1934 Act Registration No. 1-14700

 

 

 

 

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

 

FORM 6-K

 

 

REPORT OF FOREIGN PRIVATE ISSUER

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

THE SECURITIES EXCHANGE ACT OF 1934

For the month of May 2017

 

 

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    ☒            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  ☒

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

 

 

 


SIGNATURES

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

 

    Taiwan Semiconductor Manufacturing Company Ltd.
Date: May 15, 2017     By  

/s/ Lora Ho

      Lora Ho
      Senior Vice President & Chief Financial Officer


  

Taiwan Semiconductor Manufacturing

Company Limited and Subsidiaries

 

Consolidated Financial Statements for the

Three Months Ended March 31, 2017 and 2016 and

Independent Accountants’ Review Report

  


LOGO

INDEPENDENT ACCOUNTANTS’ REVIEW REPORT

The Board of Directors and Shareholders

Taiwan Semiconductor Manufacturing Company Limited

We have reviewed the accompanying consolidated balance sheets of Taiwan Semiconductor Manufacturing Company Limited and subsidiaries (the “Company”) as of March 31, 2017 and 2016 and the related consolidated statements of comprehensive income, changes in equity and cash flows for the three months ended March 31, 2017 and 2016. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to issue a report on these consolidated financial statements based on our reviews.

We conducted our reviews in accordance with Statement on Auditing Standards No. 36, “Review of Financial Statements,” issued by the Auditing Standards Committee of the Accounting Research and Development Foundation of the Republic of China. A review consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the Republic of China, the objective of which is the expression of an opinion regarding the consolidated financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our reviews, we are not aware of any material modifications that should be made to the consolidated financial statements referred to above for them to be in conformity with the Guidelines Governing the Preparation of Financial Reports by Securities Issuers and International Accounting Standard 34, “Interim Financial Reporting,” endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China.

 

LOGO

May 9, 2017

Notice to Readers

The accompanying consolidated financial statements are intended only to present the consolidated financial position, financial performance 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 applied in the Republic of China.

For the convenience of readers, the independent 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 independent accountants’ review report and consolidated financial statements shall prevail.

 

- 1 -


Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED BALANCE SHEETS

(In Thousands of New Taiwan Dollars)

 

 

     March 31, 2017
(Reviewed)
     December 31, 2016
(Audited)
     March 31, 2016
(Reviewed)
 
     Amount      %      Amount      %      Amount      %  

    

                 

ASSETS

                 

CURRENT ASSETS

                 

Cash and cash equivalents (Note 6)

   $ 564,725,266        29      $ 541,253,833        29      $ 617,984,318        36  

Financial assets at fair value through profit or loss (Note 7)

     5,374,003               6,451,112               618,810         

Available-for-sale financial assets (Notes 8 and 14)

     71,083,797        4        67,788,767        4        22,232,905        1  

Held-to-maturity financial assets (Note 9)

     18,140,374        1        16,610,116        1        7,561,182        1  

Hedging derivative financial assets (Note 10)

                   5,550                       

Notes and accounts receivable, net (Note 11)

     108,532,829        6        128,335,271        7        96,273,270        6  

Receivables from related parties (Note 29)

     494,839               969,559               683,818         

Other receivables from related parties (Note 29)

     135,051               146,788               141,009         

Inventories (Notes 12 and 33)

     50,389,022        3        48,682,233        3        57,242,320        3  

Other financial assets (Notes 30 and 33)

     3,761,484               4,100,475               7,057,944         

Other current assets (Note 17)

     3,025,168               3,385,422               2,695,531         
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total current assets

     825,661,833        43        817,729,126        44        812,491,107        47  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

NONCURRENT ASSETS

                 

Held-to-maturity financial assets (Note 9)

     20,499,458        1        22,307,561        1        17,525,301        1  

Financial assets carried at cost (Note 13)

     4,079,292               4,102,467               4,093,568         

Investments accounted for using equity method (Note 14)

     19,940,062        1        19,743,888        1        24,715,683        1  

Property, plant and equipment (Note 15)

     1,037,364,143        54        997,777,687        53        844,305,450        49  

Intangible assets (Note 16)

     14,278,436        1        14,614,846        1        13,989,513        1  

Deferred income tax assets (Note 4)

     10,644,401               8,271,421               7,561,741        1  

Refundable deposits

     572,005               407,874               443,337         

Other noncurrent assets (Note 17)

     1,624,131               1,500,432               1,399,936         
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total noncurrent assets

     1,109,001,928        57        1,068,726,176        56        914,034,529        53  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

TOTAL

   $ 1,934,663,761        100      $ 1,886,455,302        100      $ 1,726,525,636        100  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

LIABILITIES AND EQUITY

                 

CURRENT LIABILITIES

                 

Short-term loans (Note 18)

   $ 54,666,000        3      $ 57,958,200        3      $ 34,690,040        2  

Financial liabilities at fair value through profit or loss (Note 7)

     124,935               191,135               16         

Hedging derivative financial liabilities (Note 10)

     3,908                             458         

Accounts payable

     23,081,567        1        26,062,351        2        18,513,952        1  

Payables to related parties (Note 29)

     1,171,195               1,262,174               1,115,073         

Salary and bonus payable

     10,703,656        1        13,681,817        1        8,580,300        1  

Accrued profit sharing bonus to employees and compensation to directors and supervisors (Notes 22 and 27)

     28,857,625        1        22,894,006        1        25,395,073        1  

Payables to contractors and equipment suppliers

     57,671,953        3        63,154,514        3        33,953,061        2  

Income tax payable (Note 4)

     52,874,433        3        40,306,054        2        41,474,426        2  

Provisions (Note 19)

     11,298,320        1        18,037,789        1        10,090,163        1  

Long-term liabilities - current portion (Note 20)

     44,909,680        2        38,109,680        2        33,272,901        2  

Accrued expenses and other current liabilities (Notes 21 and 29)

     36,217,252        2        36,581,553        2        28,807,760        2  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total current liabilities

     321,580,524        17        318,239,273        17        235,893,223        14  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

NONCURRENT LIABILITIES

                 

Bonds payable (Note 20)

     134,198,769        7        153,093,557        8        181,151,058        11  

Long-term bank loans

     19,360               21,780               30,000         

Deferred income tax liabilities (Note 4)

     90,944               141,183               13,831         

Net defined benefit liability (Note 4)

     8,537,369               8,551,408               7,437,455         

Guarantee deposits (Note 21)

     12,321,468        1        14,670,433        1        19,492,280        1  

Others

     1,605,302               1,686,542               1,561,713         
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total noncurrent liabilities

     156,773,212        8        178,164,903        9        209,686,337        12  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total liabilities

     478,353,736        25        496,404,176        26        445,579,560        26  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

EQUITY ATTRIBUTABLE TO SHAREHOLDERS OF THE PARENT

                 

Capital stock (Note 22)

     259,303,805        13        259,303,805        14        259,303,805        15  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Capital surplus (Note 22)

     56,282,118        3        56,272,304        3        56,317,375        3  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Retained earnings (Note 22)

                 

Appropriated as legal capital reserve

     208,297,945        11        208,297,945        11        177,640,561        11  

Unappropriated earnings

     951,339,122        49        863,710,224        46        781,434,518        45  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     1,159,637,067        60        1,072,008,169        57        959,075,079        56  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Others (Note 22)

     (19,709,627)        (1      1,663,983               5,276,848         
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Equity attributable to shareholders of the parent

     1,455,513,363        75        1,389,248,261        74        1,279,973,107        74  

NONCONTROLLING INTERESTS

     796,662               802,865               972,969         
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total equity

     1,456,310,025        75        1,390,051,126        74        1,280,946,076        74  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

TOTAL

   $ 1,934,663,761        100      $ 1,886,455,302        100      $ 1,726,525,636        100  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

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

 

- 2 -


Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

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

(Reviewed, Not Audited)

 

 

     Three Months Ended March 31  
     2017      2016  
     Amount      %      Amount      %  

    

           

NET REVENUE (Notes 23, 29 and 35)

   $ 233,914,400        100      $ 203,495,361        100  

COST OF REVENUE (Notes 12, 27, 29 and 33)

     112,428,734        48        112,124,894        55  
  

 

 

    

 

 

    

 

 

    

 

 

 

GROSS PROFIT BEFORE REALIZED (UNREALIZED) GROSS PROFIT ON SALES TO ASSOCIATES

     121,485,666        52        91,370,467        45  

REALIZED (UNREALIZED) GROSS PROFIT ON SALES TO ASSOCIATES

     3,970               (32,889       
  

 

 

    

 

 

    

 

 

    

 

 

 

GROSS PROFIT

     121,489,636        52        91,337,578        45  
  

 

 

    

 

 

    

 

 

    

 

 

 

OPERATING EXPENSES (Notes 27 and 29)

           

Research and development

     19,412,393        8        15,618,963        7  

General and administrative

     5,247,603        2        3,844,935        2  

Marketing

     1,496,487        1        1,415,099        1  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total operating expenses

     26,156,483        11        20,878,997        10  
  

 

 

    

 

 

    

 

 

    

 

 

 

OTHER OPERATING INCOME AND EXPENSES, NET (Note 27)

     19,237               8,733         
  

 

 

    

 

 

    

 

 

    

 

 

 

INCOME FROM OPERATIONS (Note 35)

     95,352,390        41        70,467,314        35  
  

 

 

    

 

 

    

 

 

    

 

 

 

NON-OPERATING INCOME AND EXPENSES

           

Share of profits of associates

     666,810               840,895         

Other income

     2,104,979        1        1,332,589        1  

Foreign exchange gain (loss), net (Note 34)

     99,795               (1,093,618      (1

Finance costs

     (816,664             (850,580       

Other gains and losses (Note 24)

     415,189               1,559,299        1  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total non-operating income and expenses

     2,470,109        1        1,788,585        1  
  

 

 

    

 

 

    

 

 

    

 

 

 

INCOME BEFORE INCOME TAX

     97,822,499        42        72,255,899        36  

INCOME TAX EXPENSE (Notes 4 and 25)

     10,201,591        5        7,463,302        4  
  

 

 

    

 

 

    

 

 

    

 

 

 

NET INCOME

     87,620,908        37        64,792,597        32  
  

 

 

    

 

 

    

 

 

    

 

 

 

(Continued)

 

- 3 -


Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

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

(Reviewed, Not Audited)

 

 

     Three Months Ended March 31  
     2017      2016  
     Amount      %      Amount      %  

    

           

OTHER COMPREHENSIVE INCOME (LOSS) (Notes 22 and 25)

           

Items that may be reclassified subsequently to profit or loss:

           

Exchange differences arising on translation of foreign operations

   $ (21,243,594      (9    $ (6,593,053      (3

Changes in fair value of available-for-sale financial assets

     (93,470             51,294         

Share of other comprehensive income (loss) of associates

     (61,657             26,157         

Income tax benefit related to items that may be reclassified subsequently

     46,400               17,440         
  

 

 

    

 

 

    

 

 

    

 

 

 

Other comprehensive loss for the period, net of income tax

     (21,352,321      (9      (6,498,162      (3
  

 

 

    

 

 

    

 

 

    

 

 

 

TOTAL COMPREHENSIVE INCOME FOR THE PERIOD

   $ 66,268,587        28      $ 58,294,435        29  
  

 

 

    

 

 

    

 

 

    

 

 

 

NET INCOME (LOSS) ATTRIBUTABLE TO:

           

Shareholders of the parent

   $ 87,628,898        37      $ 64,781,493        32  

Noncontrolling interests

     (7,990             11,104         
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 87,620,908        37      $ 64,792,597        32  
  

 

 

    

 

 

    

 

 

    

 

 

 

TOTAL COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO:

           

Shareholders of the parent

   $ 66,274,790        28      $ 58,284,228        29  

Noncontrolling interests

     (6,203             10,207         
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 66,268,587        28      $ 58,294,435        29  
  

 

 

    

 

 

    

 

 

    

 

 

 
     2017      2016  
    

Income Attributable to
Shareholders of

the Parent

    

Income Attributable to

Shareholders of

the Parent

 

    

           

EARNINGS PER SHARE (NT$, Note 26)

           

Basic earnings per share

   $        3.38      $        2.50  
  

 

 

    

 

 

 

Diluted earnings per share

   $        3.38      $        2.50  
  

 

 

    

 

 

 

 

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

 

- 4 -


Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(In Thousands of New Taiwan Dollars)

(Reviewed, Not Audited)

 

 

     Equity Attributable to Shareholders of the Parent                
                                               Others                       
     Capital Stock - Common
Stock
            Retained Earnings      Foreign
Currency
    

Unrealized

Gain/Loss
from Available-

            Unearned
Stock-Based
                             
     Shares
(In Thousands)
     Amount      Capital Surplus     

Legal Capital

Reserve

     Unappropriated
Earnings
     Total     

Translation

Reserve

    

for-sale

Financial Assets

     Cash Flow
Hedges Reserve
     Employee
Compensation
     Total      Total      Noncontrolling
Interests
    

Total

Equity

 

    

                                         

BALANCE, JANUARY 1, 2017

     25,930,380      $ 259,303,805      $ 56,272,304      $ 208,297,945      $ 863,710,224      $ 1,072,008,169      $ 1,661,237      $ 2,641      $ 105      $      $ 1,663,983      $ 1,389,248,261      $ 802,865      $ 1,390,051,126  

Net income (loss) for the three months ended March 31, 2017

                                 87,628,898        87,628,898                                           87,628,898        (7,990      87,620,908  

Other comprehensive income (loss) for the three months ended March 31, 2017, net of income tax

                                               (21,304,092      (50,016                    (21,354,108      (21,354,108      1,787        (21,352,321
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total comprehensive income (loss) for the three months ended March 31, 2017

                                 87,628,898        87,628,898        (21,304,092      (50,016                    (21,354,108      66,274,790        (6,203      66,268,587  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Adjustments to share of changes in equities of associates

                   9,814                                                  (19,502      (19,502      (9,688             (9,688
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

BALANCE, March 31, 2017

     25,930,380      $ 259,303,805      $ 56,282,118      $ 208,297,945      $ 951,339,122      $ 1,159,637,067      $ (19,642,855    $ (47,375    $ 105      $ (19,502    $ (19,709,627    $ 1,455,513,363      $ 796,662      $ 1,456,310,025  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

BALANCE, JANUARY 1, 2016

     25,930,380      $ 259,303,805      $ 56,300,215      $ 177,640,561      $ 716,653,025      $ 894,293,586      $ 11,039,949      $ 734,771      $ (607    $      $ 11,774,113      $ 1,221,671,719      $ 962,760      $ 1,222,634,479  

Net income for the three months ended March 31, 2016

                                 64,781,493        64,781,493                                           64,781,493        11,104        64,792,597  

Other comprehensive income (loss) for the three months ended March 31, 2016, net of income tax

                                               (6,587,294      89,938        91               (6,497,265      (6,497,265      (897      (6,498,162
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total comprehensive income (loss) for the three months ended March 31, 2016

                                 64,781,493        64,781,493        (6,587,294      89,938        91               (6,497,265      58,284,228        10,207        58,294,435  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Adjustments to share of changes in equities of associates

                   17,160                                                                17,160        2        17,162  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

BALANCE, March 31, 2016

     25,930,380      $ 259,303,805      $ 56,317,375      $ 177,640,561      $ 781,434,518      $ 959,075,079      $ 4,452,655      $ 824,709      $ (516    $      $ 5,276,848      $ 1,279,973,107      $ 972,969      $ 1,280,946,076  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

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

 

- 5 -


Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands of New Taiwan Dollars)

(Reviewed, Not Audited)

 

 

     Three Months Ended March 31  
     2017      2016  

    

     

CASH FLOWS FROM OPERATING ACTIVITIES

     

Income before income tax

   $ 97,822,499      $ 72,255,899  

Adjustments for:

     

Depreciation expense

     59,133,361        54,950,729  

Amortization expense

     1,038,824        896,332  

Finance costs

     816,664        850,580  

Share of profits of associates

     (666,810      (840,895

Interest income

     (2,104,979      (1,332,589

Gain on disposal of property, plant and equipment, net

     (22,195      (8,235

Impairment loss on financial assets

     12,032         

Loss on disposal of available-for-sale financial assets, net

     8,982        10,829  

Gain on disposal of financial assets carried at cost, net

            (14,381

Unrealized (realized) gross profit on sales to associates

     (3,970      32,889  

Gain on foreign exchange, net

     (7,106,552      (1,293,976

Loss from hedging instruments

     15,780        11,870  

Loss (gain) arising from changes in fair value of available-for-sale financial assets in hedge effective portion

     3,707        (10,625

Changes in operating assets and liabilities:

     

Financial instruments at fair value through profit or loss

     1,010,909        (685,378

Notes and accounts receivable, net

     18,227,303        (12,473,495

Receivables from related parties

     474,720        (178,096

Other receivables from related parties

     11,737        (15,991

Inventories

     (1,706,789      9,809,950  

Other financial assets

     1,599,844        (3,129,147

Other current assets

     369,473        837,838  

Other noncurrent assets

     (152,473       

Accounts payable

     (3,020,849      3,728  

Payables to related parties

     (90,979      (7,283

Salary and bonus payable

     (2,978,161      (3,121,742

Accrued profit sharing bonus to employees and compensation to directors and supervisors

     5,963,619        4,436,180  

Accrued expenses and other current liabilities

     (824,558      760,672  

Provisions

     (6,696,992      (64,147

Net defined benefit liability

     (14,039      (10,571
  

 

 

    

 

 

 

Cash generated from operations

     161,120,108        121,670,945  

Income taxes paid

     (112,064      (142,092
  

 

 

    

 

 

 

Net cash generated by operating activities

     161,008,044        121,528,853  
  

 

 

    

 

 

 

(Continued)

 

- 6 -


Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands of New Taiwan Dollars)

(Reviewed, Not Audited)

 

 

     Three Months Ended March 31  
     2017      2016  

    

     

CASH FLOWS FROM INVESTING ACTIVITIES

     

Acquisitions of:

     

Available-for-sale financial assets

   $ (24,675,339    $ (11,171,713

Held-to-maturity financial assets

     (1,695,771      (12,439,373

Financial assets carried at cost

     (202,032      (187,378

Property, plant and equipment

     (102,505,595      (38,141,373

Intangible assets

     (917,636      (1,003,705

Proceeds from disposal or redemption of:

     

Available-for-sale financial assets

     18,436,274        2,943,420  

Held-to-maturity financial assets

     400,000        3,000,000  

Financial assets carried at cost

            14,381  

Property, plant and equipment

     151,904        12,470  

Derecognition of hedging derivative financial instruments

     (6,399      (9,647

Interest received

     1,950,176        1,541,119  

Refundable deposits paid

     (191,217      (55,609

Refundable deposits refunded

     25,376        47,608  

Decrease in receivables for temporary payments

            102,433  
  

 

 

    

 

 

 

Net cash used in investing activities

     (109,230,259      (55,347,367
  

 

 

    

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

     

Decrease in short-term loans

     (250,365      (4,114,866

Repayment of bonds

     (10,000,000       

Repayment of long-term bank loans

     (2,420       

Interest paid

     (1,257,295      (689,803

Guarantee deposits received

     723,339        200,080  

Guarantee deposits refunded

     (1,123,178      (202,243
  

 

 

    

 

 

 

Net cash used in financing activities

     (11,909,919      (4,806,832
  

 

 

    

 

 

 

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS

     (16,396,433      (6,079,266
  

 

 

    

 

 

 

NET INCREASE IN CASH AND CASH EQUIVALENTS

     23,471,433        55,295,388  

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

     541,253,833        562,688,930  
  

 

 

    

 

 

 

CASH AND CASH EQUIVALENTS, END OF PERIOD

   $ 564,725,266      $ 617,984,318  
  

 

 

    

 

 

 

 

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

 

- 7 -


Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2017 and 2016

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

(Reviewed, Not Audited)

 

 

1. GENERAL

Taiwan Semiconductor Manufacturing Company Limited (TSMC), a Republic of China (R.O.C.) corporation, was incorporated on February 21, 1987. TSMC is a dedicated foundry in the semiconductor industry which engages mainly in the manufacturing, selling, packaging, testing and computer-aided design of integrated circuits and other semiconductor devices and the manufacturing of masks.

On September 5, 1994, TSMC’s shares were listed on the Taiwan Stock Exchange (TWSE). On October 8, 1997, TSMC listed some of its shares of stock on the New York Stock Exchange (NYSE) in the form of American Depositary Shares (ADSs).

The address of its registered office and principal place of business is No. 8, Li-Hsin Rd. 6, Hsinchu Science Park, Taiwan. The principal operating activities of TSMC’s subsidiaries are described in Note 4.

 

2. THE AUTHORIZATION OF FINANCIAL STATEMENTS

The accompanying consolidated financial statements were reported to the Board of Directors and issued on May 9, 2017.

 

3. APPLICATION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS

 

  a. Initial application of the amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), IFRIC Interpretations (IFRIC), and SIC Interpretations (SIC) endorsed and issued into effect by the Financial Supervisory Commission (FSC) for application starting from 2017

Rule No. 1050050021 and Rule No. 1050026834 issued by the FSC stipulated that starting January 1, 2017, TSMC and its subsidiaries (collectively as the “Company”) should apply the amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the IFRS, IAS, IFRIC and SIC issued by the International Accounting Standards Board (IASB) (collectively, “IFRSs”) and endorsed and issued into effect by the FSC for application starting from 2017.

Except for the following, the initial application of the amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the IFRSs endorsed and issued into effect by the FSC for application starting from 2017 would not have a significant effect on the Company’s accounting policies:

 

  1) Amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers

The amendments stipulate that other companies or institutions of which the chairman of the board of directors or president serves as the chairman of the board of directors or the president, or is the spouse or second immediate family of the chairman of the board of directors or president of the Company are deemed to have a substantive related party relationship, unless it can be demonstrated that no control, joint control, or significant influence exists. Furthermore, the amendments require the disclosure of the names of the related parties and the relationship with whom the Company has significant transaction. If the transaction or balance with a specific related party is 10% or more of the Company’s respective total transaction or balance, such transaction should be separately disclosed by the name of each related party.

 

- 8 -


When the amendments are applied retrospectively from January 1, 2017, the disclosure of related party transactions is enhanced, please refer to Note 29.

 

  b. The IFRSs issued by IASB but not yet endorsed and issued into effect by FSC

The Company has not applied the following IFRSs issued by the IASB but not endorsed and issued into effect by the FSC. The FSC announced that the Company should apply IFRS 9 and IFRS 15 starting January 1, 2018. As of the date the consolidated financial statements were issued, the FSC has not announced the effective dates of other new IFRSs.

 

New, Revised or Amended Standards and Interpretations

  

Effective Date Issued by IASB (Note 1)

       

Annual Improvements to IFRSs 2014-2016 Cycle

  

Note 2

Amendment to IFRS 2 “Classification and Measurement of Share-based Payment Transactions”

  

January 1, 2018

IFRS 9 “Financial Instruments”

  

January 1, 2018

Amendments to IFRS 9 and IFRS 7 “Mandatory Effective Date of IFRS 9 and Transition Disclosure”

  

January 1, 2018

Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets between an Investor and its Associate or Joint Venture”

  

To be determined by IASB

IFRS 15 “Revenue from Contracts with Customers”

  

January 1, 2018

Amendment to IFRS 15 “Clarifications to IFRS 15”

  

January 1, 2018

IFRS 16 “Leases”

  

January 1, 2019

Amendment to IAS 7 “Disclosure Initiative”

  

January 1, 2017

Amendment to IAS 12 “Recognition of Deferred Tax Assets for Unrealized Losses”

  

January 1, 2017

IFRIC 22 “Foreign Currency Transactions and Advance Consideration”

  

January 1, 2018

 

  Note 1: The aforementioned new, revised or amended standards or interpretations are effective after fiscal year beginning on or after the effective dates, unless specified otherwise.
  Note 2: The amendment to IFRS 12 is retrospectively applied for annual periods beginning on or after January 1, 2017; the amendment to IAS 28 is retrospectively applied for annual periods beginning on or after January 1, 2018.

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

 

- 9 -


  1) IFRS 9, “Financial Instruments”

All recognized financial assets currently in the scope of IAS 39, “Financial Instruments: Recognition and Measurement,” will be subsequently measured at either the amortized cost or the fair value. The classification and measurement requirements in IFRS 9 are stated as follows:

For the debt instruments invested by the Company, if the contractual cash flows that are solely for payments of principal and interest on the principal amount outstanding, the classification and measurement requirements are stated as follows:

 

  a) If the objective of the Company’s business model is to hold the financial asset to collect the contractual cash flows, such assets are measured at the amortized cost. Interest revenue should be recognized in profit or loss by using the effective interest method, continuously assessed for impairment and the impairment loss or reversal of impairment loss should be recognized in profit and loss.

 

  b) If the objective of the Company’s business model is to hold the financial asset both to collect the contractual cash flows and to sell the financial assets, such assets are measured at fair value through other comprehensive income and are continuously assessed for impairment. Interest revenue should be recognized in profit or loss by using the effective interest method. A gain or loss on a financial asset measured at fair value through other comprehensive income should be recognized in other comprehensive income, except for impairment gains or losses and foreign exchange gains and losses. When such financial asset is derecognized or reclassified, the cumulative gain or loss previously recognized in other comprehensive income is reclassified from equity to profit or loss.

The other financial assets which do not meet the aforementioned criteria should be measured at the fair value through profit or loss. However, the Company may irrevocably designate an investment in equity instruments that is not held for trading as measured at fair value through other comprehensive income. All relevant gains and losses shall be recognized in other comprehensive income, except for dividends which are recognized in profit or loss. No subsequent impairment assessment is required, and the cumulative gain or loss previously recognized in other comprehensive income cannot be reclassified from equity to profit or loss.

IFRS 9 adds a new expected loss impairment model to measure the impairment of financial assets. A loss allowance for expected credit losses should be recognized on financial assets measured at amortized cost and financial assets mandatorily measured at fair value through other comprehensive income. If the credit risk on a financial instrument has not increased significantly since initial recognition, the Company should measure the loss allowance for that financial instrument at an amount equal to 12-month expected credit losses. If the credit risk on a financial instrument has increased significantly since initial recognition and is not deemed to be a low credit risk, the Company should measure the loss allowance for that financial instrument at an amount equal to the lifetime expected credit losses. The Company should always measure the loss allowance at an amount equal to lifetime expected credit losses for trade receivables.

The main changes in hedge accounting amended the application requirements for hedge accounting to better reflect the entity’s risk management activities. Compared with IAS 39, the main changes include: (1) enhancing types of transactions eligible for hedge accounting, specifically broadening the risks eligible for hedge accounting of non-financial items; (2) changing the way hedging derivative instruments are accounted for to reduce profit or loss volatility; and (3) replacing retrospective effectiveness assessment with the principle of economic relationship between the hedging instrument and the hedged item.

When IFRS 9 becomes effective, the Company may elect to apply this Standard either retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of the initial application of this Standard recognized at the date of initial application. However, the requirements for general hedge accounting shall be applied prospectively.

 

- 10 -


  2) IFRS 15, “Revenue from Contracts with Customers” and related amendment

IFRS 15 establishes principles for recognizing revenue that apply to all contracts with customers, and will supersede IAS 18, “Revenue,” IAS 11, “Construction Contracts,” and a number of revenue-related interpretations.

When applying IFRS 15, the Company shall recognize revenue by applying the following steps:

 

    Identify the contract with the customer;

 

    Identify the performance obligations in the contract;

 

    Determine the transaction price;

 

    Allocate the transaction price to the performance obligations in the contracts; and

 

    Recognize revenue when the entity satisfies a performance obligation.

When IFRS 15 and related amendment are effective, the Company may elect to apply this Standard either retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying this Standard recognized at the date of initial application.

 

  3) IFRS 16, “Leases”

IFRS 16 sets out the accounting standards for leases that will supersede IAS 17 and a number of related interpretations.

Under IFRS 16, if the Company is a lessee, it shall recognize right-of-use assets and lease liabilities for all leases on the consolidated balance sheets except for low-value and short-term leases. The Company may elect to apply the accounting method similar to the accounting for operating lease under IAS 17 to the low-value and short-term leases. On the consolidated statements of comprehensive income, the Company should present the depreciation expense charged on the right-of-use asset separately from interest expense accrued on the lease liability; interest is computed by using effective interest method. On the consolidated statements of cash flows, cash payments for both the principal and interest portion of the lease liability are classified within financing activities.

When IFRS 16 becomes effective, the Company may elect to apply this Standard either retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of the initial application of this Standard recognized at the date of initial application.

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

 

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Except for the following, the accounting policies applied in these consolidated financial statements are consistent with those applied in the consolidated financial statements for the year ended December 31, 2016.

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.

 

- 11 -


Statement of Compliance

The accompanying consolidated financial statements have been prepared in conformity with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and IAS 34, “Interim Financial Reporting,” endorsed and issued into effect 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 the IFRSs endorsed and issued into effect by the FSC (collectively, “Taiwan-IFRSs”) for application starting from 2017.

Basis of Consolidation

The basis of preparation and the basis for the consolidated financial statements

The basis of preparation and the basis for the consolidated financial statements applied in these consolidated financial statements are consistent with those applied in the consolidated financial statements for the year ended December 31, 2016.

The subsidiaries in the consolidated financial statements

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

 

           

Establishment

and Operating

Location

  Percentage of Ownership        
Name of Investor   Name of Investee   Main Businesses and Products    

March 31,

2017

    December 31,
2016
   

March 31,

2016

    Note  
             

TSMC

 

TSMC North America

 

Selling and marketing of integrated circuits and other semiconductor devices

 

San Jose, California, U.S.A.

    100%       100%       100%       —    
 

TSMC Japan Limited (TSMC Japan)

 

Customer service and supporting activities

 

Yokohama, Japan

    100%       100%       100%       a)  
 

TSMC Partners, Ltd. (TSMC Partners)

 

Investing in companies involved in the design, manufacture, and other related business in the semiconductor industry and other investment activities

 

Tortola, British Virgin Islands

    100%       100%       100%       a)  
 

TSMC Korea Limited (TSMC Korea)

 

Customer service and supporting activities

 

Seoul, Korea

    100%       100%       100%       a)  
 

TSMC Europe B.V. (TSMC Europe)

 

Customer service and supporting activities

 

Amsterdam, the Netherlands

    100%       100%       100%       a)  
 

TSMC Global, Ltd. (TSMC Global)

 

Investment activities

 

Tortola, British Virgin Islands

    100%       100%       100%       —    
 

TSMC China Company Limited (TSMC China)

 

Manufacturing, selling, testing and computer-aided design of integrated circuits and other semiconductor devices

 

Shanghai, China

    100%       100%       100%       —    
 

TSMC Nanjing Company Limited (TSMC Nanjing)

 

Manufacturing, selling, testing and computer-aided design of integrated circuits and other semiconductor devices

 

Nanjing, China

    100%       100%       —         b)  
 

VentureTech Alliance Fund III, L.P. (VTAF III)

 

Investing in new start-up technology companies

 

Cayman Islands

    98%       98%       98%       a)  
 

VentureTech Alliance Fund II, L.P. (VTAF II)

 

Investing in new start-up technology companies

 

Cayman Islands

    98%       98%       98%       a)  
 

Emerging Alliance Fund, L.P. (Emerging Alliance)

 

Investing in new start-up technology companies

 

Cayman Islands

    —         —         99.5%      
a),
c)
 
 
 

TSMC Solar Europe GmbH

 

Selling of solar related products and providing customer service

 

Hamburg, Germany

    100%       100%       100%      
a),
d)
 
 
 

Chi Cherng Investment Co., Ltd. (Chi Cherng)

 

Investment activities

 

Taipei, Taiwan

    —         —         100%       e)  
 

VisEra Technologies Company Ltd. (VisEra Tech)

 

Engaged in manufacturing electronic spare parts and in researching, developing, designing, manufacturing, selling, packaging and testing of color filter

 

Hsin-Chu, Taiwan

    87%       87%       —         f)  

 

(Continued)

 

- 12 -


           

Establishment

and Operating

Location

  Percentage of Ownership        
Name of Investor   Name of Investee   Main Businesses and Products    

March 31,

2017

    December 31,
2016
   

March 31,

2016

    Note  
             

TSMC Partners

 

TSMC Design Technology Canada Inc. (TSMC Canada)

 

Engineering support activities

 

Ontario, Canada

    100%       100%       100%       a)  
 

TSMC Technology, Inc. (TSMC Technology)

 

Engineering support activities

 

Delaware, U.S.A.

    100%       100%       100%       a)  
 

TSMC Development, Inc. (TSMC Development)

 

Investing in companies involved in the manufacturing related business in the semiconductor industry

 

Delaware, U.S.A.

    100%       100%       100%       —    
 

InveStar Semiconductor Development Fund, Inc. (ISDF)

 

Investing in new start-up technology companies

 

Cayman Islands

    97%       97%       97%       a), g)  
 

InveStar Semiconductor Development Fund, Inc. (II) LDC. (ISDF II)

 

Investing in new start-up technology companies

 

Cayman Islands

    97%       97%       97%       a), g)  
 

VisEra Holding Company (VisEra Holding)

 

Investing in companies involved in the design, manufacturing and other related businesses in the semiconductor industry

 

Cayman Islands

    —         —         98%       a), f)  

TSMC Development

 

WaferTech, LLC (WaferTech)

 

Manufacturing, selling and testing of integrated circuits and other semiconductor devices

 

Washington, U.S.A.

    100%       100%       100%        

VTAF III

 

Mutual-Pak Technology Co., Ltd. (Mutual-Pak)

 

Manufacturing of electronic parts, wholesaling and retailing of electronic materials, and researching, developing and testing of RFID

 

New Taipei, Taiwan

    58%       58%       58%       a)  
 

Growth Fund Limited (Growth Fund)

 

Investing in new start-up technology companies

 

Cayman Islands

    100%       100%       100%       a)  

VTAF III, VTAF II and Emerging Alliance

 

VentureTech Alliance Holdings, LLC (VTA Holdings)

 

Investing in new start-up technology companies

 

Delaware, U.S.A.

                100%       a), c), h)  

VTAF III, VTAF II and TSMC

 

VTA Holdings

 

Investing in new start-up technology companies

 

Delaware, U.S.A.

    100%       100%             a), c), h)

VisEra Holding

 

VisEra Tech

 

Engaged in manufacturing electronic spare parts and in researching, developing, designing, manufacturing, selling, packaging and testing of color filter

 

Hsin-Chu, Taiwan

                87%       f)  

(Concluded)

 

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

 

  Note b: Under the investment agreement entered into with the municipal government of Nanjing, China on March 28, 2016, the Company will make an investment in Nanjing in the amount of approximately US$3 billion to establish a subsidiary operating a 300mm wafer fab with the capacity of 20,000 12-inch wafers per month, and a design service center. TSMC Nanjing was established in May 2016.

 

  Note c: Due to the expiration of the investment agreement between Emerging Alliance and TSMC, Emerging Alliance completed the liquidation procedures in April 2016. Emerging Alliance’s ownership in VTA Holdings was held directly by TSMC.

 

  Note d: TSMC Solar Europe GmbH has started the liquidation procedures.

 

  Note e: Chi Cherng was incorporated into TSMC in December 2016.

 

  Note f: To simplify investment structure, VisEra Tech owned by VisEra Holding was transferred to TSMC in the third quarter of 2016. In October 2016, VisEra Holding was incorporated into TSMC Partners, the subsidiary of TSMC.

 

  Note g: ISDF and ISDF II have started the liquidation procedures.

 

  Note h: VTA Holdings completed the liquidation procedures in April 2017.

Retirement Benefits

Pension cost for an interim period is calculated on a year-to-date basis by using the actuarially determined pension cost rate at the end of the prior financial year.

Taxation

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

 

- 13 -


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

The same critical accounting judgments and key sources of estimates and uncertainty have been followed in these consolidated financial statements as were applied in the preparation of the Company’s consolidated financial statements for the year ended December 31, 2016.

 

6. CASH AND CASH EQUIVALENTS

 

    

March 31,

2017

     December 31,
2016
    

March 31,

2016

 
                      

Cash and deposits in banks

   $ 564,224,428      $ 536,895,344      $ 610,578,696  

Repurchase agreements collateralized by corporate bonds

     500,838        2,361,250        7,005,622  

Commercial paper

            1,997,239         

Repurchase agreements collateralized by government bonds

                   400,000  
  

 

 

    

 

 

    

 

 

 
   $ 564,725,266      $ 541,253,833      $ 617,984,318  
  

 

 

    

 

 

    

 

 

 

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

 

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

 

    

March 31,

2017

     December 31,
2016
    

March 31,

2016

 

Financial assets

        

Held for trading

        

Forward exchange contracts

   $ 23,432      $ 142,406      $ 618,810  

Cross currency swap contracts

            10,976         
  

 

 

    

 

 

    

 

 

 
     23,432        153,382        618,810  
  

 

 

    

 

 

    

 

 

 

Designated as at FVTPL

        

Time deposit

     5,344,256        6,297,708         

Forward exchange contracts

     6,315        22         
  

 

 

    

 

 

    

 

 

 
     5,350,571        6,297,730         
  

 

 

    

 

 

    

 

 

 
   $ 5,374,003      $ 6,451,112      $ 618,810  
  

 

 

    

 

 

    

 

 

 

Financial liabilities

        

Held for trading

        

Forward exchange contracts

   $ 80,795      $ 91,585      $ 16  

Designated as at FVTPL

        

Forward exchange contracts

     44,140        99,550         
  

 

 

    

 

 

    

 

 

 
   $ 124,935      $ 191,135      $ 16  
  

 

 

    

 

 

    

 

 

 

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.

 

- 14 -


Outstanding forward exchange contracts consisted of the following:

 

          Contract Amount  
     Maturity Date    (In Thousands)  
             

March  31, 2017

     

Sell NT$/Buy EUR

   April 2017 to May 2017      NT$3,147,552/EUR96,000  

Sell NT$/Buy JPY

   April 2017 to May 2017      NT$12,846,853/JPY47,100,000  

Sell US$/Buy EUR

   April 2017      US$109,848/EUR101,270  

Sell US$/Buy JPY

   April 2017      US$129,021/JPY14,339,800  

Sell US$/Buy NT$

   April 2017 to May 2017      US$8,000/NT$245,033  

Sell US$/Buy RMB

   April 2017 to June 2017      US$469,482/RMB3,233,987  

December  31, 2016

     

Sell NT$/Buy EUR

   January 2017      NT$5,393,329/EUR159,400  

Sell NT$/Buy JPY

   January 2017      NT$7,314,841/JPY26,501,800  

Sell US$/Buy EUR

   January 2017      US$4,180/EUR4,000  

Sell US$/Buy JPY

   January 2017      US$428/JPY50,000  

Sell US$/Buy NT$

   January 2017 to February 2017      US$439,000/NT$14,138,202  

Sell US$/Buy RMB

   January 2017 to June 2017      US$421,750/RMB2,908,380  

March  31, 2016

     

Sell US$/Buy JPY

   April 2016      US$500/JPY56,125  

Sell US$/Buy RMB

   April 2016      US$193,000/RMB1,255,743  

Sell US$/Buy NT$

   April 2016 to May 2016      US$1,092,000/NT$35,729,464  

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

 

    

       

December 31, 2016

       

January 2017

     US$170,000/NT$5,487,600        3.98%        

 

8. AVAILABLE-FOR-SALE FINANCIAL ASSETS

 

    

March 31,

2017

     December 31,
2016
    

March 31,

2016

 

    

        

Corporate bonds

   $ 31,423,219      $ 29,999,508      $ 9,343,220  

Agency bonds/Agency mortgage-backed securities

     17,234,724        14,880,482        5,507,441  

Asset-backed securities

     11,252,756        11,254,757        5,618,046  

Government bonds

     7,831,260        8,457,362        508,705  

Publicly traded stocks

     2,849,231        3,196,658        1,255,493  

Commercial paper

     492,607                
  

 

 

    

 

 

    

 

 

 
   $ 71,083,797      $ 67,788,767      $ 22,232,905  
  

 

 

    

 

 

    

 

 

 

 

- 15 -


9. HELD-TO-MATURITY FINANCIAL ASSETS

 

    

March 31,

2017

     December 31,
2016
    

March 31,

2016

 

    

        

Corporate bonds/Bank debentures

   $ 22,241,885      $ 23,849,701      $ 16,860,145  

Commercial paper

     10,323,947        8,628,176        399,338  

Negotiable certificate of deposit

     4,555,500        4,829,850        4,827,000  

Structured product

     1,518,500        1,609,950        3,000,000  
  

 

 

    

 

 

    

 

 

 
   $ 38,639,832      $ 38,917,677      $ 25,086,483  
  

 

 

    

 

 

    

 

 

 

Current portion

   $ 18,140,374      $ 16,610,116      $ 7,561,182  

Noncurrent portion

     20,499,458        22,307,561        17,525,301  
  

 

 

    

 

 

    

 

 

 
   $ 38,639,832      $ 38,917,677      $ 25,086,483  
  

 

 

    

 

 

    

 

 

 

 

10. HEDGING DERIVATIVE FINANCIAL INSTRUMENTS

 

    

        March 31,        

2017

         December 31,    
2016
    

        March 31,        

2016

 
        

Financial assets - current

        

Fair value hedges

        

Interest rate futures contracts

   $      $ 5,550      $  
  

 

 

    

 

 

    

 

 

 

Financial liabilities - current

        

Fair value hedges

        

Interest rate futures contracts

   $ 3,908      $      $ 458  
  

 

 

    

 

 

    

 

 

 

The Company entered into interest rate futures contracts, which are used to hedge against price risk caused by changes in interest rates in the Company’s investments in fixed income securities.

The outstanding interest rate futures contracts consisted of the following:

 

Maturity Period    Contract Amount
(US$ in Thousands)
 
        

March  31, 2017

  

June 2017

   US$ 52,400  

December  31, 2016

  

March 2017

   US$ 53,600  

March  31, 2016

  

June 2016

   US$ 8,000  

 

- 16 -


11. NOTES AND ACCOUNTS RECEIVABLE, NET

 

    

  March 31,  

2017

     December 31,
2016
    

  March 31,  

2016

 
                      

Notes and accounts receivable

   $ 109,010,938      $ 128,815,389      $ 96,761,458  

Allowance for doubtful receivables

     (478,109      (480,118      (488,188
  

 

 

    

 

 

    

 

 

 

Notes and accounts receivable, net

   $ 108,532,829      $ 128,335,271      $ 96,273,270  
  

 

 

    

 

 

    

 

 

 

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

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

Aging analysis of notes and accounts receivable, net

 

    

March 31,

2017

     December 31,
2016
    

  March 31,  

2016

 
                      

Neither past due nor impaired

   $ 94,790,800      $ 108,411,408      $ 83,871,066  

Past due but not impaired

        

Past due within 30 days

     9,682,935        15,017,824        10,181,534  

Past due 31-60 days

     550,853        1,844,726        1,815,102  

Past due 61-120 days

     3,508,241        3,061,313        405,568  
  

 

 

    

 

 

    

 

 

 
   $ 108,532,829      $ 128,335,271      $ 96,273,270  
  

 

 

    

 

 

    

 

 

 

Movements of the allowance for doubtful receivables

 

     Individually
Assessed for
Impairment
     Collectively
Assessed for
Impairment
         Total      
                      

Balance at January 1, 2017

   $ 1,848      $ 478,270      $ 480,118  

Reversal/Write-off

     (1,848             (1,848

Effect of exchange rate changes

            (161      (161
  

 

 

    

 

 

    

 

 

 

Balance at March 31, 2017

   $      $ 478,109      $ 478,109  
  

 

 

    

 

 

    

 

 

 

Balance at January 1, 2016

   $ 10,241      $ 478,010      $ 488,251  

Effect of exchange rate changes

            (63      (63
  

 

 

    

 

 

    

 

 

 

Balance at March 31, 2016

   $          10,241      $        477,947      $        488,188  
  

 

 

    

 

 

    

 

 

 

 

- 17 -


Aging analysis of accounts receivable that is individually determined as impaired

 

    

  March 31,  

2017

     December 31,
2016
    

  March 31,  

2016

 
                      

Past due over 121 days

   $      $ 1,848      $ 10,241  
  

 

 

    

 

 

    

 

 

 

 

12. INVENTORIES

 

    

  March 31,  

2017

     December 31,
2016
    

  March 31,  

2016

 
                      

Finished goods

   $ 8,024,042      $ 8,521,873      $ 5,812,241  

Work in process

     34,535,606        33,330,870        46,429,187  

Raw materials

     5,239,223        4,012,190        2,716,815  

Supplies and spare parts

     2,590,151        2,817,300        2,284,077  
  

 

 

    

 

 

    

 

 

 
   $ 50,389,022      $ 48,682,233      $ 57,242,320  
  

 

 

    

 

 

    

 

 

 

Reversal of the reserve for inventory write-downs resulting from the increase in net realizable value in the amount of NT$942,343 thousand and NT$544,672 thousand (excluding earthquake losses), respectively, were included in the cost of revenue for the three months ended March 31, 2017 and 2016. Please refer to related earthquake losses in Note 33.

 

13. FINANCIAL ASSETS CARRIED AT COST

 

    

  March 31,  

2017

     December 31,
2016
    

  March 31,  

2016

 
                      

Non-publicly traded stocks

   $ 2,791,642      $ 2,944,859      $ 3,204,088  

Mutual funds

     1,287,650        1,157,608        889,480  
  

 

 

    

 

 

    

 

 

 
   $ 4,079,292      $ 4,102,467      $ 4,093,568  
  

 

 

    

 

 

    

 

 

 

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

The stock of Impinj, Inc. was listed in July 2016. Accordingly, the Company reclassified the aforementioned investments from financial assets carried at cost to available-for-sale financial assets.

 

14. INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD

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
  

March 31,

2017

     December 31,
2016
    

March 31,

2016

    

March 31,

2017

  December 31,
2016
 

March 31,

2016

                                             

Vanguard International Semiconductor Corporation (VIS)

  

Manufacturing, selling, packaging, testing and computer-aided design of integrated circuits and other semiconductor devices and the manufacturing and design service of masks

  

Hsinchu, Taiwan

   $ 9,072,232      $ 8,806,384      $ 8,846,336      28%   28%   28%

Systems on Silicon Manufacturing Company Pte Ltd. (SSMC)

  

Manufacturing and selling of integrated circuits and other semiconductor devices

  

Singapore

     7,153,964        7,163,516        9,649,635      39%   39%   39%

 

(Continued)

 

- 18 -


          Place of    Carrying Amount      % of Ownership and Voting Rights
Held by the Company
 
Name of Associate   

Principal

Activities

   Incorporation
and Operation
  

March 31,

2017

     December 31,
2016
    

March 31,

2016

    

March 31,

2017

    December 31,
2016
   

March 31,

2016

 
                                                   

Xintec Inc. (Xintec)

  

Wafer level chip size packaging and wafer level post passivation interconnection service

  

Taoyuan, Taiwan

   $ 2,488,903      $ 2,599,807      $ 2,896,364        41%       41%       41%  

Global Unichip Corporation (GUC)

  

Researching, developing, manufacturing, testing and marketing of integrated circuits

  

Hsinchu, Taiwan

     1,224,963        1,174,181        1,174,917        35%       35%       35%  

Motech Industries, Inc. (Motech)

  

Manufacturing and selling of solar cells, crystalline silicon solar wafer, solar module, solar inverter and design and construction of solar power systems

  

New Taipei, Taiwan

                   2,148,431                    12%  
        

 

 

    

 

 

    

 

 

        
         $ 19,940,062      $ 19,743,888      $ 24,715,683         
        

 

 

    

 

 

    

 

 

        

(Concluded)

Starting June 2016, the Company has no longer served as Motech’s board of director. As a result, the Company exercises no significant influence over Motech. Therefore, Motech is no longer accounted for using the equity method. Further, such investment was reclassified to available-for-sale financial assets and the Company recognized a disposal loss of NT$259,960 thousand.

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

 

Name of Associate   

March 31,

2017

     December 31,
2016
    

March 31,

2016

 
                      

VIS

   $     26,832,118      $ 26,089,360      $     23,350,442  
  

 

 

    

 

 

    

 

 

 

Xintec

   $ 5,007,687      $ 3,622,227      $ 3,204,919  
  

 

 

    

 

 

    

 

 

 

GUC

   $ 4,738,818      $ 3,664,997      $ 3,926,449  
  

 

 

    

 

 

    

 

 

 

Motech

         $ 2,128,672  
        

 

 

 

 

- 19 -


15. PROPERTY, PLANT AND EQUIPMENT

 

    Land and Land
Improvements
    Buildings     Machinery and
Equipment
    Office
Equipment
    Assets under
Finance Leases
    Equipment under
Installation and
Construction in
Progress
    Total  
                                           

Cost

             

Balance at January 1, 2017

  $ 4,049,292     $ 304,404,474     $ 2,042,867,744     $ 34,729,640     $     $ 387,199,675     $ 2,773,250,825  

Additions (Deductions)

          22,844,918       107,830,782       2,280,174             (33,261,906     99,693,968  

Disposals or retirements

          (18,994     (1,466,833     (4,993                 (1,490,820

Reclassification

                8,791       1,507                   10,298  

Effect of exchange rate changes

    (47,560     (1,124,646     (4,261,654     (129,570           (176,397     (5,739,827
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at March 31, 2017

  $ 4,001,732     $ 326,105,752     $ 2,144,978,830     $ 36,876,758     $     $ 353,761,372     $ 2,865,724,444  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Accumulated depreciation and impairment

             

Balance at January 1, 2017

  $ 524,845     $ 174,349,077     $ 1,577,377,509     $ 23,221,707     $     $     $ 1,775,473,138  

Additions

    7,106       4,600,837       53,350,352       1,175,066                   59,133,361  

Disposals or retirements

          (18,994     (1,336,213     (4,974                 (1,360,181

Reclassification

                8,195       1,466                   9,661  

Effect of exchange rate changes

    (29,992     (910,592     (3,861,614     (93,480                 (4,895,678
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at March 31, 2017

  $ 501,959     $ 178,020,328     $ 1,625,538,229     $ 24,299,785     $     $     $ 1,828,360,301  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Carrying amounts at January 1, 2017

  $ 3,524,447     $ 130,055,397     $ 465,490,235     $ 11,507,933     $     $ 387,199,675     $ 997,777,687  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Carrying amounts at March 31, 2017

  $ 3,499,773     $ 148,085,424     $ 519,440,601     $ 12,576,973     $     $ 353,761,372     $ 1,037,364,143  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cost

             

Balance at January 1, 2016

  $ 4,067,391     $ 296,801,864     $ 1,893,489,604     $ 30,700,049     $ 7,113     $ 192,111,548     $ 2,417,177,569  

Additions

          2,448,970       16,972,797       883,459             25,824,137       46,129,363  

Disposals or retirements

                (998,529     (61,741                 (1,060,270

Reclassification

                      7,113       (7,113            

Effect of exchange rate changes

    (18,593     (442,618     (1,584,024     (39,858           (5,747     (2,090,840
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at March 31, 2016

  $ 4,048,798     $ 298,808,216     $ 1,907,879,848     $ 31,489,022     $     $ 217,929,938     $ 2,460,155,822  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Accumulated depreciation and impairment

             

Balance at January 1, 2016

  $ 506,185     $ 157,910,155     $ 1,385,857,655     $ 19,426,069     $ 7,113     $     $ 1,563,707,177  

Additions

    7,557       4,382,978       49,527,167       1,033,027                   54,950,729  

Disposals or retirements

                (983,846     (61,680                 (1,045,526

Reclassification

                      7,113       (7,113            

Effect of exchange rate changes

    (11,222     (341,013     (1,380,339     (29,434                 (1,762,008
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at March 31, 2016

  $ 502,520     $ 161,952,120     $ 1,433,020,637     $ 20,375,095     $     $     $ 1,615,850,372  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Carrying amounts at March 31, 2016

  $ 3,546,278     $ 136,856,096     $ 474,859,211     $ 11,113,927     $     $ 217,929,938     $ 844,305,450  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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.

 

- 20 -


16. INTANGIBLE ASSETS

 

     Goodwill      Technology
License
Fees
     Software and
System Design
Costs
     Patent and
Others
     Total  
                                    

Cost

              

Balance at January 1, 2017

   $ 6,007,975      $ 9,546,007      $ 22,243,595      $ 5,386,435      $ 43,184,012  

Additions

            233,977        528,188        195,537        957,702  

Retirements

                   (75,237             (75,237

Reclassification

                   7,662        (17,960      (10,298

Effect of exchange rate changes

     (249,171      (2,607      (6,197      (6,275      (264,250
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Balance at March 31, 2017

   $ 5,758,804      $ 9,777,377      $ 22,698,011      $ 5,557,737      $ 43,791,929  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Accumulated amortization and impairment

              

Balance at January 1, 2017

   $      $ 6,147,200      $ 18,144,428      $ 4,277,538      $ 28,569,166  

Additions

            385,022        525,031        128,771        1,038,824  

Retirements

                   (75,237             (75,237

Reclassification

                   7,409        (17,070      (9,661

Effect of exchange rate changes

            (2,607      (5,125      (1,867      (9,599
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Balance at March 31, 2017

   $      $ 6,529,615      $ 18,596,506      $ 4,387,372      $ 29,513,493  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Carrying amounts at January 1, 2017

   $ 6,007,975      $ 3,398,807      $ 4,099,167      $ 1,108,897      $ 14,614,846  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Carrying amounts at March 31, 2017

   $ 5,758,804      $ 3,247,762      $ 4,101,505      $ 1,170,365      $ 14,278,436  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Cost

              

Balance at January 1, 2016

   $ 6,104,784      $ 8,454,304      $ 19,474,428      $ 4,879,026      $ 38,912,542  

Additions

            454,622        230,629        235,392        920,643  

Retirements

                   (1,800             (1,800

Effect of exchange rate changes

     (98,616      2,607        (2,667      (2,478      (101,154
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Balance at March 31, 2016

   $ 6,006,168      $ 8,911,533      $ 19,700,590      $ 5,111,940      $ 39,730,231  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Accumulated amortization and impairment

              

Balance at January 1, 2016

   $      $ 4,779,388      $ 16,431,666      $ 3,635,608      $ 24,846,662  

Additions

            314,356        409,156        172,820        896,332  

Retirements

                   (1,800             (1,800

Effect of exchange rate changes

            2,607        (2,430      (653      (476
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Balance at March 31, 2016

   $      $ 5,096,351      $ 16,836,592      $ 3,807,775      $ 25,740,718  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Carrying amounts at March 31, 2016

   $ 6,006,168      $ 3,815,182      $ 2,863,998      $ 1,304,165      $ 13,989,513  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

The Company’s goodwill has been tested for impairment at the end of the annual reporting period and the recoverable amount is determined based on the value in use. The value in use was calculated based on the cash flow forecast from the financial budgets covering the future five-year period, and the Company used annual discount rate of 8.40% in its test of impairment for December 31, 2016 to reflect the relevant specific risk in the cash-generating unit.

 

- 21 -


17. OTHER ASSETS

 

    

March 31,

2017

     December 31,
2016
    

March 31,

2016

 
                      

Tax receivable

   $       1,921,963      $       2,325,825      $       1,534,342  

Prepaid expenses

     1,037,963        1,007,026        1,151,672  

Net Input VAT

     465,526        333,140         

Long-term receivable

                   365,000  

Others

     1,223,847        1,219,863        1,044,453  
  

 

 

    

 

 

    

 

 

 
   $ 4,649,299      $ 4,885,854      $ 4,095,467  
  

 

 

    

 

 

    

 

 

 

Current portion

   $ 3,025,168      $ 3,385,422      $ 2,695,531  

Noncurrent portion

     1,624,131        1,500,432        1,399,936  
  

 

 

    

 

 

    

 

 

 
   $ 4,649,299      $ 4,885,854      $ 4,095,467  
  

 

 

    

 

 

    

 

 

 

 

18. SHORT-TERM LOANS

 

    

March 31,

2017

     December 31,
2016
    

March 31,

2016

 
                      

Unsecured loans

        

Amount

   $ 54,666,000      $ 57,958,200      $ 34,690,040  
  

 

 

    

 

 

    

 

 

 

Original loan content

        

US$ (in thousands)

   $ 1,800,000      $ 1,800,000      $ 1,078,000  

Annual interest rate

     1.08%-1.23%        0.87%-1.07%        0.62%-0.70%  

Maturity date

    
Due by
April 2017
 
 
    
Due by
January 2017
 
 
    
Due in
April 2016
 
 

 

19. PROVISIONS

The Company’s current provisions were provisions for sales returns and allowances.

 

     Sales Returns
and Allowances
 
        

Three months ended March 31, 2017

  

Balance, beginning of period

   $ 18,037,789  

Provision

     8,556,743  

Payment

     (15,250,080

Effect of exchange rate changes

     (46,132
  

 

 

 

Balance, end of period

   $ 11,298,320  
  

 

 

 

Three months ended March 31, 2016

  

Balance, beginning of period

   $ 10,163,536  

Provision

     6,999,654  

Payment

     (7,060,305

Effect of exchange rate changes

     (12,722
  

 

 

 

Balance, end of period

   $ 10,090,163  
  

 

 

 

 

- 22 -


Provisions for sales returns and allowances are estimated based on historical experience and the consideration of varying contractual terms, and are recognized as a reduction of revenue in the same period of the related product sales.

 

20. BONDS PAYABLE

 

    

    March 31,    

2017

     December 31,
2016
    

March 31,

2016

 
                      

Domestic unsecured bonds

   $ 144,200,000      $ 154,200,000      $ 166,200,000  

Overseas unsecured bonds

     34,925,500        37,028,850        48,270,000  
  

 

 

    

 

 

    

 

 

 
     179,125,500        191,228,850        214,470,000  

Less: Discounts on bonds payable

     (26,731      (35,293      (56,041

Less: Current portion

     (44,900,000      (38,100,000      (33,262,901
  

 

 

    

 

 

    

 

 

 
   $ 134,198,769      $ 153,093,557      $ 181,151,058  
  

 

 

    

 

 

    

 

 

 

The major terms of overseas unsecured bonds are as follows:

 

Issuance Period   

Total Amount
(US$

in Thousands)

     Coupon Rate      Repayment and Interest Payment
                    

April 2013 to April 2016

   $ 350,000        0.95%     

Bullet repayment; interest payable semi-annually

April 2013 to April 2018

     1,150,000        1.625%     

The same as above

 

21. GUARANTEE DEPOSITS

 

    

March 31,

2017

     December 31,
2016
    

March 31,

2016

 
                      

Capacity guarantee

   $ 18,222,000      $ 20,929,350      $ 25,744,000  

Receivables guarantee

     4,900,473        5,559,960         

Others

     173,876        181,312        185,365  
  

 

 

    

 

 

    

 

 

 
   $ 23,296,349      $ 26,670,622      $ 25,929,365  
  

 

 

    

 

 

    

 

 

 

Current portion (classified under accrued expenses and other current liabilities)

   $ 10,974,881      $ 12,000,189      $ 6,437,085  

Noncurrent portion

     12,321,468        14,670,433        19,492,280  
  

 

 

    

 

 

    

 

 

 
   $   23,296,349      $   26,670,622      $   25,929,365  
  

 

 

    

 

 

    

 

 

 

Some of guarantee deposits were refunded to customers by offsetting related accounts receivable.

 

22. EQUITY

 

  a. Capital stock

 

    

March 31,

2017

     December 31,
2016
    

March 31,

2016

 
                      

Authorized shares (in thousands)

     28,050,000        28,050,000        28,050,000  
  

 

 

    

 

 

    

 

 

 

Authorized capital

   $ 280,500,000      $ 280,500,000      $ 280,500,000  
  

 

 

    

 

 

    

 

 

 

Issued and paid shares (in thousands)

     25,930,380        25,930,380        25,930,380  
  

 

 

    

 

 

    

 

 

 

Issued capital

   $ 259,303,805      $ 259,303,805      $ 259,303,805  
  

 

 

    

 

 

    

 

 

 

 

- 23 -


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

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

As of March 31, 2017, 1,072,185 thousand ADSs of TSMC were traded on the NYSE. The number of common shares represented by the ADSs was 5,360,926 thousand shares (one ADS represents five common shares).

 

  b. Capital surplus

 

    

March 31,

2017

     December 31,
2016
    

March 31,

2016

 
                      

Additional paid-in capital

   $   24,184,939      $   24,184,939      $   24,184,939  

From merger

     22,804,510        22,804,510        22,804,510  

From convertible bonds

     8,892,847        8,892,847        8,892,847  

From share of changes in equities of subsidiaries

     107,798        107,798        100,761  

From share of changes in equities of associates

     291,969        282,155        334,263  

Donations

     55        55        55  
  

 

 

    

 

 

    

 

 

 
   $ 56,282,118      $ 56,272,304      $ 56,317,375  
  

 

 

    

 

 

    

 

 

 

Under the relevant laws, 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 and convertible bonds) may be used to offset a deficit; in addition, when the Company has no deficit, such capital surplus may be distributed as cash dividends or stock dividends up to a certain percentage of TSMC’s paid-in capital. The capital surplus from share of changes in equities of subsidiaries and associates may be used to offset a deficit; however, when generated from issuance of restricted shares for employees, such capital surplus may not be used for any purpose.

 

  c. Retained earnings and dividend policy

In accordance with the amendments to the R.O.C. Company Act in May 2015, the recipients of dividends and bonuses are limited to shareholders and do not include employees. The amendments to TSMC’s Articles of Incorporation on earnings distribution policy had been approved by TSMC’s shareholders in its meeting held on June 7, 2016. For policy about the profit sharing bonus to employees, please refer to Note 27.

TSMC’s amended 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:

 

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

 

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

 

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

TSMC’s Articles of Incorporation also provide that profits of TSMC may be distributed by way of cash dividend and/or stock dividend. However, distribution of earnings shall be made preferably by way of cash dividend. Distribution of earnings 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.

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

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

 

- 24 -


The appropriations of 2016 and 2015 earnings have been approved by TSMC’s Board of Directors in its meeting held on February 14, 2017 and by TSMC’s shareholders in its meeting held on June 7, 2016, 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 2016      Year 2015      Year 2016    Year 2015
                         

Legal capital reserve

   $ 33,424,718      $ 30,657,384        

Cash dividends to shareholders

     181,512,663        155,582,283      $7.0    $6.0
  

 

 

    

 

 

       
   $       214,937,381      $       186,239,667        
  

 

 

    

 

 

       

The appropriations of earnings for 2016 are to be presented for approval in the TSMC’s shareholders’ meeting to be held on June 8, 2017 (expected).

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.

 

  d. Others

Changes in others were as follows:

 

                                                                                                                  
    Three Months Ended March 31, 2017  
    Foreign
Currency
Translation
Reserve
    Unrealized
Gain/Loss from
Available-for-
sale Financial
Assets
    Cash Flow
Hedges Reserve
    Unearned
Stock-Based
Employee
Compensation
    Total  
                               

Balance, beginning of period

  $ 1,661,237     $ 2,641     $ 105     $     $ 1,663,983  

Exchange differences arising on translation of foreign operations

    (21,242,411                       (21,242,411

Changes in fair value of available-for-sale financial assets

          (106,236                 (106,236

Cumulative (gain)/loss reclassified to profit or loss upon disposal of available-for-sale financial assets

          9,796                   9,796  

Share of other comprehensive income (loss) of associates

    (61,681     24                   (61,657

Share of unearned stock-based employee compensation of associates

                      (19,502     (19,502

Income tax effect

          46,400                   46,400  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance, end of period

  $ (19,642,855   $ (47,375   $ 105     $ (19,502   $ (19,709,627
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

- 25 -


                                                                                           
     Three Months Ended March 31, 2016  
     Foreign
Currency
Translation
Reserve
     Unrealized
Gain/Loss from
Available-for-
sale Financial
Assets
     Cash Flow
Hedges Reserve
     Total  
                             

Balance, beginning of period

   $ 11,039,949      $ 734,771      $ (607    $     11,774,113  

Exchange differences arising on translation of foreign operations

     (6,591,873                    (6,591,873

Changes in fair value of available-for-sale financial assets

            40,182               40,182  

Cumulative (gain)/loss reclassified to profit or loss upon disposal of available-for-sale financial assets

            10,829               10,829  

Share of other comprehensive income of associates

     4,579        21,487        91        26,157  

Income tax effect

            17,440               17,440  
  

 

 

    

 

 

    

 

 

    

 

 

 

Balance, end of period

   $ 4,452,655      $ 824,709      $ (516    $ 5,276,848  
  

 

 

    

 

 

    

 

 

    

 

 

 

The aforementioned other equity includes the changes in other equities of TSMC and TSMC’s share of its subsidiaries and associates.

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

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

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

Unearned stock-based employee compensation is the fair value of the restricted shares for employees based on the best estimates at the grant date of the number of shares that are expected to ultimately vest, which is debited to equity. Unearned stock-based employee compensation is reclassified to profit or loss over the vesting period.

 

23. NET REVENUE

 

                                             
     Three Months Ended March 31  
     2017      2016  
               

Net revenue from sale of goods

   $ 233,755,177      $ 203,383,417  

Net revenue from royalties

     159,223        111,944  
  

 

 

    

 

 

 
   $ 233,914,400      $ 203,495,361  
  

 

 

    

 

 

 

 

- 26 -


24. OTHER GAINS AND LOSSES

 

     Three Months Ended March 31  
     2017      2016  
               

Gain (loss) on disposal of financial assets, net

     

Available-for-sale financial assets

   $ (8,982    $ (10,829

Financial assets carried at cost

            14,381  

Other gains

     36,095        37,428  

Net gain on financial instruments at FVTPL

     

Held for trading

     373,140        1,532,135  

Designated as at FVTPL

     50,134         

Fair value hedges

     

Loss from hedging instruments

     (15,780      (11,870

Gain (loss) arising from changes in fair value of available-for-sale financial assets in hedge effective portion

     (3,707      10,625  

Impairment loss of financial assets

     

Financial assets carried at cost

     (12,032       

Other losses

     (3,679      (12,571
  

 

 

    

 

 

 
   $   415,189      $   1,559,299  
  

 

 

    

 

 

 

 

25. INCOME TAX

 

  a. Income tax expense recognized in profit or loss

 

     Three Months Ended March 31  
     2017      2016  
               

Current income tax expense

     

Current tax expense recognized in the current period

   $   12,642,088      $   8,646,510  

Other income tax adjustments

     36,356        35,840  
  

 

 

    

 

 

 
     12,678,444        8,682,350  
  

 

 

    

 

 

 

Deferred income tax benefit

     

The origination and reversal of temporary differences

     (1,039,536      (246,750

Investment tax credits and operating loss carryforward

     (1,437,317      (972,298
  

 

 

    

 

 

 
     (2,476,853      (1,219,048
  

 

 

    

 

 

 

Income tax expense recognized in profit or loss

   $ 10,201,591      $ 7,463,302  
  

 

 

    

 

 

 

 

  b. Income tax expense recognized in other comprehensive income

 

     Three Months Ended March 31  
     2017      2016  
               

Deferred income tax benefit

     

Related to unrealized gain/loss on available-for-sale financial assets

   $   46,400      $       17,440  
  

 

 

    

 

 

 

 

  c. Integrated income tax information

 

    

March 31,

2017

     December 31,
2016
    

March 31,

2016

 
                      

Balance of the Imputation

        

Credit Account - TSMC

   $    82,200,040      $    82,072,562      $         59,973,516  
  

 

 

    

 

 

    

 

 

 

 

- 27 -


The estimated and actual creditable ratio for distribution of TSMC’s earnings of 2016 and 2015 were 13.96% and 12.57%, respectively; however, the creditable ratio for individual shareholders residing in the R.O.C. is half of the original creditable ratio according to the R.O.C. Income Tax Law.

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.

 

  d. Income tax examination

The tax authorities have examined income tax returns of TSMC through 2014. All investment tax credit adjustments assessed by the tax authorities have been recognized accordingly.

 

26. EARNINGS PER SHARE

 

                                         
     Three Months Ended March 31  
     2017      2016  
               

Basic EPS

   $ 3.38      $ 2.50  
  

 

 

    

 

 

 

Diluted EPS

   $ 3.38      $       2.50  
  

 

 

    

 

 

 

EPS is computed as follows:

 

                                                              
     Amounts
(Numerator)
     Number of
Shares
(Denominator)
(In Thousands)
       EPS (NT$)    
                      

Three months ended March 31,2017

        

Basic/Diluted EPS

        

Net income available to common shareholders of the parent

   $ 87,628,898        25,930,380      $                 3.38  
  

 

 

    

 

 

    

 

 

 

Three months ended March 31,2016

        

Basic/Diluted EPS

        

Net income available to common shareholders of the parent

   $ 64,781,493        25,930,380      $ 2.50  
  

 

 

    

 

 

    

 

 

 

 

27. ADDITIONAL INFORMATION OF EXPENSES BY NATURE

 

                                         
      Three Months Ended March 31   
     2017      2016  
               

a. Depreciation of property, plant and equipment

     

Recognized in cost of revenue

   $ 54,492,962      $ 50,829,281  

Recognized in operating expenses

     4,634,177        4,115,030  

Recognized in other operating income and expenses

     6,222        6,418  
  

 

 

    

 

 

 
   $ 59,133,361      $ 54,950,729  
  

 

 

    

 

 

 

b. Amortization of intangible assets

     

Recognized in cost of revenue

   $ 527,908      $ 489,677  

Recognized in operating expenses

     510,916        406,655  
  

 

 

    

 

 

 
   $ 1,038,824      $ 896,332  
  

 

 

    

 

 

 

c. Research and development costs expensed as incurred

   $ 19,412,393      $ 15,618,963  
  

 

 

    

 

 

 

 

- 28 -


     Three Months Ended March 31  
     2017      2016  
               

d. Employee benefits expenses

     

Post-employment benefits

     

Defined contribution plans

   $ 575,760      $ 526,473  

Defined benefit plans

     67,875        68,025  
  

 

 

    

 

 

 
     643,635        594,498  

Other employee benefits

     25,289,182        21,499,624  
  

 

 

    

 

 

 
   $ 25,932,817      $ 22,094,122  
  

 

 

    

 

 

 

Employee benefits expense summarized by function

     

Recognized in cost of revenue

   $ 15,228,900      $ 13,105,421  

Recognized in operating expenses

     10,703,917        8,988,701  
  

 

 

    

 

 

 
   $ 25,932,817      $ 22,094,122  
  

 

 

    

 

 

 

In accordance with the amendments to the R.O.C. Company Act in May 2015 and the amended TSMC’s Articles of Incorporation approved by TSMC’s shareholders in its meeting held on June 7, 2016, TSMC shall allocate compensation to directors and profit sharing bonus to employees of TSMC not more than 0.3% and not less than 1% of annual profits during the period, respectively.

TSMC accrued profit sharing bonus to employees based on a percentage of net income before income tax, profit sharing bonus to employees and compensation to directors during the period, which amounted to NT$5,877,094 thousand and NT$4,344,524 thousand for the three months ended March 31, 2017 and 2016, respectively; compensation to directors was expensed based on estimated amount payable. If there is a change in the proposed amounts after the annual consolidated financial statements are authorized for issue, the differences are recorded as a change in accounting estimate.

The Board of Directors of TSMC held on February 14, 2017 approved the profit sharing bonus to employees and compensation to directors in the amounts of NT$22,418,339 thousand and NT$376,432 thousand in cash for 2016, respectively. There is no significant difference between the aforementioned approved amounts and the amounts charged against earnings of 2016.

TSMC’s profit sharing bonus to employees and compensation to directors in the amounts of NT$20,556,888 thousand and NT$356,186 thousand in cash for 2015, respectively, had been approved by the Board of Directors on February 2, 2016. The profit sharing bonus to employees and compensation to directors in cash for 2015 had been reported to TSMC’s shareholders in its meeting held on June 7, 2016, after the amended TSMC’s Articles of Incorporation had been approved. The aforementioned approved amount has no difference with the one recognized in the consolidated financial statements for the year ended December 31, 2015.

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

 

- 29 -


28. FINANCIAL INSTRUMENTS

 

  a. Categories of financial instruments

 

    

March 31,

2017

     December 31,
2016
    

March 31,

2016

 

    

        

Financial assets

        

FVTPL

        

Held for trading

   $ 23,432      $ 153,382      $ 618,810  

Designated as at FVTPL

     5,350,571        6,297,730         

Available-for-sale financial assets (Note)

     75,163,089        71,891,234        26,326,473  

Held-to-maturity financial assets

     38,639,832        38,917,677        25,086,483  

Derivative financial instruments in designated hedge accounting relationships

            5,550         

Loans and receivables

        

Cash and cash equivalents

     564,725,266        541,253,833        617,984,318  

Notes and accounts receivable (including related parties)

     109,027,668        129,304,830        96,957,088  

Other receivables

     3,896,535        2,626,401        3,741,675  

Refundable deposits

     572,005        407,874        443,337  
  

 

 

    

 

 

    

 

 

 
   $ 797,398,398      $ 790,858,511      $ 771,158,184  
  

 

 

    

 

 

    

 

 

 

Financial liabilities

        

FVTPL

        

Held for trading

   $ 80,795      $ 91,585      $ 16  

Designated as at FVTPL

     44,140        99,550         

Derivative financial instruments in designated hedge accounting relationships

     3,908               458  

Amortized cost

        

Short-term loans

     54,666,000        57,958,200        34,690,040  

Accounts payable (including related parties)

     24,252,762        27,324,525        19,629,025  

Payables to contractors and equipment suppliers

     57,671,953        63,154,514        33,953,061  

Accrued expenses and other current liabilities

     19,353,790        20,713,259        19,366,919  

Bonds payable (including long-term liabilities-current portion)

     179,098,769        191,193,557        214,413,959  

Long-term bank loans (including long-term liabilities-current portion)

     29,040        31,460        40,000  

Guarantee deposits (including those classified under accrued expenses and other current liabilities)

     23,296,349        26,670,622        25,929,365  
  

 

 

    

 

 

    

 

 

 
   $ 358,497,506      $ 387,237,272      $ 348,022,843  
  

 

 

    

 

 

    

 

 

 

 

  Note: Including financial assets carried at cost.

 

- 30 -


  b. 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.

 

  c. Market risk

The Company is exposed to the financial market risks, primarily changes in foreign currency exchange rates, interest rates and equity investment prices.

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, such as currency forward contracts and cross currency swaps, and non-derivative financial instruments, such as foreign currency-denominated debt, to partially hedge its currency exposure.

The Company’s sensitivity analysis of 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 relative to the New Taiwan dollar, the net income for the three months ended March 31, 2017 and 2016 would have decreased by NT$878,838 thousand and NT$300,909 thousand, respectively, after taking into consideration of the hedging contracts and the hedged items.

Interest rate risk

The Company is exposed to interest rate risk primarily related to its outstanding debt and investments in fixed income securities. All of the Company’s bonds payable have fixed interest rates and are measured at amortized cost. As such, changes in interest rates would not affect the future cash flows. On the other hand, because interest rates of the Company’s long-term bank loans are floating, changes in interest rates would affect the future cash flows but not the fair value.

Assuming the amount of the long-term 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 100 basis point (1.00%) increase in interest rates would have resulted in an increase in the interest expense, net of tax, by approximately NT$60 thousand and NT$83 thousand for the three months ended March 31, 2017 and 2016, respectively.

The Company classified its investments in fixed income securities as held-to-maturity and available-for-sale financial assets. Because held-to-maturity fixed income securities are measured at amortized cost, changes in interest rates would not affect the fair value. On the other hand, available-for-sale fixed income securities are exposed to fair value fluctuations caused by changes in interest rates. The Company utilized interest rate futures to partially hedge the interest rate risk on its available-for-sale fixed income investments. These hedges may offset only a portion of, but do not eliminate, the financial impact from movements in interest rates.

 

- 31 -


Based on a sensitivity analysis performed for the three months ended March 31, 2017 and 2016, a hypothetical 100 basis points (1.00%) increase in interest rates across all maturities would have resulted in a decrease in other comprehensive income by NT$1,778,761 thousand and NT$455,802 thousand, respectively.

Other price risk

The Company is exposed to equity price risk arising from available-for-sale equity investments.

Assuming a hypothetical decrease of 5% in prices of the equity investments at the end of the reporting period for the three months ended March 31, 2017 and 2016, the other comprehensive income would have decreased by NT$327,239 thousand and NT$260,202 thousand, respectively.

 

  d. 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 investing activities, primarily deposits, fixed-income investments and other financial instruments with banks. Credit risk is managed separately for business related and financial related exposures. As of the end of the reporting period, the Company’s maximum credit risk exposure is mainly from the carrying amount of financial assets.

Business related credit risk

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

As of March 31, 2017, December 31, 2016 and March 31, 2016, the Company’s ten largest customers accounted for 73%, 74% and 71% of accounts receivable, respectively. The Company believes the concentration of credit risk is not material for the remaining accounts receivable.

Financial credit risk

The Company regularly monitors and reviews the concentration 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 limiting the exposure to any individual counterparty and by selecting counterparties with investment-grade credit ratings.

 

  e. 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 cash equivalent, short-term available-for-sale financial assets and short-term held-to-maturity financial assets.

 

- 32 -


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

 

    

Less Than

1 Year

     2-3 Years      4-5 Years      5+ Years      Total  
              

March 31, 2017

              

Non-derivative financial liabilities

              

Short-term loans

   $ 54,687,875      $      $      $      $ 54,687,875  

Accounts payable (including related parties)

     24,252,762                             24,252,762  

Payables to contractors and equipment suppliers

     57,671,953                             57,671,953  

Accrued expenses and other current liabilities

     19,353,790                             19,353,790  

Bonds payable

     47,013,779        101,618,771        13,673,294        22,881,721        185,187,565  

Long-term bank loans

     10,463        19,954                      30,417  

Guarantee deposits (including those classified under accrued expenses and other current liabilities)

     10,974,881        12,235,825        85,643               23,296,349  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     213,965,503        113,874,550        13,758,937        22,881,721        364,480,711  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Derivative financial instruments

              

Forward exchange contracts

              

Outflows

     36,386,668                             36,386,668  

Inflows

     (36,341,820                           (36,341,820
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     44,848                             44,848  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   $ 214,010,351      $ 113,874,550      $ 13,758,937      $ 22,881,721      $ 364,525,559  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

December 31, 2016

              

Non-derivative financial liabilities

              

Short-term loans

   $ 57,974,562      $      $      $      $ 57,974,562  

Accounts payable (including related parties)

     27,324,525                             27,324,525  

Payables to contractors and equipment suppliers

     63,154,514                             63,154,514  

Accrued expenses and other current liabilities

     20,713,259                             20,713,259  

Bonds payable

     40,669,468        99,161,486        35,340,742        22,979,426        198,151,122  

Long-term bank loans

     10,543        20,116        2,423               33,082  

Guarantee deposits (including those classified under accrued expenses and other current liabilities)

     12,000,189        13,060,483        1,609,950               26,670,622  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     221,847,060        112,242,085        36,953,115        22,979,426        394,021,686  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Derivative financial instruments

              

Forward exchange contracts

              

Outflows

     40,571,841                             40,571,841  

Inflows

     (40,586,344                           (40,586,344
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     (14,503                           (14,503
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Cross currency swap contracts

              

Outflows

     5,478,066                             5,478,066  

Inflows

     (5,487,600                           (5,487,600
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     (9,534                           (9,534
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   $ 221,823,023      $ 112,242,085      $ 36,953,115      $ 22,979,426      $ 393,997,649  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(Continued)

 

- 33 -


    

Less Than

1 Year

     2-3 Years      4-5 Years      5+ Years      Total  
              

March 31, 2016

              

Non-derivative financial liabilities

              

Short-term loans

   $ 34,704,042      $      $      $      $ 34,704,042  

Accounts payable (including related parties)

     19,629,025                             19,629,025  

Payables to contractors and equipment suppliers

     33,953,061                             33,953,061  

Accrued expenses and other current liabilities

     19,366,919                             19,366,919  

Bonds payable

     36,133,767        101,672,799        62,362,560        23,272,541        223,441,667  

Long-term bank loans

     11,191        21,336        10,145               42,672  

Guarantee deposits (including those classified under accrued expenses and other current liabilities)

     6,437,085        13,056,280        6,436,000               25,929,365  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     150,235,090        114,750,415        68,808,705        23,272,541        357,066,751  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Derivative financial instruments

              

Forward exchange contracts

              

Outflows

     34,065,842                             34,065,842  

Inflows

     (34,689,811                           (34,689,811
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     (623,969                           (623,969
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   $ 149,611,121      $ 114,750,415      $ 68,808,705      $ 23,272,541      $ 356,442,782  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

(Concluded)

 

  f. Fair value of financial instruments

 

  1) Fair value measurements recognized in the consolidated balance sheets

Fair value measurements are 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).

 

  2) Fair value of financial instruments that are measured at fair value on a recurring basis

Fair value hierarchy

The following table presents the Company’s financial assets and liabilities measured at fair value on a recurring basis:

 

     March 31, 2017  
     Level 1      Level 2      Level 3      Total  
           

Financial assets at FVTPL

           

Held for trading

           

Forward exchange contracts

   $      $ 23,432      $      $ 23,432  

Designated as at FVTPL

           

Time deposit

            5,344,256               5,344,256  

Forward exchange contracts

            6,315               6,315  
  

 

 

    

 

 

    

 

 

    

 

 

 
   $             —      $     5,374,003      $             —      $     5,374,003  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(Continued)

 

- 34 -


     March 31, 2017  
     Level 1      Level 2      Level 3      Total  
           

Available-for-sale financial assets

           

Corporate bonds

   $ 31,423,219      $      $      $ 31,423,219  

Agency bonds/Agency mortgage-backed securities

     17,234,724                      17,234,724  

Asset-backed securities

            11,252,756               11,252,756  

Government bonds

     7,831,260                      7,831,260  

Publicly traded stocks

     2,849,231                      2,849,231  

Commercial paper

            492,607               492,607  
  

 

 

    

 

 

    

 

 

    

 

 

 
   $   59,338,434      $   11,745,363      $                —      $   71,083,797  
  

 

 

    

 

 

    

 

 

    

 

 

 

Financial liabilities at FVTPL

           

Held for trading

           

Forward exchange contracts

   $      $ 80,795      $      $ 80,795  

Designated as at FVTPL

           

Forward exchange contracts

            44,140               44,140  
  

 

 

    

 

 

    

 

 

    

 

 

 
   $      $ 124,935      $      $ 124,935  
  

 

 

    

 

 

    

 

 

    

 

 

 

Hedging derivative financial liabilities

           

Interest rate futures contracts

   $ 3,908      $      $      $ 3,908  
  

 

 

    

 

 

    

 

 

    

 

 

 

(Concluded)

 

     December 31, 2016  
     Level 1      Level 2      Level 3      Total  
           

Financial assets at FVTPL

           

Held for trading

           

Forward exchange contracts

   $      $ 142,406      $      $ 142,406  

Cross currency swap contracts

            10,976               10,976  

Designated as at FVTPL

           

Time deposit

            6,297,708               6,297,708  

Forward exchange contracts

            22               22  
  

 

 

    

 

 

    

 

 

    

 

 

 
   $      $ 6,451,112      $      $ 6,451,112  
  

 

 

    

 

 

    

 

 

    

 

 

 

Available-for-sale financial assets

           

Corporate bonds

   $ 29,999,508      $      $      $ 29,999,508  

Agency bonds/Agency mortgage-backed securities

     14,880,482                      14,880,482  

Asset-backed securities

            11,254,757               11,254,757  

Government bonds

     8,457,362                      8,457,362  

Publicly traded stocks

     3,196,658                      3,196,658  
  

 

 

    

 

 

    

 

 

    

 

 

 
   $   56,534,010      $   11,254,757      $             —      $   67,788,767  
  

 

 

    

 

 

    

 

 

    

 

 

 

Hedging derivative financial assets

           

Interest rate futures contracts

   $ 5,550      $      $      $ 5,550  
  

 

 

    

 

 

    

 

 

    

 

 

 

Financial liabilities at FVTPL

           

Held for trading

           

Forward exchange contracts

   $      $ 91,585      $      $ 91,585  

Designated as at FVTPL

           

Forward exchange contracts

            99,550               99,550  
  

 

 

    

 

 

    

 

 

    

 

 

 
   $      $ 191,135      $      $ 191,135  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

- 35 -


     March 31, 2016  
     Level 1      Level 2      Level 3      Total  
           

Financial assets at FVTPL

           

Held for trading

           

Forward exchange contracts

   $      $ 618,810      $      $ 618,810  
  

 

 

    

 

 

    

 

 

    

 

 

 

Available-for-sale financial assets

           

Corporate bonds

   $ 9,343,220      $      $      $ 9,343,220  

Asset-backed securities

            5,618,046               5,618,046  

Agency bonds/Agency mortgage-backed securities

     5,507,441                      5,507,441  

Publicly traded stocks

     1,255,493                      1,255,493  

Government bonds

     508,705                      508,705  
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 16,614,859      $ 5,618,046      $      $ 22,232,905  
  

 

 

    

 

 

    

 

 

    

 

 

 

Financial liabilities at FVTPL

           

Held for trading

           

Forward exchange contracts

   $      $ 16      $      $ 16  
  

 

 

    

 

 

    

 

 

    

 

 

 

Hedging derivative financial liabilities

           

Interest rate futures contracts

   $ 458      $      $      $ 458  
  

 

 

    

 

 

    

 

 

    

 

 

 

There were no transfers between Level 1 and Level 2 for the three months ended March 31, 2017 and 2016, respectively.

There were no purchases and disposals for assets classified as Level 3 for the three months ended March 31, 2017 and 2016, 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 interest rate futures contracts, publicly traded stocks, government bonds, agency bonds, agency mortgage-backed securities and corporate bonds are determined by quoted market prices in active markets.

 

    Forward exchange contracts and cross currency swap contracts are measured using forward exchange rates and the discounted curves that are derived from quoted market prices. For investments in asset-backed securities, the fair values are determined by quoted market prices. For investments in commercial paper and time deposit designated as FVTPL, the fair values are determined by the present value of future cash flows based on the discounted curves that are derived from the quoted market prices.

 

- 36 -


  3) Fair value of financial instruments that are not measured at fair value

Except as detailed in the following table, the Company considers that the carrying amounts of financial instruments that are not measured at fair value recognized in the consolidated financial statements approximate their fair values.

 

     March 31, 2017      December 31, 2016      March 31, 2016  
     Carrying
Amount
     Fair Value      Carrying
Amount
     Fair Value      Carrying
Amount
     Fair Value  
                 

Financial assets

                 

Held-to-maturity financial assets

                 

Corporate bonds/Bank debentures

   $ 22,241,885      $ 22,431,579      $ 23,849,701      $ 23,996,429      $ 16,860,145      $ 16,885,477  

Commercial paper

     10,323,947        10,343,339        8,628,176        8,630,769        399,338        398,928  

Negotiable certificate of deposit

     4,555,500        4,568,438        4,829,850        4,847,785        4,827,000        4,854,916  

Structured product

     1,518,500        1,513,549        1,609,950        1,609,738        3,000,000        2,996,985  

Financial liabilities

                 

Measured at amortized cost

                 

Bonds payable

     179,098,769        180,786,416        191,193,557        192,845,296        214,413,959        216,343,027  

Fair value hierarchy

The table below sets out the fair value hierarchy for the Company’s assets and liabilities which are not required to measure at fair value:

 

     March 31, 2017  
     Level 1      Level 2      Level 3      Total  
           

Financial assets

           

Held-to-maturity securities

           

Corporate bonds/Bank debentures

   $ 22,431,579      $      $      $ 22,431,579  

Commercial paper

            10,343,339               10,343,339  

Negotiable certificate of deposit

            4,568,438               4,568,438  

Structured product

            1,513,549               1,513,549  
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 22,431,579      $ 16,425,326      $      $ 38,856,905  
  

 

 

    

 

 

    

 

 

    

 

 

 

Financial liabilities

           

Measured at amortized cost

           

Bonds payable

   $ 180,786,416      $      $      $ 180,786,416  
  

 

 

    

 

 

    

 

 

    

 

 

 
     December 31, 2016  
     Level 1      Level 2      Level 3      Total  
           

Financial assets

           

Held-to-maturity securities

           

Corporate bonds/Bank debentures

   $ 23,996,429      $      $      $ 23,996,429  

Commercial paper

            8,630,769               8,630,769  

Negotiable certificate of deposit

            4,847,785               4,847,785  

Structured product

            1,609,738               1,609,738  
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 23,996,429      $   15,088,292      $             —      $ 39,084,721  
  

 

 

    

 

 

    

 

 

    

 

 

 

Financial liabilities

           

Measured at amortized cost

           

Bonds payable

   $ 192,845,296      $      $      $ 192,845,296  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

- 37 -


     March 31, 2016  
     Level 1      Level 2      Level 3      Total  
           

Financial assets

           

Held-to-maturity securities

           

Corporate bonds/Bank debentures

   $ 16,885,477      $      $      $ 16,885,477  

Negotiable certificate of deposit

            4,854,916               4,854,916  

Structured product

            2,996,985               2,996,985  

Commercial paper

            398,928               398,928  
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 16,885,477      $     8,250,829      $      $ 25,136,306  
  

 

 

    

 

 

    

 

 

    

 

 

 

Financial liabilities

           

Measured at amortized cost

           

Bonds payable

   $ 216,343,027      $      $             —      $ 216,343,027  
  

 

 

    

 

 

    

 

 

    

 

 

 

Fair value measurement

For investments in bonds, the fair value is determined using active market prices.

For investments in negotiable certificate of deposit and structured product, the fair values are determined by quoted market prices. For investment in commercial paper, the fair value is determined by the present value of future cash flows based on the discounted curves that are derived from the quoted market prices.

The fair value of the Company’s bonds payable is determined using active market prices.

 

29. 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 significant transactions between the Company and other related parties:

 

  a. Related party name and categories

 

Related Party Name

 

   Related Party Categories   

 

GUC

  Associates

VIS

  Associates

SSMC

  Associates

Xintec

  Associates

 

  b. Net revenue

 

            Three Months Ended March 31     
         2017      2016  
       

Item

  Related Party Categories      

Net revenue from sale of goods

 

Associates

   $   1,524,150      $   1,605,016  
    

 

 

    

 

 

 

Net revenue from royalties

 

Associates

   $ 117,775      $ 111,944  
    

 

 

    

 

 

 

 

- 38 -


  c. Purchases

 

            Three Months Ended March 31    
         2017      2016  
       

Related Party Categories

       

Associates

     $   2,628,068      $   2,345,245  
    

 

 

    

 

 

 

 

  d. Receivables from related parties

 

        

March 31,

2017

    

December 31,

2016

    

March 31,

2016

 
          

Item

  Related Party Name         

Receivables from related parties

  GUC    $ 494,839      $ 969,136      $ 683,114  
  Others             423        704  
    

 

 

    

 

 

    

 

 

 
     $   494,839      $   969,559      $   683,818  
    

 

 

    

 

 

    

 

 

 

Other receivables from related parties

  VIS    $ 84,321      $ 86,038      $ 97,647  
  SSMC      50,474        60,641        40,521  
  Others      256        109        2,841  
    

 

 

    

 

 

    

 

 

 
     $ 135,051      $ 146,788      $ 141,009  
    

 

 

    

 

 

    

 

 

 

 

  e. Payables to related parties

 

        

March 31,

2017

    

December 31,

2016

    

March 31,

2016

 
          

Item

  Related Party Name         

Payables to related parties

  VIS    $ 604,897      $ 587,407      $ 531,477  
  SSMC      383,246        506,121        258,813  
  Xintec      171,524        124,541        289,995  
  Others      11,528        44,105        34,788  
    

 

 

    

 

 

    

 

 

 
     $   1,171,195      $   1,262,174      $   1,115,073  
    

 

 

    

 

 

    

 

 

 

 

  f. Accrued expenses and other current liabilities

 

        

March 31,

2017

    

December 31,

2016

    

March 31,

2016

 
          

Item

  Related Party Categories         

Advance receipts

  Associates    $     384,778      $     210,791      $                 —  
    

 

 

    

 

 

    

 

 

 

 

- 39 -


  g. Others

 

            Three Months Ended March 31     
         2017      2016  
       

Item

  Related Party Categories      

Manufacturing expenses

  Associates    $   256,657      $   386,173  
    

 

 

    

 

 

 

Research and development expenses

  Associates    $ 14,489      $ 41,092  
    

 

 

    

 

 

 

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 leased factory and office from Xintec and VIS. The lease terms and prices were both determined in accordance with mutual agreements. The rental expenses were paid to Xintec and VIS monthly; the related expenses were both classified under manufacturing expenses.

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

 

  h. Compensation of key management personnel

The compensation to directors and other key management personnel for the three months ended March 31, 2017 and 2016 were as follows:

 

         Three Months Ended March 31  
         2017      2016  
       

Short-term employee benefits

     $ 527,053      $ 374,776  

Post-employment benefits

       1,146        1,038  
    

 

 

    

 

 

 
     $ 528,199      $ 375,814  
    

 

 

    

 

 

 

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.

 

30. PLEDGED ASSETS

The Company provided certificate of deposits recorded in other financial assets as collateral mainly for building lease agreements. As of March 31, 2017, December 31, 2016 and March 31, 2016, the aforementioned other financial assets amounted to NT$157,244 thousand, NT$185,698 thousand and NT$154,406 thousand, respectively.

 

- 40 -


31. SIGNIFICANT OPERATING LEASE ARRANGEMENTS

The Company’s major significant operating leases are arrangements on several parcels of land, office premises and certain office equipment.

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

 

    

March 31,

2017

     December 31,
2016
    

March 31,

2016

 

    

        

Not later than 1 year

   $ 1,272,661      $ 1,321,546      $ 1,311,773  

Later than 1 year and not later than 5 years

     3,639,334        3,677,432        3,997,732  

Later than 5 years

     6,727,624        6,623,957        8,021,844  
  

 

 

    

 

 

    

 

 

 
   $     11,639,619      $     11,622,935      $     13,331,349  
  

 

 

    

 

 

    

 

 

 

 

32. 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:

 

  a. 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 provided 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. As of March 31, 2017, the R.O.C. Government did not invoke such right.

 

  b. 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, in September 2006, Philips spun-off its semiconductor subsidiary which was renamed as NXP B.V. Further, 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 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 falls below a specific percentage of its capacity, the defaulting party is required to compensate SSMC for all related unavoidable costs. There was no default from the aforementioned commitment as of March 31, 2017.

 

  c. 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. The lock-up period expired on May 1, 2015 and as of October 8, 2015, all ASML shares had been disposed.

Both parties also signed the research and development funding agreement whereby TSMC shall provide EUR276,000 thousand to ASML’s research and development programs from 2013 to 2017. As of March 31, 2017, TSMC has paid EUR244,402 thousand to ASML under the research and development funding agreement.

 

  d. Amounts available under unused letters of credit as of March 31, 2017, December 31, 2016 and March 31, 2016 were NT$97,184 thousand, NT$122,356 thousand and NT$122,284 thousand, respectively.

 

- 41 -


33. SIGNIFICANT LOSS FROM DISASTER

On February 6, 2016, an earthquake struck Taiwan. The resulting damage was mostly to inventories and equipment. The Company recognized earthquake losses of NT$2,492,138 thousand, net of insurance claim, for the year ended December 31, 2016. Such losses were primarily included in cost of revenue. The related insurance claim was finalized in the first quarter of 2017, and the accumulated earthquake losses were NT$2,386,824 thousand, net of insurance claim. The Company recognized a reduction of such losses of NT$105,314 thousand for the three months ended March 31, 2017.

 

34. EXCHANGE RATE INFORMATION OF FOREIGN-CURRENCY FINANCIAL ASSETS AND LIABILITIES

The following information was summarized according to the foreign currencies other than the functional currency of the Company. The exchange rates disclosed were used to translate the foreign currencies into the functional currency. The significant financial assets and liabilities denominated in foreign currencies were as follows:

 

    

Foreign
Currencies

(In Thousands)

    

Exchange Rate

(Note 1)

   

Carrying
Amount

(In Thousands)

 

    

       

March 31, 2017

       

Financial assets

       

Monetary items

       

USD

   $ 4,344,232        30.370     $ 131,934,327  

USD

     305,563        6.891 (Note 2)      9,279,956  

EUR

     12,694        32.61       413,957  

JPY

     418,699        0.2731       114,347  

Non-monetary items

       

HKD

     203,027        3.91       793,837  

Financial liabilities

       

Monetary items

       

USD

     4,228,469        30.370       128,418,618  

EUR

     211,843        32.61       6,908,184  

JPY

     53,477,096        0.2731       14,604,595  

December 31, 2016

       

Financial assets

       

Monetary items

       

USD

     5,042,715        32.199       162,370,381  

EUR

     19,556        34.30       670,767  

JPY

     37,024,347        0.2775       10,274,256  

Non-monetary items

       

HKD

     257,056        4.15       1,066,780  

(Continued)

 

- 42 -


    

Foreign
Currencies

(In Thousands)

    

Exchange Rate

(Note 1)

   

Carrying
Amount

(In Thousands)

 

    

       

Financial liabilities

       

Monetary items

       

USD

   $ 4,000,930        32.199     $ 128,825,952  

EUR

     183,922        34.30       6,308,513  

JPY

     61,062,114        0.2775       16,944,737  

March 31, 2016

       

Financial assets

       

Monetary items

       

USD

     3,627,139        32.180       116,721,336  

USD

     210,246        6.468 (Note 2)      6,765,720  

EUR

     75,403        36.50       2,752,202  

JPY

     37,639,213        0.2862       10,772,343  

Non-monetary items

       

HKD

     145,623        4.15       604,334  

Financial liabilities

       

Monetary items

       

USD

     2,884,882        32.180       92,835,508  

EUR

     78,424        36.50       2,862,461  

JPY

     37,648,450        0.2862       10,774,987  

(Concluded)

 

  Note 1: Except as otherwise noted, exchange rate represents the number of N.T. dollars for which one foreign currency could be exchanged.

 

  Note 2: The exchange rate represents the number of RMB for which one USD dollars could be exchanged.

Please refer to the consolidated statements of comprehensive income for the total of realized and unrealized foreign exchange gain and loss for the three months ended March 31, 2017 and 2016, respectively. Since there were varieties of foreign currency transactions and functional currencies within the subsidiaries of the Company, the Company was unable to disclose foreign exchange gain (loss) towards each foreign currency with significant impact.

 

35. OPERATING SEGMENTS INFORMATION

From 2016, the Company has only one operating segment, 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 uses the income from operations as the measurement for the basis of performance assessment. The basis for such measurement is the same as that for the preparation of financial statements. Please refer to the consolidated statements of comprehensive income for the related segment revenue and operating results.

 

- 43 -


36. ADDITIONAL DISCLOSURES

Following are the additional disclosures required by the Securities and Futures Bureau for TSMC:

 

  a. Financings provided: Please see Table 1 attached;

 

  b. Endorsement/guarantee provided: Please see Table 2 attached;

 

  c. Marketable securities held (excluding investments in subsidiaries and associates): Please see Table 3 attached;

 

  d. Marketable securities acquired and disposed of at costs or prices of at least NT$300 million or 20% of the paid-in capital: Please see Table 4 attached;

 

  e. Acquisition of individual real estate properties at costs of at least NT$300 million or 20% of the paid-in capital: Please see Table 5 attached;

 

  f. Disposal of individual real estate properties at prices of at least NT$300 million or 20% of the paid-in capital: None;

 

  g. 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;

 

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

 

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

 

  j. Others: The business relationship between the parent and the subsidiaries and significant transactions between them: Please see Table 8 attached;

 

  k. Names, locations, and related information of investees over which TSMC exercises significant influence (excluding information on investment in mainland China): Please see Table 9 attached;

 

  l. Information on investment in mainland China

 

  1) 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, income (losses) of the investee, share of profits/losses of investee, ending balance, amount received as dividends from the investee, and the limitation on investee: Please see Table 10 attached.

 

  2) 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.

 

- 44 -


TABLE 1

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

FINANCINGS PROVIDED

FOR THE THREE MONTHS ENDED MARCH 31, 2017

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

 

 

No.

 

Financing

Company

 

Counter-party

 

Financial
Statement
Account

  Related
Party
  Maximum
Balance for the
Period (foreign
currencies in
Thousands)

(Note 3)
    Ending Balance
(foreign
currencies in
Thousands)
(Note 3)
    Amount
Actually
Drawn

(foreign
currencies in
Thousands)
    Interest
Rate
   

Nature for
Financing

  Transaction
Amounts
   

Reason for
Financing

(Note 4)

  Allowance
for Bad
Debt
   

 

Collateral

    Financing
Limits for
Each
Borrowing
Company

(Note 1
and 2)
    Financing
Company’s
Total
Financing
Amount
Limits

(Note 1
and 2)
 
                          Item   Value      
                                                                                   

1

 

TSMC China

 

TSMC Nanjing

 

Other receivables from related parties

  Yes   $

(RMB

20,271,740

4,600,000

 

  $

(RMB

20,271,740

4,600,000

 

  $

(RMB

5,508,625

1,250,000

 

    1.5%    

The need for long-term financing (Note 4)

  $    

Operating capital

  $       $     $ 42,872,278     $ 42,872,278  

2

 

TSMC Global

 

TSMC

 

Other receivables from related parties

  Yes    

(US$

45,555,000

1,500,000

 

   

(US$

45,555,000

1,500,000

 

   

(US$

6,074,000

200,000

 

    1.08%    

The need for short-term financing

       

Operating capital

                  251,749,192       251,749,192  

 

Note 1: The total amount available for lending purpose shall not exceed the net worth of TSMC China. 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 China. In addition, the total amount lendable to any one borrower shall be no more than thirty percent (30%) of the borrower’s net worth. The above restriction does not apply to the subsidiaries whose voting shares are 100% owned, directly or indirectly, by TSMC. However, the total amount lendable to any such subsidiary of TSMC shall not exceed forty percent (40%) of the net worth of TSMC China. When there is a lending for funding needs by TSMC China to TSMC, or to the subsidiaries whose voting shares are 100% owned, directly or indirectly, by TSMC, which are not located in Taiwan, the lending will not be subject to the restriction set forth in the above paragraph of this Article. Notwithstanding the foregoing, the aggregate amount available for lending to such borrowers and the total amount lendable to each of such borrowers still shall not exceed the net worth of TSMC China.
Note 2: The total amount available for lending purpose shall not exceed the net worth of TSMC Global. 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 Global. 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 TSMC, or foreign subsidiaries whose voting shares are 100% owned, directly or indirectly, by TSMC will not be subject to this restriction, their total borrowing amount still shall not exceed the net worth of TSMC Global. Notwithstanding the foregoing, the aggregate amount for lending to Taiwan companies other than TSMC shall not exceed forty percent (40%) of the net worth of TSMC Global.
Note 3: The maximum balance for the period and ending balance represent the amounts approved by the Board of Directors.
Note 4: The restriction of the term of each loan for funding not exceeding one year shall not apply to inter-company loans for funding between offshore subsidiaries in which the Company holds, directly or indirectly, 100% of the voting shares.

 

- 45 -


TABLE 2

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

ENDORSEMENTS/GUARANTEES PROVIDED

FOR THE THREE MONTHS ENDED MARCH 31, 2017

(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)
    Guarantee
Provided
by Parent
Company
    Guarantee
Provided by
A Subsidiary
    Guarantee
Provided to
Subsidiaries
in Mainland
China
 
   

Name

 

Nature of
Relationship

                   

    

                         

0

  TSMC  

TSMC Global

  Subsidiary   $ 363,878,341     $

(US$

34,925,500

1,150,000

 

  $

(US$

34,925,500

1,150,000

 

  $

(US$

34,925,500

1,150,000

 

  $       2.40%     $ 363,878,341       Yes       No       No  
   

TSMC North America

  Subsidiary     363,878,341      

(US$

2,527,188

83,213

 

   

(US$

2,527,188

83,213

 

   

(US$

2,527,188

83,213

 

          0.17%       363,878,341       Yes       No       No  

 

Note 1: The total amount of the guarantee provided by TSMC to any individual entity shall not exceed ten percent (10%) of TSMC’s net worth, or the net worth of such entity. 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 total amount of guarantee shall not exceed twenty-five percent (25%) of TSMC’s net worth.
Note 3: The maximum balance for the period and ending balance represent the amounts approved by the Board of Directors.

 

- 46 -


TABLE 3

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

MARKETABLE SECURITIES HELD

MARCH 31, 2017

(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

  March 31, 2017     Note  
        Shares/Units
(In Thousands)
    Carrying Value
(Foreign
Currencies
in Thousands)
    Percentage of
Ownership (%)
    Fair Value
(Foreign
Currencies
in Thousands)
   

    

               

TSMC

  Corporate bond              
  CPC Corporation, Taiwan     Held-to-maturity financial assets         $ 1,964,419       N/A     $ 1,965,654    
  Taiwan Power Company               200,336       N/A       200,350    
  Nan Ya Plastics Corporation               150,472       N/A       150,486    
  Formosa Petrochemical Corporation               100,101       N/A       100,139    
  Commercial paper              
  Taiwan Power Company     Held-to-maturity financial assets     1,035       10,323,947       N/A       10,343,339    
  Stock              
  Motech     Available-for-sale financial assets     58,320       1,632,954       12       1,632,954    
  Semiconductor Manufacturing International Corporation         21,105       793,837             793,837    
  United Industrial Gases Co., Ltd.     Financial assets carried at cost     21,230       193,584       10       193,584    
  Shin-Etsu Handotai Taiwan Co., Ltd.         10,500       105,000       7       105,000    
  Global Investment Holding Inc.         11,124       99,041       6       99,041    
  W.K. Technology Fund IV         2,560       18,121       2       18,121    
  Fund              
  Horizon Ventures Fund     Financial assets carried at cost           9,031       12       9,031    
  Crimson Asia Capital               8,263       1       8,263    

TSMC Partners

  Common stock              
  Tela Innovations     Financial assets carried at cost     10,440     US$ 65,000       25     US$ 65,000    
  Mcube Inc.         6,333             13          
  Fund              
  China Walden Venture Investments II, L.P.     Financial assets carried at cost         US$ 8,101       9     US$ 8,101    
  Shanghai Walden Venture Capital Enterprise             US$ 4,270       6     US$ 4,270    

TSMC Global

  Corporate bond              
  Bank of America Corp.     Available-for-sale financial assets         US$ 33,760       N/A     US$ 33,760    
  JPMorgan Chase & Co.             US$ 30,911       N/A     US$ 30,911    
  Morgan Stanley             US$ 30,498       N/A     US$ 30,498    
  Goldman Sachs Group Inc.             US$ 24,427       N/A     US$ 24,427    
  Verizon Communications             US$ 20,024       N/A     US$ 20,024    
  Citigroup Inc.             US$ 18,933       N/A     US$ 18,933    
  AT&T Inc.             US$ 18,774       N/A     US$ 18,774    
  Abbvie Inc.             US$ 15,024       N/A     US$ 15,024    
  Ford Motor Credit Co LLC             US$ 13,529       N/A     US$ 13,529    
  Microsoft Corp.             US$ 13,288       N/A     US$ 13,288    
  Gilead Sciences Inc.             US$ 11,886       N/A     US$ 11,886    
  PNC Bank NA             US$ 11,619       N/A     US$ 11,619    
  Anheuser Busch InBev Fin.             US$ 11,286       N/A     US$ 11,286    
  Apple Inc.             US$ 11,224       N/A     US$ 11,224    
  Capital One NA             US$ 11,067       N/A     US$ 11,067    
  BP Capital Markets PLC             US$ 10,286       N/A     US$ 10,286    
  BMW US Capital LLC             US$ 10,226       N/A     US$ 10,226    

(Continued)

 

- 47 -


Held Company
Name

 

Marketable Securities Type and Name

  Relationship
with the
Company
 

Financial Statement Account

  March 31, 2017     Note  
        Shares/Units
(In Thousands)
    Carrying Value
(Foreign
Currencies
in Thousands)
    Percentage of
Ownership (%)
    Fair Value
(Foreign
Currencies
in Thousands)
   

    

               

TSMC Global

  Oracle Corp.     Available-for-sale financial assets         US$ 10,148       N/A     US$ 10,148    
  Westpac Banking Corp.             US$ 9,975       N/A     US$ 9,975    
  Svenska Handelsbanken AB             US$ 9,870       N/A     US$ 9,870    
  CVS Health Corp.             US$ 9,746       N/A     US$ 9,746    
  Wells Fargo & Company             US$ 9,182       N/A     US$ 9,182    
  Analog Devices, Inc.             US$ 8,914       N/A     US$ 8,914    
  Southern Co.             US$ 8,528       N/A     US$ 8,528    
  Duke Energy Corp.             US$ 8,100       N/A     US$ 8,100    
  Aviation Capital Group             US$ 8,087       N/A     US$ 8,087    
  Rockwell Collins, Inc.             US$ 8,055       N/A     US$ 8,055    
  ERAC USA Finance LLC             US$ 7,600       N/A     US$ 7,600    
  Ventas Realty LP/Cap Crp.             US$ 7,531       N/A     US$ 7,531    
  Credit Suisse New York             US$ 7,267       N/A     US$ 7,267    
  Pricoa Global Funding I             US$ 7,151       N/A     US$ 7,151    
  HSBC Holdings PLC             US$ 6,872       N/A     US$ 6,872    
  Dow Chemical Co/The             US$ 6,571       N/A     US$ 6,571    
  Teva Pharmaceuticals Netherlands             US$ 6,198       N/A     US$ 6,198    
  Dominion Resources Inc.             US$ 6,195       N/A     US$ 6,195    
  Suntrust Banks Inc.             US$ 6,193       N/A     US$ 6,193    
  Welltower Inc.             US$ 6,122       N/A     US$ 6,122    
  Sumitomo Mitsui Trust Bank, Limited             US$ 6,039       N/A     US$ 6,039    
  Skandinaviska Enskilda Banken AB             US$ 6,018       N/A     US$ 6,018    
  Berkshire Hathaway Fin.             US$ 6,016       N/A     US$ 6,016    
  BB&T Corporation             US$ 5,981       N/A     US$ 5,981    
  Royal Bank of Canada             US$ 5,935       N/A     US$ 5,935    
  Nextera Energy Capital             US$ 5,877       N/A     US$ 5,877    
  Mizuho Financial Group             US$ 5,868       N/A     US$ 5,868    
  Toronto Dominion Bank             US$ 5,835       N/A     US$ 5,835    
  Huntington National Bank             US$ 5,807       N/A     US$ 5,807    
  Groupe Danone S.A.             US$ 5,762       N/A     US$ 5,762    
  Shell International Fin.             US$ 5,732       N/A     US$ 5,732    
  Citizens Bank NA/RI             US$ 5,718       N/A     US$ 5,718    
  Toyota Motor Credit Corp.             US$ 5,649       N/A     US$ 5,649    
  ABN AMRO Bank N.V.             US$ 5,597       N/A     US$ 5,597    
  Protective Life Global Funding             US$ 5,561       N/A     US$ 5,561    
  Key Bank N.A.             US$ 5,551       N/A     US$ 5,551    
  Mitsubishi UFJ Fin Grp.             US$ 5,550       N/A     US$ 5,550    
  Bank of Ny Mellon Corp.             US$ 5,519       N/A     US$ 5,519    
  Cisco Systems Inc.             US$ 5,514       N/A     US$ 5,514    
  New York Life Global FDG             US$ 5,454       N/A     US$ 5,454    
  Walgreens Boots Alliance             US$ 5,413       N/A     US$ 5,413    
  Siemens Financieringsmat             US$ 5,381       N/A     US$ 5,381    
  Hyundai Capital America             US$ 5,362       N/A     US$ 5,362    
  Deutsche Telekom International Fin.             US$ 5,350       N/A     US$ 5,350    
  Sempra Energy             US$ 5,158       N/A     US$ 5,158    
  Intl. Bank Recon. & Development             US$ 5,146       N/A     US$ 5,146    
  Jackson Natl Life Global             US$ 5,077       N/A     US$ 5,077    
  Voya Financial, Inc.             US$ 5,046       N/A     US$ 5,046    
  UBS AG Stamford CT             US$ 5,027       N/A     US$ 5,027    
  Macquarie Group Ltd.             US$ 5,009       N/A     US$ 5,009    
  Reliance Stand Life II             US$ 4,952       N/A     US$ 4,952    
  CA, Inc.             US$ 4,939       N/A     US$ 4,939    
  Daimler Finance NA LLC.             US$ 4,811       N/A     US$ 4,811    
  UBS Group Funding             US$ 4,733       N/A     US$ 4,733    
  American Honda Finance             US$ 4,725       N/A     US$ 4,725    

(Continued)

 

- 48 -


Held Company
Name

 

Marketable Securities Type and Name

  Relationship
with the
Company
 

Financial Statement Account

  March 31, 2017     Note  
        Shares/Units
(In Thousands)
    Carrying Value
(Foreign
Currencies
in Thousands)
    Percentage of
Ownership (%)
    Fair Value
(Foreign
Currencies
in Thousands)
   
               

TSMC Global

  Air Liquide Finance     Available-for-sale financial assets         US$ 4,717       N/A     US$ 4,717    
  Fifth Third Bank             US$ 4,712       N/A     US$ 4,712    
  ING Bank N.V.             US$ 4,693       N/A     US$ 4,693    
  Nordea Bank AB             US$ 4,676       N/A     US$ 4,676    
  Sumitomo Mitsui Financial Group             US$ 4,400       N/A     US$ 4,400    
  Enel Finance Intl N.V.             US$ 4,394       N/A     US$ 4,394    
  US Bank NA Cincinnati             US$ 4,379       N/A     US$ 4,379    
  Oaktree Capital Management, L.P.             US$ 4,302       N/A     US$ 4,302    
  Marriott International, Inc.    

        US$ 4,291       N/A     US$ 4,291    
  U.S. Bancorp             US$ 4,277       N/A     US$ 4,277    
  Twenty-First Century Fox Inc.             US$ 4,267       N/A     US$ 4,267    
  Lloyds Bank PLC             US$ 4,226       N/A     US$ 4,226    
  Exelon Generation Co. LLC             US$ 4,176       N/A     US$ 4,176    
  Schlumberger Hldgs Corp.             US$ 4,150       N/A     US$ 4,150    
  Keycorp Pty Ltd.             US$ 4,065       N/A     US$ 4,065    
  American Express Credit             US$ 4,054       N/A     US$ 4,054    
  Cadillac Fairview Corp. Ltd.             US$ 4,042       N/A     US$ 4,042    
  Pepsico Inc.             US$ 4,010       N/A     US$ 4,010    
  Mondelez International             US$ 3,974       N/A     US$ 3,974    
  Fortive Corporation             US$ 3,951       N/A     US$ 3,951    
  Wells Fargo Bank NA             US$ 3,908       N/A     US$ 3,908    
  American Intl. Group             US$ 3,809       N/A     US$ 3,809    
  Fifth Third Bancorp             US$ 3,789       N/A     US$ 3,789    
  Autozone Inc.             US$ 3,781       N/A     US$ 3,781    
  Husky Energy Inc.             US$ 3,765       N/A     US$ 3,765    
  Anheuser Busch InBev Worldwide Inc.             US$ 3,648       N/A     US$ 3,648    
  SES GLOBAL-Americas Holdings             US$ 3,517       N/A     US$ 3,517    
  BAT Intl Finance PLC             US$ 3,496       N/A     US$ 3,496    
  Credit Agricole London             US$ 3,326       N/A     US$ 3,326    
  Lam Research Corp.             US$ 3,252       N/A     US$ 3,252    
  Ryder System Inc.             US$ 3,233       N/A     US$ 3,233    
  Time Warner Inc.             US$ 3,043       N/A     US$ 3,043    
  Canadian Imperial Bank             US$ 3,013       N/A     US$ 3,013    
  Express Scripts Holding             US$ 2,996       N/A     US$ 2,996    
  Suncorp Metway Ltd.             US$ 2,991       N/A     US$ 2,991    
  Rabobank Nederland NY             US$ 2,861       N/A     US$ 2,861    
  Principal Life Global Funding II             US$ 2,781       N/A     US$ 2,781    
  PartnerRe Finance B LLC             US$ 2,732       N/A     US$ 2,732    
  Barclays PLC             US$ 2,705       N/A     US$ 2,705    
  Sprint Spectrum L.P.             US$ 2,693       N/A     US$ 2,693    
  Chevron Corp.             US$ 2,645       N/A     US$ 2,645    
  LyondellBasell Industries N.V.             US$ 2,570       N/A     US$ 2,570    
  TIAA Asset Management Finance LLC             US$ 2,567       N/A     US$ 2,567    
  MetLife Global Funding I             US$ 2,527       N/A     US$ 2,527    
  Sumitomo Mitsui Banking             US$ 2,483       N/A     US$ 2,483    
  Eastman Chemical Company             US$ 2,452       N/A     US$ 2,452    
  Xylem Inc.             US$ 2,443       N/A     US$ 2,443    
  Commonwealth Bank Australia NY             US$ 2,410       N/A     US$ 2,410    
  HSBC USA Inc.             US$ 2,374       N/A     US$ 2,374    
  NBCUniversal Media, LLC             US$ 2,363       N/A     US$ 2,363    
  Biogen Inc.             US$ 2,347       N/A     US$ 2,347    
  Bank of Tokyo-Mitsubishi UFJ             US$ 2,307       N/A     US$ 2,307    
  Air Lease Corporation             US$ 2,288       N/A     US$ 2,288    

(Continued)

 

- 49 -


Held Company
Name

 

Marketable Securities Type and Name

  Relationship
with the
Company
 

Financial Statement Account

  March 31, 2017     Note  
        Shares/Units
(In Thousands)
    Carrying Value
(Foreign
Currencies
in Thousands)
    Percentage of
Ownership (%)
    Fair Value
(Foreign
Currencies
in Thousands)
   
               

TSMC Global

  Mckesson Corp.     Available-for-sale financial assets         US$ 2,259       N/A     US$ 2,259    
  Cintas Corporation No. 2             US$ 2,226       N/A     US$ 2,226    
  ING Groep N.V.             US$ 2,203       N/A     US$ 2,203    
  Allied World Assurance             US$ 2,184       N/A     US$ 2,184    
  Celgene Corp.             US$ 2,126       N/A     US$ 2,126    
  HCP Inc.             US$ 2,096       N/A     US$ 2,096    
  Enterprise Products Operating, LLC             US$ 2,044       N/A     US$ 2,044    
  Johnson Controls International PLC             US$ 2,025       N/A     US$ 2,025    
  Sysco Corporation             US$ 2,014       N/A     US$ 2,014    
  British Telecommunications PLC             US$ 2,011       N/A     US$ 2,011    
  Nordic Investment Bank             US$ 1,998       N/A     US$ 1,998    
  Asian Development Bank             US$ 1,997       N/A     US$ 1,997    
  Wm. Wrigley Jr. Co.             US$ 1,997       N/A     US$ 1,997    
  Lloyds Banking Group PLC             US$ 1,989       N/A     US$ 1,989    
  The Bear Stearns Companies LLC.    

        US$ 1,986       N/A     US$ 1,986    
  State Street Corp.             US$ 1,986       N/A     US$ 1,986    
  Credit Suisse Group Funding Limited             US$ 1,980       N/A     US$ 1,980    
  Danske Bank A/S             US$ 1,964       N/A     US$ 1,964    
  Magellan Midstream Partners LP             US$ 1,958       N/A     US$ 1,958    
  Stryker Corp.             US$ 1,955       N/A     US$ 1,955    
  Unitedhealth Group Inc.             US$ 1,952       N/A     US$ 1,952    
  National Australia Bank/NY             US$ 1,948       N/A     US$ 1,948    
  BPCE SA             US$ 1,912       N/A     US$ 1,912    
  Branch Banking & Trust             US$ 1,884       N/A     US$ 1,884    
  Suntrust Bank             US$ 1,846       N/A     US$ 1,846    
  WestRock RKT Company             US$ 1,841       N/A     US$ 1,841    
  Orange S.A.             US$ 1,829       N/A     US$ 1,829    
  Stancorp Financial Group             US$ 1,825       N/A     US$ 1,825    
  Regency Centers, L.P.             US$ 1,804       N/A     US$ 1,804    
  Aust. & NZ Banking Grp. NY             US$ 1,801       N/A     US$ 1,801    
  Southern Power Company             US$ 1,788       N/A     US$ 1,788    
  Dominion Gas Holdings, LLC             US$ 1,772       N/A     US$ 1,772    
  Cardinal Health Inc.             US$ 1,755       N/A     US$ 1,755    
  Kimco Realty Corp.             US$ 1,730       N/A     US$ 1,730    
  Amgen Inc.             US$ 1,717       N/A     US$ 1,717    
  Tyson Foods, Inc.             US$ 1,709       N/A     US$ 1,709    
  Penske Truck Leasing (PTL)             US$ 1,679       N/A     US$ 1,679    
  Pacific Gas & Electric             US$ 1,618       N/A     US$ 1,618    
  Aetna Inc.             US$ 1,604       N/A     US$ 1,604    
  Trans Canada Pipelines             US$ 1,569       N/A     US$ 1,569    
  African Development Bank             US$ 1,565       N/A     US$ 1,565    
  Capital One Bank (USA), NA             US$ 1,553       N/A     US$ 1,553    
  Simon Property Group LP             US$ 1,504       N/A     US$ 1,504    
  Standard Chartered PLC             US$ 1,493       N/A     US$ 1,493    
  HSBC Bank PLC             US$ 1,479       N/A     US$ 1,479    
  Suncor Energy, Inc.             US$ 1,474       N/A     US$ 1,474    
  Procter & Gamble Co/The             US$ 1,472       N/A     US$ 1,472    
  Guardian Life Global Funding             US$ 1,466       N/A     US$ 1,466    
  Oesterreichische Kontrollbank             US$ 1,454       N/A     US$ 1,454    
  Walt Disney Company/The             US$ 1,398       N/A     US$ 1,398    
  ConocoPhillips             US$ 1,391       N/A     US$ 1,391    
  PacifiCorp             US$ 1,374       N/A     US$ 1,374    
  Swedbank AB             US$ 1,347       N/A     US$ 1,347    

(Continued)

 

- 50 -


Held Company
Name

 

Marketable Securities Type and Name

  Relationship
with the
Company
 

Financial Statement Account

  March 31, 2017     Note  
        Shares/Units
(In Thousands)
    Carrying Value
(Foreign
Currencies
in Thousands)
    Percentage of
Ownership (%)
    Fair Value
(Foreign
Currencies
in Thousands)
   
               

TSMC Global

  IBM Corp.     Available-for-sale financial assets         US$ 1,310       N/A     US$ 1,310    
  Eaton Corp.             US$ 1,296       N/A     US$ 1,296    
  Santander UK PLC             US$ 1,294       N/A     US$ 1,294    
  Equifax Inc.             US$ 1,290       N/A     US$ 1,290    
  Philip Morris Intl Inc.             US$ 1,290       N/A     US$ 1,290    
  Comcast Corp.             US$ 1,287       N/A     US$ 1,287    
  Visa Inc.             US$ 1,279       N/A     US$ 1,279    
  Nissan Motor Acceptance             US$ 1,261       N/A     US$ 1,261    
  The Western Union Company             US$ 1,259       N/A     US$ 1,259    
  Kroger Co.             US$ 1,252       N/A     US$ 1,252    
  CSX Corp.             US$ 1,227       N/A     US$ 1,227    
  Consolidated Edison, Inc.             US$ 1,219       N/A     US$ 1,219    
  American Airlines 2013-2             US$ 1,214       N/A     US$ 1,214    
  UBS Group Funding (Switzerland) AG             US$ 1,203       N/A     US$ 1,203    
  Banque Fed Cred Mutuel             US$ 1,176       N/A     US$ 1,176    
  ONEOK Partners LP             US$ 1,156       N/A     US$ 1,156    
  Corning Inc.             US$ 1,143       N/A     US$ 1,143    
  Public Service Enterprise Group Inc.             US$ 1,143       N/A     US$ 1,143    
  KfW             US$ 1,139       N/A     US$ 1,139    
  Everett SpinCo, Inc.             US$ 1,124       N/A     US$ 1,124    
  ERP Operating LP    

        US$ 1,122       N/A     US$ 1,122    
  Berkshire Hathaway Inc.             US$ 1,119       N/A     US$ 1,119    
  Medtronic Inc.             US$ 1,098       N/A     US$ 1,098    
  Wesfarmers Ltd.             US$ 1,096       N/A     US$ 1,096    
  Marsh & Mclennan Cos Inc.             US$ 1,090       N/A     US$ 1,090    
  International Paper Company             US$ 1,086       N/A     US$ 1,086    
  Cigna Corporation             US$ 1,077       N/A     US$ 1,077    
  BNP Paribas             US$ 1,069       N/A     US$ 1,069    
  Merck & Co Inc.             US$ 1,057       N/A     US$ 1,057    
  EOG Resources, Inc.             US$ 1,055       N/A     US$ 1,055    
  Lincoln National Corp.             US$ 1,047       N/A     US$ 1,047    
  Berkshire Hathaway Energy Co.             US$ 1,039       N/A     US$ 1,039    
  Realty Income Corp.             US$ 1,031       N/A     US$ 1,031    
  Statoil ASA             US$ 1,024       N/A     US$ 1,024    
  Amazon.com Inc.             US$ 1,020       N/A     US$ 1,020    
  Altera Corp.             US$ 1,015       N/A     US$ 1,015    
  HP Enterprise Co.             US$ 1,012       N/A     US$ 1,012    
  Home Depot Inc.             US$ 1,008       N/A     US$ 1,008    
  Manuf & Traders Trust Co.             US$ 1,007       N/A     US$ 1,007    
  John Deere Capital Corp.             US$ 1,006       N/A     US$ 1,006    
  Harley-Davidson Financial Services, Inc.             US$ 1,005       N/A     US$ 1,005    
  Macquarie Bank Ltd.             US$ 1,004       N/A     US$ 1,004    
  Nisource Finance Corp.             US$ 993       N/A     US$ 993    
  Georgia-Pacific LLC             US$ 989       N/A     US$ 989    
  National Retail Properties, Inc.             US$ 979       N/A     US$ 979    
  Duke Realty LP             US$ 970       N/A     US$ 970    
  Texas Eastern Transmission, LP             US$ 968       N/A     US$ 968    
  Duke Energy Progress Inc.             US$ 957       N/A     US$ 957    
  Exxon Mobil Corporation             US$ 953       N/A     US$ 953    
  Glaxosmithkline Cap. Inc.             US$ 942       N/A     US$ 942    
  PPL Capital Funding, Inc.             US$ 932       N/A     US$ 932    
  Southern Electric Generating Company             US$ 906       N/A     US$ 906    
  Lockheed Martin Corp.             US$ 902       N/A     US$ 902    

(Continued)

 

- 51 -


Held Company
Name

 

Marketable Securities Type and Name

  Relationship
with the
Company
 

Financial Statement Account

  March 31, 2017     Note  
        Shares/Units
(In Thousands)
    Carrying Value
(Foreign
Currencies
in Thousands)
    Percentage of
Ownership (%)
    Fair Value
(Foreign
Currencies
in Thousands)
   
               

TSMC Global

  CNOOC Finance (2011) Ltd.     Available-for-sale financial assets         US$ 890       N/A     US$ 890    
  Federal Realty Invs Trust             US$ 878       N/A     US$ 878    
  Mastercard Inc.             US$ 856       N/A     US$ 856    
  Metlife Inc.             US$ 850       N/A     US$ 850    
  Alterra Finance LLC             US$ 844       N/A     US$ 844    
  Nucor Corporation             US$ 837       N/A     US$ 837    
  Huntington Bancshares             US$ 828       N/A     US$ 828    
  AXIS Specialty Finance PLC             US$ 825       N/A     US$ 825    
  Pacific LifeCorp             US$ 821       N/A     US$ 821    
  Bank Of Montreal             US$ 815       N/A     US$ 815    
  Aon PLC             US$ 813       N/A     US$ 813    
  Societe Generale Group             US$ 807       N/A     US$ 807    
  Manulife Financial Corporation             US$ 804       N/A     US$ 804    
  State Grid Overseas Investment Ltd.             US$ 797       N/A     US$ 797    
  Spectra Energy Partners, LP             US$ 790       N/A     US$ 790    
  Cox Communications, Inc.             US$ 785       N/A     US$ 785    
  Sinopec Capital (2013) Ltd.             US$ 778       N/A     US$ 778    
  CMS Energy Corp.             US$ 764       N/A     US$ 764    
  Crown Castle Towers LLC             US$ 758       N/A     US$ 758    
  Norfolk Southern Railway Co.             US$ 735       N/A     US$ 735    
  Coca Cola Femsa S.A.B. de C.V.             US$ 734       N/A     US$ 734    
  DTE Electric Company             US$ 719       N/A     US$ 719    
  Baker Hughes Incorporated             US$ 717       N/A     US$ 717    
  Regions Financial Corporation             US$ 712       N/A     US$ 712    
  Total Capital International S.A.             US$ 705       N/A     US$ 705    
  Scentre Group             US$ 702       N/A     US$ 702    
  Rochester Gas & Electric             US$ 701       N/A     US$ 701    
  TTX Co.    

        US$ 700       N/A     US$ 700    
  Continental Airlines Inc.             US$ 697       N/A     US$ 697    
  Cargill, Incorporated             US$ 693       N/A     US$ 693    
  Entergy Louisiana, LLC             US$ 669       N/A     US$ 669    
  Ohio Power Company             US$ 668       N/A     US$ 668    
  Capital One Financial Co.             US$ 658       N/A     US$ 658    
  Grupo Bimbo, S.A.B. de C.V.             US$ 638       N/A     US$ 638    
  Liberty Property LP             US$ 638       N/A     US$ 638    
  Potash Corp Saskatchewan Inc.             US$ 636       N/A     US$ 636    
  Life Technologies Corp.             US$ 624       N/A     US$ 624    
  ABC Inc.             US$ 617       N/A     US$ 617    
  Dr Pepper Snapple Group, Inc.             US$ 614       N/A     US$ 614    
  Altria Group, Inc.             US$ 608       N/A     US$ 608    
  Kimberly Clark Corp.             US$ 603       N/A     US$ 603    
  Bayer US Finance LLC             US$ 600       N/A     US$ 600    
  Host Hotels & Resorts, Inc.             US$ 592       N/A     US$ 592    
  CenterPoint Energy Resources             US$ 589       N/A     US$ 589    
  MUFG Union Bank, N.A.             US$ 586       N/A     US$ 586    
  AvalonBay Communities Inc.             US$ 581       N/A     US$ 581    
  AXIS Specialty Finance PLC             US$ 580       N/A     US$ 580    
  Bunge Limited Finance Corp.             US$ 567       N/A     US$ 567    
  Boston Properties LP             US$ 562       N/A     US$ 562    
  Nordstrom Inc.             US$ 551       N/A     US$ 551    
  Fédération des caisses             US$ 550       N/A     US$ 550    
  Digital Realty Trust, L.P.             US$ 543       N/A     US$ 543    
  Mcdonald’s Corp.             US$ 542       N/A     US$ 542    

(Continued)

 

- 52 -


Held Company
Name

 

Marketable Securities Type and Name

  Relationship
with the
Company
 

Financial Statement Account

  March 31, 2017     Note  
        Shares/Units
(In Thousands)
    Carrying Value
(Foreign
Currencies
in Thousands)
    Percentage of
Ownership (%)
    Fair Value
(Foreign
Currencies
in Thousands)
   
               

TSMC Global

  Prudential Financial Inc.     Available-for-sale financial assets         US$ 540       N/A     US$ 540    
  Brambles USA Inc.             US$ 540       N/A     US$ 540    
  Southwestern Electric Power Company             US$ 538       N/A     US$ 538    
  O’Reilly Automotive Inc.             US$ 537       N/A     US$ 537    
  TD Ameritrade Holding Corp.             US$ 531       N/A     US$ 531    
  American Express Co.             US$ 525       N/A     US$ 525    
  Burlington Northern Santa Fe Corp.             US$ 520       N/A     US$ 520    
  Inter-American Development Bank             US$ 507       N/A     US$ 507    
  PSEG Power LLC             US$ 503       N/A     US$ 503    
  CBS Corp.             US$ 502       N/A     US$ 502    
  Halliburton Co.             US$ 501       N/A     US$ 501    
  Narragansett Electric             US$ 477       N/A     US$ 477    
  Comerica Inc.             US$ 474       N/A     US$ 474    
  Canadian Pacific Railway Company             US$ 451       N/A     US$ 451    
  Nationwide Building Society             US$ 442       N/A     US$ 442    
  Valero Energy Corp.             US$ 440       N/A     US$ 440    
  Blackstone Holdings Finance Co., LLC             US$ 425       N/A     US$ 425    
  Woolworths Limited             US$ 418       N/A     US$ 418    
  Conocophillips Company             US$ 399       N/A     US$ 399    
  Volkswagen Group of America, Inc.             US$ 399       N/A     US$ 399    
  Aon Corp.             US$ 396       N/A     US$ 396    
  First Niagara Financial Group, Inc.             US$ 392       N/A     US$ 392    
  Nationwide Financial Service, Inc.             US$ 381       N/A     US$ 381    
  Deutsche Bank AG             US$ 352       N/A     US$ 352    
  Barclays Bank PLC             US$ 294       N/A     US$ 294    
  BAE Systems Holdings, Inc.             US$ 293       N/A     US$ 293    
  Amphenol Corp.             US$ 290       N/A     US$ 290    
  EMD Finance LLC             US$ 280       N/A     US$ 280    
  Mattel Inc.             US$ 269       N/A     US$ 269    
  General Electric Co.             US$ 256       N/A     US$ 256    
  Nomura Holdings Inc.             US$ 253       N/A     US$ 253    
  NBCUniversal Enterprise, Inc.             US$ 251       N/A     US$ 251    
  Bank of Nova Scotia             US$ 246       N/A     US$ 246    
  Kansas City Power & Light Company    

        US$ 244       N/A     US$ 244    
  Protective Life Corporation             US$ 236       N/A     US$ 236    
  WestRock MWV, LLC             US$ 233       N/A     US$ 233    
  Rolls Royce PLC             US$ 224       N/A     US$ 224    
  Assurant, Inc.             US$ 211       N/A     US$ 211    
  JPMorgan Chase & Co.     Held-to-maturity financial assets         US$ 152,843       N/A     US$ 154,667    
  Wells Fargo & Company             US$ 150,006       N/A     US$ 151,515    
  Westpac Banking Corp.             US$ 100,000       N/A     US$ 101,077    
  Goldman Sachs Group, Inc.             US$ 100,000       N/A     US$ 100,436    
  Commonwealth Bank of Australia             US$ 50,000       N/A     US$ 50,551    
  National Australia Bank             US$ 50,000       N/A     US$ 50,451    
  Bank of Nova Scotia             US$ 49,984       N/A     US$ 50,341    
  Government bond              
  US Treasury N/B     Available-for-sale financial assets         US$ 254,397       N/A     US$ 254,397    
  Abu Dhabi Government International Bond             US$ 3,465       N/A     US$ 3,465    

(Continued)

 

- 53 -


Held Company
Name

 

Marketable Securities Type and Name

  Relationship
with the
Company
 

Financial Statement Account

  March 31, 2017     Note  
        Shares/Units
(In Thousands)
    Carrying Value
(Foreign
Currencies
in Thousands)
    Percentage of
Ownership (%)
    Fair Value
(Foreign
Currencies
in Thousands)
   
               

TSMC Global

 

Agency bonds/Agency mortgage-backed securities

             
  Federal National Mortgage Association     Available-for-sale financial assets         US$ 355,833       N/A     US$ 355,833    
  Federal Home Loan Mortgage Corporation             US$ 141,591       N/A     US$ 141,591    
  Government National Mortgage Association             US$ 27,910       N/A     US$ 27,910    
  Government National Mortgage Association             US$ 20,435       N/A     US$ 20,435    
  Federal Home Loan Bank             US$ 9,663       N/A     US$ 9,663    
  Fhlmc Multifamily Structured PTC             US$ 3,563       N/A     US$ 3,563    
  Export Import Bank Korea             US$ 3,008       N/A     US$ 3,008    
  Province Of Quebec             US$ 2,589       N/A     US$ 2,589    
  Export Developmnt Canada             US$ 2,003       N/A     US$ 2,003    
  Federal Farm Credit Bank             US$ 898       N/A     US$ 898    
  Negotiable certificate of deposit              
  China Development Bank     Held-to-maturity financial assets         US$ 50,000       N/A     US$ 50,148    
  Bank of China             US$ 50,000       N/A     US$ 50,146    
  China Construction Bank             US$ 50,000       N/A     US$ 50,133    
  Asset-backed securities              
  Chase Issuance Trust     Available-for-sale financial assets         US$ 31,810       N/A     US$ 31,810    
 

Citibank Credit Card Issuance Trust

            US$ 27,854       N/A     US$ 27,854    
 

Capital One Multi Asset Execution Trust

            US$ 27,177       N/A     US$ 27,177    
 

Discover Card Execution Note Trust

            US$ 26,658       N/A     US$ 26,658    
 

American Express Credit Account Master Trust

            US$ 24,241       N/A     US$ 24,241    
 

Bank of America Credit Card Trust

            US$ 19,482       N/A     US$ 19,482    
 

COMM Mortgage Trust

            US$ 13,015       N/A     US$ 13,015    
 

GS Mortgage Securities Trust

            US$ 12,719       N/A     US$ 12,719    
 

Ford Credit Floorplan Master Owner Trust

            US$ 11,968       N/A     US$ 11,968    
 

Ford Credit Auto Owner Trust

            US$ 11,739       N/A     US$ 11,739    
 

Nissan Auto Lease Trust

            US$ 11,117       N/A     US$ 11,117    
 

Morgan Stanley Bank of America Merrill Lynch Trust

            US$ 11,025       N/A     US$ 11,025    
  Hyundai Auto Receivables Trust             US$ 10,681       N/A     US$ 10,681    
  UBS-Barclays Commercial Mortgage Trust             US$ 10,172       N/A     US$ 10,172    
  Mercedes Benz Master Owner Trust             US$ 10,017       N/A     US$ 10,017    
  GM Financial Automobile Leasing Trust             US$ 9,978       N/A     US$ 9,978    
  Nissan Auto Receivables Owner Trust             US$ 9,273       N/A     US$ 9,273    
 

J.P. Morgan Chase Commercial Mortgage Securities Trust

            US$ 7,531       N/A     US$ 7,531    
  Honda Auto Receivables Owner Trust             US$ 7,520       N/A     US$ 7,520    
 

JPMBB Commercial Mortgage Securities Trust

            US$ 6,970       N/A     US$ 6,970    
  Toyota Auto Receivables Owner Trust             US$ 6,767       N/A     US$ 6,767    
  BMW Vehicle Lease Trust             US$ 6,565       N/A     US$ 6,565    
  Ford Credit Auto Owner Trust             US$ 6,180       N/A     US$ 6,180    
  Chesapeake Funding II LLC             US$ 5,691       N/A     US$ 5,691    
  Hyundai Auto Lease Securitization Trust             US$ 5,259       N/A     US$ 5,259    
  Citigroup Commercial Mortgage Trust             US$ 4,934       N/A     US$ 4,934    
  Mercedes Benz Auto Lease Trust             US$ 4,863       N/A     US$ 4,863    
  Mercedes Benz Auto Receivables Trust             US$ 3,698       N/A     US$ 3,698    
  Wells Fargo Commercial Mortgage Trust    

        US$ 3,384       N/A     US$ 3,384    
  Ford Credit Auto Lease Trust             US$ 2,973       N/A     US$ 2,973    
  Credit Suisse Mortgage Trust             US$ 2,861       N/A     US$ 2,861    
  BMW Floorplan Master Owner Trust    

        US$ 2,442       N/A     US$ 2,442    
  Morgan Stanley Capital I Trust             US$ 2,186       N/A     US$ 2,186    

(Continued)

 

- 54 -


Held Company
Name

 

Marketable Securities Type and Name

  Relationship
with the
Company
 

Financial Statement Account

  March 31, 2017     Note  
        Shares/Units
(In Thousands)
    Carrying Value
(Foreign
Currencies
in Thousands)
    Percentage of
Ownership (%)
    Fair Value
(Foreign
Currencies
in Thousands)
   
               

TSMC Global

  WF-RBS Commercial Mortgage Trust     Available-for-sale financial assets         US$ 2,107       N/A     US$ 2,107    
 

Nissan Master Owner Trust Receivables Trust

            US$ 2,003       N/A     US$ 2,003    
  Carmax Auto Owner Trust             US$ 1,999       N/A     US$ 1,999    
  Golden Credit Card Trust             US$ 1,801       N/A     US$ 1,801    
  Wheels SPV LLC             US$ 1,706       N/A     US$ 1,706    
  Enterprise Fleet Financing LLC             US$ 1,079       N/A     US$ 1,079    
  CFCRE Commercial Mortgage Trust             US$ 1,075       N/A     US$ 1,075    
  Structure product              
  Bank of Tokyo-Mitsubishi UFJ     Held-to-maturity financial assets         US$ 50,000       N/A     US$ 49,837    
  Commercial paper              
  BNP Paribas New York Branch     Available-for-sale financial assets         US$ 3,000       N/A     US$ 3,000    
  UBS AG, Stamford Branch             US$ 2,000       N/A     US$ 2,000    
  Societe Generale             US$ 2,000       N/A     US$ 2,000    
  Norinchukin Bank             US$ 2,000       N/A     US$ 2,000    
  LMA S.A. / LMA Americas LLC             US$ 1,978       N/A     US$ 1,978    
  Wells Fargo Bank NA             US$ 1,000       N/A     US$ 1,000    
  Bank of Tokyo-Mitsubishi UFJ, Ltd., London             US$ 1,000       N/A     US$ 1,000    
  Svenska Handelsbanken AB (publ)             US$ 891       N/A     US$ 891    
  AXA Financial, Inc.             US$ 886       N/A     US$ 886    
  Societe Generale Group             US$ 743       N/A     US$ 743    
  Bank of Tokyo-Mitsubishi UFJ, Ltd., NY             US$ 723       N/A     US$ 723    
  Fund              
  Primavera Capital Fund II L.P.     Financial assets carried at cost         US$ 29,458       4     US$ 29,458    

VTAF III

  Common stock              
  LiquidLeds Lighting Corp.     Financial assets carried at cost     1,600     US$ 800       11     US$ 800    
  Xenio Corporation         435     US$ 453       3     US$ 453    
  Accton Wireless Broadband Corp.         2,249             6          
  Preferred stock              
  GTBF, Inc.     Financial assets carried at cost     1,154     US$ 1,500           US$ 1,500    
  Neoconix, Inc.         4,147     US$ 170           US$ 170    

VTAF II

  Common stock              
  RichWave Technology Corp.     Available-for-sale financial assets     744     US$ 1,957       1     US$ 1,957    
  Impinj, Inc.         42     US$ 1,269           US$ 1,269    
  Sentelic     Financial assets carried at cost     1,806     US$ 2,607       8     US$ 2,607    
  5V Technologies, Inc.         963     US$ 2,168       2     US$ 2,168    
  Aether Systems, Inc.         3,100     US$ 339       30     US$ 339    
  Preferred stock              
  Aquantia     Financial assets carried at cost     4,643     US$ 4,441       2     US$ 4,441    

ISDF

  Preferred stock              
  Sonics, Inc.     Financial assets carried at cost     230             3          

ISDF II

  Common stock              
  Alchip Technologies Limited     Available-for-sale financial assets     6,581     US$ 10,683       11     US$ 10,683    
  Sonics, Inc.     Financial assets carried at cost     278             4          
  Preferred stock              
  Sonics, Inc.     Financial assets carried at cost     264             4          

Growth Fund

  Common stock              
  Innovium, Inc.     Financial assets carried at cost     221     US$ 370           US$ 370    
  Preferred stock              
  Innovium, Inc.     Financial assets carried at cost     230     US$ 384           US$ 384    

(Concluded)

 

- 55 -


TABLE 4

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

MARKETABLE SECURITIES ACQUIRED AND DISPOSED OF AT COSTS OR PRICES OF AT LEAST NT$300 MILLION OR 20% OF THE PAID-IN CAPITAL

FOR THE THREE MONTHS ENDED MARCH 31, 2017

(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 1)  
          Shares/Units
(In Thousands)
    Amount     Shares/Units
(In Thousands)
    Amount     Shares/Units
(In Thousands)
    Amount     Carrying
Value
    Gain/Loss on
Disposal
    Shares/Units
(In Thousands)
    Amount  

    

                           

TSMC

 

Corporate bond

                         
 

Hon Hai Precision Ind. Co., Ltd.

 

Held-to-maturity financial assets

                    $ 400,250           $           $ 400,000     $ 400,000     $           $  
 

Commercial paper

                         
 

Taiwan Power Company

 

Held-to-maturity financial assets

                865       8,628,176       170       1,695,771                               1,035       10,323,947  

TSMC Global

 

Corporate bond

                         
 

Morgan Stanley

 

Available-for-sale financial assets

                    US$ 11,237           US$ 12,049           US$ 1,281     US$ 1,297     US$ (16         US$ 22,124  
 

Goldman Sachs Group Inc.

 

                    US$ 7,390           US$ 11,755           US$ 1,900     US$ 1,976     US$ (76         US$ 17,289  
 

Microsoft Corp.

 

                    US$ 2,905           US$ 11,279           US$ 1,001     US$ 999     US$ 2           US$ 13,288  
 

Aetna Inc.

 

                    US$ 11,618                       US$ 10,157     US$ 10,069     US$ 88           US$ 1,604  
 

Government bond

                         
 

US Treasury N/B

 

Available-for-sale financial assets

                    US$ 195,285           US$ 122,815           US$ 142,835     US$ 143,667     US$ (832         US$ 181,590  
 

US Treasury Floating Rate Note

 

                    US$ 30,756           US$ 49,760           US$ 41,355     US$ 41,330     US$ 25           US$ 39,193  
 

Treasury Bill

 

                                US$ 18,488                                   US$ 18,493  
 

Treasury Inflation-Indexed N/B

 

                    US$ 19,349           US$ 7,972           US$ 16,995     US$ 17,093     US$ (98         US$ 10,360  
 

WI Treasury Securities

 

                                US$ 22,492           US$ 22,498     US$ 22,492     US$ 6              
 

Agency bonds/Agency mortgage-backed securities

                         
 

FNMA Pool AL9718

 

Available-for-sale financial assets

                                US$ 9,841                                   US$ 9,828  
 

FNMA TBA 30 Yr 3

 

                                US$ 14,814           US$ 11,965     US$ 11,949     US$ 16           US$ 2,875  
 

GNMA II TBA 30 Yr 3.5

 

                                US$ 21,020           US$ 19,824     US$ 19,855     US$ (31         US$ 1,182  
 

FNMA TBA 30 Yr 4.5

 

                                US$ 16,703           US$ 15,933     US$ 15,954     US$ (21         US$ 751  
 

GNMA II TBA 30 Yr 3

 

                                US$ 12,544           US$ 12,541     US$ 12,544     US$ (3            
 

FNMA TBA 30 Yr 4

 

                                US$ 17,885           US$ 17,889     US$ 17,885     US$ 4              
 

FNMA TBA 30 Yr 3.5

 

                                US$ 29,730           US$ 29,719     US$ 29,730     US$ (11            
 

Asset-backed securities

                         
 

Capital One Multi Asset Execution Trust

 

Available-for-sale financial assets

                    US$ 39,626           US$ 200           US$ 12,703     US$ 12,778     US$ (75         US$ 27,177  

 

Note 1: The ending balance includes the amortization of premium/discount on bonds investments, share of profits/losses of investees and other related adjustment.

 

- 56 -


TABLE 5

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

ACQUISITION OF INDIVIDUAL REAL ESTATE PROPERTIES AT COSTS OF AT LEAST NT$300 MILLION OR 20% OF THE PAID-IN CAPITAL

FOR THE THREE MONTHS ENDED MARCH 31, 2017

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

 

 

Company Name

 

Types of

Property

 

Transaction Date

  Transaction
Amount

(Foreign
Currencies in
Thousands)
   

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

  Fab  

January 18, 2017

  $ 352,766    

Monthly settlement by the construction progress and acceptance

 

TASA Construction Corporation

    N/A   N/A   N/A   N/A  

Bidding, price comparison and price negotiation

 

Manufacturing purpose

  None

 

- 57 -


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 THREE MONTHS ENDED MARCH 31, 2017

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

 

 

           

Transaction Details

  Abnormal Transaction   Notes/Accounts
Payable or
Receivable
       

Company Name

 

Related Party

 

Nature of Relationships

 

Purchases/Sales

  Amount
(Foreign Currencies
in Thousands)
    % to
Total
   

Payment Terms

  Unit Price   Payment Terms   Ending Balance
(Foreign
Currencies in
Thousands)
    % to
Total
    Note  

    

                     

TSMC

 

TSMC North America

  Subsidiary   Sales   $ 153,515,192       64    

Net 30 days from invoice date (Note)

    Note   $ 70,978,949       66    
 

GUC

  Associate   Sales     1,279,698       1    

Net 30 days from the end of the month of when invoice is issued

        456,331          
 

TSMC China

  Subsidiary   Purchases     5,446,644       27    

Net 30 days from the end of the month of when invoice is issued

        (1,838,200     7    
 

WaferTech

  Indirect subsidiary   Purchases     2,133,418       11    

Net 30 days from the end of the month of when invoice is issued

        (1,352,078     5    
 

VIS

  Associate   Purchases     1,634,239       8    

Net 30 days from the end of the month of when invoice is issued

        (604,897     2    
 

SSMC

  Associate   Purchases     993,829       5    

Net 30 days from the end of the month of when invoice is issued

        (382,806     1    

TSMC North America

 

GUC

  Associate of TSMC   Sales    

(US$

225,382

7,233

 

       

Net 30 days from invoice date

       

(US$

38,508

1,268

 

       

 

Note: The tenor is 30 days from TSMC’s invoice date or determined by the payment terms granted to its clients by TSMC North America.

 

- 58 -


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

MARCH 31, 2017

(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
 
               Amount      Action Taken      

    

                       

TSMC

  

TSMC North America

  

Subsidiary

   $ 71,608,125      47    $ 4,563,570         $ 5,186,060      $  
  

GUC

  

Associate

     456,477      49      210,139           213,007         

TSMC Global

  

TSMC

  

Parent company

    

(US$

6,074,182

200,006

 

   Note 2                        

TSMC China

  

TSMC

  

Parent company

    

(RMB

1,838,200

417,121

 

   30                        
  

TSMC Nanjing

  

The same parent company

    

(RMB

5,522,751

1,253,205

 

   Note 2                        

TSMC Technology

  

TSMC

  

The ultimate parent of the Company

    

(US$

212,582

7,000

 

   Note 2                        

WaferTech

  

TSMC

  

The ultimate parent of the Company

    

(US$

1,352,078

44,520

 

   57                        

 

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.

 

- 59 -


TABLE 8

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

INTERCOMPANY RELATIONSHIPS AND SIGNIFICANT INTERCOMPANY TRANSACTIONS

FOR THE THREE MONTHS ENDED MARCH 31, 2017

(Amounts in Thousands of New Taiwan Dollars)

 

 

No.

  

Company Name

  

Counter Party

   Nature of
Relationship

(Note 1)
  

Intercompany Transactions

           

Financial Statements Item

   Amount      Terms
(Note 2)
   Percentage of
Consolidated Net Revenue
or Total Assets

    

                    

0

   TSMC    TSMC North America    1   

Net revenue from sale of goods

   $ 153,515,192         66%
           

Receivables from related parties

     70,978,949         4%
           

Other receivables from related parties

     629,176         —    
      TSMC Europe    1   

Marketing expenses - commission

     106,912         —    
      TSMC Global    1   

Short-term loans

     6,074,000         —    
      TSMC China    1   

Purchases

     5,446,644         2%
           

Payables to related parties

     1,838,200         —    
      TSMC Technology    1   

Research and development expenses

     433,979         —    
           

Payables to related parties

     212,582         —    
      WaferTech    1   

Purchases

     2,133,418         1%
           

Payables to related parties

     1,352,078         —    

1

   TSMC China    TSMC Nanjing    3   

Other receivables from related parties

     5,522,751         —    

 

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.

 

- 60 -


TABLE 9

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

NAMES, LOCATIONS, AND RELATED INFORMATION OF INVESTEES OVER WHICH THE COMPANY EXERCISES SIGNIFICANT INFLUENCE (EXCLUDING INFORMATION ON INVESTMENT IN MAINLAND CHINA)

FOR THE THREE MONTHS ENDED MARCH 31, 2017

(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 March 31, 2017     Net Income
(Losses) of the
Investee
(Foreign
Currencies in
Thousands)
   

Share of
Profits/Losses

of Investee

(Note 1)

(Foreign
Currencies in
Thousands)

    Note
       

 

 

   

 

 

       
       

March 31,

2017

(Foreign
Currencies in
Thousands)

   

December 31,

2016

(Foreign
Currencies in
Thousands)

    Shares (In
Thousands)
    Percentage of
Ownership
   

Carrying
Value

(Foreign
Currencies in
Thousands)

       

 

 

 

 

 

 

 

 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

                     

TSMC

  TSMC Global   Tortola, British Virgin Islands  

Investment activities

  $ 232,207,219     $ 232,207,219       7       100     $ 251,749,192     $ 1,032,344     $ 1,032,344     Subsidiary
  TSMC Partners   Tortola, British Virgin Islands  

Investing in companies involved in the design, manufacture, and other related business in the semiconductor industry and other investment activities

    31,456,130       31,456,130       988,268       100       49,417,255       509,710       509,710     Subsidiary
  VIS   Hsin-Chu, Taiwan  

Manufacturing, selling, packaging, testing and computer-aided design of integrated circuits and other semiconductor devices and the manufacturing and design service of masks

    10,180,677       10,180,677       464,223       28       9,072,232       1,150,449       324,584     Associate
  SSMC   Singapore  

Manufacturing and selling of integrated circuits and other semiconductor devices

    5,120,028       5,120,028       314       39       7,153,964       1,014,977       393,709     Associate
  VisEra Tech   Hsin-Chu, Taiwan  

Engaged in manufacturing electronic spare parts and in researching, developing, designing, manufacturing, selling, packaging and testing of color filter

    5,005,171       5,005,171       253,120       87       5,198,832       (41,467     (36,051   Subsidiary
  TSMC North America   San Jose, California, U.S.A  

Selling and marketing of integrated circuits and other semiconductor devices

    333,718       333,718       11,000       100       4,156,471       64,340       64,340     Subsidiary
  Xintec   Taoyuan, Taiwan  

Wafer level chip size packaging and wafer level post passivation interconnection service

    1,988,317       1,988,317       111,282       41       2,488,903       (248,164     (101,299   Associate
  GUC   Hsin-Chu, Taiwan  

Researching, developing, manufacturing, testing and marketing of integrated circuits

    386,568       386,568       46,688       35       1,224,963       142,986       49,816     Associate
  VTAF II   Cayman Islands  

Investing in new start-up technology companies

    608,562       608,562             98       462,515       39,563       38,772     Subsidiary
  TSMC Europe   Amsterdam, the Netherlands  

Customer service and supporting activities

    15,749       15,749             100       346,161       10,096       10,096     Subsidiary
  VTAF III   Cayman Islands  

Investing in new start-up technology companies

    1,355,417       1,355,417             98       193,319       (15,889     (15,571   Subsidiary
  TSMC Japan   Yokohama, Japan  

Customer service and supporting activities

    83,760       83,760       6       100       132,315       1,432       1,432     Subsidiary
  TSMC Korea   Seoul, Korea  

Customer service and supporting activities

    13,656       13,656       80       100       36,769       528       528     Subsidiary
  VTA Holdings   Delaware, U.S.A  

Investing in new start-up technology companies

                      7                       Subsidiary
  TSMC Solar Europe GmbH   Hamburg, Germany  

Selling of solar related products and providing customer service

    25,266       25,266       1       100       (6,149     (135     (135   Subsidiary

 

(Continued)

 

- 61 -


Investor
Company
  Investee
Company
  Location   Main Businesses
and Products
  Original Investment Amount     Balance as of March 31, 2017     Net Income
(Losses) of the
Investee
(Foreign
Currencies in
Thousands)
   

Share of
Profits/Losses

of Investee

(Note 1)

(Foreign
Currencies in
Thousands)

    Note
       

 

 

   

 

 

       
       

March 31,

2017

(Foreign
Currencies in
Thousands)

   

December 31,

2016

(Foreign
Currencies in
Thousands)

    Shares (In
Thousands)
    Percentage of
Ownership
   

Carrying
Value

(Foreign
Currencies in
Thousands)

       

 

 

 

 

 

 

 

 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

                     

TSMC Partners

  TSMC Development   Delaware, U.S.A  

Investing in companies involved in the manufacturing related business in the semiconductor industry

  $

(US$

17,825,332

586,939

 

  $

(US$

17,825,332

586,939

 

          100     $

(US$

25,969,581

855,106

 

  $

(US$

410,042

13,160

 

    Note 2     Subsidiary
  TSMC Technology   Delaware, U.S.A  

Engineering support activities

   

(US$

433,745

14,282

 

   

(US$

433,745

14,282

 

          100      

(US$

526,776

17,345

 

   

(US$

14,829

476

 

    Note 2     Subsidiary
  ISDF II   Cayman Islands  

Investing in new start-up technology companies

   

(US$

157,737

5,194

 

   

(US$

157,737

5,194

 

    9,299       97      

(US$

292,251

9,623

 

   

(US$

(26

(1


)) 

    Note 2     Subsidiary
  TSMC Canada   Ontario, Canada  

Engineering support activities

   

(US$

69,851

2,300

 

   

(US$

69,851

2,300

 

    2,300       100      

(US$

164,775

5,426

 

   

(US$

4,473

144

 

    Note 2     Subsidiary
  ISDF   Cayman Islands  

Investing in new start-up technology companies

   

(US$

14,432

475

 

   

(US$

14,432

475

 

    583       97      

(US$

461

15

 

          Note 2     Subsidiary

VTAF III

  Growth Fund   Cayman Islands  

Investing in new start-up technology companies

   

(US$

44,394

1,462

 

   

(US$

44,394

1,462

 

          100      

(US$

27,507

906

 

   

(US$

(312

(10


)) 

    Note 2     Subsidiary
  Mutual-Pak   New Taipei, Taiwan  

Manufacturing of electronic parts, wholesaling and retailing of electronic materials, and researching, developing and testing of RFID

   

(US$

158,309

5,213

 

   

(US$

158,309

5,213

 

    15,643       58      

(US$

16,643

548

 

   

(US$

(7,312

(235


)) 

    Note 2     Subsidiary

VTAF III

  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

TSMC Development

  WaferTech   Washington, U.S.A  

Manufacturing, selling and testing of integrated circuits and other semiconductor devices

                293,637       100      

(US$

5,815,737

191,496

 

   

(US$

368,354

11,822

 

    Note 2     Subsidiary

 

Note 1: The share of profits/losses of investee includes the effect of unrealized gross profit on intercompany transactions.
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)

 

- 62 -


TABLE 10

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

INFORMATION ON INVESTMENT IN MAINLAND CHINA

FOR THREE MONTHS ENDED MARCH 31, 2017

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

 

 

Investee Company

 

Main Businesses and
Products

  Total Amount of
Paid-in Capital

(RMB
in Thousands)
    Method of
Investment
    Accumulated
Outflow of
Investment from
Taiwan as of
January 1, 2017

(US$ in
Thousands)
    Investment
Flows
    Accumulated
Outflow of
Investment from
Taiwan as of

March 31,
2017 (US$ in
Thousands)
    Net Income
(Losses) of the
Investee
Company
    Percentage of
Ownership
    Share of
Profits/Losses
    Carrying
Amount

as of
March 31,
2017
    Accumulated
Inward
Remittance of
Earnings as
of

March 31,
2017
 
          Outflow
(US$ in
Thousands)
    Inflow              
                       

TSMC China

 

Manufacturing, selling, testing and computer-aided design of integrated circuits and other semiconductor devices

  $

(RMB

18,939,667

4,502,080

 

    Note 1     $

(US$

18,939,667

596,000

 

  $     $     $

(US$

18,939,667

596,000

 

  $ 2,169,762       100%     $

 

2,170,716

(Note 2

 

  $ 42,649,871     $  

TSMC Nanjing

 

Manufacturing, selling, testing and computer-aided design of integrated circuits and other semiconductor devices

   

(RMB

6,435,200

1,366,240

 

    Note 1      

(US$

6,435,200

200,000

 

               

(US$

6,435,200

200,000

 

    38,130       100%      

38,130

(Note 2

 

    6,058,911        

 

Accumulated Investment in Mainland China
as of March 31, 2017
(US$ in Thousands)
   Investment Amounts Authorized by
Investment Commission, MOEA
(US$ in Thousands)
   Upper Limit on Investment
     
$      25,374,867

(US$      796,000)

   $       119,412,667

(US$      3,596,000)

   Note 3

 

Note 1: TSMC directly invested US$596,000 thousand in TSMC China and US$200,000 thousands in TSMC Nanjing.
Note 2: Amount was recognized based on the reviewed financial statements.
Note 3: As the Company has obtained the certificate of being qualified for operating headquarters issued by Industrial Development Bureau, MOEA on August 2016, the upper limit on investment in mainland China pursuant to “Principle of investment or Technical Cooperation in Mainland China” is not applicable.

 

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