Your parents are considering investing in TSMC ordinary shares. They ask you, as an accounting expert, to make an analysis of the company for them. TSMCs financial statements are presented in Appendix A. The complete annual report, including the notes to the financial state- ments, is available in the Investors section of the companys website at www.tsmc.com.

Instructions

(Follow the approach in the chapter for rounding numbers.)

1. (a) Compute for 2013 and 2012 the (1) profit margin, (2) asset turnover, (3) return on assets, and (4) return on ordinary shareholders equity. How would you evaluate TSMCs profitability?

2. (b) Compute for 2013 and 2012 the (1) debt to assets ratio and (2) times interest earned. How would you evaluate TSMCs long-term solvency?

3. (c) What information outside the annual report may also be useful to your parents in making a decision about TSMC?

A APPENDIX Specimen Financial Statements: Taiwan Semiconductor Manufacturing Company, Ltd. CONSOLIDATED BALANCE SHEETS (in Thousands of New Taiwan Dollars) January 1, 2012 December 31, 2013 December 31, 2012 ASSETS Amount % % Amount % Amount 18 155 195 1 1 6 CURRENT ASSETS Cash and casti equivalents (Note 6) Financial assets at fair value through profit or loss (Note 7) Available for sale financial assets (Note 8) Held-to-maturity financial assets (Note 9) Notes and accounts receivable net (Note 11) Receivables from related parties (Note 37) Other receivables from related parties (Note 37) Inventories (Notes 5 and 12) Other financial assets (Note 38) Other current assets (Note 17) 6 6 242,695,447 90,353 760,793 1,795,949 71,649,926 291,708 221,576 37,494,893 501,785 2,984,224 143,410,588 39,554 2,410,635 5,056,973 57,777,586 353,811 185,550 37,830,498 473,833 2,786,408 143,472,277 15,360 3,308,770 3,825,680 45,830,288 185,764 122,292 24,840,582 617,142 2,174,014 4 3 Total current assets 28 358,486,654 28 26 250,325,436 224,392.169 58,721,959 5 38,751,245 4 1 5,243,167 4,315,005 2,145,591 3,605,077 1 NONCURRENT ASSETS Available for sale financial assets (Note 8) Held-to-maturity financial assets (Note 9) Financial assets carried at cost (Note 13) Investments accounted for using equity method (Notes 5 and 14) Property, plant and equipment (Notes 5 and 15) Intangible assets (Notes 5 and 16) Deferred income tax assets (Notes 5 and 31) Refundable deposits (Note 37) Other noncurrent assets (Note 17) 2 63 3 63 28,316,260 792,665,913 11,490,383 7,239,609 2,519,031 1,469,577 1 23,360,918 617,562,188 10,959,569 13.128,219 2.426,712 1,235,144 3 64 1 2 24,886,931 490,422,153 10,861,563 13,604,218 4,518,863 1,306,746 1 1 2 1 - Total noncurrent assets 904,568,323 72 711,029,072 74 555,158,646 72 100 961 354 508 TOTAL $ 1263054977 The accompanying notes are an integral part of the consolidated financial statements 100 779,550,815 100 (Continued A-2 Specimen Financial Statements: TSMC LIABILITIES AND EQUITY December 31, 2013 December 31, 2012 January 1, 2012 Amount % Amount % Amount $ 3 415 15 15,645,000 33,750 34,714,929 15,625 25,926,528 13.742 232 10,530,487 1,328,521 6,148,499 2 CURRENT LIABILITIES Short-term loans (Note 18) Financial ancial liabilities at fair value through profit or loss (Note 7) Hedging derivative financial liabilities (Note 10) Accounts payable Payables to related and bonus payable Accrued profit sharing to employees and bonus to directors and supervisors (Note 24) Payables to contractors and equipment suppliers Income tax payable (Note 31) Provisions (Notes 5 and 19) Accrued expenses and other current liabilities (Notes 15 and 22) Current portion of bonds payable and long-term bank loans (Notes 20 and 21) Salary and heated parties (Note 37) 14,670,260 1.688,456 8,330,956 14,490,429 748,613 7,535,296 1 1 7 1 5 1 5 2 12,738,801 89,810,160 22,563,286 7,603,781 16,693,484 11,186,591 44,831,798 15,635,594 6,038,003 13,148,944 1 9,081,293 35,540,526 10,656,124 5.068,263 13,218,235 1 2 1 1 128,125 4562.500 Total current liabilities 16 16 189,777 934 148,473,947 122,074.950 15 17 NONCURRENT LIABILITIES Hedging derivative financial liabilities (Note 10) Bonds payable (Note 20) Long-term bank loans (Note 21) Provisions (Note 19) Other long-term payables (Note 22) Obligations under finance leases (Note 15) Accrued pension cost (Notes 5 and 23) Guarantee deposits Others 5,481,616 210,767,625 40,000 10,452 36,000 18,000,000 1,587,500 2.889 80,000,000 1,359,375 4,891 54.000 748,115 6,921,234 203,890 495 150 776,230 1 1 7,589,926 151,660 648 449 870,993 6,241,024 443,983 400,831 Total noncurrent liabilities 225.501,958 27.547,220 18 89,786,655 20 25 149,622,170 Total liabilities 415,279,892 238,260.602 33 33 21 259,244 357 55.675.340 259,286,171 55,858,626 27 6 259.162.226 55,471,662 7 4 13 EQUITY ATTRIBUTABLE TO SHAREHOLDERS OF THE PARENT Capital stock (Note 24) Capital surplus (Note 24) Retained earnings (Note 24) Appropriated as legal capital reserve Appropriated as special capital reserve Unappropriated earnings 11 12 1 1 132,436,003 2,785,741 382,971,408 518,193,152 14,170,306 27 115,820,123 7,606,224 284985, 121 408,411,468 (2,780.485) 102,399,995 6,433,874 211.630.458 320,464 327 (7,606 219) 30 29 42 41 0 Others (Note 24) 627,491,996 80 75 720,550,680 67 847,508,255 Equity attributable to shareholders of the parent 2,543,226 2,436,649 266,830 NONCONTROLUNG INTERESTS (Note 24) 75 629,928,645 80 847 775,085 67 723,093,906 Total equity 100 961 354,508 779 550 815 100 $ $ 1263,054 977 100 $ TOTAL -3 Appendix A Specimen Financial Statements: TSMC CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In Thousands of New Taiwan Dollars, Except Earnings Per Share) 2012 2013 % Amount Amount 100 506,745,234 $ 100 NET REVENUE (Notes 5. 26. 37 and 42) s 597,024,197 262 583,098 52 53 COST OF REVENUE (Notes 12, 33 and 37) 316,057,820 48 GROSS PROFIT BEFORE UNREALIZED GROSS PROFIT ON SALES TO ASSOCIATES 47 244,162,136 280.966,377 (25.029) UNREALIZED GROSS PROFIT ON SALES TO ASSOCIATES (20,870) 48 47 244, 137,107 GROSS PROFIT 280,945,507 8 8 OPERATING EXPENSES (Notes 5, 33 and 37) Research and development General and administrative Marketing 3 48,118,165 18,928,544 4,516,525 40,383,195 17,631,694 4.495,986 1 1 12 62,510,875 Total operating expenses 12 71,563,234 (449,364) OTHER OPERATING INCOME AND EXPENSES, NET (Notes 27 and 33) 47,090 36 INCOME FROM OPERATIONS (Note 42) 209,429,363 35 181,176,868 1 NON-OPERATING INCOME AND EXPENSES Share of profits of associates and joint venture (Notes 14 and 42) Other income (Note 28) Foreign exchange gain, net Finance costs (Notes 10 and 29) Other gains and losses (Notes 30 and 37) 3,972,031 2,342,123 285,460 (2,646,776) 2.104.921 2,073,729 1,716,093 582,498 (1,020,422) (2.852 310) Total non-operating income and expenses 6,057,759 499,588 INCOME BEFORE INCOME TAX 215,487,122 36 181,676,456 36 INCOME TAX EXPENSE (Notes 31 and 42) 27.468,185 5 15,552,654 NET INCOME 188,018,937 31 166,123.802 33 1 3,668,509 13,290,385 (4,322,697) 9,534,269 232 (0) 2 2 OTHER COMPREHENSIVE INCOME (LOSS) (Notes 10, 14, 23, 24 and 31) Exchange differences arising on translation of foreign operations Changes in fair value of available-for-sale financial assets Cash flow hedges Share of other comprehensive income (loss) of associates and joint venture Actuarial loss from defined benefit plans Income tax benefit (expense) related to components of other comprehensive income (59,740 (662,074) 53,748 (685,978) 115,168 (326,942) Other comprehensive income for the year, net of income tax 16,352,248 3 4.252.632 TOTAL COMPREHENSIVE INCOME FOR THE YEAR $ 204 371 185 34 $ 170 376,434 34 NET INCOME (LOSS) ATTRIBUTABLE TO: Shareholders of the parent Noncontrolling interests $ 188,146,790 (127,853) 31 $ 166,318,286 (194,484) 33 $ 188018 937 31 $ 166,123,802 33 TOTAL COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO: Shareholders of the parent Noncontrolling interests $ 204,505,782 (134597) 34 $ 170,521,543 (145,109) 34 $ 204,371,185 34 $ 170,376,434 34 2013 2012 Income Attributable to Shareholders of the Parent Income Attributable to Shareholders of the Parent EARNINGS PER SHARE (NTS, Note 32) Basic earnings per share Diluted earnings per share 7.26 7.26 $ $ The accompanying notes are an integral part of the consolidated financial statements 6.42 6.41 CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (In Thousands of New Taiwan Dollars, Except Dividends Per Share) Equity Attributable to Shareholders of the Parent Others Capital Stock - Common Stock Retained Earnings Total Noncontrolling Interests Total Equity Capital Surplus Shares (In Thousands) Total Foreign Currency Translation Reserve Total Unrealized Gain Loss from Available for-sale Financial Assets Cash Flow Hedges Reserve Legal Capital Special Capital Unappropriated Reserve Earnings Amount Reserve (93) 07,606,219) S 627,491,996 S 2.436,649 5 629,928,645 6,433,874 $ 211,630,458 $ 320,464,327 $ (6,433,364) 5 (1,172,762) S 25,916,222 $ 259,162,226 $ 55,471,662 $ 102,399,995 $ BALANCE, JANUARY 1, 2012 13,420,128 1,172,350 Appropriations of prior year's earnings Legal capital reserve Special capital reserve Cash dividends to shareholders - NT$3.00 per share Total (13,420,128) (1,172,350) (77,748,668) (92.341,146 (77 748.568 (77.748668 07.748668 (77 748.668 (77.748 668 (77,748.668) 13,420,128 1,172,350 166,318.286 (194,484 166,123 802 166,318,286 166,318,286 Net income in 2012 49375 4252 632 4 203.257 4825734 93 9,146,083 (622,477) (4320 442) (622,477) 170,376.434 (145109 93 4 825 734 170,521543 Other comprehensive income in 2012, net of income tax (4320 442) 9146,083 165,695,809 165,695,809 242.488 242.488 Total comprehensive income in 2012 6,219 6219 160,357 8,213 82,131 Issuance of stock from exercise of employee stock options 2.588 2,588 Stock option compensation cost of subsidiary 2,588 40,733 (40,733) Adjustments to share of changes in equity of associates and joint venture 286.200 286200 40,733 2543.226 723,093,906 Adjustments arising from changes in percentage of ownership in subsidiaries 12,780,485) 720.550.680 7,973,321 (10,753,806 408,411,468 284,985,121 7,606,224 115,820,123 Increase in noncontrolling interests 25,924,435 259,244,357 55,675,340 77773307 07.773307 (27.773307 17,773,307 BALANCE, DECEMBER 31, 2012 16,615,880 (4,820,483) (16,615,880) 4,820,483 (17,773,307) (89,568,704 188,018,937 (27.773,307) (17.773,307) (127,853) 188, 146,790 Continued 16,615,880 (4,820,483) Appropriations of prior year's earnings Legal capital reserve Reversal of special capital reserve Cash dividends to shareholders - NT$3.00 per share Total 188,146,790 188,146,790 Net income in 2013 Equity Attributable to Shareholders of the Parent Capital Stock - Common Stock Retained Earnings Others Shares (In Thousands) Amount Capital Surplus Legal Capital Special Capital Unappropriated Earnings Noncontrolling Total Interests Reserve Foreign Currency Translation Reserve Total Reserve Unrealized Gain Loss from Available for-sale Financial Assets Equity Cash Flow Hedges Reserve Total Other comprehensive income in 2013, net of income tax $ $ $ $ (591,799) (591,799) 3.613,444 $ 13,337 460 $ (113) $16.950,791 5 16.358 992 6.744 $ 16.392.248 Total comprehensive income in 2013 187 554 991 187 554.991 3,613,444 13,337,460 (113) 16.950,791 204 505,782 (134597 204 371.155 Issuance of stock from exercise of employee stock options 4,182 41,814 82,756 124570 124570 Stock option compensation cost of subsidiary 5312 5312 Adjustments to share of changes in equity of associates and joint venture 38,084 38,084 38.084 Adjustments arising from changes in percentage of ownership in subsidiaries 62.446 (62.446 62,446 188.488 188 488 Increase in noncontrolling interests 12.273,153 12.273,153 Effect of deconsolidation of subsidiary (113) S 14,170 306 $ 847 508 255 $ 266 830 5 347.775.085 2,785,741 $ 382,971,408 $ 518,193,152 S (7140362) $ 21,310,781 $ BALANCE, DECEMBER 31, 2013 25928,617 $ 259,286,171 $ 55,858,626 S 132,436,003 The accompanying notes are an integral part of the consolidated financial statements. Specimen Financial State CONSOLIDATED STATEMENTS OF CASH FLOWS On Thousands of New Taiwan Dollars) 2012 2013 $ 215,487,122 181.676,456 $ CASH ROWS FROM OPERATING ACTIVITIES Income before income tax Adjustments for Depreciation perse Amortization expense Stock option compensation cost of subsidiary Finance costs Share of profits of associates and joint venture Interest income 153,979,847 2.202.022 5312 2.646,776 3.972,031) 11,835,980) (48,848) 129,168,514 2.180.775 6,219 1,020.422 (2,073,729) (1,645,036 (103) 444,505 4.231,602 399,598) (141 491) (4977) 352.214 (1.267,086) (44,721) 733 (293,578) 20.870 317 547 (506,143) 19.977) 5,602,779 25,029 3.219.144) (71.057) (886) 15.071,118) Gain on disposal of property, plant and equipment and intangible assets, net Impairment loss on property, plant and equipment Impairment less of financial assets Gain on disposal of available for sale financial assets, net Gain on disposal of financial assets camed at cost, net Loss (gain on disposal of investments in associates Gain on deconsolidation of subsidiary Unrealized gross profit on sales to associates Less gain) on foreign exchange, net Dividend income Income from receipt of equity securities in settlement of trade receivables Loss on hedging instruments Gain on ansing from changes in fair value of available-for-sale financial assets in hedige effective portion Changes in operating assets and liabilities Derivative financial instruments Notes and accounts receivable net Receivables from related parties Other recewables from related parties Inventones Other financial assets Other current assets Accounts payable to related parties Salary and bonus payable Accrued profit sharing to employees and bonus to directors and supervisors Accrued expenses and other current liabilities Provisions Accrued pension cost Cash generated from operations Income taxes paid 32,189) (14,131,066) (204.278) 50.589 122,472 18,578 B12,251) 346,401 850,094 883.925 1,552.210 3,531,017 1,595,810 9,554 361,846,606 (14.463 069) (22,311) (11.947,191) (168,047) (63,258) (12,989.916) 53,182 648,051 3,656,358 (605,182) 1,386,797 2,105,298 2,051,785 977,901 (5,769) 296,275,199 (11.312.039) Payables 347 383,537 284,963 160 Net cash generated by operating activities 31.525,876) (21,303) (1,795,949) (27,165) (287,594,773) (2.750,361) (56,512) (246,137,361) (1,782,299) CASH FLOWS FROM INVESTING ACTIVITIES Acquisitions at Available-for-sale financial assets Heid-to-maturity financial assets Financial assets carried at cost Property, plant and equipment Intangible assets Proceeds from disposal or redemption of Available-for-sale financial assets Held-to-maturity financial assets Financial assets carried at cost Property, plant and equipment Other assets Costs from entering into hedging transactions Interest received Other dividends received Dividends received from associates Refundable deposits paid Refundable deposits refunded Net cash outflow from deconsolidation of subsidiary (Note 34) 2,418,578 5,145,850 67 986 173,554 964,367 2.711,440 353,656 157,484 26,688 (143,982) 1,790,725 506,143 2.141,881 (98,888) 113,399 (979,910) 1,719,026 71,057 2,088,472 (517,162) 2.609,313 (281,054 215) (269,317 707 Net cash used in investing activities 130.844,821 CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issuance of bonds Repayment of bonds Increase (decrease) in short-term loans Increase in long-term bank loans Repayment of long-term bank loans Repayment of other long-term payables Interest paid Guarantee deposits received Guarantee deposits refunded Decrease in obligations under finance leases Proceeds from exercise of employee stock options Cash dividends Increase in noncontrolling interests (19,636,240) 690.000 (62,500) (853,788) (1,330,886) 41,519 (113,087) (27,796) 124,570 (77,773,307) 202,619 62,000,000 (4,500,000) 9,747,094 50.000 (212,500) (2,367,866) (736,607) 15,671 (255,764) (108,863) 242,488 (77.748,668) 286,200 32,105,925 (13588 815 Net cash generated by (used in) financing activities 849,612 2.118,327) EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS 99,284,859 (61.689) NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 143,410,588 143,472,277 CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 242,695447 143,410,588 CASH AND CASH EQUIVALENTS, END OF YEAR The accompanying notes are an integral part of the consolidated financial statements. A APPENDIX Specimen Financial Statements: Taiwan Semiconductor Manufacturing Company, Ltd. CONSOLIDATED BALANCE SHEETS (in Thousands of New Taiwan Dollars) January 1, 2012 December 31, 2013 December 31, 2012 ASSETS Amount % % Amount % Amount 18 155 195 1 1 6 CURRENT ASSETS Cash and casti equivalents (Note 6) Financial assets at fair value through profit or loss (Note 7) Available for sale financial assets (Note 8) Held-to-maturity financial assets (Note 9) Notes and accounts receivable net (Note 11) Receivables from related parties (Note 37) Other receivables from related parties (Note 37) Inventories (Notes 5 and 12) Other financial assets (Note 38) Other current assets (Note 17) 6 6 242,695,447 90,353 760,793 1,795,949 71,649,926 291,708 221,576 37,494,893 501,785 2,984,224 143,410,588 39,554 2,410,635 5,056,973 57,777,586 353,811 185,550 37,830,498 473,833 2,786,408 143,472,277 15,360 3,308,770 3,825,680 45,830,288 185,764 122,292 24,840,582 617,142 2,174,014 4 3 Total current assets 28 358,486,654 28 26 250,325,436 224,392.169 58,721,959 5 38,751,245 4 1 5,243,167 4,315,005 2,145,591 3,605,077 1 NONCURRENT ASSETS Available for sale financial assets (Note 8) Held-to-maturity financial assets (Note 9) Financial assets carried at cost (Note 13) Investments accounted for using equity method (Notes 5 and 14) Property, plant and equipment (Notes 5 and 15) Intangible assets (Notes 5 and 16) Deferred income tax assets (Notes 5 and 31) Refundable deposits (Note 37) Other noncurrent assets (Note 17) 2 63 3 63 28,316,260 792,665,913 11,490,383 7,239,609 2,519,031 1,469,577 1 23,360,918 617,562,188 10,959,569 13.128,219 2.426,712 1,235,144 3 64 1 2 24,886,931 490,422,153 10,861,563 13,604,218 4,518,863 1,306,746 1 1 2 1 - Total noncurrent assets 904,568,323 72 711,029,072 74 555,158,646 72 100 961 354 508 TOTAL $ 1263054977 The accompanying notes are an integral part of the consolidated financial statements 100 779,550,815 100 (Continued A-2 Specimen Financial Statements: TSMC LIABILITIES AND EQUITY December 31, 2013 December 31, 2012 January 1, 2012 Amount % Amount % Amount $ 3 415 15 15,645,000 33,750 34,714,929 15,625 25,926,528 13.742 232 10,530,487 1,328,521 6,148,499 2 CURRENT LIABILITIES Short-term loans (Note 18) Financial ancial liabilities at fair value through profit or loss (Note 7) Hedging derivative financial liabilities (Note 10) Accounts payable Payables to related and bonus payable Accrued profit sharing to employees and bonus to directors and supervisors (Note 24) Payables to contractors and equipment suppliers Income tax payable (Note 31) Provisions (Notes 5 and 19) Accrued expenses and other current liabilities (Notes 15 and 22) Current portion of bonds payable and long-term bank loans (Notes 20 and 21) Salary and heated parties (Note 37) 14,670,260 1.688,456 8,330,956 14,490,429 748,613 7,535,296 1 1 7 1 5 1 5 2 12,738,801 89,810,160 22,563,286 7,603,781 16,693,484 11,186,591 44,831,798 15,635,594 6,038,003 13,148,944 1 9,081,293 35,540,526 10,656,124 5.068,263 13,218,235 1 2 1 1 128,125 4562.500 Total current liabilities 16 16 189,777 934 148,473,947 122,074.950 15 17 NONCURRENT LIABILITIES Hedging derivative financial liabilities (Note 10) Bonds payable (Note 20) Long-term bank loans (Note 21) Provisions (Note 19) Other long-term payables (Note 22) Obligations under finance leases (Note 15) Accrued pension cost (Notes 5 and 23) Guarantee deposits Others 5,481,616 210,767,625 40,000 10,452 36,000 18,000,000 1,587,500 2.889 80,000,000 1,359,375 4,891 54.000 748,115 6,921,234 203,890 495 150 776,230 1 1 7,589,926 151,660 648 449 870,993 6,241,024 443,983 400,831 Total noncurrent liabilities 225.501,958 27.547,220 18 89,786,655 20 25 149,622,170 Total liabilities 415,279,892 238,260.602 33 33 21 259,244 357 55.675.340 259,286,171 55,858,626 27 6 259.162.226 55,471,662 7 4 13 EQUITY ATTRIBUTABLE TO SHAREHOLDERS OF THE PARENT Capital stock (Note 24) Capital surplus (Note 24) Retained earnings (Note 24) Appropriated as legal capital reserve Appropriated as special capital reserve Unappropriated earnings 11 12 1 1 132,436,003 2,785,741 382,971,408 518,193,152 14,170,306 27 115,820,123 7,606,224 284985, 121 408,411,468 (2,780.485) 102,399,995 6,433,874 211.630.458 320,464 327 (7,606 219) 30 29 42 41 0 Others (Note 24) 627,491,996 80 75 720,550,680 67 847,508,255 Equity attributable to shareholders of the parent 2,543,226 2,436,649 266,830 NONCONTROLUNG INTERESTS (Note 24) 75 629,928,645 80 847 775,085 67 723,093,906 Total equity 100 961 354,508 779 550 815 100 $ $ 1263,054 977 100 $ TOTAL -3 Appendix A Specimen Financial Statements: TSMC CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In Thousands of New Taiwan Dollars, Except Earnings Per Share) 2012 2013 % Amount Amount 100 506,745,234 $ 100 NET REVENUE (Notes 5. 26. 37 and 42) s 597,024,197 262 583,098 52 53 COST OF REVENUE (Notes 12, 33 and 37) 316,057,820 48 GROSS PROFIT BEFORE UNREALIZED GROSS PROFIT ON SALES TO ASSOCIATES 47 244,162,136 280.966,377 (25.029) UNREALIZED GROSS PROFIT ON SALES TO ASSOCIATES (20,870) 48 47 244, 137,107 GROSS PROFIT 280,945,507 8 8 OPERATING EXPENSES (Notes 5, 33 and 37) Research and development General and administrative Marketing 3 48,118,165 18,928,544 4,516,525 40,383,195 17,631,694 4.495,986 1 1 12 62,510,875 Total operating expenses 12 71,563,234 (449,364) OTHER OPERATING INCOME AND EXPENSES, NET (Notes 27 and 33) 47,090 36 INCOME FROM OPERATIONS (Note 42) 209,429,363 35 181,176,868 1 NON-OPERATING INCOME AND EXPENSES Share of profits of associates and joint venture (Notes 14 and 42) Other income (Note 28) Foreign exchange gain, net Finance costs (Notes 10 and 29) Other gains and losses (Notes 30 and 37) 3,972,031 2,342,123 285,460 (2,646,776) 2.104.921 2,073,729 1,716,093 582,498 (1,020,422) (2.852 310) Total non-operating income and expenses 6,057,759 499,588 INCOME BEFORE INCOME TAX 215,487,122 36 181,676,456 36 INCOME TAX EXPENSE (Notes 31 and 42) 27.468,185 5 15,552,654 NET INCOME 188,018,937 31 166,123.802 33 1 3,668,509 13,290,385 (4,322,697) 9,534,269 232 (0) 2 2 OTHER COMPREHENSIVE INCOME (LOSS) (Notes 10, 14, 23, 24 and 31) Exchange differences arising on translation of foreign operations Changes in fair value of available-for-sale financial assets Cash flow hedges Share of other comprehensive income (loss) of associates and joint venture Actuarial loss from defined benefit plans Income tax benefit (expense) related to components of other comprehensive income (59,740 (662,074) 53,748 (685,978) 115,168 (326,942) Other comprehensive income for the year, net of income tax 16,352,248 3 4.252.632 TOTAL COMPREHENSIVE INCOME FOR THE YEAR $ 204 371 185 34 $ 170 376,434 34 NET INCOME (LOSS) ATTRIBUTABLE TO: Shareholders of the parent Noncontrolling interests $ 188,146,790 (127,853) 31 $ 166,318,286 (194,484) 33 $ 188018 937 31 $ 166,123,802 33 TOTAL COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO: Shareholders of the parent Noncontrolling interests $ 204,505,782 (134597) 34 $ 170,521,543 (145,109) 34 $ 204,371,185 34 $ 170,376,434 34 2013 2012 Income Attributable to Shareholders of the Parent Income Attributable to Shareholders of the Parent EARNINGS PER SHARE (NTS, Note 32) Basic earnings per share Diluted earnings per share 7.26 7.26 $ $ The accompanying notes are an integral part of the consolidated financial statements 6.42 6.41 CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (In Thousands of New Taiwan Dollars, Except Dividends Per Share) Equity Attributable to Shareholders of the Parent Others Capital Stock - Common Stock Retained Earnings Total Noncontrolling Interests Total Equity Capital Surplus Shares (In Thousands) Total Foreign Currency Translation Reserve Total Unrealized Gain Loss from Available for-sale Financial Assets Cash Flow Hedges Reserve Legal Capital Special Capital Unappropriated Reserve Earnings Amount Reserve (93) 07,606,219) S 627,491,996 S 2.436,649 5 629,928,645 6,433,874 $ 211,630,458 $ 320,464,327 $ (6,433,364) 5 (1,172,762) S 25,916,222 $ 259,162,226 $ 55,471,662 $ 102,399,995 $ BALANCE, JANUARY 1, 2012 13,420,128 1,172,350 Appropriations of prior year's earnings Legal capital reserve Special capital reserve Cash dividends to shareholders - NT$3.00 per share Total (13,420,128) (1,172,350) (77,748,668) (92.341,146 (77 748.568 (77.748668 07.748668 (77 748.668 (77.748 668 (77,748.668) 13,420,128 1,172,350 166,318.286 (194,484 166,123 802 166,318,286 166,318,286 Net income in 2012 49375 4252 632 4 203.257 4825734 93 9,146,083 (622,477) (4320 442) (622,477) 170,376.434 (145109 93 4 825 734 170,521543 Other comprehensive income in 2012, net of income tax (4320 442) 9146,083 165,695,809 165,695,809 242.488 242.488 Total comprehensive income in 2012 6,219 6219 160,357 8,213 82,131 Issuance of stock from exercise of employee stock options 2.588 2,588 Stock option compensation cost of subsidiary 2,588 40,733 (40,733) Adjustments to share of changes in equity of associates and joint venture 286.200 286200 40,733 2543.226 723,093,906 Adjustments arising from changes in percentage of ownership in subsidiaries 12,780,485) 720.550.680 7,973,321 (10,753,806 408,411,468 284,985,121 7,606,224 115,820,123 Increase in noncontrolling interests 25,924,435 259,244,357 55,675,340 77773307 07.773307 (27.773307 17,773,307 BALANCE, DECEMBER 31, 2012 16,615,880 (4,820,483) (16,615,880) 4,820,483 (17,773,307) (89,568,704 188,018,937 (27.773,307) (17.773,307) (127,853) 188, 146,790 Continued 16,615,880 (4,820,483) Appropriations of prior year's earnings Legal capital reserve Reversal of special capital reserve Cash dividends to shareholders - NT$3.00 per share Total 188,146,790 188,146,790 Net income in 2013 Equity Attributable to Shareholders of the Parent Capital Stock - Common Stock Retained Earnings Others Shares (In Thousands) Amount Capital Surplus Legal Capital Special Capital Unappropriated Earnings Noncontrolling Total Interests Reserve Foreign Currency Translation Reserve Total Reserve Unrealized Gain Loss from Available for-sale Financial Assets Equity Cash Flow Hedges Reserve Total Other comprehensive income in 2013, net of income tax $ $ $ $ (591,799) (591,799) 3.613,444 $ 13,337 460 $ (113) $16.950,791 5 16.358 992 6.744 $ 16.392.248 Total comprehensive income in 2013 187 554 991 187 554.991 3,613,444 13,337,460 (113) 16.950,791 204 505,782 (134597 204 371.155 Issuance of stock from exercise of employee stock options 4,182 41,814 82,756 124570 124570 Stock option compensation cost of subsidiary 5312 5312 Adjustments to share of changes in equity of associates and joint venture 38,084 38,084 38.084 Adjustments arising from changes in percentage of ownership in subsidiaries 62.446 (62.446 62,446 188.488 188 488 Increase in noncontrolling interests 12.273,153 12.273,153 Effect of deconsolidation of subsidiary (113) S 14,170 306 $ 847 508 255 $ 266 830 5 347.775.085 2,785,741 $ 382,971,408 $ 518,193,152 S (7140362) $ 21,310,781 $ BALANCE, DECEMBER 31, 2013 25928,617 $ 259,286,171 $ 55,858,626 S 132,436,003 The accompanying notes are an integral part of the consolidated financial statements. Specimen Financial State CONSOLIDATED STATEMENTS OF CASH FLOWS On Thousands of New Taiwan Dollars) 2012 2013 $ 215,487,122 181.676,456 $ CASH ROWS FROM OPERATING ACTIVITIES Income before income tax Adjustments for Depreciation perse Amortization expense Stock option compensation cost of subsidiary Finance costs Share of profits of associates and joint venture Interest income 153,979,847 2.202.022 5312 2.646,776 3.972,031) 11,835,980) (48,848) 129,168,514 2.180.775 6,219 1,020.422 (2,073,729) (1,645,036 (103) 444,505 4.231,602 399,598) (141 491) (4977) 352.214 (1.267,086) (44,721) 733 (293,578) 20.870 317 547 (506,143) 19.977) 5,602,779 25,029 3.219.144) (71.057) (886) 15.071,118) Gain on disposal of property, plant and equipment and intangible assets, net Impairment loss on property, plant and equipment Impairment less of financial assets Gain on disposal of available for sale financial assets, net Gain on disposal of financial assets camed at cost, net Loss (gain on disposal of investments in associates Gain on deconsolidation of subsidiary Unrealized gross profit on sales to associates Less gain) on foreign exchange, net Dividend income Income from receipt of equity securities in settlement of trade receivables Loss on hedging instruments Gain on ansing from changes in fair value of available-for-sale financial assets in hedige effective portion Changes in operating assets and liabilities Derivative financial instruments Notes and accounts receivable net Receivables from related parties Other recewables from related parties Inventones Other financial assets Other current assets Accounts payable to related parties Salary and bonus payable Accrued profit sharing to employees and bonus to directors and supervisors Accrued expenses and other current liabilities Provisions Accrued pension cost Cash generated from operations Income taxes paid 32,189) (14,131,066) (204.278) 50.589 122,472 18,578 B12,251) 346,401 850,094 883.925 1,552.210 3,531,017 1,595,810 9,554 361,846,606 (14.463 069) (22,311) (11.947,191) (168,047) (63,258) (12,989.916) 53,182 648,051 3,656,358 (605,182) 1,386,797 2,105,298 2,051,785 977,901 (5,769) 296,275,199 (11.312.039) Payables 347 383,537 284,963 160 Net cash generated by operating activities 31.525,876) (21,303) (1,795,949) (27,165) (287,594,773) (2.750,361) (56,512) (246,137,361) (1,782,299) CASH FLOWS FROM INVESTING ACTIVITIES Acquisitions at Available-for-sale financial assets Heid-to-maturity financial assets Financial assets carried at cost Property, plant and equipment Intangible assets Proceeds from disposal or redemption of Available-for-sale financial assets Held-to-maturity financial assets Financial assets carried at cost Property, plant and equipment Other assets Costs from entering into hedging transactions Interest received Other dividends received Dividends received from associates Refundable deposits paid Refundable deposits refunded Net cash outflow from deconsolidation of subsidiary (Note 34) 2,418,578 5,145,850 67 986 173,554 964,367 2.711,440 353,656 157,484 26,688 (143,982) 1,790,725 506,143 2.141,881 (98,888) 113,399 (979,910) 1,719,026 71,057 2,088,472 (517,162) 2.609,313 (281,054 215) (269,317 707 Net cash used in investing activities 130.844,821 CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issuance of bonds Repayment of bonds Increase (decrease) in short-term loans Increase in long-term bank loans Repayment of long-term bank loans Repayment of other long-term payables Interest paid Guarantee deposits received Guarantee deposits refunded Decrease in obligations under finance leases Proceeds from exercise of employee stock options Cash dividends Increase in noncontrolling interests (19,636,240) 690.000 (62,500) (853,788) (1,330,886) 41,519 (113,087) (27,796) 124,570 (77,773,307) 202,619 62,000,000 (4,500,000) 9,747,094 50.000 (212,500) (2,367,866) (736,607) 15,671 (255,764) (108,863) 242,488 (77.748,668) 286,200 32,105,925 (13588 815 Net cash generated by (used in) financing activities 849,612 2.118,327) EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS 99,284,859 (61.689) NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 143,410,588 143,472,277 CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 242,695447 143,410,588 CASH AND CASH EQUIVALENTS, END OF YEAR The accompanying notes are an integral part of the consolidated financial statements