareholders differ from the estimated amounts, the differences are recorded in the year of shareholders’ resolution as a change in accounting estimate. If profit sharing approved for distribution to employees is in the form of common shares, the number of shares is determined by dividing the amount of profit sharing by the closing price (after considering the effect of dividends) of the shares on the day preceding the shareholders’ meeting.

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

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

The appropriations of 2012 and 2011 earnings have been approved by TSMC’s shareholders in its meetings held on June 11, 2013 and on June 12, 2012, 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 2012			Year 2011		Year 2012		Year 2011
Legal capital reserve	$	16,615,880		$	13,420,128
Special capital reserve		(4,820,483	)		1,172,350
Cash dividends to shareholders		77,773,307			77,748,668	$	3.00	$	3.00

	$	89,568,704		$	92,341,146

TSMC’s profit sharing to employees and bonus to directors in the amounts of NT$11,115,240 thousand and NT$71,351 thousand in cash for 2012, respectively, and profit sharing to employees and bonus to directors in the amounts of NT$8,990,026 thousand and NT$62,324 thousand in cash for 2011, respectively, had been approved by the shareholders in its meeting held on June 11, 2013 and June 12, 2012, respectively. The aforementioned approved amount has no difference with the one approved by the Board of Directors in its meetings held on February 5, 2013 and February 14, 2012 and the same amount had been charged against earnings of 2012 and 2011, respectively.

The appropriations of earnings, payment of profit sharing to employees and bonus to directors for 2012 approved by the Board of Directors of TSMC were based on the financial statements for the year ended December 31, 2012 prepared under the R.O.C. GAAP and in accordance with the Guidelines Governing the Preparation of Financial Reports by Securities Issuers issued by the FSC before amendment.

- 30 -

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

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

Others

Changes in others were as follows:


	Six Months Ended June 30, 2013
	Foreign Currency Translation Reserve			Unrealized Gain/Loss from Available-for- sale Financial Assets			Total
Balance, beginning of period	$	(10,753,806	)	$	7,973,321		$	(2,780,485	)
Foreign currency translation reserve		4,074,732			—			4,074,732
Changes in fair value of available-for-sale financial assets		—			8,484,679			8,484,679
Cumulative gain/loss reclassified to profit or loss upon disposal of available-for-sale financial assets		—			(987,693	)		(987,693	)
Share of other comprehensive income of associates and joint venture		(58,050	)		225			(57,825	)
The proportionate share of other comprehensive income/losses reclassified to profit or loss upon partial disposal of associates		774			(44	)		730
Income tax effect		—			43,210			43,210

Balance, end of period	$	(6,736,350	)	$	15,513,698		$	8,777,348


	Six Months Ended June 30, 2012
	Foreign Currency Translation Reserve			Unrealized Gain/Loss from Available-for- sale Financial Assets			Cash Flow Hedges Reserve			Total
Balance, beginning of period	$	(6,433,364	)	$	(1,172,762	)	$	(93	)	$	(7,606,219	)
Foreign currency translation reserve		(1,426,037	)		—			—			(1,426,037	)
Changes in fair value of hedging instruments for cash flow hedges		—			—			(7	)		(7	)
Changes in fair value of hedging instruments for cash flow hedges reclassified to profit or loss		—			—			72			72
Changes in fair value of available-for-sale financial assets		—			(625,490	)		—			(625,490	)

(Continued)

- 31 -


	Six Months Ended June 30, 2012
	Foreign Currency Translation Reserve			Unrealized Gain/Loss from Available-for- sale Financial Assets			Cash Flow Hedges Reserve			Total
Cumulative (gain)/loss reclassified to profit or loss upon impairment of available-for-sale financial assets	$	—		$	2,449,990		$	—		$	2,449,990
Share of other comprehensive income of associates and joint venture		28,517			(8,130	)		—			20,387
Income tax effect		—			(308,929	)		—			(308,929	)

Balance, end of period	$	(7,830,884	)	$	334,679		$	(28	)	$	(7,496,233	)

(Concluded)

The exchange differences arising from the 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 hedge instrument. 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 gain or loss arising on changes in fair value of the hedging instruments that are recognized and accumulated in cash flow hedges reserve will be reclassified to profit or loss only when the hedge transaction affects profit or loss.

Noncontrolling interests


	Six Months Ended June 30
	2013			2012
Balance, beginning of period	$	2,543,226		$	2,436,649
Share of noncontrolling interests
Net loss		(87,555	)		(152,421	)
Changes in fair value of hedging instruments for cash flow hedges		—			(10	)
Changes in fair value of hedging instruments for cash flow hedges reclassified to profit or loss		—			108
Adjustments arising from changes in percentage of ownership in subsidiaries		(66,928	)		(29,976	)
Changes in fair value of available-for-sale financial assets		1,519			2,406
Cumulative gain/loss reclassified to profit or loss upon disposal of available-for-sale financial assets		(3,020	)		(4,083	)

(Continued)

- 32 -


	Six Months Ended June 30
	2013			2012
Share of other comprehensive income of associates and joint venture	$	223		$	—
The proportionate share of other comprehensive income/losses reclassified to profit or loss upon partial disposal of associates		1			—
Stock option compensation cost of subsidiary		5,312			—
Foreign currency translation reserve		1,162			38,154
Increase in noncontrolling interests		203,729			288,458
Effect of deconsolidation of subsidiary		(2,273,153	)		—

Balance, end of period	$	324,516		$	2,579,285

(Concluded)

25.

SHARE-BASED PAYMENT

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

The Company elected to take the optional exemption from applying IFRS 2 retrospectively for the shared-based payment transactions granted and vested before January 1, 2012. The plans are described as follows:

TSMC’s Employee Stock Option Plans, consisting of the TSMC 2004 Plan, TSMC 2003 Plan and TSMC 2002 Plan, were approved by the Securities and Futures Bureau (SFB) on January 6, 2005, October 29, 2003 and June 25, 2002, respectively. The maximum number of options authorized to be granted under the TSMC 2004 Plan, TSMC 2003 Plan and TSMC 2002 Plan was 11,000 thousand, 120,000 thousand and 100,000 thousand, respectively, with each option eligible to subscribe for one common share of TSMC when exercised. The options may be granted to qualified employees of TSMC or any of its domestic or foreign subsidiaries, in which TSMC’s shareholding with voting rights, directly or indirectly, is more than fifty percent (50%). The options of all the plans are valid for ten years and exercisable at certain percentages subsequent to the second anniversary of the grant date. Under the terms of the plans, the options are granted at an exercise price equal to the closing price of TSMC’s common shares listed on the TWSE on the grant date.

Stock options of the plans that had never been granted or had been granted but subsequently canceled had expired as of June 30, 2013.

Information about TSMC’s outstanding options for the six months ended June 30, 2013 and 2012 was as follows:


	Number of Options (In Thousands)			Weighted- average Exercise Price (NT$)
Six months ended June 30, 2013
Balance, beginning of period		5,945		$	34.6
Options exercised		(3,870	)		28.5

Balance, end of period		2,075			46.0

(Continued)

- 33 -


	Number of Options (In Thousands)			Weighted- average Exercise Price (NT$)
Six months ended June 30, 2012
Balance, beginning of period		14,293		$	32.1
Options exercised		(4,487	)		31.1

Balance, end of period		9,806			32.6

(Concluded)

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

Information about TSMC’s outstanding options was as follows:


June 30, 2013		December 31, 2012
	Weighted-average		Weighted-average
Range of Exercise Price	Remaining Contractual Life	Range of Exercise Price	Remaining Contractual Life
(NT$)	(Years)	(NT$)	(Years)
$38.0-$50.1	1.6	$20.2-$28.3	0.4
		$38.0-$50.1	2.0

June 30, 2012		January 1, 2012
	Weighted-average		Weighted-average
Range of Exercise Price	Remaining Contractual Life	Range of Exercise Price	Remaining Contractual Life
(NT$)	(Years)	(NT$)	(Years)
$20.9-$29.3	0.8	$20.9-$29.3	1.2
$38.0-$50.1	2.5	$38.0-$50.1	2.9

As of June 30, 2013, all of the above outstanding options were exercisable.

Application of IFRS 2

The Company applied IFRS 2 for the following plans as the shared-based payment transactions were granted and vested on or after January 1, 2012. The plans are described as follows:

The Board of Directors of TSMC SSL approved on December 18, 2012 and November 21, 2011 the issuance of new shares for cash and allocated 17,000 thousand shares and 17,175 thousand shares for 2013 and 2012 stock option plan, respectively, for their employees to subscribe to, according to the Company Law. The aforementioned shares were fully vested on the grant date.

- 34 -

Information about TSMC SSL’s employee stock options related to the aforementioned new shares issued was as follows:


				Weighted-
	Number of			average
	Options			Exercise Price
	(In Thousands)			(NT$)
Six months ended June 30, 2013
Balance, beginning of period		—		$	—
Options granted		17,000			10.0
Options exercised		(17,000	)		10.0

Balance, end of period		—			—

Six months ended June 30, 2012
Balance, beginning of period		—		$	—
Options granted		17,175			10.0
Options exercised		(17,175	)		10.0

Balance, end of period		—			—

The grant dates of aforementioned stock options were April 10, 2013 and January 9, 2012, respectively. TSMC SSL used the Black-Scholes model to determine the fair value of the options. The valuation assumptions were as follows:


	2013 Stock Option Plan			2012 Stock Option Plan
Valuation assumptions:
Stock price on grant date (NT$/share)	$	4.6		$	8.9
Exercise price (NT$/share)	$	10.0		$	10.0
Expected volatility		51.68	%		40.32	%
Expected life		31 days			40 days
Risk free interest rate		0.60	%		0.76	%

The stock price on grant date was determined based on the cost approach. The expected volatility was calculated using the historical rate of return based on the TWSE Optoelectronic Index.

The fair value of the aforementioned stock option was close to nil, and accordingly, no compensation cost was recognized.

The Board of Directors of TSMC Solar approved on November 21, 2011 the issuance of new shares for cash and allocated 12,341 thousand shares for their employees to subscribe to, according to the Company Law. The aforementioned shares were fully vested on the grant date.

- 35 -

Information about TSMC Solar’s employee stock options related to the aforementioned new shares issued was as follows:


				Weighted-
	Number of			average
	Options			Exercise Price
	(In Thousands)			(NT$)
Six months ended June 30, 2012
Balance, beginning of period		—		$	—
Options granted		12,341			10.0
Options exercised		(12,341	)		10.0

Balance, end of period		—			—

The grant date of aforementioned stock options was January 9, 2012. TSMC Solar used the Black-Scholes model to determine the fair value of the options. The valuation assumptions were as follows:


Valuation assumptions:
Stock price on grant date (NT$/share)	$	9.0
Exercise price (NT$/share)	$	10.0
Expected volatility		40.32	%
Expected life		40 days
Risk free interest rate		0.76	%

The stock price on grant date was determined based on the cost approach. The expected volatility was calculated using the historical rate of return based on the TWSE Optoelectronic Index.

The fair value of the aforementioned stock option was close to nil, and accordingly, no compensation cost was recognized.

26.

NET REVENUE

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


	Three Months Ended June 30				Six Months Ended June 30
	2013		2012		2013		2012
Net revenue from the sale of goods	$	155,758,012	$	128,060,828	$	288,390,575	$	233,568,503
Net revenue from the royalties		128,308		125,503		250,741		232,659

	$	155,886,320	$	128,186,331	$	288,641,316	$	233,801,162

- 36 -

27.

OTHER OPERATING INCOME AND EXPENSES, NET


	Three Months Ended June 30						Six Months Ended June 30
	2013			2012			2013			2012
Income (expenses) of rental assets
Rental income	$	3,572		$	249		$	7,255		$	503
Depreciation of rental assets		(6,222	)		(1,433	)		(12,677	)		(3,789	)

		(2,650	)		(1,184	)		(5,422	)		(3,286	)
Gain (loss) on disposal of property, plant and equipment and intangible assets, net		655			(2,631	)		29,365			(4,126	)
Reversal of impairment loss/(impairment loss) on property, plant and equipment		—			19,989			—			(422,323	)
Settlement income from receiving equity securities		1,025			642			9,590			642

	$	(970	)	$	16,816		$	33,533		$	(429,093	)

28.

OTHER INCOME


	Three Months Ended June 30				Six Months Ended June 30
	2013		2012		2013		2012
Interest income
Bank deposits	$	499,423	$	405,789	$	833,500	$	867,890
Available-for-sale financial assets		1,480		1,509		3,000		2,986
Held-to-maturity financial assets		5,469		33,198		16,193		70,856

		506,372		440,496		852,693		941,732
Dividend income		502,692		69,945		502,692		69,945

	$	1,009,064	$	510,441	$	1,355,385	$	1,011,677

29.

FINANCE COSTS


	Three Months Ended June 30					Six Months Ended June 30
	2013		2012			2013		2012
Interest expense
Corporate bonds	$	593,187	$	125,112		$	1,034,881	$	266,534
Bank loans		29,682		58,735			72,120		113,673
Finance leases		4,909		16,545			9,697		40,596
Others		7,562		142			12,640		498

		635,340		200,534			1,129,338		421,301
Loss reclassified to profit or loss arising from effective portion for cash flow hedges		—		82			—		180
Capitalized interest		—		(3,268	)		—		(6,442	)

	$	635,340	$	197,348		$	1,129,338	$	415,039

- 37 -

30.

OTHER GAINS AND LOSSES


	Three Months Ended June 30						Six Months Ended June 30
	2013			2012			2013			2012
Gain on disposal of financial assets, net
Available-for-sale financial assets	$	172,398		$	149,246		$	990,713		$	231,622
Financial assets carried at cost		2,468			142,894			4,573			134,109
Gain on deconsolidation of subsidiary		293,578			—			293,578			—
Settlement income		451,050			448,275			451,050			448,275
Other gains		94,023			255,191			186,610			322,229
Net gain/(loss) on financial instruments at FVTPL
Held for trading		(408,731	)		55,268			(150,294	)		(189,737	)
Impairment loss of financial assets
Available-for-sale financial assets		—			(2,677,529	)		—			(2,677,529	)
Financial assets carried at cost		(45,716	)		(66,537	)		(45,716	)		(70,927	)
Fair value hedges
Loss from hedging instruments		(2,587,357	)		—			(1,937,366	)		—
Gain arising from changes in fair value of available-for-sale financial assets in hedge effective portion		2,416,999			—			1,657,824			—
Other losses		(75,341	)		(74,496	)		(131,258	)		(145,481	)

	$	313,371		$	(1,767,688	)	$	1,319,714		$	(1,947,439	)

31.

INCOME TAX

Income tax expense recognized in profit or loss

Income tax expense consisted of the following:


	Three Months Ended June 30					Six Months Ended June 30
	2013			2012		2013			2012
Current income tax expense (benefit)
Current tax expense recognized for the current period	$	6,030,509		$	3,559,326	$	11,018,835		$	6,430,572
Income tax adjustments on prior years		(634,420	)		48,049		(1,044,163	)		48,049
Other income tax adjustments		(16,082	)		4,152		(12,284	)		38,284

		5,380,007			3,611,527		9,962,388			6,516,905

(Continued)

- 38 -


	Three Months Ended June 30						Six Months Ended June 30
	2013			2012			2013			2012
Deferred income tax expense (benefit)
Temporary differences	$	32,657		$	(870,060	)	$	1,041,130		$	(723,392	)
Income tax credits and loss carryforward		2,920,986			1,415,848			3,542,503			653,920
Effect of deconsolidation of subsidiary		(78,474	)		—			(78,474	)		—

		2,875,169			545,788			4,505,159			(69,472	)

Income tax expense recognized in profit or loss	$	8,255,176		$	4,157,315		$	14,467,547		$	6,447,433


											(Concluded	)

Income tax expense recognized in other comprehensive income


	Three Months Ended June 30				Six Months Ended June 30
	2013		2012		2013			2012
Deferred income tax expense (benefit)
Related to unrealized gain/loss on available-for-sale financial assets	$	29	$	308,777	$	(43,210	)	$	308,929

Integrated income tax information


	June 30, 2013		December 31, 2012		June 30, 2012		January 1, 2012
Balance of the Imputation
Credit Account—TSMC	$	22,093,263	$	8,130,060	$	14,283,587	$	4,003,228

The actual creditable ratio for distribution of TSMC’s earnings of 2011 was 6.69%.

The estimated creditable ratio for distribution of TSMC’s 2012 earnings was approximately 7.75%, which is calculated based on draft amendment of the Income Tax Law not yet passed by the Legislative Yuan of the Republic of China as of the date that the consolidated financial statements were authorized for issue. The imputation credit allocated to shareholders is based on its balance as of the date of the dividend distribution. The estimated creditable ratio may change when the actual distribution of the imputation credit is made.

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

Income tax examination

The tax authorities have examined income tax returns of TSMC through 2010. All investment tax credit adjustments assessed by the tax authorities have been recognized accordingly.

- 39 -

32.

EARNINGS PER SHARE


	Three Months Ended June 30				Six Months Ended June 30
	2013		2012		2013		2012
Basic EPS	$	2.00	$	1.61	$	3.52	$	2.91

Diluted EPS	$	2.00	$	1.61	$	3.52	$	2.91

EPS is computed as follows:


	Amounts (Numerator)		Number of Shares (Denominator) (In Thousands)		EPS (NT$)
Three months ended June 30, 2013
Basic EPS
Net income available to common shareholders of the parent	$	51,807,725		25,928,299	$	2.00

Effect of dilutive potential common shares		—		1,192

Diluted EPS
Net income available to common shareholders of the parent (including effect of dilutive potential common shares)	$	51,807,725		25,929,491	$	2.00

Three months ended June 30, 2012
Basic EPS
Net income available to common shareholders of the parent	$	41,843,339		25,920,703	$	1.61

Effect of dilutive potential common shares		—		5,879

Diluted EPS
Net income available to common shareholders of the parent (including effect of dilutive potential common shares)	$	41,843,339		25,926,582	$	1.61

Six months ended June 30, 2013
Basic EPS
Net income available to common shareholders of the parent	$	91,384,601		25,927,130	$	3.52

Effect of dilutive potential common shares		—		2,340

Diluted EPS
Net income available to common shareholders of the parent (including effect of dilutive potential common shares)	$	91,384,601		25,929,470	$	3.52

(Continued)

- 40 -


	Amounts (Numerator)		Number of Shares (Denominator) (In Thousands)		EPS (NT$)
Six months ended June 30, 2012
Basic EPS
Net income available to common shareholders of the parent	$	75,334,973		25,919,175	$	2.91

Effect of dilutive potential common shares		—		7,329

Diluted EPS
Net income available to common shareholders of the parent (including effect of dilutive potential common shares)	$	75,334,973		25,926,504	$	2.91

(Concluded)

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

33.

ADDITIONAL INFORMATION OF EXPENSES BY NATURE

Net income included the following items:


	Three Months Ended June 30				Six Months Ended June 30
	2013		2012		2013		2012
a. Depreciation of property, plant and equipment
Recognized in cost of revenue	$	34,427,466	$	29,266,334	$	67,470,119	$	54,111,631
Recognized in operating expenses		3,120,876		2,632,364		6,036,445		5,261,932
Recognized in other operating income and expenses		6,222		1,433		12,677		3,789

	$	37,554,564	$	31,900,131	$	73,519,241	$	59,377,352

b. Amortization of intangible assets
Recognized in cost of revenue	$	281,530	$	356,805	$	576,662	$	680,233
Recognized in operating expenses		258,547		203,895		494,928		408,653

	$	540,077	$	560,700	$	1,071,590	$	1,088,886

(Continued)

- 41 -


	Three Months Ended June 30				Six Months Ended June 30
	2013		2012		2013		2012
c. Research and development costs expensed as incurred	$	11,941,871	$	10,068,390	$	22,592,856	$	19,226,242

d. Employee benefits expenses
Post-employment benefits (Note 23)
Defined contribution plans	$	403,779	$	336,114	$	788,237	$	666,655
Defined benefit plans		60,697		54,669		121,387		109,328

		464,476		390,783		909,624		775,983
Share-based payments
Equity-settled share-based payments		2,611		397		5,312		397
Other employee benefits		17,278,663		14,886,220		32,294,666		27,952,862

	$	17,745,750	$	15,277,400	$	33,209,602	$	28,729,242

Employee benefits expense summarized by function
Recognized in cost of revenue	$	10,576,504	$	9,018,651	$	19,925,928	$	16,499,499
Recognized in operating expenses		7,169,246		6,258,749		13,283,674		12,229,743

	$	17,745,750	$	15,277,400	$	33,209,602	$	28,729,242

(Concluded)

34.

DECONSOLIDATION OF SUBSIDIARY

Starting June 2013, the Company has no power to govern the financial and operating policies of Xintec for the loss of power to cast the majority of votes at meetings of the Board of Directors; accordingly, the Company derecognized related assets, liabilities and noncontrolling interests of Xintec.

Consideration received

The Company did not receive any consideration in the deconsolidation of Xintec.

Analysis of assets and liabilities over which the Company lost control


	June 30, 2013
Current assets
Cash and cash equivalents	$	979,910
Accounts receivable		564,364
Inventories		213,133
Others		110,766

(Continued)

- 42 -


	June 30, 2013
Noncurrent assets
Property, plant and equipment	$	5,595,040
Others		164,311
Current liabilities
Accounts payable		(1,571,289	)
Others		(291,715	)
Noncurrent liabilities
Loans		(1,940,625	)
Others		(27,472	)

Net assets deconsolidated	$	3,796,423

(Concluded)

Gain on deconsolidation of subsidiary


	Six Months Ended June 30, 2013
Fair value of interest retained	$	1,816,848

Less: Carrying amount of interest retained
Net assets deconsolidated		3,796,423
Noncontrolling interests		(2,273,153	)

		1,523,270

Gain on deconsolidation of subsidiary	$	293,578

Gain on deconsolidation of subsidiary was included in other gains and losses for the six months ended June 30, 2013.

Net cash outflow arising from deconsolidation of the subsidiary


	Six Months Ended June 30, 2013
The balance of cash and cash equivalents deconsolidated	$	979,910

35.

CAPITAL MANAGEMENT

The Company requires significant amounts of capital to build and expand its production facilities and equipment. In consideration of the industry dynamics, the Company manages its capital in a manner to ensure that it has sufficient and necessary financial resources to fund its working capital needs, capital asset purchases, research and development activities, dividend payments, debt service requirements and other business requirements associated with its existing operations over the next 12 months.

- 43 -

36.

FINANCIAL INSTRUMENTS

Categories of financial instruments


	June 30, 2013		December 31, 2012		June 30, 2012		January 1, 2012
Financial assets
FVTPL
Held for trading derivatives	$	20,010	$	39,554	$	23,734	$	15,360
Available-for-sale financial assets (Note)		54,319,453		44,766,957		6,561,060		7,623,775
Held-to-maturity financial assets		700,576		5,056,973		8,126,699		9,068,847
Loans and receivables
Cash and cash equivalents		225,832,646		143,410,588		178,440,559		143,472,277
Notes and accounts receivables (including related parties)		80,340,331		58,131,397		61,447,677		46,016,052
Other receivables		3,804,679		1,307,473		2,219,280		1,403,694
Refundable deposits		2,412,290		2,426,712		4,296,083		4,518,863

	$	367,429,985	$	255,139,654	$	261,115,092	$	212,118,868

Financial liabilities
FVTPL
Held for trading derivatives	$	136,515	$	15,625	$	35,166	$	13,742
Derivative instruments in designated hedge accounting relationships		1,813,291		—		69		232
Amortized cost
Short-term loans		31,466,400		34,714,929		30,772,585		25,926,528
Accounts payable (including related parties)		15,202,734		15,239,042		15,436,960		11,859,008
Payables to contactors and equipment suppliers		60,883,767		44,831,798		45,039,813		35,540,526
Cash dividends payable		77,773,307		—		77,762,637		—
Accrued expenses and other current liabilities		12,933,671		9,316,232		10,803,925		7,796,538
Bonds payable		169,801,262		80,000,000		35,000,000		22,500,000
Long-term bank loans		—		1,487,500		1,650,000		1,650,000
Other long-term payables		913,102		967,485		2,039,819		3,399,855
Guarantee deposits		166,112		203,890		253,346		443,983

	$	371,090,161	$	186,776,501	$	218,794,320	$	109,130,412

Note: Including financial assets carried at cost.

Financial risk management objectives

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

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

- 44 -

Market risk

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

Foreign currency risk

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

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

The Company’s sensitivity analysis to foreign currency risk mainly focuses on the foreign currency monetary items at the end of the reporting period. Assuming an unfavorable 10% movement in the levels of foreign exchanges against the New Taiwan dollar, the net income for the six months ended June 30, 2013 and 2012 would have decreased by NT$331,962 thousand and NT$504,452 thousand, respectively, after taking into consideration of the hedge contracts and the hedged items.

Interest rate risk

The Company is exposed to interest rate risk arising from borrowing at both fixed and floating interest rates. All of the Company’s long-term bonds have fixed interest rates and are measured at amortized cost. As such, changes in interest rates would not affect the future cash flows. On the other hand, because interest rates on the Company’s long-term bank loans are floating, changes in interest rates would affect the future cash flows but not the fair value. To reduce the cash flow risk caused by floating interest rates, the Company utilized an interest rate swap contract to partially hedge its exposure. As of June 30, 2013, the long-term bank loans bearing floating interest rates were amounted to nil as a result of deconsolidation of a subsidiary.

Assuming the amount of floating interest rate bank loans at the end of the reporting period had been outstanding for the entire period and all other variables were held constant, a hypothetical increase in interest rates of 100 basis point (1%) would have resulted in an increase in the interest expense, net of tax, by approximately NT$6,590 thousand for the six months ended June 30, 2012.

Other price risk

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

Assuming a hypothetical decrease of 5% in equity prices of the equity investments at the end of the reporting period, the net income for the six months ended June 30, 2013 and 2012 would have been unaffected as they were classified as available-for-sale; however, the other comprehensive income for the six months ended June 30, 2013 and 2012 would have decreased by NT$1,879,083 thousand and NT$308,146 thousand, respectively.

- 45 -

Credit risk management

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

Business related credit risk

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

As of June 30, 2013, December 31, 2012, June 30, 2012 and January 1, 2012, the Company’s ten largest customers accounted for 69%, 68%, 62% and 64% of accounts receivable, respectively. The Company believes the concentration of credit risk is insignificant for the remaining accounts receivable.

Financial credit risk

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

Liquidity risk management

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

As of June 30, 2013, December 31, 2012, June 30, 2012 and January 1, 2012, the unused of financing facilities of the Company amounted to NT$55,098,102 thousand, NT$53,422,331 thousand, NT$61,928,356 thousand and NT$63,708,014 thousand, respectively.

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


	Less Than 1 Year		2-3 Years		4-5 Years		5+ Years		Total
June 30, 2013
Non-derivative financial liabilities
Short-term loans	$	31,470,473	$	—	$	—	$	—	$	31,470,473
Accounts payable (including related parties)		15,202,734		—		—		—		15,202,734
Payables to contactors and equipment suppliers		60,883,767		—		—		—		60,883,767
Cash dividends payable		77,773,307		—		—		—		77,773,307
Accrued expenses and other current liabilities		12,933,671		—		—		—		12,933,671

(Continued)

- 46 -


	Less Than 1 Year			2-3 Years			4-5 Years		5+ Years		Total
Bonds payable	$	2,368,241		$	15,201,201		$	97,982,526	$	66,672,284	$	182,224,252
Other long-term payables		877,102			36,000			—		—		913,102
Obligations under finance leases		28,144			56,288			56,289		731,168		871,889
Guarantee deposits		—			166,112			—		—		166,112

		201,537,439			15,459,601			98,038,815		67,403,452		382,439,307

Derivative financial instruments
Forward exchange contracts
Outflows		26,579,381			—			—		—		26,579,381
Inflows		(26,487,571	)		—			—		—		(26,487,571	)

		91,810			—			—		—		91,810

Cross currency swap contracts
Outflows		1,200,176			—			—		—		1,200,176
Inflows		(1,201,117	)		—			—		—		(1,201,117	)

		(941	)		—			—		—		(941	)

Stock forward contracts
Outflows		—			14,753,429			—		—		14,753,429
Inflows		—			(14,753,429	)		—		—		(14,753,429	)

		—			—			—		—		—

	$	201,628,308		$	15,459,601		$	98,038,815	$	67,403,452	$	382,530,176

December 31, 2012
Non-derivative financial liabilities
Short-term loans	$	34,721,003		$	—		$	—	$	—	$	34,721,003
Accounts payable (including related parties)		15,239,042			—			—		—		15,239,042
Payables to contactors and equipment suppliers		44,831,798			—			—		—		44,831,798
Accrued expenses and other current liabilities		9,316,232			—			—		—		9,316,232
Bonds payable		1,108,150			2,216,300			44,911,191		37,834,474		86,070,115
Long-term bank loans		146,571			745,174			637,580		—		1,529,325
Other long-term payables		913,485			36,000			18,000		—		967,485
Obligations under finance leases		27,042			54,084			54,084		729,566		864,776
Guarantee deposits		—			203,890			—		—		203,890

		106,303,323			3,255,448			45,620,855		38,564,040		193,743,666

Derivative financial instruments
Forward exchange contracts
Outflows		11,030,154			—			—		—		11,030,154
Inflows		(11,059,396	)		—			—		—		(11,059,396	)

		(29,242	)		—			—		—		(29,242	)

Cross currency swap contracts
Outflows		9,068,589			—			—		—		9,068,589
Inflows		(9,068,727	)		—			—		—		(9,068,727	)

		(138	)		—			—		—		(138	)

	$	106,273,943		$	3,255,448		$	45,620,855	$	38,564,040	$	193,714,286

June 30, 2012
Non-derivative financial liabilities
Short-term loans	$	30,779,995		$	—		$	—	$	—	$	30,779,995
Accounts payable (including related parties)		15,436,960			—			—		—		15,436,960
Payables to contactors and equipment suppliers		45,039,813			—			—		—		45,039,813
Cash dividends payable		77,762,637			—			—		—		77,762,637
Accrued expenses and other current liabilities		10,803,925			—			—		—		10,803,925
Bonds payable		500,450			1,000,900			21,329,148		14,808,455		37,638,953
Long-term bank loans		143,196			773,982			782,175		—		1,699,353
Other long-term payables		1,926,049			95,770			18,000		—		2,039,819
Obligations under finance leases		27,448			54,896			54,896		740,525		877,765
Guarantee deposits		—			253,346			—		—		253,346

		182,420,473			2,178,894			22,184,219		15,548,980		222,332,566

(Continued)

- 47 -


	Less Than 1 Year			2-3 Years		4-5 Years		5+ Years		Total
Derivative financial instruments
Forward exchange contracts
Outflows	$	16,190,099		$	—	$	—	$	—	$	16,190,099
Inflows		(16,228,937	)		—		—		—		(16,228,937	)

		(38,838	)		—		—		—		(38,838	)

Cross currency swap contracts
Outflows		756,117			—		—		—		756,117
Inflows		(755,497	)		—		—		—		(755,497	)

		620			—		—		—		620

Interest rate swap contracts
Outflows		197			—		—		—		197
Inflows		(124	)		—		—		—		(124	)

		73			—		—		—		73

	$	182,382,328		$	2,178,894	$	22,184,219	$	15,548,980	$	222,294,421

January 1, 2012
Non-derivative financial liabilities
Short-term loans	$	25,933,177		$	—	$	—	$	—	$	25,933,177
Accounts payable (including related parties)		11,859,008			—		—		—		11,859,008
Payables to contactors and equipment suppliers		35,540,526			—		—		—		35,540,526
Accrued expenses and other current liabilities		7,796,538			—		—		—		7,796,538
Bonds payable		4,775,081			538,500		11,000,933		7,713,258		24,027,772
Long-term bank loans		79,558			778,190		849,021		—		1,706,769
Other long-term payables		3,399,855			—		—		—		3,399,855
Obligations under finance leases		—			167,472		55,824		780,962		1,004,258
Guarantee deposits		—			443,983		—		—		443,983

		89,383,743			1,928,145		11,905,778		8,494,220		111,711,886

Derivative financial instruments
Forward exchange contracts
Outflows		7,736,197			—		—		—		7,736,197
Inflows		(7,726,584	)		—		—		—		(7,726,584	)

		9,613			—		—		—		9,613

Cross currency swap contracts
Outflows		420,431			—		—		—		420,431
Inflows		(420,397	)		—		—		—		(420,397	)

		34			—		—		—		34

Interest rate swap contracts
Outflows		706			—		—		—		706
Inflows		(442	)		—		—		—		(442	)

		264			—		—		—		264

	$	89,393,654		$	1,928,145	$	11,905,778	$	8,494,220	$	111,721,797

(Concluded)

Fair value of financial instruments

Fair value of financial instruments carried at amortized cost

Except as detailed in the following table, the Company considers that the carrying amounts of financial assets and financial liabilities recognized in the consolidated financial statements approximate their fair values.


	June 30, 2013				December 31, 2012				June 30, 2012				January 1, 2012
	Carrying Amount		Fair Value		Carrying Amount		Fair Value		Carrying Amount		Fair Value		Carrying Amount		Fair Value
Financial assets
Held-to-maturity financial assets
Corporate bonds	$	700,576	$	704,777	$	5,056,973	$	5,066,363	$	7,678,424	$	7,700,578	$	8,614,527	$	8,674,016
Government bonds		—		—		—		—		448,275		448,329		454,320		454,047
Financial liabilities
Measured at amortized cost
Bonds payable		169,801,262		168,643,055		80,000,000		80,343,413		35,000,000		35,278,868		22,500,000		22,597,115

- 48 -

Fair value measurements recognized in the consolidated statement of financial position

The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable:

•

Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities;

•

Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

•

Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).


	June 30, 2013
	Level 1		Level 2		Level 3		Total
Financial assets at FVTPL
Derivative financial instruments	$	—	$	20,010	$	—	$	20,010

Available-for-sale financial assets
Publicly traded stocks	$	50,643,339	$	—	$	—	$	50,643,339
Money market funds		8,417		—		—		8,417

	$	50,651,756	$	—	$	—	$	50,651,756

Financial liabilities at FVTPL
Derivative financial instruments	$	—	$	136,515	$	—	$	136,515

Hedging derivative financial liabilities
Stock forward contract	$	—	$	1,813,291	$	—	$	1,813,291


	December 31, 2012
	Level 1		Level 2		Level 3		Total
Financial assets at FVTPL
Derivative financial instruments	$	—	$	39,554	$	—	$	39,554

Available-for-sale financial assets
Publicly traded stocks	$	41,160,437	$	—	$	—	$	41,160,437
Money market funds		1,443		—		—		1,443

	$	41,161,880	$	—	$	—	$	41,161,880

Financial liabilities at FVTPL
Derivative financial instruments	$	—	$	15,625	$	—	$	15,625

- 49 -


	June 30, 2012
	Level 1		Level 2		Level 3		Total
Financial assets at FVTPL
Derivative financial instruments	$	—	$	23,734	$	—	$	23,734

Available-for-sale financial assets
Publicly traded stocks	$	2,476,537	$	—	$	—	$	2,476,537
Money market funds		509		—		—		509

	$	2,477,046	$	—	$	—	$	2,477,046

Financial liabilities at FVTPL
Derivative financial instruments	$	—	$	35,166	$	—	$	35,166

Hedging derivative financial liabilities
Interest rate swap contract	$	—	$	69	$	—	$	69


	January 1, 2012
	Level 1		Level 2		Level 3		Total
Financial assets at FVTPL
Derivative financial instruments	$	—	$	15,360	$	—	$	15,360

Available-for-sale financial assets
Publicly traded stocks	$	3,306,248	$	—	$	—	$	3,306,248
Money market funds		2,522		—		—		2,522

	$	3,308,770	$	—	$	—	$	3,308,770

Financial liabilities at FVTPL
Derivative financial instruments	$	—	$	13,742	$	—	$	13,742

Hedging derivative financial liabilities
Interest rate swap contract	$	—	$	232	$	—	$	232

There were no transfers between Level 1 and 2 for the six months ended June 30, 2013 and 2012, respectively.

There were no purchases and disposals for assets on Level 3 for the six months ended June 30, 2013 and 2012, respectively.

Valuation techniques and assumptions used in fair value measurement

The fair values of financial assets and financial liabilities are determined as follows:

•

The fair values of financial assets and financial liabilities with standard terms and conditions and traded on active liquid markets are determined with reference to quoted market prices (includes publicly traded stocks and money market funds).

•

Forward exchange contracts and cross currency swap contracts are measured using quoted forward exchange rates and yield curves derived from quoted interest rates matching maturities of the contracts; interest rate swaps are measured at the present value of future cash flows estimated and discounted based on the applicable yield curves derived from quoted interest rates; and stock forward contracts are measured at the difference between the present value of stock forward price discounted based on the applicable yield curve derived from quoted interest rates and the stock spot price.

- 50 -

•

The fair values of other financial assets and financial liabilities are determined in accordance with generally accepted pricing models based on discounted cash flow analysis.

37.

RELATED PARTY TRANSACTIONS

Intercompany balances and transactions between TSMC and its subsidiaries, which are related parties of TSMC, have been eliminated upon consolidation; therefore those items are not disclosed in this note. The following is a summary of transactions between the Company and other related parties:

Operating transactions


	Net Revenue from Sale of Goods
	Three Months Ended June 30				Six Months Ended June 30
	2013		2012		2013		2012
Associates	$	932,700	$	1,489,336	$	1,617,486	$	2,636,030
Joint venture		311		1,123		839		2,305

	$	933,011	$	1,490,459	$	1,618,325	$	2,638,335


	Net Revenue from Royalties
	Three Months Ended June 30				Six Months Ended June 30
	2013		2012		2013		2012
Associates	$	127,829	$	120,096	$	248,245	$	227,251


	Purchases
	Three Months Ended June 30				Six Months Ended June 30
	2013		2012		2013		2012
Associates	$	2,173,451	$	2,158,983	$	4,270,005	$	3,764,529


	Manufacturing Expenses
	Three Months Ended June 30				Six Months Ended June 30
	2013		2012		2013		2012
Associates	$	6,380	$	1,295	$	12,752	$	1,295
Joint venture		2,645		4,901		3,502		9,604

	$	9,025	$	6,196	$	16,254	$	10,899


	Research and Development Expenses
	Three Months Ended June 30				Six Months Ended June 30
	2013		2012		2013		2012
Joint venture	$	2,267	$	2,647	$	3,458	$	4,461

- 51 -


	Sales of Machinery and Equipment
	Three Months Ended June 30					Six Months Ended June 30
	2013			2012		2013		2012
Associates	$	—		$	—	$	11,418	$	—
Joint venture		—			—		—		9,000

	$	—		$	—	$	11,418	$	9,000


	Gains (Losses) from Sales of Machinery and Equipment, Net
	Three Months Ended June 30					Six Months Ended June 30
	2013			2012		2013		2012
Associates	$	(398	)	$	—	$	2,565	$	—
Joint venture		58			58		116		97

	$	(340	)	$	58	$	2,681	$	97


	Purchase of Machinery and Equipment and Intangible Assets
	Three Months Ended June 30					Six Months Ended June 30
	2013			2012		2013		2012
Associates	$	11,835		$	4,137	$	11,835	$	4,137
Joint venture		—			1,224		—		1,224

	$	11,835		$	5,361	$	11,835	$	5,361


	Non-operating Income
	Three Months Ended June 30					Six Months Ended June 30
	2013			2012		2013		2012
Associates	$	—		$	5,116	$	—	$	5,116


The following balances were outstanding at the end of reporting period:

	Receivables from Related Parties
	June 30, 2013			December 31, 2012		June 30, 2012		January 1, 2012
Associates	$	597,459		$	353,652	$	836,578	$	185,552
Joint venture		164			159		667		212

	$	597,623		$	353,811	$	837,245	$	185,764


	Other Receivables from Related Parties
	June 30, 2013			December 31, 2012		June 30, 2012		January 1, 2012
Associates	$	2,433,325		$	185,550	$	570,070	$	121,767
Joint venture		—			—		411,193		525

	$	2,433,325		$	185,550	$	981,263	$	122,292

- 52 -


	Refundable Deposits
	June 30, 2013			December 31, 2012			June 30, 2012		January 1, 2012
Associates	$	5,813		$	5,813		$	5,813	$	—
Joint venture		—			4			4		—

	$	5,813		$	5,817		$	5,817	$	—


	Payables to Related Parties
	June 30, 2013			December 31, 2012			June 30, 2012		January 1, 2012
Associates	$	808,388		$	746,532		$	1,305,553	$	1,325,791
Joint venture		2,807			2,081			4,413		2,730

	$	811,195		$	748,613		$	1,309,966	$	1,328,521


	Deferred Gains (Losses) from Disposal of Machinery and Equipment
	June 30, 2013			December 31, 2012			June 30, 2012		January 1, 2012
Associates	$	(10,320	)	$	(7,806	)	$	—	$	—
Joint venture		832			948			1,064		—

	$	(9,488	)	$	(6,858	)	$	1,064	$	—

The sales prices and payment terms to related parties were not significantly different from those of sales to third parties. For other related party transactions, price and terms were determined in accordance with mutual agreements.

The Company’s other receivables from related parties was mainly dividend income.

The Company deferred the disposal gain/loss (classified under other noncurrent assets and other noncurrent liabilities) derived from sales of property, plant and equipment to related parties (transactions with associates and joint venture), and then recognized such gain/loss over the depreciable lives of the disposed assets.

Compensation of key management personnel:

The compensation to directors and other key management personnel were as follows:


	Three Months Ended June 30				Six Months Ended June 30
	2013		2012		2013		2012
Short-term employee benefits	$	463,386	$	494,937	$	630,966	$	669,922
Post-employment benefits		1,177		903		2,348		1,764

	$	464,563	$	495,840	$	633,314	$	671,686

The compensation to directors and other key management personnel were determined by the Compensation Committee of TSMC in accordance with the individual performance and the market trends.

- 53 -

38.

PLEDGED ASSETS

The Company provided certificate of deposits recorded in other financial assets as collateral mainly for building lease agreements. As of June 30, 2013, December 31, 2012, June 30, 2012 and January 1, 2012, the aforementioned other financial assets amounted to NT$120,987 thousand, NT$119,710 thousand, NT$120,523 thousand and NT$121,140 thousand, respectively.

39.

SIGNIFICANT OPERATING LEASE ARRANGEMENTS

The Company leases several parcels of land, factory and office premises from the Science Park Administration and entered into lease agreements for its office premises and certain office equipment located in the United States, Europe, Japan, Shanghai and Taiwan. These operating leases expire between September 2013 and December 2032 and can be renewed upon expiration.

The Company expensed the lease payments as follows:


	Three Months Ended June 30				Six Months Ended June 30
	2013		2012		2013		2012
Minimum lease payments	$	267,349	$	166,326	$	467,482	$	331,112

Future minimum lease payments under the above non-cancellable operating leases are as follows:


	June 30, 2013		December 31, 2012		June 30, 2012		January 1, 2012
Not later than 1 year	$	841,055	$	693,758	$	634,571	$	627,882
Later than 1 year and not later than 5 years		3,125,895		2,478,443		2,348,621		2,258,302
Later than 5 years		5,867,588		4,221,524		3,651,028		3,870,728

	$	9,834,538	$	7,393,725	$	6,634,220	$	6,756,912

40.

SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNIZED COMMITMENTS

Significant contingent liabilities and unrecognized commitments of the Company as of the end of the reporting period, excluding those disclosed in other notes, were as follows:

Under a technical cooperation agreement with Industrial Technology Research Institute, the R.O.C. Government or its designee approved by TSMC can use up to 35% of TSMC’s capacity if TSMC’s outstanding commitments to its customers are not prejudiced. The term of this agreement is for five years beginning from January 1, 1987 and is automatically renewed for successive periods of five years unless otherwise terminated by either party with one year prior notice.

Under a Shareholders Agreement entered into with Philips and EDB Investments Pte Ltd. on March 30, 1999, the parties formed a joint venture company, SSMC, which is an integrated circuit foundry in Singapore. TSMC’s equity interest in SSMC was 32%. Nevertheless, Philips parted with its semiconductor company which was renamed as NXP B.V. in September 2006. TSMC and NXP B.V. purchased all the SSMC shares owned by EDB Investments Pte Ltd. pro rata according to the Shareholders Agreement on November 15, 2006. After the purchase, TSMC and NXP B.V. currently own approximately 39% and 61% of the SSMC shares respectively. TSMC and Philips (now NXP B.V.) are required, in the aggregate, to purchase at least 70% of SSMC’s capacity, but TSMC alone is not required to purchase more than 28% of the capacity. If any party defaults on the commitment and the capacity utilization of SSMC fall below a specific percentage of its capacity, the defaulting party is required to compensate SSMC for all related unavoidable costs.

- 54 -

In August 2006, TSMC filed a lawsuit against Semiconductor Manufacturing International Corporation, SMIC (Shanghai) and SMIC Americas (aggregately referred to as “SMIC”) in the Superior Court of California for Alameda County for breach of a 2005 agreement that settled an earlier trade secret misappropriation and patent infringement litigation between the parties, as well as for trade secret misappropriation, seeking injunctive relief and monetary damages. In September 2006, SMIC filed a cross-complaint against TSMC in the same court alleging breach of settlement agreement, implied covenant of good faith and fair dealing. SMIC also filed a civil action against TSMC in November 2006 with the Beijing People’s High Court alleging defamation and breach of good faith. On June 10, 2009, the Beijing People’s High Court ruled in favor of TSMC and dismissed SMIC’s lawsuit. On November 4, 2009, after a two-month trial, a jury in the California action found SMIC to have both breached the 2005 settlement agreement and misappropriated TSMC’s trade secrets. TSMC has subsequently settled both lawsuits with SMIC. Pursuant to the new settlement agreement, the parties have agreed to the entry of a stipulated judgment in favor of TSMC in the California action, and to the dismissal of SMIC’s appeal against the Beijing High Court’s finding in favor of TSMC. Under the new settlement agreement and the related stipulated judgment, SMIC has agreed to make cash payments by installments to TSMC totaling US$200 million, which are in addition to the US$135 million previously paid to TSMC under the 2005 settlement agreement, and, conditional upon relevant government regulatory approvals, to issue to TSMC a total of 1,789,493,218 common shares of Semiconductor Manufacturing International Corporation and a three-year warrant to purchase 695,914,030 common shares (subject to adjustment) of Semiconductor Manufacturing International Corporation at HK$1.30 per share (subject to adjustment). TSMC has acquired the above mentioned common shares in July 2010, which are recorded within available for sale financial assets, and obtained the subsequent cash settlement income in accordance with the agreement. The above mentioned warrant has expired without being exercised in July 2013.

In June 2010, Keranos, LLC. filed a lawsuit in the U.S. District Court for the Eastern District of Texas alleging that TSMC, TSMC North America, and several other leading technology companies infringe three expired U.S. patents. In response, TSMC, TSMC North America, and several co-defendants in the Texas case filed a lawsuit against Keranos in the U.S. District Court for the Northern District of California in November 2010, seeking a judgment declaring that they did not infringe the asserted patents, and that those patents are invalid. These two litigations have been consolidated into a single case in the U.S. District Court for the Eastern District of Texas. The outcome cannot be determined and the Company cannot make a reliable estimate of the contingent liability at this time.

In December 2010, Ziptronix, Inc. filed a complaint in the U.S. District Court for the Northern District of California accusing TSMC, TSMC North America and one other company of infringing several U.S. patents. The outcome cannot be determined and the Company cannot make a reliable estimate of the contingent liability at this time.

TSMC joined the Customer Co-Investment Program of ASML and entered into the investment agreement in August 2012. The agreement includes an investment of EUR837,816 thousand by TSMC Global to acquire 5% of ASML’s equity with a lock-up period of 2.5 years. TSMC Global has acquired the aforementioned equity on October 31, 2012. Both parties also signed the research and development funding agreement and TSMC shall provide EUR276,000 thousand to ASML’s research and development programs from 2013 to 2017.

Amounts available under unused letters of credit as of June 30, 2013, December 31, 2012, June 30, 2012 and January 1, 2012 were NT$89,904 thousand, NT$99,671 thousand, NT$96,002 thousand and NT$263,880 thousand, respectively.

- 55 -

41.

EXCHANGE RATE INFORMATION OF FOREIGN-CURRENCY FINANCIAL ASSETS AND LIABILITIES

The significant financial assets and liabilities denominated in foreign currencies were as follows:


	June 30, 2013				December 31, 2012				June 30, 2012				January 1, 2012
	Foreign Currencies (In Thousands)		Exchange Rate (Note)		Foreign Currencies (In Thousands)		Exchange Rate (Note)		Foreign Currencies (In Thousands)		Exchange Rate (Note)		Foreign Currencies (In Thousands)		Exchange Rate (Note)
Financial assets
Monetary items
USD	$	5,679,233		29.968	$	3,437,165		29.038	$	4,479,936		29.880-29.885	$	3,744,817		30.288
EUR		190,687		39.08		125,973		38.39-38.49		160,421		37.56-37.73		135,857		39.18-39.27
JPY		30,877,478		0.3033		35,734,874		0.3352-0.3364		29,478,683		0.3754-0.3776		37,276,671		0.3897-0.3906
RMB		522,386		4.85		102,995		4.66		334,695		4.73		201,385		4.81
Non-monetary items
USD		1,993,870		29.968		1,611,474		29.038		139,082		29.885		141,498		30.288
HKD		157,296		3.86		492,014		3.75		456,321		3.85		671,060		3.90
Investments accounted for using equity method
USD		318,157		29.968		328,281		29.038		284,093		29.885		294,797		30.288
Financial liabilities
Monetary items
USD		3,757,241		29.968		2,193,343		29.038		2,140,675		29.880-29.885		1,744,746		30.288
EUR		450,177		39.08		247,052		38.39-38.49		174,960		37.56-37.73		111,750		39.18-39.27
JPY		57,660,925		0.3033		43,311,360		0.3352-0.3364		44,485,239		0.3754-0.3776		35,349,169		0.3897-0.3906
RMB		198,447		4.85		205,930		4.66		214,203		4.73		278,877		4.81

Note: Exchange rate represents the number of N.T. dollars for which one foreign currency could be exchanged.

42.

OPERATING SEGMENTS INFORMATION

Operating segments

The Company’s only reportable segment is the foundry segment. The foundry segment engages mainly in the manufacturing, selling, packaging, testing and computer-aided design of integrated circuits and other semiconductor devices and the manufacturing of masks. The Company also had other operating segments that did not exceed the quantitative threshold for separate reporting. These segments mainly engage in the researching, developing, designing, manufacturing and selling of solid state lighting devices and renewable energy and efficiency related technologies and products.

The Company uses the operating profit as the measurement for segment profit and the basis of performance assessment. There was no material differences between the accounting policies of the operating segment and the accounting policies described in Note 4.

Segment sales and operating results


	Foundry		Others			Elimination			Total
Three months ended June 30, 2013
Net revenue from external customers	$	155,802,306	$	84,014		$	—		$	155,886,320
Net revenue from sales among intersegments		—		5,660			(5,660	)		—
Income (loss) from operations		58,289,165		(660,083	)		—			57,629,082
Three months ended June 30, 2012
Net revenue from external customers		128,160,350		25,981			—			128,186,331
Net revenue from sales among intersegments		—		3,478			(3,478	)		—
Income (loss) from operations		47,522,630		(650,542	)		—			46,872,088

(Continued)

- 56 -


	Foundry		Others			Elimination			Total
Six months ended June 30, 2013
Net revenue from external customers	$	288,483,842	$	157,474		$	—		$	288,641,316
Net revenue from sales among intersegments		—		5,898			(5,898	)		—
Income (loss) from operations		103,400,482		(1,343,391	)		—			102,057,091
Six months ended June 30, 2012
Net revenue from external customers		233,729,182		71,980			—			233,801,162
Net revenue from sales among intersegments		—		3,478			(3,478	)		—
Income (loss) from operations		83,180,742		(1,191,341	)		—			81,989,401

(Concluded)

43.

FIRST-TIME ADOPTION OF TAIWAN-IFRSs

Basis of preparation for financial information under Taiwan-IFRSs

The Company prepares consolidated financial statements for the six months ended June 30, 2013 under Taiwan-IFRSs. As the basis of the preparation, the Company not only follows the significant accounting policies stated in Note 4 but also applies IFRS 1.

Exemptions from IFRS 1

IFRS 1 establishes the procedures for the Company’s first consolidated financial statements prepared in accordance with Taiwan-IFRSs. According to IFRS 1, the Company is required to determine the accounting policies under Taiwan-IFRSs and retrospectively apply those accounting policies in its opening balance sheet at the date of transition to Taiwan-IFRSs; except for optional exemptions and mandatory exceptions to such retrospective application provided under IFRS 1. The main optional exemptions the Company adopted are summarized as follows:

Business combinations. The Company elected not to apply IFRS 3, “Business Combinations,” retrospectively to business combinations that occurred before January 1, 2012. Therefore, in the opening balance sheet, the amount of goodwill generated from past business combinations remains the same compared with the one under R.O.C. GAAP as of December 31, 2011.

Employee benefits. The Company elected to recognize all cumulative actuarial gains and losses in retained earnings as of January 1, 2012. In addition, the Company elected to apply the exemption disclosure requirement provided by IFRS 1, in which the amounts of present value of defined benefit obligations, the fair value of plan assets, the surplus or deficit in the plan and the experience adjustments are determined for each accounting period prospectively from the transition date.

Share-based payment. The Company elected to take the optional exemption from applying IFRS 2 retrospectively for the shared-based payment transactions granted and vested before January 1, 2012.

Effect of transition to Taiwan-IFRSs

Except for the additional information disclosed below, for the effect of transition to Taiwan-IFRSs on the Company’s consolidated balance sheets and the consolidated statements of comprehensive income, please refer to Note 42 to the consolidated financial statements for the three months ended March 31, 2013 for details.

- 57 -

Reconciliation of consolidated balance sheet as of June 30, 2012


				Effect of Transition to Taiwan-IFRSs
R.O.C. GAAP				Recognition and Measurement			Presentation			Taiwan-IFRSs
Item	Amount			Difference			Difference			Amount		Item	Note
Current assets
Cash and cash equivalents	$	178,440,559		$	—		$	—		$	178,440,559	Cash and cash equivalents
Financial assets at fair value through profit or loss		23,734			—			—			23,734	Financial assets at fair value through profit or loss
Available-for-sale financial assets		2,477,046			—			—			2,477,046	Available-for-sale financial assets
Held-to-maturity financial assets		7,424,976			—			—			7,424,976	Held-to-maturity financial assets
Notes and accounts receivable		61,101,346			—			(490,914	)		60,610,432	Notes and accounts receivable
Receivables from related parties		837,245			—			—			837,245	Receivables from related parties
Allowance for doubtful receivables		(490,914	)		—			490,914			—	—
Allowance for sales returns and others		(6,508,185	)		—			6,508,185			—	—	a)
Other receivables from related parties		981,263			—			—			981,263	Other receivables from related parties
Other financial assets		603,940			—			—			603,940	Other financial assets
Inventories		30,780,466			—			—			30,780,466	Inventories
Deferred income tax assets		2,805,069			—			(2,805,069	)		—	—	b)
Prepaid expenses and other current assets		2,404,358			—			—			2,404,358	Other current assets

Total current assets		280,880,903			—			3,703,116			284,584,019	Total current assets

Long-term investments
Investments accounted for using equity method		23,372,224			(51,594	)		—			23,320,630	Investments accounted for using equity method	e)
Held-to-maturity financial assets		701,723			—			—			701,723	Held-to-maturity financial assets
Financial assets carried at cost		4,084,014			—			—			4,084,014	Financial assets carried at cost

Total long-term investments		28,157,961			(51,594	)		—			28,106,367

Net property, plant and equipment		548,148,865			—			35,609			548,184,474	Property, plant and equipment	c)

Intangible assets		10,860,551			—			—			10,860,551	Intangible assets

Other assets
Deferred income tax assets		10,344,401			227,520			2,805,069			13,376,990	Deferred income tax assets	b), d)
Refundable deposits		4,296,083			—			—			4,296,083	Refundable deposits
Others		1,217,289			—			(35,609	)		1,181,680	Other noncurrent assets	c)

Total other assets		15,857,773			227,520			2,769,460			18,854,753

Total	$	883,906,053		$	175,926		$	6,508,185		$	890,590,164	Total

Current liabilities
Short-term loans	$	30,772,585		$	—		$	—		$	30,772,585	Short-term loans
Financial liabilities at fair value through profit or loss		35,166			—			—			35,166	Financial liabilities at fair value through profit or loss
Hedging derivative financial liabilities		69			—			—			69	Hedging derivative financial liabilities
Accounts payable		14,126,994			—			—			14,126,994	Accounts payable
Payables to related parties		1,309,966			—			—			1,309,966	Payables to related parties
Salary and bonus payable		5,518,151			—			—			5,518,151	Salary and bonus payable
Income tax payable		6,787,548			—			—			6,787,548	Income tax payable
Cash dividends payable		77,762,637			—			—			77,762,637	Cash dividends payable
Accrued profit sharing to employees and bonus to directors and supervisors		14,152,148			—			—			14,152,148	Accrued profit sharing to employees and bonus to directors and supervisors
Payables to contractors and equipment suppliers		45,039,813			—			—			45,039,813	Payables to contractors and equipment suppliers
Accrued expenses and other current liabilities		16,216,838			—			—			16,216,838	Accrued expenses and other current liabilities
Current portion of bonds payable and long-term bank loans		125,000			—			—			125,000	Current portion of bonds payable and long-term bank loans
—		—			—			6,508,185			6,508,185	Provisions	a)

Total current liabilities		211,846,915			—			6,508,185			218,355,100	Total current liabilities

(Continued)

- 58 -


				Effect of Transition to Taiwan-IFRSs
R.O.C. GAAP				Recognition and Measurement			Presentation			Taiwan-IFRSs
Item	Amount			Difference			Difference			Amount			Item	Note
Long-term liabilities
Bonds payable	$	35,000,000		$	—		$	—		$	35,000,000		Bonds payable
Long-term bank loans		1,525,000			—			—			1,525,000		Long-term bank loans
Other long-term payable		113,770			—			—			113,770		Other long-term payable
Obligations under capital leases		749,794			—			—			749,794		Obligations under capital leases

Total long-term liabilities		37,388,564			—			—			37,388,564

Other liabilities
Accrued pension cost		3,930,438			2,296,320			—			6,226,758		Accrued pension cost	d)
Guarantee deposits		253,346			—			—			253,346		Guarantee deposits
—		—			—			3,398			3,398		Provisions
Others		429,142			—			(3,398	)		425,744		Other noncurrent liabilities

Total other liabilities		4,612,926			2,296,320			—			6,909,246

Total liabilities		253,848,405			2,296,320			6,508,185			262,652,910		Total liabilities

Equity attributable to shareholders of the parent
Capital stock		259,207,094			—			—			259,207,094		Capital stock

Capital surplus		56,025,149			(428,673	)		—			55,596,476		Capital surplus	e)

Retained earnings													Retained earnings
Appropriated as legal capital reserve		115,820,123			—			—			115,820,123		Appropriated as legal capital reserve
Appropriated as special capital reserve		7,606,224			—			—			7,606,224		Appropriated as special capital reserve
Unappropriated earnings		196,302,944			(1,678,659	)		—			194,624,285		Unappropriated earnings	d), e)

		319,729,291			(1,678,659	)		—			318,050,632

Others
Cumulative translation adjustments		(7,830,895	)		11			—			(7,830,884	)	Foreign currency translation reserve	e)
Unrealized gain on financial instruments		334,651			—			28			334,679		Unrealized gain/loss from available-for-sales financial assets
—		—			—			(28	)		(28	)	Cash flow hedging reserve

		(7,496,244	)		11			—			(7,496,233	)

Equity attributable to shareholders of the parent		627,465,290			(2,107,321	)		—			625,357,969		Equity attributable to shareholders of the parent
Minority interests		2,592,358			(13,073	)		—			2,579,285		Noncontrolling interests	d)

Total shareholders’ equity		630,057,648			(2,120,394	)		—			627,937,254		Total shareholders’ equity

Total	$	883,906,053		$	175,926		$	6,508,185		$	890,590,164		Total

(Concluded)

Reconciliation of consolidated statement of comprehensive income for the six months ended June 30, 2012


				Effect of Transition to Taiwan-IFRSs
R.O.C. GAAP				Recognition and Measurement			Presentation			Taiwan-IFRSs
Item	Amount			Difference			Difference			Amount			Item	Note
Net sales	$	233,568,503		$	—		$	232,659		$	233,801,162		Net revenue	f)
Cost of sales		120,811,731			(22,373	)		—			120,789,358		Cost of revenue	d)

Gross profit before affiliates elimination		112,756,772			22,373			232,659			113,011,804		Gross profit before associates elimination
Unrealized gross profit from affiliates		(139,950	)		—			—			(139,950	)	Unrealized profit on sales to associates

Gross profit		112,616,822			22,373			232,659			112,871,854		Gross profit

Operating expenses
Research and development		19,235,781			(9,539	)		—			19,226,242		Research and development	d)
General and administrative		9,025,466			(3,524	)		—			9,021,942		General and administrative	d)
Marketing		2,205,936			(760	)		—			2,205,176		Marketing	d)

Total operating expenses		30,467,183			(13,823	)		—			30,453,360

—		—			—			(429,093	)		(429,093	)	Other operating income and expenses, net	f)

Income from operations		82,149,639			36,196			(196,434	)		81,989,401		Income from operations

(Continued)

- 59 -


			Effect of Transition to Taiwan-IFRSs
R.O.C. GAAP			Recognition and Measurement		Presentation			Taiwan-IFRSs
Item	Amount		Difference		Difference			Amount			Item	Note
Non-operating income and gains
Equity in earnings of equity method investees, net	$	610,296	$	15,779	$	—		$	626,075		Share of profits of associates and joint venture	e)
Interest income		941,732		—		(941,732	)		—		—	f)
Settlement income		448,275		—		(448,275	)		—		—	f)
Gain on disposal of financial assets, net		365,731		—		(365,731	)		—		—	f)
Foreign exchange gain, net		365,310		—		—			365,310		Foreign exchange gain, net
Technical service income		232,659		—		(232,659	)		—		—	f)
Gain on disposal of property, plant and equipment and other assets		21,176		—		(21,176	)		—		—	f)
Others		393,319		—		(393,319	)		—		—	f)
—		—		—		1,011,677			1,011,677		Other income	f)
—		—		—		(1,947,439	)		(1,947,439	)	Other gains and losses	f)

		3,378,498		15,779		(3,338,654	)		55,623

Non-operating expenses and losses
Impairment of financial assets		2,748,456		—		(2,748,456	)		—		—	f)
Impairment loss on idle assets		422,323		—		(422,323	)		—		—	f)
Interest expense		415,039		—		—			415,039		Finance cost
Valuation loss on financial instruments, net		189,737		—		(189,737	)		—		—	f)
Loss on disposal of property, plant and equipment		25,302		—		(25,302	)		—		—	f)
Others		149,270		—		(149,270	)		—		—	f)

		3,950,127		—		(3,535,088	)		415,039

Income before income tax		81,578,010		51,975		—			81,629,985		Income before income tax
Income tax expense		6,443,942		3,491		—			6,447,433		Income tax expense	d)

Net income	$	75,134,068	$	48,484	$	—			75,182,552		Net income

									(1,387,883	)	Exchange differences on translating foreign operations
									1,822,823		Changes in fair value of available-for-sale financial assets
									163		Cash flow hedges
									20,387		Share of other comprehensive income of associates and joint venture
									(308,929	)	Income tax expense relating to components of other comprehensive income

									146,561		Other comprehensive income for the period, net of income tax

								$	75,329,113		Total comprehensive income for the period

(Concluded)

- 60 -

Reconciliation of consolidated statement of comprehensive income for the three months ended June 30, 2012


				Effect of Transition to Taiwan-IFRSs
R.O.C. GAAP				Recognition and Measurement			Presentation			Taiwan-IFRSs
Item	Amount			Difference			Difference			Amount			Item	Note
Net sales	$	128,060,828		$	—		$	125,503		$	128,186,331		Net revenue	f)
Cost of sales		65,590,639			(11,628	)		—			65,579,011		Cost of revenue	d)

Gross profit before affiliates elimination		62,470,189			11,628			125,503			62,607,320		Gross profit before associates elimination
Unrealized gross profit from affiliates		(213,979	)		—			—			(213,979	)	Unrealized gross profit on sales to associates

Gross profit		62,256,210			11,628			125,503			62,393,341		Gross profit

Operating expenses
Research and development		10,073,000			(4,610	)		—			10,068,390		Research and development	d)
General and administrative		4,366,442			(1,504	)		—			4,364,938		General and administrative	d)
Marketing		1,105,097			(356	)		—			1,104,741		Marketing	d)

Total operating expenses		15,544,539			(6,470	)		—			15,538,069

—		—			—			16,816			16,816		Other operating income and expenses, net	f)

Income from operations		46,711,671			18,098			142,319			46,872,088		Income from operations

Non-operating income and gains
Equity in earnings of equity method investees, net		589,344			14,527			—			603,871		Share of profits of associates and joint venture	e)
Interest income		440,496			—			(440,496	)		—		—	f)
Settlement income		448,275			—			(448,275	)		—		—	f)
Gain on settlement and disposal of financial assets, net		292,140			—			(292,140	)		—		—	f)
Technical service income		125,503			—			(125,503	)		—		—	f)
Valuation gain on financial assets, net		55,268			—			(55,268	)		—		—	f)
Gain on reversal of impairment loss on idle assets		19,989			—			(19,989	)		—		—	f)
Gain on disposal of property, plant and equipment and other assets		18,941			—			(18,941	)		—		—	f)
Others		326,027			—			(326,027	)		—		—	f)
—		—			—			510,441			510,441		Other income	f)
—		—			—			(1,767,688	)		(1,767,688	)	Other gains and losses	f)

		2,315,983			14,527			(2,983,886	)		(653,376	)

Non-operating expenses and losses
Impairment of financial assets		2,744,066			—			(2,744,066	)		—		—	f)
Interest expense		197,348			—			—			197,348		Finance costs
Foreign exchange loss, net		64,433			—			—			64,433		Foreign exchange loss, net
Loss on disposal of property, plant and equipment		21,572			—			(21,572	)		—		—	f)
Others		75,929			—			(75,929	)		—		—	f)

		3,103,348			—			(2,841,567	)		261,781

Income before income tax		45,924,306			32,625			—			45,956,931		Income before income tax
Income tax expense		4,155,570			1,745			—			4,157,315		Income tax expense	d)

Net income	$	41,768,736		$	30,880		$	—			41,799,616		Net income

											1,236,890		Exchange differences arising on translation of foreign operations
											1,542,651		Changes in fair value of available-for-sale financial assets
											66		Cash flow hedges
											(22,321	)	Share of other comprehensive income of associates and joint venture

(Continued)

- 61 -

Effect of Transition to
Taiwan-IFRSs

R.O.C. GAAP

Recognition and
Measurement

Presentation

Taiwan-IFRSs

Item

Amount

Difference

Amount

Item

Note

(308,777

)

Income tax expense relating to components of other comprehensive income

2,448,509

Other comprehensive income for the period, net of income tax

44,248,125

Total comprehensive income for the period

(Concluded)

Reconciliation of equity


	Note	June 30, 2012
Equity under R.O.C. GAAP		$	630,057,648
Adjustments:
Defined benefit plans	d)		(2,068,800	)
Investments accounted for using the equity method	e)		(51,594	)

Equity under Taiwan-IFRSs		$	627,937,254

Notes to the reconciliation of the significant differences:

Allowance for sales returns and others

Under R.O.C. GAAP, provisions for estimated sales returns and others are recognized as a reduction in revenue in the period the related revenue is recognized based on historical experience. The corresponding allowance for sales returns and others is recorded as a deduction in accounts receivable. Under Taiwan-IFRSs, the allowance for sales returns and others is a present obligation with uncertain timing and an amount that arises from past events and is therefore reclassified as provisions in accordance with IAS No. 37, “Provisions, Contingent Liabilities and Contingent Assets.”

As of June 30, 2012, the amounts reclassified from allowance for sales returns and others to provisions were NT$6,508,185 thousand.

Classifications of deferred income tax asset/liability and valuation allowance

Under R.O.C. GAAP, a deferred tax asset and liability is classified as current or noncurrent in accordance with the classification of its related asset or liability. However, if a deferred income tax asset or liability does not relate to an asset or liability in the financial statements, it is classified as either current or noncurrent based on the expected length of time before it is realized or settled. Under Taiwan-IFRSs, a deferred tax asset and liability is classified as noncurrent asset or liability.

In addition, under R.O.C. GAAP, valuation allowances are provided to the extent, if any, that it is more likely than not that deferred income tax assets will not be realized. In accordance with IAS No. 12, “Income Taxes,” deferred tax assets are only recognized to the extent that it is probable that there will be sufficient taxable profits and the valuation allowance account is no longer used.

- 62 -

As of June 30, 2012, the amounts reclassified from deferred income tax assets to noncurrent assets were NT$2,805,069 thousand.

The classification of assets leased to others and idle assets

Under R.O.C. GAAP, assets leased to others and idle assets are classified under other assets. Under Taiwan-IFRSs, the aforementioned items are classified as property, plant and equipment according to their nature. In accordance with IAS No. 40, “Investment Property,” investment properties are defined as properties held to earn rentals or for capital appreciation; however, the Company’s assets leased to others are mainly dormitories leased to employees and factories leased to suppliers. The dormitories leased to employees are not classified as investment properties; factories leased to suppliers are not considered as investment properties since they cannot be sold separately and comprise only an insignificant portion of the plant.

As of June 30, 2012, the amounts reclassified from assets leased to others and idle assets to property, plant and equipment were NT$35,609 thousand.

Employee benefits

The Company had previously applied an actuarial valuation on its defined benefit obligation and recognized the related pension cost and retirement benefit obligation in conformity with R.O.C. GAAP. Under Taiwan-IFRSs, the Company should carry out actuarial valuation on defined benefit obligation in accordance with IAS No. 19, “Employee Benefits.”

In addition, under R.O.C. GAAP, it is not allowed to recognize actuarial gains and losses from defined benefit plans directly to equity; instead, actuarial gains and losses should be accounted for under the corridor approach which resulted in the deferral of gains and losses. When using the corridor approach, actuarial gains and losses should be amortized over the expected average remaining working lives of the participating employees.

Under IAS No. 19, “Employee Benefits,” the Company elects to recognize actuarial gains and losses immediately in full in the period in which they occur, as other comprehensive income. The subsequent reclassification to earnings is not permitted.

At the transition date, the Company performed the actuarial valuation under IAS No. 19, “Employee Benefits,” and recognized the valuation difference directly to retained earnings under the requirement of IFRS 1. For the year ended December 31, 2012, total actuarial gains and losses were also recognized to other comprehensive income in accordance with actuarial valuation carried out in 2012.

In addition, under R.O.C. GAAP, the minimum pension liability should be recognized in the balance sheet. If the accrued pension cost is less than the minimum amount, the difference should be recognized as an additional liability. Under Taiwan-IFRSs, there is no aforementioned requirement of minimum pension liability.

As of June 30, 2012, accrued pension cost of the Company was adjusted for an increase of NT$2,296,320 thousand; deferred income tax assets were adjusted for an increase of NT$227,520 thousand; noncontrolling interests were adjusted for a decrease of NT$13,073 thousand. For the six months ended June 30, 2012, pension cost and income tax expense of the Company were adjusted for a decrease of NT$36,196 thousand and an increase of NT$3,491 thousand, respectively. For the three months ended June 30, 2012, pension cost and income tax expense of the Company were adjusted for a decrease of NT$18,098 thousand and an increase of NT$1,745 thousand, respectively.

- 63 -

Investments accounted for using the equity method

The Company has evaluated significant differences between current accounting policies and Taiwan-IFRSs for the Company’s associates and joint ventures accounted for using the equity method. The significant difference is mainly due to the adjustment to employee benefits.

In addition, if the investing company subscribes to additional investee’s shares disproportionate to its existing ownership percentage that results in a decrease in the investing company’s ownership percentage in the investee, the resulting carrying amount of the investment in the investee differs from the amount of its share in the investee’s equity. Under R.O.C. GAAP, the investing company records such a difference as an adjustment to investments with the corresponding amount charged or credited to capital surplus. Under Taiwan-IFRSs, such a difference is still adjusted to investments and capital surplus; however, if the investing company’s ownership interest in an associate is reduced, the proportionate amount of the gains or losses previously recognized in other comprehensive income in relation to that associate shall be reclassified to profit or loss on the same basis as would be required if the investee had directly disposed of the related assets or liabilities.

As of June 30, 2012, as a result of the differences mentioned above, investment accounted for using the equity method was adjusted for a decrease of NT$51,594 thousand; foreign currency translation reserve was adjusted for an increase of NT$11 thousand; capital surplus was adjusted for a decrease of NT$428,673 thousand. In addition, share of profits of associates and joint venture was adjusted for an increase of NT$15,779 thousand and NT$14,527 thousand, respectively, for the six months and three months ended June 30, 2012, respectively.

The reclassification of line items in the consolidated statement of comprehensive income

In accordance with the Guidelines Governing the Preparation of Financial Reports by Securities Issuers before its amendment due to the adoption of Taiwan-IFRSs, income from operations in the consolidated income statement only includes net revenue, cost of revenue and operating expenses. Under Taiwan-IFRSs, based on the nature of operating transactions, technical service income is reclassified under net revenue; rental revenue, depreciation of rental assets, net gain or loss on disposal of property, plant and equipment and other assets, and impairment loss on idle assets, are reclassified under other operating income and expenses, which are included in income from operations.

Under Taiwan-IFRSs, based on the nature of operating transactions, for the six months ended June 30, 2012, the Company reclassified technical service income of NT$232,659 thousand to net revenue; rental revenue of NT$503 thousand, other income of NT$642 thousand, net loss on disposal of property, plant and equipment and other assets of NT$4,126 thousand, depreciation of rental assets of NT$3,789 thousand and impairment loss on idle assets of NT$422,323 thousand to other operating income and expenses. In addition, interest income of NT$941,732 thousand and dividend income of NT$69,945 thousand were reclassified to other income; settlement income of NT$448,275 thousand, net gain on disposal of financial assets of NT$365,731 thousand, others of NT$322,229 thousand (under non-operating income and gains), net valuation loss on financial instruments of NT$189,737 thousand, impairment of financial assets of NT$2,748,456 thousand as well as others of NT$145,481 thousand (under non-operating expenses and losses) were reclassified to other gains and losses for the six months ended June 30, 2012. For the three months ended June 30, 2012, the Company also reclassified technical service income of NT$125,503 thousand to net revenue, rental revenue of NT$249 thousand, other income of NT$642 thousand, net loss on disposal of property, plant and equipment and other assets of NT$2,631 thousand, depreciation of rental assets of NT$1,433 thousand and gain on reversal of impairment loss on idle assets of NT$19,989 thousand to other operating income and expenses. In addition, interest income of NT$440,496 thousand and dividend income of NT$69,945 thousand were also reclassified to other income; settlement income of NT$448,275 thousand, net gain on disposal of financial assets of NT$292,140 thousand, others of NT$255,191 thousand (under non-operating income and gains), net valuation gain on financial instruments of NT$55,268 thousand, impairment of financial assets of NT$2,744,066 thousand as well as others of NT$74,496 thousand (under non-operating expenses and losses) were reclassified to other gains and losses for the three months ended June 30, 2012.

- 64 -

44.

ADDITIONAL DISCLOSURES

Following are the additional disclosures required by the SFB for TSMC and its investees in which all significant intercompany balances and transactions are eliminated upon consolidation:

Financings provided: Please see Table 1 attached;

Endorsement/guarantee provided: Please see Table 2 attached;

Marketable securities held: Please see Table 3 attached;

Marketable securities acquired and disposed of at costs or prices of at least NT$100 million or 20% of the paid-in capital: Please see Table 4 attached;

Acquisition of individual real estate properties at costs of at least NT$100 million or 20% of the paid-in capital: Please see Table 5 attached;

Disposal of individual real estate properties at prices of at least NT$100 million or 20% of the paid-in capital: None;

Total purchases from or sales to related parties of at least NT$100 million or 20% of the paid-in capital: Please see Table 6 attached;

Receivables from related parties amounting to at least NT$100 million or 20% of the paid-in capital: Please see Table 7 attached;

Information about the derivative instruments transaction: Please see Notes 7 and 10;

Others: The business relationship between the parent and the subsidiaries and between each subsidiary, and significant transactions between them: Please see Table 8 attached;

Names, locations, and related information of investees over which TSMC exercises significant influence: Please see Table 9 attached;

Information on investment in Mainland China

The name of the investee in Mainland China, the main businesses and products, its issued capital, method of investment, information on inflow or outflow of capital, percentage of ownership, equity in the net gain or net loss, ending balance, amount received as dividends from the investee, and the limitation on investee: Please see Table 10 attached.

Significant direct or indirect transactions with the investee, its prices and terms of payment, unrealized gain or loss, and other related information which is helpful to understand the impact of investment in Mainland China on financial reports: Please see Table 8 attached.

- 65 -

TABLE 1

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

FINANCINGS PROVIDED

FOR THE SIX MONTHS ENDED JUNE 30, 2013

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


				Maximum Balance for the Period (US$ in Thousands) (Note 4)																								Financing Company’s Total Financing Amount Limits (Note 3)
							Ending Balance (US$ in Thousands) (Note 4)			Amount Actually Drawn (US$ in Thousands)															Financing Limits for Each Borrowing Company
			Financial Statement Account												Nature for Financing			Reason for Financing	Allowance for Bad Debt
	Financing Company	Counter- party											Interest Rate			Transaction Amounts					Collateral
No.	Financing Company	Counter- party											Interest Rate			Transaction Amounts					Item		Value
1	TSMC Partners	TSMC China	Other receivables from related parties	$ (US$	3,895,840 130,000	)	$	—		$	—			—	The need for short-term financing	$	—	Purchase equipment	$	—		—	$	—	$	41,053,732 (Note 1	)	$	41,053,732
2	TSMC Development	TSMC Solar	Other receivables from related parties	(US$	2,397,440 80,000	)	(US$	2,397,440 80,000	)	(US$	1,723,160 57,500	)		0.20%-0.23%	The need for short-term financing		—	Operating capital		—		—		—		5,846,207 (Notes 2 and 5	)		14,615,517 (Note 5	)
		TSMC SSL	Other receivables from related parties	(US$	2,697,120 90,000	)	(US$	2,697,120 90,000	)		—			—	The need for short-term financing		—	Operating capital		—		—		—		5,846,207 (Notes 2 and 5	)		14,615,517 (Note 5	)

Note 1:

The total amount for lending to a company for funding for a short-term period shall not exceed ten percent (10%) of the net worth of TSMC Partners. In addition, the total amount lendable to any one borrower shall be no more than thirty percent (30%) of the borrower’s net worth. While offshore subsidiaries whose voting shares are 100% owned, directly or indirectly, by TSMC are not subject to the above restrictions. However, the respective lending limit for such borrower shall not exceed the net worth of TSMC Partners.

Note 2:

The total amount for lending to a company for funding for a short-term period shall not exceed ten percent (10%) of the net worth of TSMC Development. In addition, the total amount lendable to any one borrower shall be no more than thirty percent (30%) of the borrower’s net worth. While subsidiaries whose voting shares are 90% and up owned, directly or indirectly, by TSMC are not subject to the above restrictions. However, the aggregate amounts lendable to all such borrowers and the total amount lendable to one such borrower shall be no more than forty percent (40%) of the net worth of TSMC Development.

Note 3:

The total amount available for lending purpose shall not exceed the net worth of TSMC Partners and TSMC Development, respectively.

Note 4:

The maximum balance for the period and ending balance represents the amounts approved by the Board of Directors.

Note 5:

The amount was determined based on the reviewed financial statements in accordance with local accounting principles.

- 66 -

TABLE 2

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

ENDORSEMENTS/GUARANTEES PROVIDED

FOR THE SIX MONTHS ENDED JUNE 30, 2013

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


No.	Endorsement/ Guarantee Provider	Guaranteed Party		Limits on Endorsement/ Guarantee Amount Provided to Each Guaranteed Party (Notes 1 and 2)		Maximum Balance for the Period (US$ in Thousands) (Note 3)			Ending Balance (US$ in Thousands) (Note 3)			Amount Actually Drawn (US$ in Thousands)			Amount of Endorsement/ Guarantee Collateralized by Properties		Ratio of Accumulated Endorsement/ Guarantee to Net Equity per Latest Financial Statements			Maximum Endorsement/ Guarantee Amount Allowable (Note 2)
No.	Endorsement/ Guarantee Provider	Name	Nature of Relationship						Ending Balance (US$ in Thousands) (Note 3)			Amount Actually Drawn (US$ in Thousands)
0	TSMC	TSMC Global	Subsidiary	$	186,477,939	$ (US$	44,952,000 1,500,000	)	$ (US$	44,952,000 1,500,000	)	$ (US$	44,952,000 1,500,000	)	$	—		6.0	%	$	186,477,939

Note 1:

The ceiling for guaranteed amount to a company shall not exceed ten percent (10%) of the net worth of TSMC. In addition, the guaranteed amount shall not exceed net worth of the guaranteed company. However, subsidiaries whose voting shares are 100% owned, directly or indirectly, by TSMC are not subject to the above restrictions after the approval of the Board of Directors.

Note 2:

The ceiling for total guaranteed amount shall not exceed twenty-five percent (25%) of the net worth of TSMC.

Note 3:

The maximum balance for the period and ending balance represent the amounts approved by the Board of Directors.

- 67 -

TABLE 3

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

MARKETABLE SECURITIES HELD

JUNE 30, 2013

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


Held Company Name	Marketable Securities Type and Name	Relationship with the Company	Financial Statement Account	June 30, 2013								Note
Held Company Name	Marketable Securities Type and Name	Relationship with the Company	Financial Statement Account	Shares/Units (In Thousands)		Carrying Value (Foreign Currencies in Thousands)		Percentage of Ownership (%)		Market Value or Net Asset Value (Foreign Currencies in Thousands)		Note
TSMC	Corporate bond
	Nan Ya Plastics Corporation	—	Held-to-maturity financial assets		—	$	549,952		N/A	$	553,742
	China Steel Corporation	—	”		—		150,624		N/A		151,035
	Stock
	Semiconductor Manufacturing International Corporation	—	Available-for-sale financial assets		275,957		270,921		1		607,161		Notes 1 and 2
	TSMC Global	Subsidiary	Investments accounted for using equity method		1		59,567,335		100		59,567,335
	TSMC Partners	Subsidiary	”		988,268		41,053,305		100		41,053,732
	VIS	Investee accounted for using equity method	”		628,223		9,619,243		39		21,359,599
	SSMC	Investee accounted for using equity method	”		314		6,441,982		39		6,227,998
	TSMC Solar	Subsidiary	”		1,118,000		5,239,236		99		5,211,540
	TSMC North America	Subsidiary	”		11,000		3,327,899		100		3,327,899
	TSMC SSL	Subsidiary	”		554,674		2,934,989		92		2,934,989
	Xintec	Investee accounted for using equity method	”		94,950		1,816,848		40		1,525,403
	GUC	Investee accounted for using equity method	”		46,688		1,113,804		35		4,533,391
	TSMC Europe	Subsidiary	”		—		258,876		100		258,876
	TSMC Japan	Subsidiary	”		6		131,253		100		131,253
	TSMC Korea	Subsidiary	”		80		26,896		100		26,896
	United Industrial Gases Co., Ltd.	—	Financial assets carried at cost		21,230		193,584		10		381,791
	Shin-Etsu Handotai Taiwan Co., Ltd.	—	”		10,500		105,000		7		334,326
	W.K. Technology Fund IV	—	”		4,000		39,280		2		31,367
	Fund
	Horizon Ventures Fund	—	Financial assets carried at cost		—		89,916		12		89,916
	Crimson Asia Capital	—	”		—		55,385		1		55,385
	Capital
	TSMC China	Subsidiary	Investments accounted for using equity method		—		20,754,814		100		20,831,292
	VTAF III	Subsidiary	”		—		1,033,180		50		1,010,962
	VTAF II	Subsidiary	”		—		451,211		98		444,965
	Emerging Alliance	Subsidiary	”		—		148,516		99		148,516
	TSMC GN	Subsidiary	”		—		53,149		100		53,149
TSMC Solar	Stock
	Motech	Investee accounted for using equity method	Investments accounted for using equity method		87,480		2,714,439		20		3,311,110		Note 3
	TSMC Solar Europe	Subsidiary	”		—		118,459		100		118,459
	TSMC Solar NA	Subsidiary	”		1		24,492		100		24,492
	Capital
	VTAF III	Investee accounted for using equity method	Investments accounted for using equity method		—		1,364,661		49		1,364,661

(Continued)

- 68 -


Held Company Name	Marketable Securities Type and Name	Relationship with the Company	Financial Statement Account	June 30, 2013								Note
Held Company Name	Marketable Securities Type and Name	Relationship with the Company	Financial Statement Account	Shares/Units (In Thousands)		Carrying Value (Foreign Currencies in Thousands)		Percentage of Ownership (%)		Market Value or Net Asset Value (Foreign Currencies in Thousands)		Note
TSMC SSL	Stock
	TSMC Lighting NA	Subsidiary	Investments accounted for using equity method		1	$	2,919		100	$	2,919
TSMC GN	Stock
	TSMC Solar	Investee accounted for using equity method	Investments accounted for using equity method		4,436		20,618		—		20,618
	TSMC SSL	Investee accounted for using equity method	”		4,873		25,751		1		25,751
TSMC Partners	Stock
	TSMC Development	Subsidiary	Investments accounted for using equity method		—	US$	633,828		100	US$	633,828
	VisEra Holding Company	Investee accounted for using equity method	”		43,000	US$	110,335		49	US$	110,335
	TSMC Technology	Subsidiary	”		—	US$	12,367		100	US$	12,367
	ISDF II	Subsidiary	”		14,153	US$	11,193		97	US$	11,193
	ISDF	Subsidiary	”		787	US$	8,120		97	US$	8,120
	TSMC Canada	Subsidiary	”		2,300	US$	4,627		100	US$	4,627
	Mcube Inc.	Investee accounted for using equity method	”		6,333		—		25		—
	Fund
	Shanghai Walden Venture Capital Enterprise	—	Financial assets carried at cost		—	US$	5,000		6	US$	5,000
TSMC North America	Stock
	Spansion Inc.	—	Available-for-sale financial assets		272	US$	5,179		—	US$	3,411		Note 1
TSMC Development	Stock
	WaferTech	Subsidiary	Investments accounted for using equity method		293,637	US$	241,076		100	US$	251,434
Emerging Alliance	Common stock
	Global Investment Holding Inc.	—	Financial assets carried at cost		11,124	US$	3,065		6	US$	3,065
	RichWave Technology Corp.	—	”		4,074	US$	1,545		10	US$	1,545
	Preferred stock
	Next IO, Inc.	—	Financial assets carried at cost		8	US$	28		—	US$	28		Note 4
	QST Holdings, LLC	—	”		—	US$	141		4	US$	141
	Capital
	VTA Holdings	Subsidiary	Investments accounted for using equity method		—		—		7		—
VTAF II	Common stock
	Sentelic	—	Financial assets carried at cost		1,806	US$	2,607		9	US$	2,607
	Aether Systems, Inc.	—	”		2,600	US$	2,243		28	US$	2,243
	RichWave Technology Corp.	—	”		1,267	US$	1,036		3	US$	1,036

(Continued)

- 69 -


Held Company Name	Marketable Securities Type and Name	Relationship with the Company	Financial Statement Account	June 30, 2013								Note
Held Company Name	Marketable Securities Type and Name	Relationship with the Company	Financial Statement Account	Shares/Units (In Thousands)		Carrying Value (Foreign Currencies in Thousands)		Percentage of Ownership (%)		Market Value or Net Asset Value (Foreign Currencies in Thousands)		Note
VTAF II	Preferred stock
	5V Technologies, Inc.	—	Financial assets carried at cost		2,890	US$	2,168		4	US$	2,168
	Aquantia	—	”		4,556	US$	4,316		2	US$	4,316
	Cresta Technology Corporation	—	”		92	US$	28		—	US$	28
	Impinj, Inc.	—	”		711	US$	1,100		—	US$	1,100
	Next IO, Inc.	—	”		179	US$	149		1	US$	149		Note 5
	QST Holdings, LLC	—	”		—	US$	588		13	US$	588
	Capital
	VTA Holdings	Subsidiary	Investments accounted for using equity method		—		—		31		—
VTAF III	Common stock
	Mutual-Pak Technology Co., Ltd.	Subsidiary	Investments accounted for using equity method		15,643	US$	1,451		58	US$	1,004
	Accton Wireless Broadband Corp.	—	Financial assets carried at cost		2,249	US$	315		6	US$	315
	Preferred stock
	BridgeLux, Inc.	—	Financial assets carried at cost		7,522	US$	9,379		3	US$	9,379
	GTBF, Inc.	—	”		1,154	US$	1,500		N/A	US$	1,500
	LiquidLeds Lighting Corp.	—	”		1,600	US$	800		11	US$	800
	Neoconix, Inc.	—	”		4,147	US$	4,842		4	US$	4,842
	Powervation, Ltd.	—	”		509	US$	7,938		16	US$	7,938
	Stion Corp.	—	”		8,152	US$	45,467		15	US$	45,467
	Tilera, Inc.	—	”		3,890	US$	3,025		2	US$	3,025
	Validity Sensors, Inc.	—	”		11,192	US$	4,197		4	US$	4,197
	Capital
	Growth Fund	Subsidiary	Investments accounted for using equity method		—	US$	362		100	US$	362
	VTA Holdings	Subsidiary	”		—		—		62		—
ISDF	Common stock
	Integrated Memory Logic, Inc.	—	Available-for-sale financial assets		868	US$	184		1	US$	2,104		Note 1
	Memsic, Inc.	—	”		1,286	US$	1,414		5	US$	5,271		Note 1
	Preferred stock
	Sonics, Inc.	—	Financial assets carried at cost		230	US$	497		2	US$	497
ISDF II	Common stock
	Memsic, Inc.	—	Available-for-sale financial assets		1,072	US$	1,461		5	US$	4,395		Note 1
	Alchip Technologies Limited	—	Financial assets carried at cost		7,520	US$	3,664		14	US$	3,664
	Sonics, Inc.	—	”		278	US$	10		3	US$	10
	Goyatek Technology, Corp.	—	”		745	US$	163		6	US$	163
	Preferred stock
	Sonics, Inc.	—	Financial assets carried at cost		264	US$	456		3	US$	456

(Continued)

- 70 -

Held

Company

Name

Marketable Securities
Type and Name

Relationship with the
Company

Financial Statement
Account

June 30, 2013

Note

Shares/Units
(In Thousands)

Carrying Value
(Foreign
Currencies in
Thousands)

Percentage of
Ownership (%)

Market Value or
Net
Asset Value
(Foreign
Currencies
in Thousands)

TSMC Solar Europe

Stock

TSMC Solar Europe GmbH

Subsidiary

Investments accounted for using equity method

—

EUR 2,945

100

EUR 2,945

TSMC Global

Stock

ASML

—

Available-for-sale financial assets

20,993

US$

1,085,474

US$ 1,654,472

Notes 1 and 6

Money market fund

Ssga Cash Mgmt Global Offshore

—

Available-for-sale financial assets

281

US$

281

N/A

US$

281

Note 1

Note 1:

The carrying value is original carrying amount without fair value adjustment.

Note 2:

The carrying value includes the impairment loss in the amount of NT$412,901 thousand.

Note 3:

The carrying value includes the impairment loss in the amount of NT$1,186,674 thousand.

Note 4:

The carrying value includes the impairment loss in the amount of US$472 thousand.

Note 5:

The carrying value includes the impairment loss in the amount of US$1,070 thousand.

Note 6:

In October 2012, TSMC Global acquired 5% of the outstanding equity of ASML with a lock-up period of 2.5 years starting from the acquisition date.

(Concluded)

- 71 -

TABLE 4

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

MARKETABLE SECURITIES ACQUIRED AND DISPOSED OF AT COSTS OR PRICES OF AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL

FOR THE SIX MONTHS ENDED JUNE 30, 2013

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


Company Name	Marketable Securities Type and Name	Financial Statement Account	Counter- party		Nature of Relationship		Beginning Balance				Acquisition				Disposal								Ending Balance (Note)
Company Name	Marketable Securities Type and Name	Financial Statement Account	Counter- party		Nature of Relationship		Shares/Units (In Thousands)		Amount (Foreign Currencies in Thousands)		Shares/Units (In Thousands)		Amount (Foreign Currencies in Thousands)		Shares/Units (In Thousands)		Amount (Foreign Currencies in Thousands)		Carrying Value (Foreign Currencies in Thousands)		Gain/Loss on Disposal (Foreign Currencies in Thousands)		Shares/Units (In Thousands)		Amount (Foreign Currencies in Thousands)
TSMC	Stock
	Semiconductor Manufacturing International Corporation	Available-for-sale financial assets		—		—		1,277,958	$	1,845,052		—	$	—		1,002,001	$	1,830,424	$	983,714	$	846,710		275,957	$	607,161
	TSMC SSL	Investments accounted for using equity method		—		Subsidiary		430,400		2,389,541		124,274		1,242,744		—		—		—		—		554,674		2,934,989
TSMC Global	Corporate bond
	Aust + Nz Banking Group	Held-to-maturity financial assets		—		—		20,000	US$	19,999		—		—		20,000	US$	20,000	US$	20,000		—		—		—
	Commonwealth Bank of Australia	”		—		—		25,000	US$	25,000		—		—		25,000	US$	25,000	US$	25,000		—		—		—
	Commonwealth Bank of Australia	”		—		—		25,000	US$	25,000		—		—		25,000	US$	25,000	US$	25,000		—		—		—
	Deutsche Bank AG London	”		—		—		20,000	US$	19,999		—		—		20,000	US$	20,000	US$	20,000		—		—		—
	JP Morgan Chase + Co.	”		—		—		35,000	US$	35,006		—		—		35,000	US$	35,000	US$	35,000		—		—		—
	Westpac Banking Corp.	”		—		—		25,000	US$	25,000		—		—		25,000	US$	25,000	US$	25,000		—		—		—

Note:

The ending balance includes the amortization of premium/discount on bonds investments, unrealized valuation gains/ losses on financial assets, share of profits/losses of investees and other related adjustment to equity.

- 72 -

TABLE 5

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

ACQUISITION OF INDIVIDUAL REAL ESTATE PROPERTIES AT COSTS OF AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL

FOR THE SIX MONTHS ENDED JUNE 30, 2013

(Amounts in Thousands of New Taiwan Dollars)

Company

Name

Types of

Property

Transaction Date

Transaction
Amount

Payment Term

Counter-party

Nature of
Relationships

Prior Transaction of Related Counter-party

Price

Reference

Purpose of

Acquisition

Other

Terms

Owner

Relationships

Transfer Date

Amount

TSMC

Land

January 3, 2013

2,248,400

By the contract

Miaoli County Government

—

N/A

Public bidding

Manufacturing purpose

None

Fab

January 28, 2013 to June 27, 2013

2,049,892

By the construction progress

Da Cin Construction Co., Ltd.

—

N/A

Public bidding

Manufacturing purpose

None

Fab

January 28, 2013 to June 26, 2013

1,304,097

By the construction progress

Fu Tsu Construction Co., Ltd.

—

N/A

Public bidding

Manufacturing purpose

None

Fab

January 28, 2013 to June 26, 2013

793,465

By the construction progress

China Steel Structure Co., Ltd.

—

N/A

Public bidding

Manufacturing purpose

None

Fab

January 28, 2013 to June 26, 2013

320,244

By the construction progress

I Domain Industrial Co., Ltd.

—

N/A

Public bidding

Manufacturing purpose

None

Fab

January 28, 2013 to June 26, 2013

294,223

By the construction progress

Tasa Construction Corporation

—

N/A

Public bidding

Manufacturing purpose

None

Fab

January 28, 2013 to June 26, 2013

119,049

By the construction progress

Mandartech Interiors Inc.

—

N/A

Public bidding

Manufacturing purpose

None

Fab

February 23, 2013 to May 28, 2013

132,116

By the construction progress

Mega Facade Corporation

—

N/A

Public bidding

Manufacturing purpose

None

- 73 -

TABLE 6

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

TOTAL PURCHASES FROM OR SALES TO RELATED PARTIES OF AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL

FOR THE SIX MONTHS ENDED JUNE 30, 2013

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


Company Name	Related Party	Nature of Relationships	Transaction Details							Abnormal Transaction				Notes/Accounts Payable or Receivable					Note
Company Name	Related Party	Nature of Relationships	Purchases/ Sales	Amount (Foreign Currencies in Thousands)			% to Total		Payment Terms	Unit Price (Note)		Payment Terms (Note)		Ending Balance (Foreign Currencies in Thousands)			% to Total		Note
TSMC	TSMC North America	Subsidiary	Sales	$	196,216,951			68	Net 30 days after invoice date		—		—	$	56,663,448			71
	GUC	Investee accounted for using equity method	Sales		964,328			1	Net 30 days after monthly closing		—		—		338,344			—
	VIS	Investee accounted for using equity method	Sales		114,757			—	Net 30 days after monthly closing		—		—		—			—
	TSMC China	Subsidiary	Purchases		8,089,257			26	Net 30 days after monthly closing		—		—		(1,393,493	)		8
	WaferTech	Indirect subsidiary	Purchases		4,368,478			14	Net 30 days after monthly closing		—		—		(695,593	)		4
	VIS	Investee accounted for using equity method	Purchases		3,037,262			10	Net 30 days after monthly closing		—		—		(482,748	)		3
	SSMC	Investee accounted for using equity method	Purchases		1,232,556			4	Net 30 days after monthly closing		—		—		(283,473	)		2
TSMC North America	GUC	Investee accounted for using equity method by TSMC	Sales	(US$	395,794 13,354	)		—	Net 30 days after invoice date		—		—	(US$	204,092 6,810	)		—

Note:

The sales prices and payment terms to related parties were not significantly different from those of sales to third parties. For other related party transactions, prices and terms were determined in accordance with mutual agreements.

- 74 -

TABLE 7

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

RECEIVABLES FROM RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL

JUNE 30, 2013

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


Company Name	Related Party	Nature of Relationships	Ending Balance (Foreign Currencies in Thousands)			Turnover Days (Note 1)	Overdue					Amounts Received in Subsequent Period			Allowance for Bad Debts
Company Name	Related Party	Nature of Relationships				Turnover Days (Note 1)	Amount			Action Taken		Amounts Received in Subsequent Period			Allowance for Bad Debts
TSMC	TSMC North America	Subsidiary	$	56,854,998		45	$	19,596,608			—	$	23,484,012		$	—
	SSMC	Investee accounted for using equity method		1,450,878		(Note 2)		—			—		—			—
	VIS	Investee accounted for using equity method		748,013		(Note 2)		—			—		—			—
	GUC	Investee accounted for using equity method		485,719		55		—			—		—			—
TSMC Development	TSMC Solar	The same parent company	(US$	1,725,670 57,584	)	(Note 2)		—			—		—			—
TSMC China	TSMC	Parent company		1,393,493 (RMB 285,656	)	31		—			—		—			—
TSMC Technology	TSMC	Parent company	(US$	142,889 4,768	)	63		—			—		—			—
WaferTech	TSMC	Parent company	(US$	695,593 23,211	)	27		—			—		—			—
TSMC North America	GUC	Investee accounted for using equity method by TSMC	(US$	204,092 6,810	)	55	(US$	16,091 537	)		—	(US$	168,727 5,630	)		—

Note 1: The calculation of turnover days excludes other receivables from related parties.

Note 2: The ending balance is primarily consisted of other receivables, which is not applicable for the calculation of turnover days.

- 75 -

TABLE 8

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

INTERCOMPANY RELATIONSHIPS AND SIGNIFICANT INTERCOMPANY TRANSACTIONS

FOR THE SIX MONTHS ENDED JUNE 30, 2013

(Amounts in Thousands of New Taiwan Dollars)


No.	Company Name	Counter Party	Nature of Relationship (Note 1)		Intercompany Transactions
No.	Company Name	Counter Party	Nature of Relationship (Note 1)		Financial Statements Item	Amount		Terms (Note 2)		Percentage of Consolidated Net Revenue or Total Assets
0	TSMC	TSMC North America		1	Net revenue from the sale of goods	$	196,216,951		—		68	%
					Receivables from related parties		56,663,448		—		5	%
					Other receivables from related parties		191,550		—		—
					Payables to related parties		22,497		—		—
		TSMC China		1	Net revenue from the sale of goods		3,146		—		—
					Purchases		8,089,257		—		3	%
					Marketing expenses—commission		42,902		—		—
					Disposal of property, plant and equipment		31,045		—		—
					Loss on disposal of property, plant and equipment		3,822		—		—
					Purchases of property, plant and equipment		74,991		—		—
					Other receivables from related parties		2,120		—		—
					Payables to related parties		1,393,493		—		—
					Other noncurrent liabilities		38,201		—		—
		TSMC Japan		1	Marketing expenses—commission		121,378		—		—
					Payables to related parties		54,826		—		—
		TSMC Europe		1	Marketing expenses—commission		183,641		—		—
					Research and development expenses		29,778		—		—
					Payables to related parties		44,579		—		—
		TSMC Korea		1	Marketing expenses—commission		11,779		—		—
					Payables to related parties		2,981		—		—
		TSMC Technology		1	Research and development expenses		372,642		—		—
					Payables to related parties		142,889		—		—
		WaferTech		1	Net revenue from the sale of goods		2,990		—		—
					Purchases		4,368,478		—		2	%
					Other receivables from related parties		2,014		—		—
					Payables to related parties		695,593		—		—
		TSMC Canada		1	Research and development expenses		106,550		—		—
					Payables to related parties		19,004		—		—
		Xintec (Note 3)		1	Manufacturing expenses		106,290		—		—
					Research and development expenses		1,418		—		—
					Disposal of property, plant and equipment		26,977		—		—
		TSMC SSL		1	Other gains and losses		4,500		—		—
					Other receivables from related parties		2,407		—		—
		TSMC Solar		1	Manufacturing expenses		1,129		—		—
					General and administrative expenses		2,257		—		—
					Purchases of property, plant and equipment		5,660		—		—
					Other gains and losses		5,268		—		—
					Other receivables from related parties		2,721		—		—

(Continued)

- 76 -


No.	Company Name	Counter Party	Nature of Relationship (Note 1)	Intercompany Transactions
No.	Company Name	Counter Party	Nature of Relationship (Note 1)	Financial Statements Item	Amount		Terms (Note 2)		Percentage of Consolidated Net Revenue or Total Assets
1	TSMC Partners	TSMC China	3	Other income	$	2,784		—		—
2	TSMC Development	WaferTech	1	Other receivables from related parties		59,991		—		—
3	TSMC North America	TSMC Technology	3	Other receivables from related parties		5,651		—		—
4	TSMC Solar	TSMC Solar Europe GmbH	1	Net revenue from the sale of goods		26,934		—		—
				Receivables from related parties		3,233		—		—
		TSMC Development	3	Finance costs		1,735		—		—
				Other payables to related parties		1,725,670		—		—
5	TSMC China	Xintec (Note 3)	3	Disposal of property, plant and equipment		48,193		—		—

Note 1:

No. 1 represents the transactions from parent company to subsidiary.

No. 3 represents the transactions between subsidiaries.

Note 2:

The sales prices and payment terms of intercompany sales are not significantly different from those to third parties. For other intercompany transactions, prices and terms are determined in accordance with mutual agreements.

Note 3:

(Concluded)

- 77 -

TABLE 9

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

NAMES, LOCATIONS, AND RELATED INFORMATION OF INVESTEES OVER WHICH THE COMPANY EXERCISES SIGNIFICANT INFLUENCE

JUNE 30, 2013

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


Investor Company	Investee Company	Location	Main Businesses and Products	Original Investment Amount				Balance as of June 30, 2013						Net Income (Losses) of the Investee (Foreign Currencies in Thousands)			Share of Profits/Losses of Investee (Note 1) (Foreign Currencies in Thousands)			Note
Investor Company	Investee Company	Location	Main Businesses and Products	June 30, 2013 (Foreign Currencies in Thousands)		December 31, 2012 (Foreign Currencies in Thousands)		Shares (In Thousands)		Percentage of Ownership		Carrying Value (Foreign Currencies in Thousands)								Note
TSMC	TSMC Global	Tortola, British Virgin Islands	Investment activities	$	42,327,245	$	42,327,245		1		100	$	59,567,335	$	99,297		$	99,297		Subsidiary
	TSMC Partners	Tortola, British Virgin Islands	Investing in companies involved in the design, manufacture, and other related business in the semiconductor industry		31,456,130		31,456,130		988,268		100		41,053,305		1,269,416			1,269,469		Subsidiary
	TSMC China	Shanghai, China	Manufacturing and selling of integrated circuits at the order of and pursuant to product design specifications provided by customers		18,939,667		18,939,667		—		100		20,754,814		2,188,298			2,169,449		Subsidiary
	VIS	Hsin-Chu, Taiwan	Research, design, development, manufacture, packaging, testing and sale of memory integrated circuits, LSI, VLSI and related parts		13,232,288		13,232,288		628,223		39		9,619,243		2,015,438			803,177		Investee accounted for using equity method
	SSMC	Singapore	Fabrication and supply of integrated circuits		5,120,028		5,120,028		314		39		6,441,982		2,340,338			907,817		Investee accounted for using equity method
	TSMC Solar	Tai-Chung, Taiwan	Engaged in researching, developing, designing, manufacturing and selling renewable energy and saving related technologies and products		11,180,000		11,180,000		1,118,000		99		5,239,236		(851,279	)		(834,776	)	Subsidiary
	TSMC North America	San Jose, California, U.S.A.	Selling and marketing of integrated circuits and semiconductor devices		333,718		333,718		11,000		100		3,327,899		26,814			26,814		Subsidiary
	TSMC SSL	Hsin-Chu, Taiwan	Engaged in researching, developing, designing, manufacturing and selling solid state lighting devices and related applications products and systems		5,546,744		4,304,000		554,674		92		2,934,989		(815,067	)		(767,911	)	Subsidiary
	Xintec	Taoyuan, Taiwan	Wafer level chip size packaging service		1,357,890		1,357,890		94,950		40		1,816,848		(22,127	)		(8,891	)	Investee accounted for using equity method
	GUC	Hsin-Chu, Taiwan	Researching, developing, manufacturing, testing and marketing of integrated circuits		386,568		386,568		46,688		35		1,113,804		109,595			38,032		Investee accounted for using equity method
	VTAF III	Cayman Islands	Investing in new start-up technology companies		1,882,556		1,896,914		—		50		1,033,180		8,656			11,390		Subsidiary
	VTAF II	Cayman Islands	Investing in new start-up technology companies		590,704		704,447		—		98		451,211		9,327			9,141		Subsidiary
	TSMC Europe	Amsterdam, the Netherlands	Marketing and engineering supporting activities		15,749		15,749		—		100		258,876		18,892			18,892		Subsidiary
	Emerging Alliance	Cayman Islands	Investing in new start-up technology companies		841,757		852,258		—		99		148,516		(8,035	)		(7,995	)	Subsidiary
	TSMC Japan	Yokohama, Japan	Marketing activities		83,760		83,760		6		100		131,253		2,476			2,476		Subsidiary
	TSMC GN	Taipei, Taiwan	Investment activities		100,000		100,000		—		100		53,149		(11,322	)		(11,322	)	Subsidiary
	TSMC Korea	Seoul, Korea	Customer service and technical supporting activities		13,656		13,656		80		100		26,896		777			777		Subsidiary
TSMC Solar	Motech	Taipei, Taiwan	Manufacturing and sales of solar cells, crystalline silicon solar cell, and test and measurement instruments and design and construction of solar power systems		6,228,661		6,228,661		87,480		20		2,714,439		(537,724	)		Note 2		Investee accounted for using equity method
	VTAF III	Cayman Islands	Investing in new start-up technology companies		1,805,197		1,801,918		—		49		1,364,661		8,656			Note 2		Investee accounted for using equity method
	TSMC Solar Europe	Amsterdam, the Netherlands	Investing in solar related business		504,107		504,107		—		100		118,459		(59,309	)		Note 2		Subsidiary
	TSMC Solar NA	Delaware, U.S.A.	Selling and marketing of solar related products		205,772		205,772		1		100		24,492		(20,726	)		Note 2		Subsidiary
TSMC SSL	TSMC Lighting NA	Delaware, U.S.A.	Selling and marketing of solid state lighting related products		3,133		3,133		1		100		2,919		(36	)		Note 2		Subsidiary

(Continued)

- 78 -


Investor Company	Investee Company	Location	Main Businesses and Products	Original Investment Amount						Balance as of June 30, 2013							Net Income (Losses) of the Investee (Foreign Currencies in Thousands)			Share of Profits/Losses of Investee (Note 1) (Foreign Currencies in Thousands)		Note
Investor Company	Investee Company	Location	Main Businesses and Products	June 30, 2013 (Foreign Currencies in Thousands)			December 31, 2012 (Foreign Currencies in Thousands)			Shares (In Thousands)		Percentage of Ownership		Carrying Value (Foreign Currencies in Thousands)								Note
TSMC Partners	TSMC Development	Delaware, U.S.A.	Investment activities	$ (US$	0.03 0.001	)	$ (US$	0.03 0.001	)		—		100	$ (US$	18,994,562 633,828	)	$ (US$	873,196 29,461	)		Note 2	Subsidiary
	VisEra Holding Company	Cayman Islands	Investing in companies involved in the design, manufacturing, and other related businesses in the semiconductor industry	(US$	1,288,624 43,000	)	(US$	1,288,624 43,000	)		43,000		49	(US$	3,306,524 110,335	)	(US$	534,331 18,028	)		Note 2	Investee accounted for using equity method
	TSMC Technology	Delaware, U.S.A.	Engineering support activities	(US$	0.03 0.001	)	(US$	0.03 0.001	)		—		100	(US$	370,619 12,367	)	(US$	19,143 646	)		Note 2	Subsidiary
	ISDF II	Cayman Islands	Investing in new start-up technology companies	(US$	424,137 14,153	)	(US$	424,137 14,153	)		14,153		97	(US$	335,435 11,193	)	(US$	(2,577 (87	) ) )		Note 2	Subsidiary
	ISDF	Cayman Islands	Investing in new start-up technology companies	(US$	23,585 787	)	(US$	23,585 787	)		787		97	(US$	243,349 8,120	)	(US$	38,002 1,282	)		Note 2	Subsidiary
	TSMC Canada	Ontario, Canada	Engineering support activities	(US$	68,926 2,300	)	(US$	68,926 2,300	)		2,300		100	(US$	138,653 4,627	)	(US$	8,072 272	)		Note 2	Subsidiary
	Mcube Inc.	Delaware, U.S.A.	Research, development, and sale of micro-semiconductor device	(US$	53,942 1,800	)	(US$	53,942 1,800	)		6,333		25		—		(US$	(210,622 (7,106	) ))		Note 2	Investee accounted for using equity method
TSMC Development	WaferTech	Washington, U.S.A.	Manufacturing, selling, testing and computer-aided designing of integrated circuits and other semiconductor devices	(US$	3,895,840 130,000	)	(US$	8,391,040 280,000	)		293,637		100	(US$	7,224,571 241,076	)	(US$	861,026 29,050	)		Note 2	Subsidiary
VTAF III	Mutual-Pak Technology Co., Ltd.	Taipei, Taiwan	Manufacturing and selling of electronic parts and researching, developing, and testing of RFID	(US$	156,193 5,212	)	(US$	156,193 5,212	)		15,643		58	(US$	43,474 1,451	)	(US$	(7,137 (241	) ))		Note 2	Subsidiary
	Growth Fund	Cayman Islands	Investing in new start-up technology companies	(US$	54,841 1,830	)	(US$	54,841 1,830	)		—		100	(US$	10,859 362	)	(US$	(183 (6	) ))		Note 2	Subsidiary
	VTA Holdings	Delaware, U.S.A.	Investing in new start-up technology companies		—			—			—		62		—			—			Note 2	Subsidiary
VTAF II	VTA Holdings	Delaware, U.S.A.	Investing in new start-up technology companies		—			—			—		31		—			—			Note 2	Subsidiary
Emerging Alliance	VTA Holdings	Delaware, U.S.A.	Investing in new start-up technology companies		—			—			—		7		—			—			Note 2	Subsidiary
TSMC Solar Europe	TSMC Solar Europe GmbH	Hamburg, Germany	Selling of solar related products and providing customer service	(EUR	484,592 12,400	)	(EUR	484,592 12,400	)		—		100	(EUR	115,077 2,945	)	(EUR	(59,635 (1,525	) ))		Note 2	Subsidiary
TSMC GN	TSMC Solar	Tai-Chung, Taiwan	Engaged in researching, developing, designing, manufacturing and selling renewable energy and saving related technologies and products		44,360			42,945			4,436		—		20,618			(851,279	)		Note 2	Investee accounted for using equity method
	TSMC SSL	Hsin-Chu, Taiwan	Engaged in researching, developing, designing, manufacturing and selling solid state lighting devices and related applications products and systems		48,725			34,266			4,873		1		25,751			(815,067	)		Note 2	Investee accounted for using equity method

Note 1:

The share of profits/losses of investee includes the effect of unrealized gross profit on sales to affiliates.

Note 2:

The share of profits/losses of the investee company is not reflected herein as such amount is already included in the share of profits/losses of the investor company.

(Concluded)

- 79 -

TABLE 10

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

INFORMATION ON INVESTMENT IN MAINLAND CHINA

FOR THE SIX MONTHS ENDED JUNE 30, 2013

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


Investee Company	Main Businesses and Products	Total Amount of Paid-in Capital (Foreign Currencies in Thousands)			Method of Investment	Accumulated Outflow of Investment from Taiwan as of January 1, 2013 (US$ in Thousands)			Investment Flows				Accumulated Outflow of Investment from Taiwan as of June 30, 2013 (US$ in Thousands)			Percentage of Ownership			Share of Profits/Losses			Carrying Amount as of June 30, 2013 (US$ in Thousands)			Accumulated Inward Remittance of Earnings as of June 30, 2013
Investee Company	Main Businesses and Products				Method of Investment				Outflow		Inflow					Percentage of Ownership			Share of Profits/Losses
TSMC China	Manufacturing and selling of integrated circuits at the order of and pursuant to product design specifications provided by customers	$ (RMB	18,939,667 4,502,080	)	(Note 1)	$ (US$	18,939,667 596,000	)	$	—	$	—	$ (US$	18,939,667 596,000	)		100	%	$	2,169,449 (Note 3	)	$	20,754,814		$	—
Shanghai Walden Venture Capital Enterprise	Investing in new start-up technology companies	(US$	2,324,062 78,791	)	(Note 2)	(US$	147,485 5,000	)		—		—	(US$	147,485 5,000	)		6	%		(Note 4	)	(US$	149,840 5,000	)		—

Accumulated Investment in Mainland China

as of June 30, 2013

(US$ in Thousands)

Investment Amounts Authorized by

Investment Commission, MOEA

(US$ in Thousands)

Upper Limit on Investment

(US$ in Thousands)

$ 19,087,152

(US$ 601,000)

$19,087,152

(US$ 601,000)

$19,087,152

(US$ 601,000)

Note 1: TSMC directly invested US$596,000 thousand in TSMC China.

Note 2: TSMC indirectly invested in China company through third region, TSMC Partners.

Note 3: Amount was recognized based on the reviewed financial statements.

Note 4: TSMC Partners invested in financial assets carried at cost, share of profits/losses from which was not recognized.

- 80 -