Form 6-K

1934 Act Registration No. 1-14700

 

 

 

 

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

 

FORM 6-K

 

 

REPORT OF FOREIGN PRIVATE ISSUER

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

THE SECURITIES EXCHANGE ACT OF 1934

For the month of Aug 2016

 

 

Taiwan Semiconductor Manufacturing Company Ltd.

(Translation of Registrant’s Name Into English)

 

 

No. 8, Li-Hsin Rd. 6,

Hsinchu Science Park,

Taiwan

(Address of Principal Executive Offices)

 

 

(Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.)

Form 20-F  x            Form 40-F  ¨

(Indicate by check mark whether the registrant by furnishing the information contained in this form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.)

Yes  ¨            No   x

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

 

 

 


SIGNATURES

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

 

    Taiwan Semiconductor Manufacturing Company Ltd.
Date: Aug 11, 2016     By  

/s/ Lora Ho

      Lora Ho
      Senior Vice President & Chief Financial Officer


  

Taiwan Semiconductor Manufacturing

Company Limited and Subsidiaries

  
  

Consolidated Financial Statements for the

Six Months Ended June 30, 2016 and 2015 and

Independent Accountants’ Review Report

  


LOGO

INDEPENDENT ACCOUNTANTS’ REVIEW REPORT

The Board of Directors and Shareholders

Taiwan Semiconductor Manufacturing Company Limited

We have reviewed the accompanying consolidated balance sheets of Taiwan Semiconductor Manufacturing Company Limited and subsidiaries (the “Company”) as of June 30, 2016 and 2015 and the related consolidated statements of comprehensive income for the three months ended June 30, 2016 and 2015 and for the six months ended June 30, 2016 and 2015, as well as the consolidated statements of changes in equity and cash flows for the six months ended June 30, 2016 and 2015. 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 Regulations Governing the Preparation of Financial Reports by Securities Issuers and International Accounting Standard 34, “Interim Financial Reporting,” endorsed by the Financial Supervisory Commission of the Republic of China.

 

 

LOGO

August 2, 2016

Notice to Readers

The accompanying consolidated financial statements are intended only to present the consolidated financial position, results of operations and cash flows in accordance with accounting principles and practices generally accepted in the Republic of China and not those of any other jurisdictions. The standards, procedures and practices to review such consolidated financial statements are those generally accepted and applied in the Republic of China.

For the convenience of readers, the accountants’ review report and the accompanying consolidated financial statements have been translated into English from the original Chinese version prepared and used in the Republic of China. If there is any conflict between the English version and the original Chinese version or any difference in the interpretation of the two versions, the Chinese-language accountants’ review report and consolidated financial statements shall prevail.

 

- 1 -


Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED BALANCE SHEETS

(In Thousands of New Taiwan Dollars)

 

 

    June 30, 2016
(Reviewed)
    December 31, 2015
(Audited)
    June 30, 2015
(Reviewed)
 
    Amount     %     Amount     %     Amount     %  

ASSETS

           

CURRENT ASSETS

           

Cash and cash equivalents (Note 6)

  $ 622,359,302        35      $ 562,688,930        34      $ 528,895,107        33   

Financial assets at fair value through profit or loss (Notes 4 and 7)

    1,820,907               6,026               58,535          

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

    36,322,049        2        14,299,361        1        14,216,874        1   

Held-to-maturity financial assets (Note 9)

    7,362,302               9,166,523        1        7,180,351          

Hedging derivative financial assets (Note 10)

                  1,739                        

Notes and accounts receivable, net (Note 11)

    111,300,187        6        85,059,675        5        98,992,354        6   

Receivables from related parties (Note 32)

    424,210               505,722               744,707          

Other receivables from related parties (Note 32)

    1,546,979               125,018               3,565,341          

Inventories (Notes 12 and 36)

    60,705,814        4        67,052,270        4        66,278,597        4   

Other financial assets (Notes 4, 33 and 36)

    7,419,643               4,305,358               8,408,233        1   

Other current assets (Note 17)

    3,263,678               3,533,369               3,028,691          
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total current assets

    852,525,071        47        746,743,991        45        731,368,790        45   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

NONCURRENT ASSETS

           

Held-to-maturity financial assets (Note 9)

    27,266,867        2        6,910,873                        

Financial assets carried at cost (Note 13)

    4,066,621               3,990,882               1,858,376          

Investments accounted for using equity method (Note 14)

    22,064,632        1        24,091,828        2        25,915,208        2   

Property, plant and equipment (Note 15)

    875,870,205        49        853,470,392        52        829,703,176        52   

Intangible assets (Note 16)

    14,066,562        1        14,065,880        1        12,938,507        1   

Deferred income tax assets (Note 4)

    6,643,607               6,384,974               5,342,444          

Refundable deposits

    441,447               430,802               408,585          

Other noncurrent assets (Note 17)

    1,546,548               1,428,676               1,317,980          
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total noncurrent assets

    951,966,489        53        910,774,307        55        877,484,276        55   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

TOTAL

  $ 1,804,491,560        100      $ 1,657,518,298        100      $ 1,608,853,066        100   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

LIABILITIES AND EQUITY

           

CURRENT LIABILITIES

           

Short-term loans (Note 18)

  $ 38,739,600        2      $ 39,474,000        2      $ 5,592,600          

Financial liabilities at fair value through profit or loss (Notes 4 and 7)

    178,704               72,610               780,721          

Hedging derivative financial liabilities (Note 10)

    4,217                             2,625,763          

Accounts payable

    22,117,148        1        18,575,286        1        19,773,550        1   

Payables to related parties (Note 32)

    1,037,116               1,149,988               1,327,345          

Salary and bonus payable

    9,843,554        1        11,702,042        1        9,116,649        1   

Accrued profit sharing bonus to employees and compensation to directors and supervisors (Notes 22 and 28)

    30,365,818        2        20,958,893        1        28,834,956        2   

Payables to contractors and equipment suppliers

    48,102,264        3        26,012,192        2        43,610,962        3   

Cash dividends payable (Note 22)

    155,696,382        9                      116,683,481        7   

Income tax payable (Note 4)

    31,168,780        2        32,901,106        2        30,335,340        2   

Provisions (Note 19)

    9,495,889               10,163,536        1        8,593,075        1   

Long-term liabilities - current portion (Note 20)

    22,010,000        1        23,517,612        1        10,868,322        1   

Accrued expenses and other current liabilities (Note 21)

    29,979,582        2        27,701,329        2        31,236,977        2   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total current liabilities

    398,739,054        23        212,228,594        13        309,379,741        20   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

NONCURRENT LIABILITIES

           

Bonds payable (Note 20)

    181,276,211        10        191,965,082        12        201,856,784        13   

Long-term bank loans

    26,300               32,500               37,500          

Deferred income tax liabilities (Note 4)

    3,631               31,271               232,340          

Obligations under finance leases

                                766,836          

Net defined benefit liability (Note 4)

    7,456,666               7,448,026               6,585,747          

Guarantee deposits (Note 21)

    17,950,414        1        21,564,801        1        21,916,587        1   

Others (Note 19)

    1,708,306               1,613,545               1,449,976          
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total noncurrent liabilities

    208,421,528        11        222,655,225        13        232,845,770        14   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities

    607,160,582        34        434,883,819        26        542,225,511        34   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

EQUITY ATTRIBUTABLE TO SHAREHOLDERS OF THE PARENT

           

Capital stock (Note 22)

    259,303,805        14        259,303,805        16        259,303,805        16   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Capital surplus (Note 22)

    56,263,141        3        56,300,215        3        56,532,959        4   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Retained earnings (Note 22)

           

Appropriated as legal capital reserve

    208,297,945        12        177,640,561        11        177,640,561        11   

Unappropriated earnings

    667,701,172        37        716,653,025        43        569,248,657        35   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    875,999,117        49        894,293,586        54        746,889,218        46   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Others (Note 22)

    4,888,074               11,774,113        1        3,854,399          
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Equity attributable to shareholders of the parent

    1,196,454,137        66        1,221,671,719        74        1,066,580,381        66   

NONCONTROLLING INTERESTS

    876,841               962,760               47,174          
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total equity

    1,197,330,978        66        1,222,634,479        74        1,066,627,555        66   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

TOTAL

  $ 1,804,491,560        100      $ 1,657,518,298        100      $ 1,608,853,066        100   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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

 

- 2 -


Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

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

(Reviewed, Not Audited)

 

 

    For the Three Months Ended June 30     For the Six Months Ended June 30  
    2016     2015     2016     2015  
    Amount     %     Amount     %     Amount     %     Amount     %  

NET REVENUE (Notes 24, 32 and 38)

  $ 221,809,846        100      $ 205,439,752        100      $ 425,305,207        100      $ 427,473,896        100   

COST OF REVENUE (Notes 12, 28, 32 and 36)

    107,468,601        48        105,735,807        51        219,593,495        52        218,321,140        51   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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

    114,341,245        52        99,703,945        49        205,711,712        48        209,152,756        49   

REALIZED (UNREALIZED) GROSS PROFIT ON SALES TO ASSOCIATES

    (7,009            1,011               (39,898            (18,536       
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

GROSS PROFIT

    114,334,236        52        99,704,956        49        205,671,814        48        209,134,220        49   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

OPERATING EXPENSES (Notes 28 and 32)

               

Research and development

    16,903,540        8        16,612,213        8        32,522,503        7        33,393,676        8   

General and administrative

    4,667,198        2        4,463,580        2        8,512,133        2        8,829,633        2   

Marketing

    1,436,902        1        1,479,419        1        2,852,001        1        2,870,415        1   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

    23,007,640        11        22,555,212        11        43,886,637        10        45,093,724        11   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

OTHER OPERATING INCOME AND EXPENSES, NET (Note 28)

    (5,595            (80,686            3,138               (345,315       
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

INCOME FROM OPERATIONS (Note 38)

    91,321,001        41        77,069,058        38        161,788,315        38        163,695,181        38   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

NON-OPERATING INCOME AND EXPENSES

               

Share of profits of associates and joint venture

    892,266               815,749               1,733,161               1,950,398          

Other income

    1,792,766        1        1,544,750        1        3,125,355        1        2,426,532        1   

Foreign exchange loss, net (Note 37)

    (807,218            (292,295            (1,900,836            (244,112       

Finance costs

    (821,425            (783,401            (1,672,005            (1,577,343       

Other gains and losses (Note 25)

    1,029,001               19,777,822        9        2,588,300               20,140,007        5   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total non-operating income and expenses

    2,085,390        1        21,062,625        10        3,873,975        1        22,695,482        6   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

INCOME BEFORE INCOME TAX

    93,406,391        42        98,131,683        48        165,662,290        39        186,390,663        44   

INCOME TAX EXPENSE (Notes 4 and 26)

    20,878,112        9        18,718,779        9        28,341,414        7        27,993,851        7   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

NET INCOME

    72,528,279        33        79,412,904        39        137,320,876        32        158,396,812        37   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

OTHER COMPREHENSIVE INCOME (LOSS) (Notes 22 and 26)

               

Items that may be reclassified subsequently to profit or loss

               

Exchange differences arising on translation of foreign operations

    (353,467            (3,368,788     (2     (6,946,520     (1     (5,647,926     (1

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

    (30,018            (16,627,929     (8     21,276               (16,832,744     (4

Share of other comprehensive income (loss) of associates and joint venture

    (17,528            (249,353            8,629               593,810          

Income tax benefit (expense) related to items that may be reclassified subsequently

    10,200               (13,311            27,640               (18,104       
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive loss for the period, net of income tax

    (390,813            (20,259,381     (10     (6,888,975     (1     (21,904,964     (5
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

TOTAL COMPREHENSIVE INCOME FOR THE PERIOD

  $ 72,137,466        33      $ 59,153,523        29      $ 130,431,901        31      $ 136,491,848        32   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

NET INCOME (LOSS) ATTRIBUTABLE TO:

               

Shareholders of the parent

  $ 72,506,321        33      $ 79,417,514        39      $ 137,287,814        32      $ 158,407,425        37   

Noncontrolling interests

    21,958               (4,610            33,062               (10,613       
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  $ 72,528,279        33      $ 79,412,904        39      $ 137,320,876        32      $ 158,396,812        37   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

TOTAL COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO:

               

Shareholders of the parent

  $ 72,117,547        33      $ 59,161,055        29      $ 130,401,775        31      $ 136,512,533        32   

Noncontrolling interests

    19,919               (7,532            30,126               (20,685       
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  $ 72,137,466        33      $ 59,153,523        29      $ 130,431,901        31      $ 136,491,848        32   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    For the Three Months Ended June 30     For the Six Months Ended June 30  
    2016     2015     2016     2015  
   

Income Attributable to
Shareholders of

the Parent

   

Income Attributable to
Shareholders of

the Parent

   

Income Attributable to
Shareholders of

the Parent

   

Income Attributable to

Shareholders of

the Parent

 

EARNINGS PER SHARE (NT$, Note 27)

       

Basic earnings per share

  $          2.80      $          3.06      $          5.29      $          6.11   
 

 

 

   

 

 

   

 

 

   

 

 

 

Diluted earnings per share

  $          2.80      $          3.06      $          5.29      $          6.11   
 

 

 

   

 

 

   

 

 

   

 

 

 

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

 

- 3 -


Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

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

(Reviewed, Not Audited)

 

 

    Equity Attributable to Shareholders of the Parent              
                                        Others                    
    Capital Stock - Common Stock           Retained Earnings     Foreign
Currency
    Unrealized
Gain/Loss
from Available-
                               
   

Shares

(In Thousands)

    Amount     Capital Surplus     Legal Capital
Reserve
    Unappropriated
Earnings
    Total     Translation
Reserve
    for-sale
Financial Assets
    Cash Flow
Hedges Reserve
    Total     Total     Noncontrolling
Interests
   

Total

Equity

 

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   

Appropriations of prior year’s earnings

                         

Legal capital reserve

                         30,657,384        (30,657,384                                                        

Cash dividends to shareholders - NT$6.0 per share

                                (155,582,283     (155,582,283                                 (155,582,283            (155,582,283
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

                         30,657,384        (186,239,667     (155,582,283                                 (155,582,283            (155,582,283
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income for the six months ended June 30, 2016

                                137,287,814        137,287,814                                    137,287,814        33,062        137,320,876   

Other comprehensive income (loss) for the six months ended June 30, 2016, net of income tax

                                              (6,958,514     72,190        285        (6,886,039     (6,886,039     (2,936     (6,888,975
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income (loss) for the six months ended June 30, 2016

                                137,287,814        137,287,814        (6,958,514     72,190        285        (6,886,039     130,401,775        30,126        130,431,901   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Disposal of investments accounted for using equity method

                  (56,169                                                      (56,169            (56,169

Adjustments to share of changes in equities of associates and joint venture

                  19,095                                                         19,095        8        19,103   

Decrease in noncontrolling interests

                                                                                 (114,099     (114,099

Effect of disposal of subsidiary

                                                                                 (1,954     (1,954
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

BALANCE, JUNE 30, 2016

    25,930,380      $ 259,303,805      $ 56,263,141      $ 208,297,945      $ 667,701,172      $ 875,999,117      $ 4,081,435      $ 806,961      $ (322   $ 4,888,074      $ 1,196,454,137      $ 876,841      $ 1,197,330,978   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

BALANCE, JANUARY 1, 2015

    25,929,662      $ 259,296,624      $ 55,989,922      $ 151,250,682      $ 553,914,592      $ 705,165,274      $ 4,502,113      $ 21,247,483      $ (305   $ 25,749,291      $ 1,046,201,111      $ 127,221      $ 1,046,328,332   

Appropriations of prior year’s earnings

                         

Legal capital reserve

                         26,389,879        (26,389,879                                                        

Cash dividends to shareholders - NT$4.5 per share

                                (116,683,481     (116,683,481                                 (116,683,481            (116,683,481
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

                         26,389,879        (143,073,360     (116,683,481                                 (116,683,481            (116,683,481
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) for the six months ended June 30, 2015

                                158,407,425        158,407,425                                    158,407,425        (10,613     158,396,812   

Other comprehensive loss for the six months ended June 30, 2015, net of income tax

                                              (5,599,519     (16,295,209     (164     (21,894,892     (21,894,892     (10,072     (21,904,964
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income (loss) for the six months ended June 30, 2015

                                158,407,425        158,407,425        (5,599,519     (16,295,209     (164     (21,894,892     136,512,533        (20,685     136,491,848   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Issuance of stock from exercise of employee stock options

    718        7,181        130,974                                                         138,155               138,155   

Disposal of investments accounted for using equity method

                  (26,537                                                      (26,537            (26,537

Adjustments to share of changes in equities of associates and joint venture

                  464,471                                                         464,471        126        464,597   

From share of changes in equities of subsidiaries

                  (25,871                                                      (25,871     25,871          

Decrease in noncontrolling interests

                                                                                 (42,719     (42,719

Effect of disposal of subsidiary

                                                                                 (42,640     (42,640
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

BALANCE, JUNE 30, 2015

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

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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

 

- 4 -


Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands of New Taiwan Dollars)

(Reviewed, Not Audited)

 

 

     Six Months Ended June 30  
     2016      2015  

CASH FLOWS FROM OPERATING ACTIVITIES

     

Income before income tax

   $ 165,662,290       $ 186,390,663   

Adjustments for:

     

Depreciation expense

     109,352,892         108,544,796   

Amortization expense

     1,769,157         1,556,307   

Finance costs

     1,672,005         1,577,343   

Share of profits of associates and joint venture

     (1,733,161      (1,950,398

Interest income

     (2,987,896      (1,817,825

Loss (gain) on disposal of property, plant and equipment, net

     (6,828      50,368   

Impairment loss on property, plant and equipment

             31,305   

Impairment loss on financial assets

     30,872           

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

     (89,669      (17,642,367

Gain on disposal of financial assets carried at cost, net

     (20,009      (70,597

Loss (gain) on disposal of investments accounted for using equity method, net

     259,960         (2,305,323

Loss from liquidation of subsidiaries

     36,105           

Unrealized gross profit on sales to associates

     39,898         18,536   

Loss (gain) on foreign exchange, net

     308,122         (2,014,106

Dividend income

     (137,459      (608,707

Loss from hedging instruments

     15,548         737,305   

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

     (14,707      (299,191

Changes in operating assets and liabilities:

     

Financial instruments at fair value through profit or loss

     (1,708,787      428,017   

Notes and accounts receivable, net

     (29,118,721      14,569,490   

Receivables from related parties

     81,512         (431,752

Other receivables from related parties

     (19,200      17,984   

Inventories

     6,346,456         59,374   

Other financial assets

     (3,053,635      499,150   

Other current assets

     269,691         731,724   

Accounts payable

     3,446,305         (1,587,537

Payables to related parties

     (85,240      (164,145

Salary and bonus payable

     (1,858,488      (1,457,273

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

     9,406,925         10,782,136   

Accrued expenses and other current liabilities

     1,420,239         (232,268

Provisions

     (642,887      (1,844,746

Net defined benefit liability

     8,640         17,965   
  

 

 

    

 

 

 

Cash generated from operations

     258,649,930         293,586,228   

Income taxes paid

     (30,444,686      (26,518,415
  

 

 

    

 

 

 

Net cash generated by operating activities

     228,205,244         267,067,813   
  

 

 

    

 

 

 

 

(Continued)

 

- 5 -


Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands of New Taiwan Dollars)

(Reviewed, Not Audited)

 

 

     Six Months Ended June 30  
     2016      2015  

CASH FLOWS FROM INVESTING ACTIVITIES

     

Acquisitions of:

     

Available-for-sale financial assets

   $ (28,802,391    $ (3,628

Held-to-maturity financial assets

     (23,706,522      (11,766,723

Financial assets carried at cost

     (218,762      (87,321

Property, plant and equipment

     (111,727,052      (102,689,656

Intangible assets

     (1,783,656      (1,589,831

Land use right

     (805,318        

Proceeds from disposal or redemption of:

     

Available-for-sale financial assets

     8,070,785         39,269,616   

Held-to-maturity financial assets

     4,700,000         9,100,000   

Financial assets carried at cost

     20,009         86,756   

Investments accounted for using equity method

             3,962,848   

Property, plant and equipment

     26,517         30,462   

Proceeds from return of capital of financial assets carried at cost

     42,064           

Derecognition of hedging derivative financial instruments

     (9,534        

Costs from entering into hedging transactions

             (495,348

Interest received

     3,310,985         1,764,337   

Net cash inflow from disposal of subsidiary (Note 30)

             601,047   

Other dividends received

     118,890         595,980   

Refundable deposits paid

     (59,844      (218,253

Refundable deposits refunded

     63,470         161,583   

Decrease in receivables for temporary payments

     706,718           
  

 

 

    

 

 

 

Net cash used in investing activities

     (150,053,641      (61,278,131
  

 

 

    

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

     

Decrease in short-term loans

     (157,064      (30,334,110

Repayment of bonds

     (11,471,600        

Repayment of long-term bank loans

     (3,700        

Interest paid

     (1,289,308      (1,212,515

Decrease in obligations under finance leases

             (29,098

Guarantee deposits received

     498,025         454,190   

Guarantee deposits refunded

     (485,721      (443,769

Proceeds from exercise of employee stock options

             33,891   

Decrease in noncontrolling interests

     (509      (42,719
  

 

 

    

 

 

 

Net cash used in financing activities

     (12,909,877      (31,574,130
  

 

 

    

 

 

 

 

(Continued)

 

- 6 -


Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands of New Taiwan Dollars)

(Reviewed, Not Audited)

 

 

     Six Months Ended June 30  
     2016      2015  

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS

   $ (5,571,354    $ (3,850,952
  

 

 

    

 

 

 

NET INCREASE IN CASH AND CASH EQUIVALENTS

     59,670,372         170,364,600   

CASH AND CASH EQUIVALENTS INCLUDED IN NONCURRENT ASSETS HELD FOR SALE, BEGINNING OF PERIOD

             81,478   

CASH AND CASH EQUIVALENT ON CONSOLIDATED BALANCE SHEET, BEGINNING OF PERIOD

     562,688,930         358,449,029   
  

 

 

    

 

 

 

CASH AND CASH EQUIVALENTS, END OF PERIOD

   $ 622,359,302       $ 528,895,107   
  

 

 

    

 

 

 

 

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

 

- 7 -


Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2016 and 2015

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

(Reviewed, Not Audited)

 

 

1. GENERAL

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

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

The address of its registered office and principal place of business is No. 8, Li-Hsin Rd. 6, Hsinchu Science Park, Taiwan. The principal operating activities and operating segments information of TSMC and its subsidiaries (collectively as the “Company”) are described in Notes 4 and 38.

 

2. THE AUTHORIZATION OF FINANCIAL STATEMENTS

The accompanying consolidated financial statements were reported to the Board of Directors and issued on August 2, 2016.

 

3. APPLICATION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS

As of the date that the accompanying consolidated financial statements were issued, the Company has not applied the following International Financial Reporting Standards (IFRS), International Accounting Standards (IASs), Interpretations of International Financial Reporting Standards, and Interpretations of IASs issued by the International Accounting Standards Board (IASB) (collectively, “IFRSs”).

 

  a. The IFRSs in issue and endorsed by Financial Supervisory Commission (FSC) with effective date starting 2017

On July 18, 2016, according to Rule No. 1050026834 issued by the FSC, the following IFRSs endorsed by the FSC should be adopted by the Company starting 2017.

 

New, Revised or Amended Standards and Interpretations

  

Effective Date Issued

by IASB (Note 1)

Annual Improvements to IFRSs 2010 - 2012 Cycle

  

July 1, 2014 or transactions on or after July 1, 2014

Annual Improvements to IFRSs 2011 - 2013 Cycle

  

July 1, 2014

Annual Improvements to IFRSs 2012 - 2014 Cycle

  

January 1, 2016 (Note 2)

Amendments to IFRS 10, IFRS 12 and IAS 28 Investment Entities: Applying the Consolidation Exception

  

January 1, 2016

 

(Continued)

 

- 8 -


New, Revised or Amended Standards and Interpretations

  

Effective Date Issued

by IASB (Note 1)

Amendment to IFRS 11 Accounting for Acquisitions of Interests in Joint Operations

  

January 1, 2016

Amendment to IAS 1 Disclosure Initiative

  

January 1, 2016

Amendments to IAS 16 and IAS 38 Clarification of Acceptable Methods of Depreciation and Amortization

  

January 1, 2016

Amendment to IAS 19 Defined Benefit Plans: Employee Contributions

  

July 1, 2014

Amendment to IAS 27 Equity Method in Separate Financial Statements

  

January 1, 2016

Amendment to IAS 36 Recoverable Amount Disclosures for Non-Financial Assets

  

January 1, 2014

Amendment to IAS 39 Novation of Derivatives and Continuation of Hedge Accounting

  

January 1, 2014

(Concluded)

 

  Note 1: The aforementioned new, revised or amended standards or interpretations are effective after fiscal year beginning on or after the effective dates, unless specified otherwise.
  Note 2: The amendment to IFRS 5 is applied prospectively to changes in a method of disposal that occur in annual periods beginning on or after January 1, 2016; the remaining amendments are effective for annual periods beginning on or after January 1, 2016.

Except for the following items, the Company believes that the adoption of aforementioned IFRSs with effective date starting 2017 will not have a significant effect on the Company’s consolidated financial statements:

 

  1) Amendments to IAS 36, “Recoverable Amount Disclosures for Non-Financial Assets”

The amendments to IAS 36 clarify that the Company is required to disclose the recoverable amount of an asset or a cash-generating unit only when an impairment loss on the asset has been recognized or reversed during the period. Furthermore, if the recoverable amount for which impairment loss has been recognized or reversed is fair value less costs of disposal, the Company is required to disclose the fair value hierarchy. If the fair value measurements are categorized within Level 2 or Level 3, the valuation technique and key assumptions used to measure the fair value are disclosed. The discount rate used is disclosed if such fair value less costs of disposal is measured by using present value technique. The Company expects the aforementioned amendments will result in a broader disclosure of recoverable amount for non-financial assets.

 

  b. The IFRSs issued by IASB but not endorsed by FSC

The Company has not applied the following IFRSs issued by the IASB but not endorsed by the FSC. As of the date that the consolidated financial statements were issued, the initial adoption to the following standards and interpretations is still subject to the effective date to be published by the FSC, except for IFRS 15, which is endorsed by the FSC with effective date starting 2018.

 

New, Revised or Amended Standards and Interpretations

  

Effective Date Issued

by IASB (Note 3)

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

 

(Continued)

 

- 9 -


New, Revised or Amended Standards and Interpretations

  

Effective Date Issued

by IASB (Note 3)

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

  

Effective date 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

(Concluded)

 

  Note 3: The aforementioned new, revised or amended standards or interpretations are effective after fiscal year beginning on or after the effective dates.

Except for the following, the initial application of the above new standards and interpretations has not had any material impact on the Company’s accounting policies:

 

  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.

 

- 10 -


The main change in IFRS 9 is the increase of the eligibility of hedge accounting. It allows reporters to reflect risk management activities in the financial statements more closely as it provides more opportunities to apply hedge accounting. A fundamental difference to IAS 39 is that IFRS 9 (a) increases the scope of hedged items eligible for hedge accounting. For example, the risk components of non-financial items may be designated as hedging accounting; (b) revises a new way to account for the gain or loss recognition arising from hedging derivative financial instruments, which results in a less volatility in profit or loss; and (c) is necessary for there to be an economic relationship between the hedged item and hedging instrument instead of performing the retrospective hedge effectiveness testing.

 

  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.

 

- 11 -


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, 2015.

For the convenience of readers, the accompanying consolidated financial statements have been translated into English from the original Chinese version prepared and used in the R.O.C. If there is any conflict between the English version and the original Chinese version or any difference in the interpretation of the two versions, the Chinese-language consolidated financial statements shall prevail.

Statement of Compliance

The accompanying consolidated financial statements have been prepared in conformity with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and IAS 34, “Interim Financial Reporting,” endorsed by the FSC. The consolidated financial statements do not present all the disclosures required for a complete set of annual consolidated financial statements prepared under the IFRSs.

Basis of Consolidation

The basis for the consolidated financial statements

The basis for the consolidated financial statements applied in these consolidated financial statements is consistent with those applied in the consolidated financial statements for the year ended December 31, 2015.

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    

June 30,

2016

  December 31,
2015
 

June 30,

2015

  Note

TSMC

 

TSMC North America

 

Selling and marketing of integrated circuits and semiconductor devices

 

San Jose, California, U.S.A.

  100%   100%   100%  
 

TSMC Japan Limited (TSMC Japan)

 

Marketing activities

 

Yokohama, Japan

  100%   100%   100%   a)
 

TSMC Partners, Ltd. (TSMC Partners)

 

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

 

Tortola, British Virgin Islands

  100%   100%   100%   a)
 

TSMC Korea Limited (TSMC Korea)

 

Customer service and technical supporting activities

 

Seoul, Korea

  100%   100%   100%   a)
 

TSMC Europe B.V. (TSMC Europe)

 

Marketing and engineering supporting activities

 

Amsterdam, the Netherlands

  100%   100%   100%   a)
 

TSMC Global, Ltd. (TSMC Global)

 

Investment activities

 

Tortola, British Virgin Islands

  100%   100%   100%  
 

TSMC China Company Limited (TSMC China)

 

Manufacturing and selling of integrated circuits at the order of and pursuant to product design specifications provided by customers

 

Shanghai, China

  100%   100%   100%  
 

TSMC Nanjing Company Limited (TSMC Nanjing)

 

Manufacturing and selling of integrated circuits at the order of and pursuant to product design specifications provided by customers

 

Nanjing, China

  100%       b)

(Continued)

 

- 12 -


              

Establishment

and Operating

Location

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

June 30,

2016

   December 31,
2015
  

June 30,

2015

   Note

TSMC

  

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

  

Investing in new start-up technology companies

  

Cayman Islands

   98%    98%    98%    a)
  

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

  

Investing in new start-up technology companies

  

Cayman Islands

   98%    98%    98%    a)
  

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

  

Investing in new start-up technology companies

  

Cayman Islands

      99.5%    99.5%    a), c)
  

TSMC Solar Ltd. (TSMC Solar)

  

Engaged in researching, developing, designing, manufacturing and selling renewable energy and saving related technologies and products

  

Tai-Chung, Taiwan

         99%    d)
  

TSMC Guang Neng Investment, Ltd. (TSMC GN)

  

Investment activities

  

Taipei, Taiwan

         100%    d)
  

TSMC Solar Europe GmbH

  

Selling of solar related products and providing customer service

  

Hamburg, Germany

   100%    100%       a), d)
  

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

  

Investment activities

  

Taipei, Taiwan

   100%    100%       e), f)

TSMC Partners

  

TSMC Design Technology Canada Inc. (TSMC Canada)

  

Engineering support activities

  

Ontario, Canada

   100%    100%    100%    a)
  

TSMC Technology, Inc. (TSMC Technology)

  

Engineering support activities

  

Delaware, U.S.A.

   100%    100%    100%    a)
  

TSMC Development, Inc. (TSMC Development)

  

Investment activities

  

Delaware, U.S.A.

   100%    100%    100%   
  

InveStar Semiconductor Development Fund, Inc. (ISDF)

  

Investing in new start-up technology companies

  

Cayman Islands

   97%    97%    97%    a)
  

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

  

Investing in new start-up technology companies

  

Cayman Islands

   97%    97%    97%    a)
  

VisEra Holding Company (VisEra Holding)

  

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

  

Cayman Islands

   98%    98%    49%    a), e)

TSMC Development

  

WaferTech, LLC (WaferTech)

  

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

  

Washington, U.S.A.

   100%    100%    100%   

VTAF III

  

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

  

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

  

New Taipei, Taiwan

   58%    58%    58%   
  

Growth Fund Limited (Growth Fund)

  

Investing in new start-up technology companies

  

Cayman Islands

   100%    100%    100%    a)

VTAF III, VTAF II and Emerging Alliance

  

VentureTech Alliance Holdings, LLC (VTA Holdings)

  

Investing in new start-up technology companies

  

Delaware, U.S.A.

   100%    100%    100%    a)

TSMC Solar

  

TSMC Solar North America, Inc. (TSMC Solar NA)

  

Selling and marketing of solar related products

  

Delaware, U.S.A.

         100%    a), d)
  

TSMC Solar Europe GmbH

  

Selling of solar modules and related products and providing customer service

  

Hamburg, Germany

         100%    a), d)

VisEra Holding

  

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%    87%    e)

(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 wholly-owned subsidiary managing 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.
  Note d: In August 2015, TSMC Solar ceased its manufacturing operations. TSMC Solar and TSMC GN were incorporated into TSMC in December 2015. After the incorporation, TSMC Solar Europe GmbH, the 100% owned subsidiary of TSMC Solar, is held directly by TSMC and TSMC Solar Europe GmbH has started the liquidation procedures. TSMC Solar NA, the 100% owned subsidiary of TSMC Solar, completed the liquidation procedures in December 2015.
  Note e: The Company acquired OmniVision Technologies, Inc.’s (“OVT’s”) 49.1% ownership in VisEra Holding and 100% ownership in Taiwan OmniVision Investment Holding Co. (“OVT Taiwan”) on November 20, 2015. As a result, the Company has obtained controls of VisEra Holding and OVT Taiwan; therefore the Company has consolidated VisEra Holding, OVT Taiwan and VisEra Tech, held directly by VisEra Holding, since November 20, 2015. Please refer to Note 29.
  Note f: OVT Taiwan that originally acquired by the Company was renamed as Chi Cherng in December 2015.

Financial Instruments Designated as at Fair Value through Profit or Loss

A financial instrument may be designated as at fair value through profit or loss (FVTPL) upon initial recognition. The financial instrument forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Company’s documented risk management or investment strategy, and information about the grouping is provided internally on that basis.

 

- 13 -


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.

Insurance Claim

The Company recognizes insurance claim reimbursement for losses incurred related to disaster damages. Insurance claim reimbursements are recorded, net of any deductible amounts, at the time while there is evidence that the claim reimbursement is virtually certain to be received.

Government Grants

Government grants are not recognized until there is reasonable assurance that the Company will comply with the conditions attaching to them and that the grants will be received.

Government grants whose primary condition is that the Company should purchase, construct or otherwise acquire non-current assets (mainly including land use right and depreciable assets) are recognized as a deduction from the carrying amount of the related assets and recognized as a reduced depreciation or amortization charge in profit or loss over the contract period or useful lives of the related assets. Government grants that are receivables as compensation for expenses already incurred are deducted from incurred expenses in the period in which they become receivables.

 

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, 2015.

 

6. CASH AND CASH EQUIVALENTS

 

                                                                    
    

June 30,

2016

     December 31,
2015
    

June 30,

2015

 

Cash and deposits in banks

   $ 617,660,014       $ 557,270,910       $ 522,994,073   

Repurchase agreements collateralized by corporate bonds

     4,499,288         5,132,778         4,155,782   

Repurchase agreements collateralized by government bonds

     200,000         285,242         546,526   

Repurchase agreements collateralized by short-term commercial paper

                     898,859   

Commercial paper

                     299,867   
  

 

 

    

 

 

    

 

 

 
   $ 622,359,302       $ 562,688,930       $ 528,895,107   
  

 

 

    

 

 

    

 

 

 

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.

 

- 14 -


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

 

                                                                    
    

June 30,

2016

     December 31,
2015
    

June 30,

2015

 

Financial assets

        

Held for trading

        

Forward exchange contracts

   $ 143,834       $ 6,026       $ 31,580   

Cross currency swap contracts

     62,917                 26,955   
  

 

 

    

 

 

    

 

 

 
     206,751         6,026         58,535   
  

 

 

    

 

 

    

 

 

 

Designated as at FVTPL

        

Time deposit

     1,614,156                   
  

 

 

    

 

 

    

 

 

 
   $ 1,820,907       $ 6,026       $ 58,535   
  

 

 

    

 

 

    

 

 

 

Financial liabilities

        

Held for trading

        

Forward exchange contracts

   $ 160,423       $ 72,610       $ 780,721   

Cross currency swap contracts

     7,408                   
  

 

 

    

 

 

    

 

 

 
     167,831         72,610         780,721   
  

 

 

    

 

 

    

 

 

 

Designated as at FVTPL

        

Forward exchange contracts

     10,873                   
  

 

 

    

 

 

    

 

 

 
   $ 178,704       $ 72,610       $ 780,721   
  

 

 

    

 

 

    

 

 

 

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

Outstanding forward exchange contracts consisted of the following:

 

          Contract Amount  
     Maturity Date    (In Thousands)  

June 30, 2016

     

Sell NT$/Buy EUR

   July 2016      NT$2,114,352/EUR59,000   

Sell NT$/Buy JPY

   July 2016      NT$4,889,373/JPY15,521,040   

Sell US$/Buy JPY

   July 2016      US$166,271/JPY16,944,380   

Sell US$/Buy RMB

   July 2016 to June 2017      US$233,000/RMB1,538,880   

Sell US$/Buy NT$

   July 2016 to August 2016      US$498,000/NT$16,190,246   

December 31, 2015

     

Sell US$/Buy JPY

   January 2016      US$128,418/JPY15,449,355   

Sell US$/Buy RMB

   January 2016      US$226,000/RMB1,464,472   

Sell US$/Buy NT$

   January 2016 to February 2016      US$440,000/NT$14,434,179   

(Continued)

 

- 15 -


          Contract Amount  
     Maturity Date    (In Thousands)  

June 30, 2015

     

Sell EUR/Buy US$

   July 2015      EUR3,400/US$3,834   

Sell NT$/Buy US$

   July 2015      NT$1,868,845/US$60,500   

Sell US$/Buy EUR

   July 2015      US$10,153/EUR9,079   

Sell US$/Buy JPY

   July 2015      US$40,000/JPY4,947,990   

Sell US$/Buy NT$

   July 2015 to August 2015      US$2,345,000/NT$72,072,355   

Sell US$/Buy RMB

   July 2015      US$90,000/RMB559,832   

(Concluded)

Outstanding cross currency swap contracts consisted of the following:

 

Maturity Date   

Contract Amount

(In Thousands)

    

Range of

Interest Rates
Paid

    

Range of

Interest Rates
Received

 

June 30, 2016

        

July 2016

     US$415,000/NT$13,452,895         0.66%-0.90%           

June 30, 2015

        

July 2015

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

 

8. AVAILABLE-FOR-SALE FINANCIAL ASSETS

 

    

     June 30,     

2016

     December 31,
2015
    

     June 30,     

2015

 

Corporate bonds

   $ 12,525,209       $ 6,267,768       $   

Agency bonds

     6,379,861         2,627,367           

Money market funds

     6,128,310                 383   

Corporate issued asset-backed securities

     6,029,248         3,154,366           

Publicly traded stocks

     2,893,386         1,371,483         14,216,491   

Government bonds

     2,366,035         878,377           
  

 

 

    

 

 

    

 

 

 
   $ 36,322,049       $ 14,299,361       $ 14,216,874   
  

 

 

    

 

 

    

 

 

 

 

9. HELD-TO-MATURITY FINANCIAL ASSETS

 

    

     June 30,     

2016

     December 31,
2015
    

     June 30,     

2015

 

Corporate bonds/Bank debentures

   $ 26,988,011       $ 8,143,146       $   

Negotiable certificate of deposit

     4,842,450         4,934,250           

Structured product

     2,000,000         3,000,000           

Commercial paper

     798,708                 7,180,351   
  

 

 

    

 

 

    

 

 

 
   $ 34,629,169       $ 16,077,396       $   7,180,351   
  

 

 

    

 

 

    

 

 

 

Current portion

   $ 7,362,302       $ 9,166,523       $ 7,180,351   

Noncurrent portion

     27,266,867         6,910,873           
  

 

 

    

 

 

    

 

 

 
   $ 34,629,169       $ 16,077,396       $ 7,180,351   
  

 

 

    

 

 

    

 

 

 

 

- 16 -


10. HEDGING DERIVATIVE FINANCIAL INSTRUMENTS

 

    

         June 30,         

2016

          December 31,     
2015
               June 30,          
2015
 

Financial assets - current

        

Fair value hedges

        

Interest rate futures contracts

   $       $ 1,739       $   
  

 

 

    

 

 

    

 

 

 

Financial liabilities - current

        

Fair value hedges

        

Interest rate futures contracts

   $ 4,217       $       $   

Stock forward contracts

                     2,625,763   
  

 

 

    

 

 

    

 

 

 
   $ 4,217       $       $ 2,625,763   
  

 

 

    

 

 

    

 

 

 

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)

 
June 30, 2016   

September 2016

   US$ 10,000   
December 31, 2015   

March 2016

   US$ 13,800   

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

The outstanding stock forward contracts consisted of the following:

 

    

         June 30,         

2016

          December 31,     
2015
   

          June 30,          

2015

 

Contract amount (US$ in thousands)

   $       $       $ 10,575,328   
        (US$ 340,371

 

11. NOTES AND ACCOUNTS RECEIVABLE, NET

 

                                                                                         
    

         June 30,         

2016

          December 31,     
2015
    

          June 30,          

2015

 

Notes and accounts receivable

   $ 111,788,384       $ 85,547,926       $ 99,479,058   

Allowance for doubtful receivables

     (488,197      (488,251      (486,704
  

 

 

    

 

 

    

 

 

 

Notes and accounts receivable, net

   $ 111,300,187       $ 85,059,675       $ 98,992,354   
  

 

 

    

 

 

    

 

 

 

 

- 17 -


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

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

Aging analysis of notes and accounts receivable, net

 

                                                                    
    

June 30,

2016

     December 31,
2015
    

June 30,

2015

 

Neither past due nor impaired

   $ 97,225,328       $ 71,482,666       $ 84,924,664   

Past due but not impaired

        

Past due within 30 days

     9,190,367         13,577,009         12,393,941   

Past due 31-60 days

     1,901,629                 1,466,102   

Past due 61-120 days

     2,982,863                 207,647   
  

 

 

    

 

 

    

 

 

 
   $ 111,300,187       $ 85,059,675       $ 98,992,354   
  

 

 

    

 

 

    

 

 

 

Movements of the allowance for doubtful receivables

 

                                                                    
     Individually
Assessed for
Impairment
     Collectively
Assessed for
Impairment
     Total  

Balance at January 1, 2016

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

Effect of exchange rate changes

             (54      (54
  

 

 

    

 

 

    

 

 

 

Balance at June 30, 2016

   $ 10,241       $ 477,956       $ 488,197   
  

 

 

    

 

 

    

 

 

 

Balance at January 1, 2015

   $ 8,093       $ 478,637       $ 486,730   

Provision

     10,861         597         11,458   

Reversal

             (11,383      (11,383

Effect of exchange rate changes

             (101      (101
  

 

 

    

 

 

    

 

 

 

Balance at June 30, 2015

   $          18,954       $      467,750       $      486,704   
  

 

 

    

 

 

    

 

 

 

Aging analysis of accounts receivable that is individually determined as impaired

 

                                                                    
    

June 30,

2016

     December 31,
2015
    

June 30,

2015

 

Not past due

   $       $       $ 4,984   

Past due 1-30 days

                     4,387   

Past due 31-60 days

                     1,656   

Past due over 121 days

     10,241         10,241         7,927   
  

 

 

    

 

 

    

 

 

 
   $          10,241       $        10,241       $        18,954   
  

 

 

    

 

 

    

 

 

 

 

- 18 -


12. INVENTORIES

 

    

                

    

June 30,

2016

     December 31,
2015
    

June 30,

2015

 

Finished goods

      $ 4,943,938       $ 7,974,902       $ 14,418,570   

Work in process

        50,604,010         53,632,056         45,538,445   

Raw materials

        2,765,102         3,038,756         4,146,095   

Supplies and spare parts

        2,392,764         2,406,556         2,175,487   
     

 

 

    

 

 

    

 

 

 
      $    60,705,814       $ 67,052,270       $     66,278,597   
     

 

 

    

 

 

    

 

 

 

Write-down of inventories to net realizable value (excluding earthquake losses) and reversal of write-down of inventories resulting from the increase in net realizable value were included in the cost of revenue, which were as follows. Please refer to related earthquake losses in Note 36.

 

     Three Months Ended June 30      Six Months Ended June 30  
     2016      2015      2016      2015  

Inventory losses (reversal of write-down of inventories)

   $     1,195,805       $    (401,637    $          651,133       $       1,367,721   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

13. FINANCIAL ASSETS CARRIED AT COST

 

           

June 30,

2016

     December 31,
2015
    

June 30,

2015

 

Non-publicly traded stocks

      $      3,176,575       $ 3,268,100       $ 1,580,737   

Mutual funds

        890,046         722,782         277,639   
     

 

 

    

 

 

    

 

 

 
      $ 4,066,621       $ 3,990,882       $       1,858,376   
     

 

 

    

 

 

    

 

 

 

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

The common stock of Richwave Technology Corp. was listed on the TWSE in November 2015. Thus, the Company reclassified the aforementioned investment from financial assets carried at cost to available-for-sale financial assets.

 

14. INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD

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

 

           

June 30,

2016

     December 31,
2015
    

June 30,

2015

 

Associates

      $    22,064,632       $ 24,091,828       $     22,446,195   

Joint venture

                        3,469,013   
     

 

 

    

 

 

    

 

 

 
      $ 22,064,632       $ 24,091,828       $ 25,915,208   
     

 

 

    

 

 

    

 

 

 

 

- 19 -


  a. Investments in associates

Associates consisted of the following:

 

          Place of    Carrying Amount      % of Ownership and Voting
Rights Held by the Company
 
Name of Associate    Principal Activities    Incorporation
and Operation
  

June 30,

2016

     December 31,
2015
    

June 30,

2015

    

June 30,

2016

    December 31,
2015
   

June 30,

2015

 

Systems on Silicon Manufacturing Company Pte Ltd. (SSMC)

  

Fabrication and supply of integrated circuits

  

Singapore

   $ 10,154,793       $ 9,511,515       $ 7,831,408         39     39     39

Vanguard International Semiconductor Corporation (VIS)

  

Research, design, development, manufacture, packaging, testing and sale of memory integrated circuits, LSI, VLSI and related parts

  

Hsinchu, Taiwan

     8,068,620         8,446,054         8,196,482         28     28     28

Xintec Inc. (Xintec)

  

Wafer level chip size packaging service

  

Taoyuan, Taiwan

     2,777,336         2,928,362         2,250,809         41     41     35

Global Unichip Corporation (GUC)

  

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

  

Hsinchu, Taiwan

     1,063,883         1,152,335         1,013,265         35     35     35

Motech Industries, Inc. (Motech)

  

Manufacturing and sales of solar cells, crystalline silicon solar cell, and test and measurement instruments and design and construction of solar power systems

  

New Taipei, Taiwan

             2,053,562         3,154,231                12     18
        

 

 

    

 

 

    

 

 

        
         $ 22,064,632       $ 24,091,828       $ 22,446,195          
        

 

 

    

 

 

    

 

 

        

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.

In the fourth quarter of 2015, the Company sold 29,160 thousand common shares of Motech and recognized a disposal gain of NT$202,384 thousand. After the sale, the Company’s percentage of ownership over Motech decreased to 12.0%. Motech continued to be accounted for using equity method as the Company still retained significant influence over Motech.

The Company acquired OVT’s 49.1% ownership in VisEra Holding on November 20, 2015. As a result, the Company has obtained control of VisEra Holding and consolidated VisEra Holding since November 20, 2015. The Company included the Xintec shares held by VisEra Holding and total percentage of ownership over Xintec increased to 41.4%.

In the second quarter of 2015, the Company sold 82,000 thousand common shares of VIS and recognized a disposal gain of NT$2,263,539 thousand. After the sale, the Company owned approximately 28.3% of the equity interest in VIS.

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

 

                                                                    
Name of Associate   

June 30,

2016

     December 31,
2015
    

June 30,

2015

 

VIS

   $ 24,511,000       $ 19,868,766       $ 22,932,641   
  

 

 

    

 

 

    

 

 

 

GUC

   $ 3,417,551       $ 3,081,399       $ 3,571,621   
  

 

 

    

 

 

    

 

 

 

Xintec

   $ 2,325,793       $ 3,605,534       $ 4,082,245   
  

 

 

    

 

 

    

 

 

 

Motech

      $ 2,636,054       $ 3,201,760   
     

 

 

    

 

 

 

 

- 20 -


  b. Investments in joint venture

Joint venture consisted of the following:

 

        Place of   Carrying Amount     % of Ownership and Voting
Rights Held by the Company
Name of Joint Venture   Principal Activities  

Incorporation

and Operation

 

June 30,

2016

    December 31,
2015
   

June 30,

2015

   

June 30,

2016

  December 31,
2015
 

June 30,

2015

VisEra Holding

 

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

 

Cayman Islands

  $      $      $ 3,469,013          49%
     

 

 

   

 

 

   

 

 

       
               

The Company acquired OVT’s 49.1% ownership in VisEra Holding on November 20, 2015. As a result, the Company has obtained control of VisEra Holding and consolidated VisEra Holding since November 20, 2015. Please refer to Note 29 for related disclosures.

 

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, 2016

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

Additions

           5,544,359        117,986,695        3,012,979               5,870,440        132,414,473   

Disposals or retirements

                  (1,828,533     (316,251                   (2,144,784

Reclassification

                         7,113        (7,113              

Effect of exchange rate changes

    (15,914     (777,818     (2,435,252     (44,228            (19,513     (3,292,725
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at June 30, 2016

  $ 4,051,477      $ 301,568,405      $ 2,007,212,514      $ 33,359,662      $      $ 197,962,475      $ 2,544,154,533   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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

    14,949        8,772,080        98,462,355        2,103,508                      109,352,892   

Disposals or retirements

                  (1,808,905     (316,190                   (2,125,095

Reclassification

                         7,113        (7,113              

Effect of exchange rate changes

    (9,643     (575,262     (2,034,628     (31,113                   (2,650,646
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at June 30, 2016

  $ 511,491      $ 166,106,973      $ 1,480,476,477      $ 21,189,387      $      $      $ 1,668,284,328   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Carrying amounts at January 1, 2016

  $ 3,561,206      $ 138,891,709      $ 507,631,949      $ 11,273,980      $      $ 192,111,548      $ 853,470,392   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Carrying amounts at June 30, 2016

  $ 3,539,986      $ 135,461,432      $ 526,736,037      $ 12,170,275      $      $ 197,962,475      $ 875,870,205   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cost

             

Balance at January 1, 2015

  $ 4,036,785      $ 269,163,850      $ 1,754,170,227      $ 27,960,835      $ 841,154      $ 109,334,736      $ 2,165,507,587   

Additions

           4,968,013        77,365,235        1,628,622               36,568,389        120,530,259   

Disposals or retirements

                  (949,684     (709,966                   (1,659,650

Effect of exchange rate changes

    (16,849     (460,203     (1,096,526     (58,461     (16,785     (69,523     (1,718,347
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at June 30, 2015

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

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Accumulated depreciation and impairment

             

Balance at January 1, 2015

  $ 459,140      $ 141,245,913      $ 1,188,388,402      $ 16,767,934      $ 447,397      $      $ 1,347,308,786   

Additions

    14,224        7,833,137        98,831,428        1,844,552        21,455               108,544,796   

Disposals or retirements

                  (912,589     (666,231                   (1,578,820

Impairment

                  31,305                             31,305   

Effect of exchange rate changes

    (9,433     (325,663     (957,574     (47,778     (8,946            (1,349,394
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at June 30, 2015

  $ 463,931      $ 148,753,387      $ 1,285,380,972      $ 17,898,477      $ 459,906      $      $ 1,452,956,673   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Carrying amounts at June 30, 2015

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

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

- 21 -


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.

For the year ended December 31, 2015, the Company recognized an impairment loss of NT$259,568 thousand under foundry segment since the carrying amount of some of property, plant and equipment is expected to be unrecoverable. Such impairment loss was included in other operating income and expenses for the year ended December 31, 2015.

In August 2015, TSMC Solar ceased its manufacturing operations. In the third quarter of 2015, the Company recognized an impairment loss of NT$2,286,016 thousand since the carrying amounts of some of machinery and equipment, office equipment and mechanical and electrical power equipment were expected to be unrecoverable. Such impairment loss was included in other operating income and expenses for the year ended December 31, 2015.

The Company had a building lease agreement with leasing terms from December 2003 to November 2018 and such lease was accounted for as a finance lease. In August 2015, the lease was determined to be an operating lease due to a modification on lease conditions; as such, the Company recognized a gain of NT$430,041 thousand from the modification. Such gain was included in other operating income and expenses for the year ended December 31, 2015.

 

16. INTANGIBLE ASSETS

 

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

Cost

              

Balance at January 1, 2016

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

Additions

             751,269         745,416         362,770         1,859,455   

Retirements

                     (1,800              (1,800

Effect of exchange rate changes

     (84,410      2,910         (5,961      (6,179      (93,640
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Balance at June 30, 2016

   $ 6,020,374       $ 9,208,483       $ 20,212,083       $ 5,235,617       $ 40,676,557   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Accumulated amortization

              

Balance at January 1, 2016

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

Additions

             651,638         791,025         326,494         1,769,157   

Retirements

                     (1,800              (1,800

Effect of exchange rate changes

             2,910         (5,409      (1,525      (4,024
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Balance at June 30, 2016

   $       $ 5,433,936       $ 17,215,482       $ 3,960,577       $ 26,609,995   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Carrying amounts at January 1, 2016

   $ 6,104,784       $ 3,674,916       $ 3,042,762       $ 1,243,418       $ 14,065,880   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Carrying amounts at June 30, 2016

   $ 6,020,374       $ 3,774,547       $ 2,996,601       $ 1,275,040       $ 14,066,562   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Cost

              

Balance at January 1, 2015

   $ 5,888,813       $ 6,350,253       $ 18,697,098       $ 4,292,555       $ 35,228,719   

Additions

             540,027         202,818         311,139         1,053,984   

Retirements

                     (91,578              (91,578

Effect of exchange rate changes

     (88,279      (5,354      (3,165      (2,802      (99,600
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Balance at June 30, 2015

   $ 5,800,534       $ 6,884,926       $ 18,805,173       $ 4,600,892       $ 36,091,525   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Accumulated amortization

              

Balance at January 1, 2015

   $       $ 3,778,912       $ 14,861,146       $ 3,057,151       $ 21,697,209   

Additions

             445,742         830,478         280,087         1,556,307   

Retirements

                     (91,578              (91,578

Effect of exchange rate changes

             (5,354      (2,978      (588      (8,920
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Balance at June 30, 2015

   $       $ 4,219,300       $ 15,597,068       $ 3,336,650       $ 23,153,018   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Carrying amounts at June 30, 2015

   $ 5,800,534       $ 2,665,626       $ 3,208,105       $ 1,264,242       $ 12,938,507   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

- 22 -


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, 2015 to reflect the relevant specific risk in the cash-generating unit.

In August 2015, TSMC Solar ceased its manufacturing operation and the Company recognized an impairment loss of NT$58,514 thousand in the third quarter of 2015 since the carrying amounts of technology license fees, software and system design costs were expected to be unrecoverable. Such impairment loss was included in other operating income and expenses for the year ended December 31, 2015.

 

17. OTHER ASSETS

 

                                                                                         
    

  June 30,  

2016

    

  December 31,  

2015

    

  June 30,  

2015

 

Tax receivable

   $ 2,064,225       $ 2,026,509       $ 1,795,457   

Prepaid expenses

     1,159,387         1,457,044         1,171,189   

Long-term receivable

     358,900         360,000         347,000   

Others

     1,227,714         1,118,492         1,033,025   
  

 

 

    

 

 

    

 

 

 
   $ 4,810,226       $ 4,962,045       $ 4,346,671   
  

 

 

    

 

 

    

 

 

 

Current portion

   $ 3,263,678       $ 3,533,369       $ 3,028,691   

Noncurrent portion

     1,546,548         1,428,676         1,317,980   
  

 

 

    

 

 

    

 

 

 
   $   4,810,226       $   4,962,045       $   4,346,671   
  

 

 

    

 

 

    

 

 

 

 

18. SHORT-TERM LOANS

 

                                                                                         
    

June 30,

2016

    

December 31,

2015

    

June 30,

2015

 

Unsecured loans

        

Amount

   $ 38,739,600       $ 39,474,000       $ 5,592,600   
  

 

 

    

 

 

    

 

 

 

Original loan content

        

US$ (in thousands)

   $ 1,200,000       $ 1,200,000       $ 180,000   

Annual interest rate

     0.70%-0.77%         0.50%-0.77%         0.38%-0.44%   

Maturity date

    
 
Due in
July 2016
  
  
    
 
Due by
February 2016
  
  
    
 
Due in
July 2015
  
  

 

19. PROVISIONS

 

                                                                                         
    

June 30,

2016

    

December 31,

2015

    

June 30,

2015

 

Sales returns and allowances

   $ 9,495,889       $ 10,163,536       $ 8,593,075   

Warranties

     40,241         46,304         16,756   
  

 

 

    

 

 

    

 

 

 
   $ 9,536,130       $ 10,209,840       $ 8,609,831   
  

 

 

    

 

 

    

 

 

 

Current portion

   $ 9,495,889       $ 10,163,536       $ 8,593,075   

Noncurrent portion (classified under other noncurrent liabilities)

     40,241         46,304         16,756   
  

 

 

    

 

 

    

 

 

 
   $   9,536,130       $  10,209,840       $   8,609,831   
  

 

 

    

 

 

    

 

 

 

 

- 23 -


                                                                                
    

Sales Returns

and Allowances

     Warranties      Total  

Six months ended June 30, 2016

        

Balance, beginning of period

   $ 10,163,536       $ 46,304       $ 10,209,840   

Provision (Reversal)

     13,433,695         (3,878      13,429,817   

Payment

     (14,070,519      (2,185      (14,072,704

Effect of exchange rate changes

     (30,823              (30,823
  

 

 

    

 

 

    

 

 

 

Balance, end of period

   $ 9,495,889       $ 40,241       $ 9,536,130   
  

 

 

    

 

 

    

 

 

 

Six months ended June 30, 2015

        

Balance, beginning of period

   $ 10,445,452       $ 19,828       $ 10,465,280   

Provision (Reversal)

     6,353,637         6,071         6,359,708   

Payment

     (8,196,055      (8,399      (8,204,454

Effect of exchange rate changes

     (9,959      (744      (10,703
  

 

 

    

 

 

    

 

 

 

Balance, end of period

   $ 8,593,075       $ 16,756       $ 8,609,831   
  

 

 

    

 

 

    

 

 

 

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

The provision for warranties represents the present value of the Company’s best estimate of the future outflow of the economic benefits that will be required under the Company’s obligations for warranties. The best estimate has been made on the basis of historical warranty trends of business.

 

20. BONDS PAYABLE

 

                                                                                
    

June 30,

2016

    

December 31,

2015

    

June 30,

2015

 

Domestic unsecured bonds

   $ 166,200,000       $ 166,200,000       $ 166,200,000   

Overseas unsecured bonds

     37,125,450         49,342,500         46,605,000   
  

 

 

    

 

 

    

 

 

 
     203,325,450         215,542,500         212,805,000   

Less: Discounts on bonds payable

     (49,239      (67,306      (82,394

Less: Current portion

     (22,000,000      (23,510,112      (10,865,822
  

 

 

    

 

 

    

 

 

 
   $ 181,276,211       $ 191,965,082       $ 201,856,784   
  

 

 

    

 

 

    

 

 

 

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

 

- 24 -


21. GUARANTEE DEPOSITS

 

    

June 30,

2016

    

December 31,

2015

    

June 30,

2015

 

Capacity guarantee

   $ 24,212,250       $ 27,549,563       $ 28,351,375   

Others

     200,014         183,051         167,587   
  

 

 

    

 

 

    

 

 

 
   $ 24,412,264       $ 27,732,614       $ 28,518,962   
  

 

 

    

 

 

    

 

 

 

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

   $ 6,461,850       $ 6,167,813       $ 6,602,375   

Noncurrent portion

     17,950,414         21,564,801         21,916,587   
  

 

 

    

 

 

    

 

 

 
   $   24,412,264       $ 27,732,614       $   28,518,962   
  

 

 

    

 

 

    

 

 

 

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

 

22. EQUITY

 

  a. Capital stock

 

                                                              
    

June 30,

2016

     December 31,
2015
    

June 30,

2015

 

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   
  

 

 

    

 

 

    

 

 

 

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

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

As of June 30, 2016, 1,072,635 thousand ADSs of TSMC were traded on the NYSE. The number of common shares represented by the ADSs was 5,363,175 thousand shares (one ADS represents five common shares).

 

  b. Capital surplus

 

                                                              
    

June 30,

2016

     December 31,
2015
    

June 30,

2015

 

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

     100,761         100,761         78,464   

From share of changes in equities of associates and joint venture

     280,029         317,103         572,144   

Donations

     55         55         55   
  

 

 

    

 

 

    

 

 

 
   $ 56,263,141       $ 56,300,215       $ 56,532,959   
  

 

 

    

 

 

    

 

 

 

 

- 25 -


Under the Company Act, 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 as well as associates and joint venture may be used to offset a deficit.

 

  c. Retained earnings and dividend policy

In accordance with the amendments to the Company Act in May 2015, the recipients of dividends and bonuses are limited to shareholders and do not include employees. The amendments to TSMC’s Articles of Incorporation on profits 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 28.

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 profits shall be made preferably by way of cash dividend. Distribution of profits may also be made by way of stock dividend; provided that the ratio for stock dividend shall not exceed 50% of the total distribution.

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

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.

 

- 26 -


The appropriations of 2015 and 2014 earnings have been approved by TSMC’s shareholders in its meeting held on June 7, 2016 and on June 9, 2015, 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 2015      Year 2014      Year 2015      Year 2014  

Legal capital reserve

   $ 30,657,384       $ 26,389,879         

Cash dividends to shareholders

     155,582,283         116,683,481       $ 6.0       $ 4.5   
   $       186,239,667       $       143,073,360         
  

 

 

    

 

 

       

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:

 

                                                                                           
     Six Months Ended June 30, 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

     (6,981,647                      (6,981,647

Other comprehensive income reclassified to profit or loss upon disposal of subsidiaries

     36,105                         36,105   

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

             112,904                 112,904   

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

             (89,669              (89,669

Share of other comprehensive income (loss) of associates and joint venture

     (8,260      24,784         285         16,809   

Other comprehensive loss reclassified to profit or loss upon disposal of associates

     (4,712      (3,469              (8,181

Income tax effect

             27,640                 27,640   
  

 

 

    

 

 

    

 

 

    

 

 

 

Balance, end of period

   $ 4,081,435       $ 806,961       $ (322    $ 4,888,074   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

- 27 -


                                                                                                           
     Six Months Ended June 30, 2015  
    

Foreign

Currency

Translation

Reserve

    

Unrealized

Gain/Loss from

Available-for-

sale Financial

Assets

    

Cash Flow

Hedges Reserve

     Total  

Balance, beginning of period

   $ 4,502,113       $ 21,247,483       $ (305    $ 25,749,291   

Exchange differences arising on translation of foreign operations

     (4,654,336                      (4,654,336

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

             (174,880              (174,880

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

     (993,026      (16,649,252              (17,642,278

Share of other comprehensive income (loss) of associates and joint venture

     43,487         544,976         (175      588,288   

The proportionate share of other comprehensive income reclassified to profit or loss upon partial disposal of associates

     4,356         2,051         11         6,418   

Income tax effect

             (18,104              (18,104
  

 

 

    

 

 

    

 

 

    

 

 

 

Balance, end of period

   $ (1,097,406    $ 4,952,274       $ (469    $ 3,854,399   
  

 

 

    

 

 

    

 

 

    

 

 

 

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.

 

- 28 -


23. SHARE-BASED PAYMENT

The Company did not issue employee stock option plans for the six months ended June 30, 2016 and 2015. Information about the TSMC’s outstanding employee stock options is described as follows:

 

              

Number of
Stock Options

(In Thousands)

    

Weighted-

average

Exercise Price

(NT$)

 

Six months ended June 30, 2015

           

Balance, beginning of period

                                                              718       $ 47.2   

Options exercised

           (718      47.2   
        

 

 

    

Balance, end of period

                     
        

 

 

    

Balance exercisable, end of period

                     
        

 

 

    

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

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

 

24. NET REVENUE

 

                                                                                           
         Three Months Ended June 30              Six Months Ended June 30      
     2016      2015      2016      2015  

Net revenue from sale of goods

   $ 221,667,204       $ 205,306,861       $ 425,050,621       $ 427,206,385   

Net revenue from royalties

     142,642         132,891         254,586         267,511   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 221,809,846       $ 205,439,752       $ 425,305,207       $ 427,473,896   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

25. OTHER GAINS AND LOSSES

 

                                                                                           
         Three Months Ended June 30              Six Months Ended June 30      
     2016      2015      2016      2015  

Gain on disposal of financial assets, net

           

Available-for-sale financial assets

   $ 100,498       $ 17,639,406       $ 89,669       $ 17,642,367   

Financial assets carried at cost

     5,628         28,354         20,009         70,597   

Gain (loss) on disposal of investments accounted for using equity method

     (259,960      2,305,323         (259,960      2,305,323   

Other gains

     25,210         11,240         62,638         27,409   

Net gain (loss) on financial instruments at FVTPL

           

Held for trading

     1,297,816         243,123         2,829,951         560,678   

Designated as at FVTPL

     (70,947              (70,947        

(Continued)

 

- 29 -


     Three Months Ended June 30      Six Months Ended June 30  
     2016      2015      2016      2015  

Fair value hedges

           

Loss from hedging instruments

   $ (3,678    $ (5,329,381    $ (15,548    $ (737,305

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

     4,082         4,901,475         14,707         299,191   

Impairment loss of financial assets

           

Financial assets carried at cost

     (30,872              (30,872        

Loss from liquidation of subsidiaries

     (36,105              (36,105        

Other losses

     (2,671      (21,718      (15,242      (28,253
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 1,029,001       $ 19,777,822       $ 2,588,300       $ 20,140,007   
  

 

 

    

 

 

    

 

 

    

 

 

 

(Concluded)

 

26. INCOME TAX

 

  a. Income tax expense recognized in profit or loss

 

     Three Months Ended June 30      Six Months Ended June 30  
     2016      2015      2016      2015  

Current income tax expense

           

Current tax expense recognized in the current period

   $   20,823,242       $   18,461,370       $   29,469,752       $   28,865,330   

Income tax adjustments on prior years

     (1,035,405      (793,673      (1,035,405      (793,673

Other income tax adjustments

     169,156         107,473         204,996         149,512   
  

 

 

    

 

 

    

 

 

    

 

 

 
     19,956,993         17,775,170         28,639,343         28,221,169   
  

 

 

    

 

 

    

 

 

    

 

 

 

Deferred income tax expense (benefit)

           

The origination and reversal of temporary differences

     (51,179      (230,930      (297,929      (414,198

Investment tax credits and operating loss carryforward

     972,298         1,174,539                 186,880   
  

 

 

    

 

 

    

 

 

    

 

 

 
     921,119         943,609         (297,929      (227,318
  

 

 

    

 

 

    

 

 

    

 

 

 

Income tax expense recognized in profit or loss

   $ 20,878,112       $ 18,718,779       $ 28,341,414       $ 27,993,851   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

- 30 -


  b. Income tax expense recognized in other comprehensive income

 

                                                                                           
     Three Months Ended June 30      Six Months Ended June 30  
     2016      2015      2016      2015  

Deferred income tax benefit (expense)

           

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

   $ 10,200       $ (13,311    $ 27,640       $ (18,104
  

 

 

    

 

 

    

 

 

    

 

 

 

 

  c. Integrated income tax information

 

                                                                    
    

June 30,

2016

     December 31,
2015
    

June 30,

2015

 

Balance of the Imputation

        

Credit Account - TSMC

   $ 90,045,123       $ 59,973,516       $ 61,581,277   
  

 

 

    

 

 

    

 

 

 

The estimated and actual creditable ratio for distribution of TSMC’s earnings of 2015 and 2014 were 12.56% and 11.13%, respectively; however, effective from January 1, 2015, the creditable ratio for individual shareholders residing in the Republic of China will be half of the original creditable ratio according to the revised Article 66 - 6 of the 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 2013. All investment tax credit adjustments assessed by the tax authorities have been recognized accordingly.

 

27. EARNINGS PER SHARE

 

                                                                                           
     Three Months Ended June 30      Six Months Ended June 30  
     2016      2015      2016      2015  

Basic EPS

   $ 2.80       $ 3.06       $ 5.29       $ 6.11   
  

 

 

    

 

 

    

 

 

    

 

 

 

Diluted EPS

   $               2.80       $               3.06       $               5.29       $               6.11   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

- 31 -


EPS is computed as follows:

 

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

Three months ended June 30, 2016

        

Basic/Diluted EPS

        

Net income available to common shareholders of the parent

   $ 72,506,321         25,930,380       $ 2.80   
  

 

 

    

 

 

    

 

 

 

Three months ended June 30, 2015

        

Basic EPS

        

Net income available to common shareholders of the parent

   $ 79,417,514         25,930,375       $ 3.06   
        

 

 

 

Effect of dilutive potential common shares

             5      
  

 

 

    

 

 

    

Diluted EPS

        

Net income available to common shareholders of the parent (including effect of dilutive potential common shares)

   $ 79,417,514         25,930,380       $ 3.06   
  

 

 

    

 

 

    

 

 

 

Six months ended June 30, 2016

        

Basic/Diluted EPS

        

Net income available to common shareholders of the parent

   $ 137,287,814         25,930,380       $ 5.29   
  

 

 

    

 

 

    

 

 

 

Six months ended June 30, 2015

        

Basic EPS

        

Net income available to common shareholders of the parent

   $ 158,407,425         25,930,194       $ 6.11   
        

 

 

 

Effect of dilutive potential common shares

             186      
  

 

 

    

 

 

    

Diluted EPS

        

Net income available to common shareholders of the parent (including effect of dilutive potential common shares)

   $ 158,407,425         25,930,380       $ 6.11   
  

 

 

    

 

 

    

 

 

 

 

- 32 -


28. ADDITIONAL INFORMATION OF EXPENSES BY NATURE

 

     Three Months Ended June 30      Six Months Ended June 30  
     2016      2015      2016      2015  

a. Depreciation of property, plant and equipment

           

Recognized in cost of revenue

   $ 50,255,557       $ 50,147,268       $ 101,084,838       $ 101,188,982   

Recognized in operating expenses

     4,140,384         3,685,080         8,255,414         7,343,371   

Recognized in other operating income and expenses

     6,222         6,221         12,640         12,443   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 54,402,163       $ 53,838,569       $ 109,352,892       $ 108,544,796   
  

 

 

    

 

 

    

 

 

    

 

 

 

b. Amortization of intangible assets

           

Recognized in cost of revenue

   $ 491,251       $ 404,092       $ 980,928       $ 811,842   

Recognized in operating expenses

     381,574         380,446         788,229         744,465   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 872,825       $ 784,538       $ 1,769,157       $ 1,556,307   
  

 

 

    

 

 

    

 

 

    

 

 

 

c. Research and development costs expensed as incurred

   $ 16,903,540       $ 16,612,213       $ 32,522,503       $ 33,393,676   
  

 

 

    

 

 

    

 

 

    

 

 

 

d. Employee benefits expenses

           

Post-employment benefits

           

Defined contribution plans

   $ 527,743       $ 501,747       $ 1,053,990       $ 977,573   

Defined benefit plans

     68,034         79,591         136,059         147,719   
  

 

 

    

 

 

    

 

 

    

 

 

 
     595,777         581,338         1,190,049         1,125,292   

Other employee benefits

     22,753,404         22,918,891         44,165,653         45,163,630   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 23,349,181       $ 23,500,229       $ 45,355,702       $ 46,288,922   
  

 

 

    

 

 

    

 

 

    

 

 

 

Employee benefits expense summarized by function

           

Recognized in cost of revenue

   $ 13,811,159       $ 13,576,089       $ 26,916,580       $ 26,870,583   

Recognized in operating expenses

     9,538,022         9,924,140         18,439,122         19,418,339   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 23,349,181       $ 23,500,229       $ 45,355,702       $ 46,288,922   
  

 

 

    

 

 

    

 

 

    

 

 

 

In accordance with the amendments to the 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. Prior to the amendments, TSMC’s Articles of Incorporation provided that, when allocating the net profits for each fiscal year, TSMC shall first set aside legal capital reserve and special capital reserve, then set aside not more than 0.3% of the balance as compensation to directors and not less than 1% as profit sharing bonus to employees, respectively.

 

- 33 -


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$4,863,012 thousand and NT$9,207,536 thousand for the three months and six months ended June 30, 2016, respectively. TSMC accrued profit sharing bonus to employees based on certain percentage of net income during the period, which amounted to NT$5,338,604 thousand and NT$10,621,290 thousand for the three months and six months ended June 30, 2015, 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.

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, and profit sharing bonus to employees and compensation to directors in the amounts of NT$17,645,966 thousand and NT$406,854 thousand in cash for 2014, respectively, had been approved by the Board of Directors and the shareholders in its meetings held on February 2, 2016 and June 9, 2015, respectively. 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 years ended December 31, 2015 and 2014, respectively.

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. CONSOLIDATION OF SUBSIDIARIES

Due to a Chinese consortium’s acquisition of OVT, major shareholders of VisEra Holding and OVT Taiwan, the Company acquired OVT’s 49.1% ownership in VisEra Holding and 100% ownership in OVT Taiwan on November 20, 2015. The related information is as follows:

 

  a. Subsidiaries acquired

 

    Principal Activity   Date of Acquisition    Proportion of 
Voting Equity 
Interests 
Acquired (%) 
     Consideration
Transferred
 

VisEra Holding

 

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

  November 20, 2015      49.1        $ 3,536,119   
         

 

 

 
         
         
         

OVT Taiwan

 

Investment activities

  November 20, 2015      100        $ 394,674   
         

 

 

 

 

  b. Considerations transferred

 

     VisEra Holding        OVT Taiwan  

Cash

   $ 3,536,119       $ 394,674   
  

 

 

    

 

 

 

 

- 34 -


  c. Assets acquired and liabilities assumed at the date of acquisition

 

                                                           
     VisEra Holding         OVT Taiwan     

Current assets

     

Cash and cash equivalents

   $  3,858,482       $ 20,710   

Accounts receivable

     511,999           

Inventories

     59,050           

Other financial assets

     706,500         373,813   

Other current assets

     26,441         155   

Noncurrent assets

     

Investments accounted for using equity method

     721,641           

Property, plant and equipment

     2,651,209           

Intangible assets

     12,111           

Deferred income tax assets

     29,943           

Refundable deposits

     15,611           
  

 

 

    

 

 

 
     8,592,987         394,678   
  

 

 

    

 

 

 

Current liabilities

     

Financial liabilities at fair value through profit or loss

     975           

Accounts payable

     87,480           

Salary and bonus payable

     183,090           

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

     45,819         4   

Payables to contractors and equipment suppliers

     132,305           

Income tax payable

     47,860           

Provisions

     126,049           

Accrued expenses and other current liabilities

     102,851           

Noncurrent liabilities

     

Guarantee deposits

     1,279           
  

 

 

    

 

 

 
     727,708         4   
  

 

 

    

 

 

 

Net assets

   $ 7,865,279       $     394,674   
  

 

 

    

 

 

 

 

  d. Goodwill arising on acquisition

 

                                                           
    

VisEra Holding

 

          

Consideration transferred

   $ 3,536,119        

Fair value of investments previously owned

     3,458,146        

Less: Fair value of identifiable net assets acquired

     (7,865,279     

Noncontrolling interests

     923,683        
  

 

 

      

Goodwill arising on acquisition

   $ 52,669        
  

 

 

      

 

  e. Net cash outflow on acquisition of subsidiaries

 

                                                           
     VisEra Holding          OVT Taiwan    

Consideration paid in cash

   $ 3,536,119         $ 394,674   

Less: Cash and cash equivalent balances acquired

     (3,858,482        (20,710
  

 

 

      

 

 

 
   $ (322,363      $     373,964   
  

 

 

      

 

 

 

 

- 35 -


  f. Impact of acquisitions on the results of the Company

The results of VisEra Holding since the acquisition date included in the consolidated statements of comprehensive income for the year ended December 31, 2015 were as follows:

 

                                                           
    

VisEra Holding

 

        

Net revenue

   $         254,319                                  
  

 

 

    

Net income

   $ 16,264      
  

 

 

    

Had the business combination of VisEra Holding been in effect on January 1, 2015, the Company’s net revenue and net income for the year ended December 31, 2015 would have been NT$846,401,819 thousand and NT$306,687,674 thousand, respectively. This pro-forma information is for illustrative purposes only and is not necessarily an indication of revenue and results of operations of the Company that actually would have been achieved had the acquisition been completed on January 1, 2015, nor is it intended to be a projection of future results. The aforementioned pro-forma net revenue and net income were calculated based on the fair value of assets acquired and liabilities assumed at the date of acquisition.

 

30. DISPOSAL OF SUBSIDIARY

In January 2015, the Board of Directors of TSMC approved a sale of TSMC SSL common shares of 565,480 thousand held by TSMC and TSMC Guang Neng to Epistar Corporation. The transaction was completed in February 2015.

 

  a. Consideration received from the disposal

 

Total consideration received

   $         825,000   

Expenditure associated with consideration received

     (142,475
  

 

 

 

Net consideration received

   $ 682,525   
  

 

 

 

 

  b. Gain/loss on disposal of subsidiary

 

Net consideration received

   $         682,525   

Net assets disposed of

     (725,165

Noncontrolling interests

     42,640   
  

 

 

 

Gain/loss on disposal of subsidiary

   $   
  

 

 

 

 

  c. Net cash inflow arising from disposal of subsidiary

 

Net consideration received

   $ 682,525   

Less: Balance of cash and cash equivalents disposed of

     81,478   
  

 

 

 
   $         601,047   
  

 

 

 

 

- 36 -


31. FINANCIAL INSTRUMENTS

 

  a. Categories of financial instruments

 

    

June 30,

2016

     December 31,
2015
    

June 30,

2015

 

Financial assets

        

FVTPL

        

Held for trading

   $ 206,751       $ 6,026       $ 58,535   

Designated as at FVTPL

     1,614,156                   

Available-for-sale financial assets (Note)

     40,388,670         18,290,243         16,075,250   

Held-to-maturity financial assets

     34,629,169         16,077,396         7,180,351   

Derivative financial instruments in designated hedge accounting relationships

             1,739           

Loans and receivables

        

Cash and cash equivalents

     622,359,302         562,688,930         528,895,107   

Notes and accounts receivables (including related parties)

     111,724,397         85,565,397         99,737,061   

Other receivables

     5,503,244         4,790,376         12,320,574   

Refundable deposits

     441,447         430,802         408,585   
  

 

 

    

 

 

    

 

 

 
   $ 816,867,136       $ 687,850,909       $ 664,675,463   
  

 

 

    

 

 

    

 

 

 

Financial liabilities

        

FVTPL

        

Held for trading

   $ 167,831       $ 72,610       $ 780,721   

Designated as at FVTPL

     10,873                   

Derivative financial instruments in designated hedge accounting relationships

     4,217                 2,625,763   

Amortized cost

        

Short-term loans

     38,739,600         39,474,000         5,592,600   

Accounts payable (including related parties)

     23,154,264         19,725,274         21,100,895   

Payables to contractors and equipment suppliers

     48,102,264         26,012,192         43,610,962   

Cash dividends payable

     155,696,382                 116,683,481   

Accrued expenses and other current liabilities

     20,189,411         18,900,123         21,890,115   

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

     203,276,211         215,475,194         212,722,606   

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

     36,300         40,000         40,000   

Other long-term payables (classified under accrued expenses and other current liabilities)

             18,000         18,000   

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

     24,412,264         27,732,614         28,518,962   
  

 

 

    

 

 

    

 

 

 
   $ 513,789,617       $ 347,450,007       $ 453,584,105   
  

 

 

    

 

 

    

 

 

 

 

  Note: Including financial assets carried at cost.

 

- 37 -


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

Foreign currency risk

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

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

The Company’s sensitivity analysis to foreign currency risk mainly focuses on the foreign currency monetary items at the end of the reporting period. Assuming an unfavorable 10% movement in the levels of foreign exchanges against the New Taiwan dollar, the net income for the six months ended June 30, 2016 and 2015 would have decreased by NT$89,642 thousand and NT$1,618,369 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 arising from borrowing at both fixed and floating interest rates and from fixed income securities. All of the Company’s long-term bonds have fixed interest rates and are measured at amortized cost. As such, changes in interest rates would not affect the future cash flows. On the other hand, because interest rates 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 floating interest rate bank loans at the end of the reporting period had been outstanding for the entire period and all other variables were held constant, a hypothetical increase in interest rates of 100 basis point (1%) would have resulted in an increase in the interest expense, net of tax, by approximately NT$151 thousand and NT$166 thousand for the six months ended June 30, 2016 and 2015, respectively.

The Company classified 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. To manage its exposure to the fair value fluctuations, the Company enters into interest rate futures contract to hedge against price risk caused by changes in risk-free interest rates in the Company’s investments in available-for-sale fixed income securities.

 

- 38 -


Assuming a hypothetical increase of 100 basis point (1%) in interest rates of available-for-sale fixed income securities at the end of the reporting period, the net income for the six months ended June 30, 2016 would have been unaffected as they were classified as available-for-sale; however, the other comprehensive income for the six months ended June 30, 2016 would have decreased by NT$607,921 thousand.

Other price risk

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

Assuming a hypothetical decrease of 5% in equity prices of the equity investments at the end of the reporting period, the net income for the six months ended June 30, 2016 and 2015 would have been unaffected as they were classified as available-for-sale; however, the other comprehensive income for the six months ended June 30, 2016 and 2015 would have decreased by NT$328,089 thousand and NT$135,538 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 recognized in the consolidated balance sheet.

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 June 30, 2016, December 31, 2015 and June 30, 2015, the Company’s ten largest customers accounted for 69%, 68% and 66% of accounts receivable, respectively. The Company believes the concentration of credit risk is insignificant for the remaining accounts receivable.

Financial credit risk

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

 

  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.

 

- 39 -


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  

June 30, 2016

              

Non-derivative financial liabilities

              

Short-term loans

   $ 38,743,592       $       $       $       $ 38,743,592   

Accounts payable (including related parties)

     23,154,264                                 23,154,264   

Payables to contractors and equipment suppliers

     48,102,264                                 48,102,264   

Accrued expenses and other current liabilities

     20,189,411                                 20,189,411   

Bonds payable

     24,797,738         101,437,838         62,143,440         23,174,836         211,553,852   

Long-term bank loans

     11,040         21,056         6,353                 38,449   

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

     6,461,850         13,107,964         4,842,450                 24,412,264   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     161,460,159         114,566,858         66,992,243         23,174,836         366,194,096   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Derivative financial instruments

              

Forward exchange contracts

              

Outflows

     35,970,330                                 35,970,330   

Inflows

     (35,960,606                              (35,960,606
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     9,724                                 9,724   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Cross currency swap contracts

              

Outflows

     13,404,146                                 13,404,146   

Inflows

     (13,452,895                              (13,452,895
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     (48,749                              (48,749
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   $ 161,421,134       $ 114,566,858       $ 66,992,243       $ 23,174,836       $ 366,155,071   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

December 31, 2015

              

Non-derivative financial liabilities

              

Short-term loans

   $ 39,488,957       $       $       $       $ 39,488,957   

Accounts payable (including related parties)

     19,725,274                                 19,725,274   

Payables to contractors and equipment suppliers

     26,012,192                                 26,012,192   

Accrued expenses and other current liabilities

     18,900,123                                 18,900,123   

Bonds payable

     26,494,990         104,462,371         68,378,787         25,981,316         225,317,464   

Long-term bank loans

     8,800         21,540         12,741                 43,081   

Other long-term payables (classified under accrued expenses and other current liabilities)

     18,000                                 18,000   

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

     6,167,813         13,341,051         8,223,750                 27,732,614   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     136,816,149         117,824,962         76,615,278         25,981,316         357,237,705   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(Continued)

 

- 40 -


     Less Than
1 Year
     2-3 Years      4-5 Years      5+ Years      Total  

Derivative financial instruments

              

Forward exchange contracts

              

Outflows

     23,192,477                                 23,192,477   

Inflows

     (23,135,579                              (23,135,579
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     56,898                                 56,898   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   $ 136,873,047       $ 117,824,962       $ 76,615,278       $ 25,981,316       $ 357,294,603   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

June 30, 2015

              

Non-derivative financial liabilities

              

Short-term loans

   $ 5,594,309       $       $       $       $ 5,594,309   

Accounts payable (including related parties)

     21,100,895                                 21,100,895   

Payables to contractors and equipment suppliers

     43,610,962                                 43,610,962   

Accrued expenses and other current liabilities

     21,890,115                                 21,890,115   

Bonds payable

     13,915,132         107,533,065         66,178,944         36,407,035         224,034,176   

Long-term bank loans

     3,931         21,933         18,002                 43,866   

Other long-term payables (classified under accrued expenses and other current liabilities)

     18,000                                 18,000   

Obligations under finance leases

     29,076         58,151         755,364                 842,591   

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

     6,602,375         12,595,587         9,321,000                 28,518,962   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     112,764,795         120,208,736         76,273,310         36,407,035         345,653,876   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Derivative financial instruments

              

Forward exchange contracts

              

Outflows

     76,898,431                                 76,898,431   

Inflows

     (76,154,158                              (76,154,158
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     744,273                                 744,273   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Cross currency swap contracts

              

Outflows

     3,033,613                                 3,033,613   

Inflows

     (3,060,582                              (3,060,582
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     (26,969                              (26,969
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Stock forward contracts

              

Outflows

     10,575,328                                 10,575,328   

Inflows

     (10,575,328                              (10,575,328
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
                                       
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   $ 113,482,099       $ 120,208,736       $ 76,273,310       $ 36,407,035       $ 346,371,180   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

(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).

 

- 41 -


  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:

 

     June 30, 2016  
     Level 1      Level 2      Level 3      Total  

Financial assets at FVTPL

           

Held for trading

           

Forward exchange contracts

   $       $ 143,834       $       $ 143,834   

Cross currency swap contracts

             62,917                 62,917   

Designated as at FVTPL

           

Time deposit

             1,614,156                 1,614,156   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $       $ 1,820,907       $       $ 1,820,907   
  

 

 

    

 

 

    

 

 

    

 

 

 

Available-for-sale financial assets

           

Corporate bonds

   $ 12,525,209       $       $       $ 12,525,209   

Agency bonds

     6,379,861                         6,379,861   

Money market funds

     6,128,310                         6,128,310   

Corporate issued asset-backed securities

             6,029,248                 6,029,248   

Publicly traded stocks

     2,893,386                         2,893,386   

Government bonds

     2,366,035                         2,366,035   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 30,292,801       $     6,029,248       $             —       $ 36,322,049   
  

 

 

    

 

 

    

 

 

    

 

 

 

Financial liabilities at FVTPL

           

Held for trading

           

Forward exchange contracts

   $       $ 160,423       $       $ 160,423   

Cross currency swap contracts

             7,408                 7,408   

Designated as at FVTPL

           

Forward exchange contracts

             10,873                 10,873   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $       $ 178,704       $       $ 178,704   
  

 

 

    

 

 

    

 

 

    

 

 

 

Hedging derivative financial liabilities

           

Interest rate futures contracts

   $ 4,217       $       $       $ 4,217   
  

 

 

    

 

 

    

 

 

    

 

 

 
     December 31, 2015  
     Level 1      Level 2      Level 3      Total  

Financial assets at FVTPL

           

Held for trading

           

Forward exchange contracts

   $       $ 6,026       $       $ 6,026   
  

 

 

    

 

 

    

 

 

    

 

 

 

Available-for-sale financial assets

           

Corporate bonds

   $ 6,267,768       $       $       $ 6,267,768   

Corporate issued asset-backed securities

             3,154,366                 3,154,366   

Agency bonds

     2,627,367                         2,627,367   

Publicly traded stocks

     1,371,483                         1,371,483   

Government bonds

     878,377                         878,377   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $   11,144,995       $ 3,154,366       $       $   14,299,361   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(Continued)

 

- 42 -


     December 31, 2015  
     Level 1      Level 2      Level 3      Total  

Hedging derivative financial assets

           

Interest rate futures contracts

   $ 1,739       $       $       $ 1,739   
  

 

 

    

 

 

    

 

 

    

 

 

 

Financial liabilities at FVTPL

           

Held for trading

           

Forward exchange contracts

   $       $ 72,610       $             —       $ 72,610   
  

 

 

    

 

 

    

 

 

    

 

 

 
              (Concluded)   
     June 30, 2015  
     Level 1      Level 2      Level 3      Total  

Financial assets at FVTPL

           

Held for trading

           

Forward exchange contracts

   $       $ 31,580       $       $ 31,580   

Cross currency swap contracts

             26,955                 26,955   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $       $ 58,535       $       $ 58,535   
  

 

 

    

 

 

    

 

 

    

 

 

 

Available-for-sale financial assets

           

Publicly traded stocks

   $ 14,216,491       $       $       $   14,216,491   

Money market funds

     383                         383   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $   14,216,874       $       $       $ 14,216,874   
  

 

 

    

 

 

    

 

 

    

 

 

 

Financial liabilities at FVTPL

           

Held for trading

           

Forward exchange contracts

   $       $ 780,721       $       $ 780,721   
  

 

 

    

 

 

    

 

 

    

 

 

 

Hedging derivative financial liabilities

           

Stock forward contract

   $       $   2,625,763       $       $ 2,625,763   
  

 

 

    

 

 

    

 

 

    

 

 

 

There were no transfers between Level 1 and Level 2 for the six months ended June 30, 2016 and 2015, respectively.

There were no purchases and disposals for assets on Level 3 for the six months ended June 30, 2016 and 2015, respectively.

Valuation techniques and assumptions used in fair value measurement

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

 

    The fair values of financial assets and financial liabilities with standard terms and conditions and traded on active liquid markets are determined with reference to quoted market prices (includes interest rate futures contracts, publicly traded stocks, money market funds, government bonds, agency bonds and corporate bonds).

 

    Forward exchange contracts and cross currency swap contracts are measured using quoted forward exchange rates and yield curves derived from quoted interest rates matching maturities of the contracts; and stock forward contracts are measured at the difference between the present value of stock forward price discounted based on the applicable yield curve derived from quoted interest rates and the stock spot price. For investments in corporate issued asset-backed securities and time deposit, the fair value are determined using quoted market prices or the present value of future cash flows based on the observable yield curves.

 

- 43 -


  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.

 

     June 30, 2016      December 31, 2015      June 30, 2015  
     Carrying
Amount
     Fair Value      Carrying
Amount
     Fair Value      Carrying
Amount
     Fair Value  

Financial assets

                 

Held-to-maturity financial assets

                 

Corporate bonds/Bank debentures

   $ 26,988,011       $ 27,051,457       $ 8,143,146       $ 8,146,756       $       $   

Negotiable certificate of deposit

     4,842,450         4,849,988         4,934,250         4,945,878                   

Structured product

     2,000,000         1,997,850         3,000,000         2,995,731                   

Commercial paper

     798,708         799,370                         7,180,351         7,189,249   

Financial liabilities

                 

Measured at amortized cost

                 

Bonds payable

     203,276,211         205,939,533         215,475,194         216,223,736         212,722,606         213,040,105   

Fair value hierarchy

The table below sets out the balances for the Company’s assets and liabilities that are not measured at fair value but for which the fair value is disclosed:

 

     June 30, 2016  
         Level 1               Level 2                Level 3               Total      

Assets

           

Held-to-maturity securities

           

Corporate bonds/Bank debentures

   $ 27,051,457       $       $       $ 27,051,457   

Negotiable certificate of deposit

             4,849,988                 4,849,988   

Structured product

             1,997,850                 1,997,850   

Commercial paper

             799,370                 799,370   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 27,051,457       $ 7,647,208       $       $ 34,698,665   
  

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities

           

Measured at amortized cost

           

Bonds payable

   $ 205,939,533       $       $       $ 205,939,533   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

     December 31, 2015  
         Level 1               Level 2                Level 3               Total      

Assets

           

Held-to-maturity securities

           

Corporate bonds/Bank debentures

   $ 8,146,756       $       $       $ 8,146,756   

Negotiable certificate of deposit

             4,945,878                 4,945,878   

Structured product

             2,995,731                 2,995,731   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 8,146,756       $ 7,941,609       $       $ 16,088,365   
  

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities

           

Measured at amortized cost

           

Bonds payable

   $ 216,223,736       $       $       $ 216,223,736   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

- 44 -


     June 30, 2015  
         Level 1              Level 2              Level 3              Total      

Assets

           

Held-to-maturity securities

           

Commercial paper

   $       $ 7,189,249       $       $ 7,189,249   
  

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities

           

Measured at amortized cost

           

Bonds payable

   $ 213,040,105       $       $       $ 213,040,105   
  

 

 

    

 

 

    

 

 

    

 

 

 

Fair value measurement

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

For investments in negotiable certificate of deposit, structured product and commercial paper, the fair value is determined using the present value of future cash flows based on the observable yield curves.

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

 

32. 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. Net revenue

 

             Three Months Ended June 30              Six Months Ended June 30      
         2016      2015      2016      2015  

Item

  Related Party Categories            

Net revenue from sale of goods

 

Associates

   $ 957,496       $ 1,171,840       $ 2,562,512       $ 2,186,502   
  Joint venture              283                 667   
    

 

 

    

 

 

    

 

 

    

 

 

 
     $ 957,496       $ 1,172,123       $ 2,562,512       $ 2,187,169   
    

 

 

    

 

 

    

 

 

    

 

 

 

Net revenue from royalties

 

Associates

   $ 137,376       $ 130,168       $ 249,320       $ 262,144   
    

 

 

    

 

 

    

 

 

    

 

 

 
             

 

  b. Purchases

 

         Three Months Ended June 30              Six Months Ended June 30      
     2016      2015      2016      2015  

Related Party Categories

           

Associates

   $ 2,441,794       $ 2,974,865       $ 4,787,039       $ 5,979,141   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

- 45 -


  c. Receivables from related parties

 

        

 June 30,

 2016

    

December 31,

2015

    

June 30,

2015

 

Item

 

Related Party Categories

        

Receivables from related parties

 

Associates

   $ 424,210       $ 505,722       $ 744,584   
 

Joint venture

                     123   
    

 

 

    

 

 

    

 

 

 
     $ 424,210       $ 505,722       $ 744,707   
    

 

 

    

 

 

    

 

 

 

Other receivables from related parties

  Associates    $ 1,546,979       $ 125,018       $ 3,164,538   
 

Joint venture

                     400,803   
    

 

 

    

 

 

    

 

 

 
     $ 1,546,979       $ 125,018       $ 3,565,341   
    

 

 

    

 

 

    

 

 

 

 

  d. Payables to related parties

 

        

  June 30,  

2016

    

December 31,

2015

    

June 30,

2015

 

Item

  Related Party Categories         

Payables to related parties

  Associates    $ 1,037,116       $ 1,149,988       $ 1,325,844   
  Joint venture                      1,501   
    

 

 

    

 

 

    

 

 

 
     $ 1,037,116       $ 1,149,988       $ 1,327,345   
    

 

 

    

 

 

    

 

 

 

 

  e. Others

 

             Three Months Ended June 30              Six Months Ended June 30      
         2016      2015      2016      2015  

Item

  Related Party Categories            

Manufacturing expenses

  Associates    $ 387,637       $ 680,185       $ 773,810       $ 1,394,699   
  Joint venture              3,023                 5,363   
    

 

 

    

 

 

    

 

 

    

 

 

 
     $ 387,637       $ 683,208       $ 773,810       $ 1,400,062   
    

 

 

    

 

 

    

 

 

    

 

 

 

Research and development expenses

  Associates    $ 27,986       $ 6,873       $ 69,078       $ 25,926   
  Joint venture              888                 948   
    

 

 

    

 

 

    

 

 

    

 

 

 
     $ 27,986       $ 7,761       $ 69,078       $ 26,874   
    

 

 

    

 

 

    

 

 

    

 

 

 

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 machinery and equipment from Xintec and office from VIS, respectively. The lease terms and prices were both determined in accordance with mutual agreements. The rental expenses were paid to Xintec and VIS quarterly and monthly, respectively; 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 joint venture), and then recognized such gain/loss over the depreciable lives of the disposed assets.

 

- 46 -


  f. Compensation of key management personnel

The compensation to directors and other key management personnel for the three months and six months ended June 30, 2016 and 2015 were as follows:

 

     Three Months Ended June 30      Six Months Ended June 30  
     2016      2015      2016      2015  

Short-term employee benefits

   $   477,001       $   484,183       $   851,777       $   970,226   

Post-employment benefits

     1,073         1,037         2,111         2,042   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 478,074       $ 485,220       $ 853,888       $ 972,268   
  

 

 

    

 

 

    

 

 

    

 

 

 

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.

 

33. PLEDGED ASSETS

The Company provided certificate of deposits recorded in other financial assets as collateral mainly for litigation and building lease agreements. As of June 30, 2016, December 31, 2015 and June 30, 2015, the aforementioned other financial assets amounted to NT$154,829 thousand, NT$177,229 thousand and NT$269,032 thousand, respectively.

 

34. SIGNIFICANT OPERATING LEASE ARRANGEMENTS

The Company leases several parcels of land, office premises and certain office equipment. These operating leases expire between September 2016 and June 2066 and can be renewed upon expiration.

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

 

    

June 30,

2016

     December 31,
2015
    

June 30,

2015

 

Not later than 1 year

   $ 1,314,854       $ 1,099,017       $ 1,005,463   

Later than 1 year and not later than 5 years

     3,945,083         3,635,180         3,608,378   

Later than 5 years

     7,807,962         6,921,891         7,168,284   
  

 

 

    

 

 

    

 

 

 
   $ 13,067,899       $ 11,656,088       $ 11,782,125   
  

 

 

    

 

 

    

 

 

 

 

35. 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 June 30, 2016, the R.O.C. Government did not invoke such right.

 

- 47 -


  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 June 30, 2016.

 

  c. In June 2010, Keranos, LLC. filed a complaint in the U.S. District Court for the Eastern District of Texas alleging that TSMC, TSMC North America, and several other leading technology companies infringe three expired U.S. patents. In response, TSMC, TSMC North America, and several co-defendants in the Texas case filed a lawsuit against Keranos in the U.S. District Court for the Northern District of California in November 2010, seeking a judgment declaring that they did not infringe the asserted patents, and that those patents were invalid. These two litigations have been consolidated into a single lawsuit in the U.S. District Court for the Eastern District of Texas. In February 2014, the Court entered a final judgment in favor of TSMC, dismissing all of Keranos’ claims against TSMC with prejudice. Keranos appealed the final judgment to the U.S. Court of Appeals for the Federal Circuit, and in August 2015, the Federal Circuit remanded the case back to the Texas court for further proceedings. The outcome cannot be determined and the Company cannot make a reliable estimate of the contingent liability at this time.

 

  d. In December 2010, Ziptronix, Inc. filed a complaint in the U.S. District Court for the Northern District of California accusing TSMC, TSMC North America and one other company of infringing several U.S. patents. In September 2014, the Court granted summary judgment of noninfringement in favor of TSMC and TSMC North America. Ziptronix, Inc. can appeal the Court’s order. In August 2015, Tessera Technologies, Inc. announced it had acquired Ziptronix. The outcome cannot be determined and the Company cannot make a reliable estimate of the contingent liability at this time.

 

  e. 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 June 30, 2016, TSMC has paid EUR197,332 thousand to ASML under the research and development funding agreement.

 

  f. In March 2014, DSS Technology Management, Inc. (DSS) filed a complaint in the U.S. District Court for the Eastern District of Texas alleging that TSMC, TSMC North America, TSMC Development and several other companies infringe one U.S. patent. TSMC Development has subsequently been dismissed. In May 2015, the Court entered a final judgment of noninfringement in favor of TSMC and TSMC North America. DSS appealed the final judgment to the U.S. Court of Appeals for the Federal Circuit (Federal Circuit). In November 2015, the Patent Trial and Appeal Board (PTAB) determined after concluding an Inter Partes Review (IPR) that the patent claims asserted by DSS in the District Court litigation are unpatentable. DSS appealed the PTAB’s decision to the Federal Circuit in January 2016. In March 2016, the District Court’s judgment of noninfringement was affirmed by the Federal Circuit. In April 2016, the District Court litigation between the parties and the related Federal Circuit appeal were dismissed, and the appeal proceeding of the PTAB’s decision is also over as to TSMC.

 

  g. Amounts available under unused letters of credit as of June 30, 2016, December 31, 2015 and June 30, 2015 were NT$122,675 thousand, NT$144,738 thousand and NT$198,848 thousand, respectively.

 

- 48 -


36. SIGNIFICANT LOSS FROM DISASTER

On February 6, 2016, an earthquake struck Taiwan. The resulting damage was mostly to inventories and equipment. In the first quarter of 2016, the Company recognized related earthquake losses of NT$2,289,128 thousand, net of insurance claim. Such losses were primarily included in cost of revenue for the three months ended March 31, 2016.

 

37. 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)

 

June 30, 2016

       

Financial assets

       

Monetary items

       

USD

   $ 4,531,293         32.283      $ 146,283,737   

EUR

     20,955         35.89        752,085   

JPY

     21,406,874         0.3134        6,708,914   

Non-monetary items

       

HKD

     130,849         4.16        544,333   

Financial liabilities

       

Monetary items

       

USD

     3,232,481         32.283        104,354,180   

EUR

     81,995         35.89        2,942,798   

JPY

     52,928,214         0.3134        16,587,702   

December 31, 2015

       

Financial assets

       

Monetary items

       

USD

     3,089,634         32.895        101,633,497   

USD

     251,824         6.494 (Note 2)      8,283,759   

EUR

     43,933         36.00        1,581,571   

JPY

     9,717,089         0.2733        2,655,680   

Non-monetary items

       

HKD

     166,727         4.24        706,924   

(Continued)

 

- 49 -


    

Foreign
Currencies

(In Thousands)

    

Exchange Rate

(Note 1)

   

Carrying
Amount

(In Thousands)

 

Financial liabilities

       

Monetary items

       

USD

   $ 2,952,404         32.895      $ 97,119,331   

EUR

     44,174         36.00        1,590,264   

JPY

     26,416,113         0.2733        7,219,524   

June 30, 2015

       

Financial assets

       

Monetary items

       

USD

     4,645,790         31.070        144,344,694   

RMB

     2,496,163         0.161 (Note 3)      12,507,023   

EUR

     218,538         34.70        7,583,271   

JPY

     39,072,839         0.2542        9,932,316   

Non-monetary items

       

HKD

     179,390         4.01        719,354   

Financial liabilities

       

Monetary items

       

USD

     2,516,198         31.070        78,178,285   

EUR

     224,175         34.70        7,778,856   

JPY

     41,504,262         0.2542        10,550,383   

(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.
  Note 3: The exchange rate represents the number of USD dollars for which one RMB could be exchanged.

The realized and unrealized foreign exchange losses were NT$807,218 thousand and NT$292,295 thousand for the three months ended June 30, 2016 and 2015, respectively; NT$1,900,836 thousand and NT$244,112 thousand for the six months ended June 30, 2016 and 2015, 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.

 

- 50 -


38. OPERATING SEGMENTS INFORMATION

 

  a. Operating segments

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

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

 

  b. Segment revenue and operating results

 

         Foundry              Others                 Total         

Three months ended June 30, 2016

        

Net revenue from external customers

   $ 221,809,846       $       $ 221,809,846   

Income from operations

     91,321,001                 91,321,001   

Three months ended June 30, 2015

        

Net revenue from external customers

     205,167,427         272,325         205,439,752   

Income (loss) from operations

     77,380,992         (311,934      77,069,058   

Six months ended June 30, 2016

        

Net revenue from external customers

     425,305,207                 425,305,207   

Income from operations

     161,788,315                 161,788,315   

Six months ended June 30, 2015

        

Net revenue from external customers

     427,062,560         411,336         427,473,896   

Income (loss) from operations

     164,356,759         (661,578      163,695,181   

 

39. 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, associates and joint venture): 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;

 

- 51 -


  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.

 

- 52 -


TABLE 1

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

FINANCINGS PROVIDED

FOR THE SIX MONTH ENDED JUNE 30, 2016

(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
(RMB in
Thousands)

(Note 2)
    Ending
Balance

(RMB in
Thousands)

(Note 2)
    Amount
Actually
Drawn

(RMB in
Thousands)
    Interest
Rate
   

Nature
for
Financing

  Transaction
Amounts
    Reason
for
Financing
  Allowance
for Bad
Debt
   

 

Collateral

    Financing
Limits for
Each
Borrowing
Company
    Financing
Company’s
Total
Financing
Amount
Limits
 
                          Item     Value      

1

 

TSMC China

  TSMC Nanjing  

Other receivables from related parties

  Yes   $

(RMB

3,887,600

800,000

  

  $

(RMB

3,887,600

800,000

  

  $

(RMB

1,700,825

350,000

  

    1.3  

The need for short-term financing

  $      Operating
capital
  $             $      $

 

40,833,154

(Note 1

  

  $

 

40,833,154

(Note 1

  

 

Note 1: The total amount for lending to a company for funding for a short-term period shall not exceed ten percent (10%) of the net worth of TSMC 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 100% owned subsidiaries by 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, which are not located in Taiwan, directly or indirectly wholly owned by TSMC, 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 and the total amount lending limit for such borrower still shall not exceed the net worth of TSMC China.
Note 2: The maximum balance for the period and ending balance represent the amounts approved by the Board of Directors.

 

- 53 -


TABLE 2

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

ENDORSEMENTS/GUARANTEES PROVIDED

FOR THE SIX MONTH ENDED JUNE 30, 2016

(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   $ 299,113,534      $

(US$

48,424,500

1,500,000

  

  $

(US$

48,424,500

1,500,000

  

  $

(US$

48,424,500

1,500,000

  

  $        4.05   $ 299,113,534      Yes   No   No
   

TSMC North America

  Subsidiary     299,113,534       

(US$

2,686,375

83,213

  

   

(US$

2,686,375

83,213

  

   

(US$

2,686,375

83,213

  

           0.22     299,113,534      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.

 

- 54 -


TABLE 3

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

MARKETABLE SECURITIES HELD

JUNE 30, 2016

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

 

 

Held Company
Name

 

Marketable Securities Type and Name

  Relationship
with the
Company
   

Financial Statement Account

  June 30, 2016     Note  
        Shares/Units
(In Thousands)
    Carrying Value
(Foreign
Currencies
in Thousands)
    Percentage of
Ownership (%)
    Fair Value
(Foreign
Currencies
in Thousands)
   

TSMC

 

Bank debentures

             
  The Export-Import Bank of the ROC          Held-to-maturity financial assets          $ 149,999        N/A      $ 149,999     
  Corporate bond              
  CPC Corporation, Taiwan          Held-to-maturity financial assets            3,050,535        N/A        3,053,903     
  Taiwan Power Company                     1,203,797        N/A        1,205,101     
  Hon Hai Precision Ind. Co., Ltd.                     801,187        N/A        802,422     
  Nan Ya Plastics Corporation                     301,494        N/A        301,499     
  Formosa Plastics Corporation                     175,317        N/A        175,595     
  Formosa Petrochemical Corporation                     100,460        N/A        100,833     
  China Steel Corporation                     100,169        N/A        100,278     
  Structure deposit              
  Hua Nan Commercial Bank          Held-to-maturity financial assets            2,000,000        N/A        1,997,850     
  Commercial paper              
  Taiwan Power Company          Held-to-maturity financial assets     80        798,708        N/A        799,370     
  Stock              
  Motech          Available-for-sale financial assets     58,320        1,953,713        12        1,953,713     
 

Semiconductor Manufacturing International Corporation

             211,047        544,333        1        544,333     
  RichWave Technology Corp.              2,007        143,902        4        143,902     
  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     
  Preferred stock              
  QST Holdings, LLC          Financial assets carried at cost     4,034        4,537        4        4,537     
  Fund              
  Horizon Ventures Fund          Financial assets carried at cost            11,259        12        11,259     
  Crimson Asia Capital                     8,263        1        8,263     

TSMC Partners

  Stock              
  Tela Innovations          Financial assets carried at cost     10,440      US$ 65,000        25      US$ 65,000     
  Mcube Inc.              6,333               14            
  Fund              
  China Walden Venture Investments II, L.P.          Financial assets carried at cost          US$ 5,951        9      US$ 5,951     
  Shanghai Walden Venture Capital Enterprise                   US$ 5,000        6      US$ 5,000     

(Continued)

 

- 55 -


Held Company
Name

 

Marketable Securities Type and Name

  Relationship
with the
Company
   

Financial Statement Account

  June 30, 2016     Note  
        Shares/Units
(In Thousands)
    Carrying Value
(Foreign
Currencies
in Thousands)
    Percentage of
Ownership (%)
    Fair Value
(Foreign
Currencies
in Thousands)
   

TSMC Global

  Corporate bond              
  JPMorgan Chase & Co.          Available-for-sale financial assets          US$ 16,152        N/A      US$ 16,152     
  Bank of America Corp.                   US$ 12,390        N/A      US$ 12,390     
  Aetna Inc.                   US$ 9,014        N/A      US$ 9,014     
  Hyundai Capital America                   US$ 8,643        N/A      US$ 8,643     
  Walgreens Boots Alliance                   US$ 8,106        N/A      US$ 8,106     
  Sysco Corporation                   US$ 8,034        N/A      US$ 8,034     
  AT&T Inc.                   US$ 7,973        N/A      US$ 7,973     
  Southern Co.                   US$ 7,746        N/A      US$ 7,746     
  Verizon Communications                   US$ 7,228        N/A      US$ 7,228     
  Citigroup Inc.                   US$ 6,782        N/A      US$ 6,782     
  Anheuser Busch InBev Fin.                   US$ 6,740        N/A      US$ 6,740     
  Bank of Ny Mellon Corp.                   US$ 6,187        N/A      US$ 6,187     
  BB&T Corporation                   US$ 6,093        N/A      US$ 6,093     
  Fortive Corporation                   US$ 6,088        N/A      US$ 6,088     
  Citizens Bank NA/RI                   US$ 5,839        N/A      US$ 5,839     
  Intl Bk Recon & Develop                   US$ 5,605        N/A      US$ 5,605     
  State Street Corp.                   US$ 5,586        N/A      US$ 5,586     
  Oracle Corp.                   US$ 5,444        N/A      US$ 5,444     
  Chevron Corp.                   US$ 5,332        N/A      US$ 5,332     
  Principal Lfe Glb Fnd II                   US$ 5,229        N/A      US$ 5,229     
  Morgan Stanley                   US$ 5,062        N/A      US$ 5,062     
  PNC Bank NA                   US$ 5,002        N/A      US$ 5,002     
  Wells Fargo & Company                   US$ 4,996        N/A      US$ 4,996     
  Swedbank AB                   US$ 4,983        N/A      US$ 4,983     
  Toronto Dominion Bank                   US$ 4,853        N/A      US$ 4,853     
  Abbvie Inc.                   US$ 4,851        N/A      US$ 4,851     
  ING Bank N.V.                   US$ 4,755        N/A      US$ 4,755     
  KfW                   US$ 4,642        N/A      US$ 4,642     
  American Intl Group                   US$ 4,641        N/A      US$ 4,641     
  Morgan Stanley                   US$ 4,600        N/A      US$ 4,600     
  US Bank NA Cincinnati                   US$ 4,528        N/A      US$ 4,528     
  CVS Health Corp.                   US$ 4,504        N/A      US$ 4,504     
  Shell International Fin.                   US$ 4,502        N/A      US$ 4,502     
  Mitsubishi UFJ Fin Grp.                   US$ 4,149        N/A      US$ 4,149     
  Ameren Corp.                   US$ 4,120        N/A      US$ 4,120     
  Chubb Ina Holdings Inc.                   US$ 4,113        N/A      US$ 4,113     
  Svenska Handelsbanken AB                   US$ 4,109        N/A      US$ 4,109     
  Goldman Sachs Group Inc.                   US$ 4,088        N/A      US$ 4,088     
  Cisco Systems Inc.                   US$ 4,014        N/A      US$ 4,014     
  Enel Finance Intl N.V.                   US$ 3,943        N/A      US$ 3,943     
  National Rural Util. Coop.                   US$ 3,920        N/A      US$ 3,920     
  UBS Group Funding                   US$ 3,621        N/A      US$ 3,621     
  Fifth Third Bancorp                   US$ 3,523        N/A      US$ 3,523     
  Express Scripts Holding                   US$ 3,365        N/A      US$ 3,365     
  Lam Research Corp.                   US$ 3,316        N/A      US$ 3,316     
  BMW US Capital LLC                   US$ 3,244        N/A      US$ 3,244     
  Morgan Stanley                   US$ 3,101        N/A      US$ 3,101     
  ERAC USA Finance LLC                   US$ 3,049        N/A      US$ 3,049     
  Credit Agricole London                   US$ 3,034        N/A      US$ 3,034     
  Suncorp Metway Ltd.                   US$ 3,033        N/A      US$ 3,033     
  Protective Life Global                   US$ 3,018        N/A      US$ 3,018     
  Westpac Banking Corporation                   US$ 3,003        N/A      US$ 3,003     
  Fifth Third Bank                   US$ 2,873        N/A      US$ 2,873     

(Continued)

 

- 56 -


Held Company
Name

 

Marketable Securities Type and Name

  Relationship
with the
Company
 

Financial Statement Account

  June 30, 2016     Note  
        Shares/Units
(In Thousands)
    Carrying Value
(Foreign
Currencies
in Thousands)
    Percentage of
Ownership (%)
    Fair Value
(Foreign
Currencies
in Thousands)
   

TSMC Global

  Corporate bond              
  Ryder System Inc.     Available-for-sale financial assets          US$ 2,536        N/A      US$ 2,536     
  Nordea Bank AB              US$ 2,532        N/A      US$ 2,532     
  Allied World Assurance              US$ 2,227        N/A      US$ 2,227     
  Comcast Corp.              US$ 2,146        N/A      US$ 2,146     
  Xcel Energy Inc.              US$ 2,056        N/A      US$ 2,056     
  Mizuho Financial Group              US$ 2,037        N/A      US$ 2,037     
  PSEG Power LLC              US$ 2,035        N/A      US$ 2,035     
  Bank of Ny Mellon Corp.              US$ 2,031        N/A      US$ 2,031     
  Reliance Stand Life II              US$ 2,030        N/A      US$ 2,030     
  Jackson Natl Life Global              US$ 2,026        N/A      US$ 2,026     
  New York Life Global FDG              US$ 2,019        N/A      US$ 2,019     
  FMS Wertmanagement              US$ 2,019        N/A      US$ 2,019     
  Wells Fargo Bank NA              US$ 2,017        N/A      US$ 2,017     
  BP Capital Markets PLC              US$ 2,016        N/A      US$ 2,016     
  Asian Development Bank              US$ 2,013        N/A      US$ 2,013     
  Pricoa Global Funding 144A              US$ 2,013        N/A      US$ 2,013     
  Nordic Investment Bank              US$ 2,012        N/A      US$ 2,012     
  Autozone Inc.              US$ 1,965        N/A      US$ 1,965     
  Oncor Electric Delivery              US$ 1,885        N/A      US$ 1,885     
  Electricite de France SA              US$ 1,839        N/A      US$ 1,839     
  Public Service Colorado              US$ 1,712        N/A      US$ 1,712     
  JPMorgan Chase & Co.              US$ 1,609        N/A      US$ 1,609     
  Heineken N.V.              US$ 1,602        N/A      US$ 1,602     
  African Development Bank              US$ 1,589        N/A      US$ 1,589     
  Capital One Bank (USA), NA              US$ 1,561        N/A      US$ 1,561     
  Unum Group              US$ 1,534        N/A      US$ 1,534     
  Nextera Energy Capital              US$ 1,529        N/A      US$ 1,529     
  Guardian Life Glob Fund              US$ 1,520        N/A      US$ 1,520     
  Wm. Wrigley Jr. Co.              US$ 1,516        N/A      US$ 1,516     
  Medtronic Inc.              US$ 1,513        N/A      US$ 1,513     
  Pfizer Inc.              US$ 1,512        N/A      US$ 1,512     
  Biogen Inc.              US$ 1,382        N/A      US$ 1,382     
  General Electric Co.              US$ 1,336        N/A      US$ 1,336     
  Unitedhealth Group Inc.              US$ 1,319        N/A      US$ 1,319     
  CSX Corp.              US$ 1,290        N/A      US$ 1,290     
  Stryker Corp.              US$ 1,169        N/A      US$ 1,169     
  American Intl Group              US$ 1,162        N/A      US$ 1,162     
  Trans Canada Pipelines              US$ 1,153        N/A      US$ 1,153     
  Corning Inc.              US$ 1,145        N/A      US$ 1,145     
  Pacificorp              US$ 1,094        N/A      US$ 1,094     
  Merck & Co Inc.              US$ 1,077        N/A      US$ 1,077     
  Statoil ASA              US$ 1,042        N/A      US$ 1,042     
  Gilead Sciences Inc.              US$ 1,039        N/A      US$ 1,039     
  Keycorp              US$ 1,034        N/A      US$ 1,034     
  Celgene Corp.              US$ 1,034        N/A      US$ 1,034     
  Met Life Glob Funding I              US$ 1,023        N/A      US$ 1,023     
  Suntrust Banks Inc.              US$ 1,021        N/A      US$ 1,021     
  Schlumberger Hldgs Corp.              US$ 1,020        N/A      US$ 1,020     
  UBS AG Stamford CT              US$ 1,020        N/A      US$ 1,020     
  Bank of America N.A.              US$ 1,015        N/A      US$ 1,015     
  Rabobank Nederland NY              US$ 1,009        N/A      US$ 1,009     
  Carnival Corp.              US$ 1,009        N/A      US$ 1,009     
  Visa Inc.              US$ 1,006        N/A      US$ 1,006     

(Continued)

 

- 57 -


Held Company
Name

 

Marketable Securities Type and Name

  Relationship
with the
Company
   

Financial Statement Account

  June 30, 2016     Note  
        Shares/Units
(In Thousands)
    Carrying Value
(Foreign
Currencies
in Thousands)
    Percentage of
Ownership (%)
    Fair Value
(Foreign
Currencies
in Thousands)
   

TSMC Global

  Corporate bond              
  HSBC USA Inc.          Available-for-sale financial assets          US$ 1,005        N/A      US$ 1,005     
  Eaton Corp.                   US$ 1,005        N/A      US$ 1,005     
  AIG Global Funding                   US$ 1,004        N/A      US$ 1,004     
  IBM Corp.                   US$ 1,004        N/A      US$ 1,004     
  Royal Bank of Canada                   US$ 1,003        N/A      US$ 1,003     
  Credit Suisse New York                   US$ 1,001        N/A      US$ 1,001     
  Deutsche Bank AG, London                   US$ 994        N/A      US$ 994     
  Branch Banking & Trust                   US$ 954        N/A      US$ 954     
  Marsh & Mclennan Cos Inc.                   US$ 947        N/A      US$ 947     
  Mastercard Inc.                   US$ 872        N/A      US$ 872     
  Eaton Corp.                   US$ 834        N/A      US$ 834     
  Amgen Inc.                   US$ 831        N/A      US$ 831     
  BAT Intl Finance PLC                   US$ 809        N/A      US$ 809     
  Manuf & Traders Trust Co.                   US$ 766        N/A      US$ 766     
  Burlingtn North Santa Fe                   US$ 727        N/A      US$ 727     
  TTX Co.                   US$ 712        N/A      US$ 712     
  Commonwealth Bk Austr NY                   US$ 655        N/A      US$ 655     
  Bayer US Finance LLC                   US$ 601        N/A      US$ 601     
  Coca Cola Co/The                   US$ 591        N/A      US$ 591     
  Mcdonald S Corp.                   US$ 560        N/A      US$ 560     
  BPCE SA                   US$ 514        N/A      US$ 514     
  ERP Operating LP                   US$ 502        N/A      US$ 502     
  Duke Energy Corp.                   US$ 429        N/A      US$ 429     
  Pepsico Inc.                   US$ 416        N/A      US$ 416     
  BB&T Corporation                   US$ 414        N/A      US$ 414     
  American Honda Finance                   US$ 383        N/A      US$ 383     
  Equifax Inc.                   US$ 314        N/A      US$ 314     
  Nissan Motor Acceptance                   US$ 299        N/A      US$ 299     
  Philip Morris Intl Inc.                   US$ 292        N/A      US$ 292     
  U.S. Bancorp                   US$ 267        N/A      US$ 267     
  Ford Motor Credit Co LLC                   US$ 263        N/A      US$ 263     
  Capital One NA                   US$ 249        N/A      US$ 249     
  Bank of Nova Scotia                   US$ 249        N/A      US$ 249     
  Rolls Royce PLC                   US$ 231        N/A      US$ 231     
  HSBC Holdings PLC                   US$ 217        N/A      US$ 217     
  Berkshire Hathaway Fin.                   US$ 137        N/A      US$ 137     
  Capital One Financial Co.                   US$ 122        N/A      US$ 122     
  JPMorgan Chase & Co.          Held-to-maturity financial assets          US$ 153,765        N/A      US$ 154,276     
  Wells Fargo & Company                   US$ 150,007        N/A      US$ 149,366     
  Goldman Sachs Group, Inc.                   US$ 100,000        N/A      US$ 100,898     
  Westpac Banking Corporation                   US$ 100,000        N/A      US$ 100,497     
  Commonwealth Bank of Australia                   US$ 50,000        N/A      US$ 50,294     
  National Australia Bank                   US$ 50,000        N/A      US$ 50,176     
  Bank of Nova Scotia                   US$ 49,979        N/A      US$ 50,005     
  Government bond              
  US Treasury N/B          Available-for-sale financial assets          US$ 38,908        N/A      US$ 38,908     
  US Treasury Floating Rate Note                   US$ 21,667        N/A      US$ 21,667     
  Treasury Inflation-Indexed N/B                   US$ 9,175        N/A      US$ 9,175     
  Abu Dhabi Government International Bond                   US$ 3,540        N/A      US$ 3,540     

(Continued)

 

- 58 -


Held Company
Name

 

Marketable Securities Type and Name

  Relationship
with the
Company
 

Financial Statement Account

  June 30, 2016     Note  
        Shares/Units
(In Thousands)
    Carrying Value
(Foreign
Currencies
in Thousands)
    Percentage of
Ownership (%)
    Fair Value
(Foreign
Currencies
in Thousands)
   

TSMC Global

  Agency bond              
  Fnma Pool AL7191     Available-for-sale financial assets          US$ 14,450        N/A      US$ 14,450     
  Fnma Pool 888577              US$ 10,949        N/A      US$ 10,949     
  Fnma Pool AV5062              US$ 9,641        N/A      US$ 9,641     
  Fnma Pool AL8703              US$ 8,070        N/A      US$ 8,070     
  Fnma Pool 890731              US$ 7,895        N/A      US$ 7,895     
  Fnma Pool AL4193              US$ 6,829        N/A      US$ 6,829     
  Fnma Pool AL7437              US$ 6,407        N/A      US$ 6,407     
  Fnma Pool AL1543              US$ 5,908        N/A      US$ 5,908     
  Fed Hm Ln Pc Pool J32501              US$ 5,507        N/A      US$ 5,507     
  Fnma Pool AD4037              US$ 4,685        N/A      US$ 4,685     
  Fnma Pool 995113              US$ 4,533        N/A      US$ 4,533     
  Fnma Pool AL7671              US$ 4,290        N/A      US$ 4,290     
  Fnma Pool AL0516              US$ 3,909        N/A      US$ 3,909     
  Fnma Pool AS3460              US$ 3,760        N/A      US$ 3,760     
  Fnma Pool 310104              US$ 3,754        N/A      US$ 3,754     
  Fnma Pool AB2895              US$ 3,579        N/A      US$ 3,579     
  Freddie Mac              US$ 3,251        N/A      US$ 3,251     
  Fnma Pool AL0950              US$ 3,069        N/A      US$ 3,069     
  Fnma Pool AH5613              US$ 3,066        N/A      US$ 3,066     
  Fed Hm Ln Pc Pool J32520              US$ 3,011        N/A      US$ 3,011     
  Export Import Bank Korea              US$ 3,002        N/A      US$ 3,002     
  Fed Hm Ln Pc Pool A94972              US$ 2,994        N/A      US$ 2,994     
  Fnma Pool 725423              US$ 2,662        N/A      US$ 2,662     
  Fed Hm Ln Pc Pool 2B5202              US$ 2,625        N/A      US$ 2,625     
  Fnma Pool 888637              US$ 2,404        N/A      US$ 2,404     
  Fed Hm Ln Pc Pool 849787              US$ 2,263        N/A      US$ 2,263     
  Freddie Mac              US$ 2,230        N/A      US$ 2,230     
  Fnma Pool 995024              US$ 2,202        N/A      US$ 2,202     
  Fnma Pool AD0198              US$ 2,137        N/A      US$ 2,137     
  Fannie Mae              US$ 2,087        N/A      US$ 2,087     
  Fnma Pool AL6818              US$ 2,073        N/A      US$ 2,073     
  Fnma Pool AY6119              US$ 2,008        N/A      US$ 2,008     
  Freddie Mac              US$ 2,001        N/A      US$ 2,001     
  Fnma Pool AL7485              US$ 1,871        N/A      US$ 1,871     
  Fnma Pool AL6254              US$ 1,831        N/A      US$ 1,831     
  Fnma Pool 255364              US$ 1,820        N/A      US$ 1,820     
  Fnma Pool AH7196              US$ 1,722        N/A      US$ 1,722     
  Fnma Pool AL7421              US$ 1,660        N/A      US$ 1,660     
  Fnma Pool 930289              US$ 1,579        N/A      US$ 1,579     
  Freddie Mac              US$ 1,501        N/A      US$ 1,501     
  Fnma Pool AL4141              US$ 1,493        N/A      US$ 1,493     
  Fnma Pool MA1201              US$ 1,468        N/A      US$ 1,468     
  Fannie Mae              US$ 1,358        N/A      US$ 1,358     
  Freddie Mac              US$ 1,319        N/A      US$ 1,319     
  Federal Farm Credit Bank              US$ 1,254        N/A      US$ 1,254     
  Fnma Pool 890101              US$ 1,238        N/A      US$ 1,238     
  Fannie Mae              US$ 1,219        N/A      US$ 1,219     
  Fannie Mae              US$ 1,216        N/A      US$ 1,216     
  Fed Hm Ln Pc Pool 849872              US$ 1,052        N/A      US$ 1,052     
  Fnma Pool AL7912              US$ 1,007        N/A      US$ 1,007     
  Fnma Pool AX5630              US$ 988        N/A      US$ 988     

(Continued)

 

- 59 -


Held Company
Name

 

Marketable Securities Type and Name

  Relationship
with the
Company
 

Financial Statement Account

  June 30, 2016     Note  
        Shares/Units
(In Thousands)
    Carrying Value
(Foreign
Currencies
in Thousands)
    Percentage of
Ownership (%)
    Fair Value
(Foreign
Currencies
in Thousands)
   

TSMC Global

  Agency bond              
  Federal Farm Credit Bank     Available-for-sale financial assets          US$ 913        N/A      US$ 913     
  Fed Hm Ln Pc Pool 849614              US$ 912        N/A      US$ 912     
  Fed Hm Ln Pc Pool 2B3772              US$ 891        N/A      US$ 891     
  Fed Hm Ln Pc Pool J32972              US$ 830        N/A      US$ 830     
  Fed Hm Ln Pc Pool V60841              US$ 752        N/A      US$ 752     
  Fed Hm Ln Pc Pool 840260              US$ 723        N/A      US$ 723     
  Fnma Pool AL8471              US$ 698        N/A      US$ 698     
  Freddie Mac              US$ 696        N/A      US$ 696     
  Fnma Pool 888129              US$ 695        N/A      US$ 695     
  Freddie Mac              US$ 694        N/A      US$ 694     
  Freddie Mac              US$ 693        N/A      US$ 693     
  Fnma Pool AD0249              US$ 667        N/A      US$ 667     
  Fed Hm Ln Pc Pool G05956              US$ 662        N/A      US$ 662     
  Freddie Mac              US$ 660        N/A      US$ 660     
  Export Developmnt Canada              US$ 657        N/A      US$ 657     
  Fannie Mae              US$ 611        N/A      US$ 611     
  Government National Mortgage Association              US$ 594        N/A      US$ 594     
  Fnma Pool AL6302              US$ 580        N/A      US$ 580     
  Fnma Pool 257041              US$ 578        N/A      US$ 578     
  Fannie Mae              US$ 563        N/A      US$ 563     
  Fannie Mae              US$ 561        N/A      US$ 561     
  Freddie Mac              US$ 523        N/A      US$ 523     
  Fnma Pool 725946              US$ 498        N/A      US$ 498     
  Fnma Pool AL7920              US$ 488        N/A      US$ 488     
  Fnma Pool 257004              US$ 465        N/A      US$ 465     
  Fed Hm Ln Pc Pool C03532              US$ 406        N/A      US$ 406     
  Fannie Mae              US$ 397        N/A      US$ 397     
  Fed Hm Ln Pc Pool J33012              US$ 369        N/A      US$ 369     
  Fed Hm Ln Pc Pool G60473              US$ 365        N/A      US$ 365     
  Fnma Pool AL0720              US$ 360        N/A      US$ 360     
  Government National Mortgage Association              US$ 351        N/A      US$ 351     
  Fnma Pool AL6406              US$ 341        N/A      US$ 341     
  Fnma Pool AE0154              US$ 332        N/A      US$ 332     
  Fnma Pool 256513              US$ 316        N/A      US$ 316     
  Freddie Mac              US$ 313        N/A      US$ 313     
  Gnma Pool 701598              US$ 311        N/A      US$ 311     
  Fed Hm Ln Pc Pool C03464              US$ 308        N/A      US$ 308     
  Fannie Mae              US$ 299        N/A      US$ 299     
  Fannie Mae              US$ 295        N/A      US$ 295     
  Freddie Mac              US$ 291        N/A      US$ 291     
  Fed Hm Ln Pc Pool J16417              US$ 276        N/A      US$ 276     
  Fnma Pool AH3371              US$ 259        N/A      US$ 259     
  Fnma Pool 735997              US$ 245        N/A      US$ 245     
  Freddie Mac              US$ 234        N/A      US$ 234     
  Fannie Mae              US$ 216        N/A      US$ 216     
  Fnma Pool 889633              US$ 210        N/A      US$ 210     
  Fnma Pool 725424              US$ 180        N/A      US$ 180     
  Fannie Mae              US$ 174        N/A      US$ 174     
  Fnma Pool 889576              US$ 169        N/A      US$ 169     
  Fnma Pool 888994              US$ 153        N/A      US$ 153     
  Fnma Pool 970382              US$ 136        N/A      US$ 136     

(Continued)

 

- 60 -


Held Company
Name

 

Marketable Securities Type and Name

  Relationship
with the
Company
 

Financial Statement Account

  June 30, 2016     Note  
        Shares/Units
(In Thousands)
    Carrying Value
(Foreign
Currencies
in Thousands)
    Percentage of
Ownership (%)
    Fair Value
(Foreign
Currencies
in Thousands)
   

TSMC Global

  Agency bond              
  Fnma Pool AC8517     Available-for-sale financial assets          US$ 116        N/A      US$ 116     
  Fnma Pool AS7124              US$ 115        N/A      US$ 115     
  Fnma Pool 745418              US$ 114        N/A      US$ 114     
  Fnma Pool 889455              US$ 77        N/A      US$ 77     
  Fnma Pool 995018              US$ 73        N/A      US$ 73     
  Fnma Pool 831811              US$ 60        N/A      US$ 60     
  Fed Hm Ln Pc Pool 849506              US$ 42        N/A      US$ 42     
  Fnma Pool 954940              US$ 41        N/A      US$ 41     
  Fnma Pool AL6964              US$ 30        N/A      US$ 30     
  Fnma Pool AB0109              US$ 28        N/A      US$ 28     
  Fnma Pool AC8444              US$ 26        N/A      US$ 26     
  Fnma Pool 745516              US$ 23        N/A      US$ 23     
  Fnma Pool 890071              US$ 23        N/A      US$ 23     
  Fnma Pool 535994              US$ 22        N/A      US$ 22     
  Fed Hm Ln Pc Pool C91876              US$ 20        N/A      US$ 20     
  Fnma Pool AE0616              US$ 19        N/A      US$ 19     
  Fnma Pool 323692              US$ 16        N/A      US$ 16     
  Fnma Pool 725773              US$ 13        N/A      US$ 13     
  Fnma Pool 735141              US$ 11        N/A      US$ 11     
  Negotiable certificate of deposit              
  Bank of China     Held-to-maturity financial assets          US$ 50,000        N/A      US$ 50,176     
  China Development Bank              US$ 50,000        N/A      US$ 50,209     
  China Construction Bank              US$ 50,000        N/A      US$ 49,850     
  Corporate issued asset-backed securities              
  Citibank Credit Card Issuance Trust     Available-for-sale financial assets          US$ 21,062        N/A      US$ 21,062     
  Chase Issuance Trust              US$ 20,809        N/A      US$ 20,809     
  Capital One Multi Asset Execution Trust              US$ 20,195        N/A      US$ 20,195     
  Discover Card Execution Note Trust              US$ 16,549        N/A      US$ 16,549     
  Bank of America Credit Card Trust              US$ 10,448        N/A      US$ 10,448     
  American Express Credit Account Master Trust              US$ 7,783        N/A      US$ 7,783     
  Ford Credit Floorplan Master Owner Trust              US$ 7,359        N/A      US$ 7,359     
  Mercedes Benz Master Owner Trust              US$ 5,990        N/A      US$ 5,990     
  Chesapeake Funding II LLC              US$ 5,782        N/A      US$ 5,782     
  Ford Credit Auto Owner Trust              US$ 4,768        N/A      US$ 4,768     
  Morgan Stanley Capital I Trust              US$ 4,069        N/A      US$ 4,069     
  American Express Credit Account Master Trust              US$ 4,006        N/A      US$ 4,006     
  American Express Credit Account Master Trust              US$ 3,997        N/A      US$ 3,997     
  GS Mortgage Securities Trust              US$ 3,170        N/A      US$ 3,170     
  Hyundai Auto Receivables Trust              US$ 2,849        N/A      US$ 2,849     
  Mercedes Benz Auto Lease Trust              US$ 2,692        N/A      US$ 2,692     
  Toyota Auto Receivables Owner Trust              US$ 2,495        N/A      US$ 2,495     
  BMW Floorplan Master Owner Trust              US$ 2,437        N/A      US$ 2,437     
  Nissan Auto Receivables Owner Trust              US$ 2,387        N/A      US$ 2,387     
  Carmax Auto Owner Trust              US$ 2,018        N/A      US$ 2,018     
  Nissan Auto Receivables Owner Trust              US$ 2,011        N/A      US$ 2,011     
  BMW Vehicle Lease Trust              US$ 2,004        N/A      US$ 2,004     
  Ford Credit Auto Owner Trust              US$ 2,003        N/A      US$ 2,003     
  Toyota Auto Receivables Owner Trust              US$ 2,002        N/A      US$ 2,002     
  Nissan Auto Receivables Owner Trust              US$ 2,002        N/A      US$ 2,002     
  Hyundai Auto Lease Securitization Trust              US$ 2,002        N/A      US$ 2,002     

(Continued)

 

- 61 -


Held Company
Name

 

Marketable Securities Type and Name

  Relationship
with the
Company
 

Financial Statement Account

  June 30, 2016     Note  
        Shares/Units
(In Thousands)
    Carrying Value
(Foreign
Currencies
in Thousands)
    Percentage of
Ownership (%)
    Fair Value
(Foreign
Currencies
in Thousands)
   

TSMC Global

  Corporate issued asset-backed securities              
  USAA Auto Owner Trust     Available-for-sale financial assets          US$ 2,000        N/A      US$ 2,000     
  Mercedes Benz Auto Lease Trust              US$ 1,999        N/A      US$ 1,999     
  Nissan Master Owner Trust Receivables Trust              US$ 1,997        N/A      US$ 1,997     
  Nissan Auto Lease Trust              US$ 1,904        N/A      US$ 1,904     
  Golden Credit Card Trust              US$ 1,804        N/A      US$ 1,804     
  Mercedes Benz Auto Receivables Trust              US$ 1,709        N/A      US$ 1,709     
  Honda Auto Receivables Owner Trust              US$ 1,706        N/A      US$ 1,706     
  Toyota Auto Receivables Owner Trust              US$ 1,561        N/A      US$ 1,561     
  Hyundai Auto Lease Securitization Trust              US$ 1,347        N/A      US$ 1,347     
  Toyota Auto Receivables Owner Trust              US$ 1,148        N/A      US$ 1,148     
  CFCRE Commercial Mortgage Trust              US$ 1,119        N/A      US$ 1,119     
  Ford Credit Auto Lease Trust              US$ 1,113        N/A      US$ 1,113     
  Hyundai Auto Receivables Trust              US$ 1,010        N/A      US$ 1,010     
  Nissan Auto Lease Trust              US$ 1,002        N/A      US$ 1,002     
  Ford Credit Auto Owner Trust              US$ 935        N/A      US$ 935     
  Honda Auto Receivables Owner Trust              US$ 917        N/A      US$ 917     
  Nissan Auto Lease Trust              US$ 605        N/A      US$ 605     
  Fund              
  Primavera Capital Fund II L.P.     Financial assets carried at cost          US$ 16,014        4      US$ 16,014     
  Money market fund              
  Goldman Sachs US$ Liquid Reserves Fund     Available-for-sale financial assets     189,831      US$ 189,831        N/A      US$ 189,831     

VTAF III

  Common stock              
  Accton Wireless Broadband Corp.     Financial assets carried at cost     2,249      US$ 315        6      US$ 315     
  Preferred stock              
  BridgeLux, Inc.     Financial assets carried at cost     7,522      US$ 4,235        3      US$ 4,235     
  GTBF, Inc.         1,154      US$ 1,500        N/A      US$ 1,500     
  LiquidLeds Lighting Corp.         1,600      US$ 800        11      US$ 800     
  Neoconix, Inc.         4,147      US$ 170             US$ 170     

VTAF II

  Common stock              
  RichWave Technology Corp.     Available-for-sale financial assets     1,267      US$ 2,814        3      US$ 2,814     
  Sentelic     Financial assets carried at cost     1,806      US$ 2,607        8      US$ 2,607     
  Aether Systems, Inc.         3,100      US$ 2,429        30      US$ 2,429     
  Preferred stock              
  Aquantia     Financial assets carried at cost     4,643      US$ 4,441        2      US$ 4,441     
  5V Technologies, Inc.         963      US$ 2,168        2      US$ 2,168     
  Impinj, Inc.         711      US$ 1,100             US$ 1,100     
  QST Holdings, LLC              US$ 588        13      US$ 588     
  Cresta Technology Corporation         92      US$ 28             US$ 28     

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$ 4,974        11      US$ 4,974     
  Goyatek Technology, Corp.     Financial assets carried at cost     745               6            
  Sonics, Inc.         278               4            
  Preferred stock              
  Sonics, Inc.     Financial assets carried at cost     264               4            

(Concluded)

 

- 62 -


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 SIX MONTHS ENDED JUNE 30, 2016

(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

 

Bank debentures

                         
 

HSBC Bank (Taiwan) Limited

 

Held-to-maturity financial assets

                       $ 3,305,475             $             $ 3,300,000      $ 3,300,000      $             $   
 

Corporate bond

                         
 

CPC Corporation, Taiwan

 

Held-to-maturity financial assets

                         1,543,723               1,513,743                                           3,050,535   
 

Nan Ya Plastics Corporation

 

                                       302,139                                           301,494   
 

Structure deposit

                         
 

Cathay United Bank

 

Held-to-maturity financial assets

                         1,000,000                             1,000,000        1,000,000                        
 

Commercial paper

                         
 

Taiwan Power Company

 

Held-to-maturity financial assets

                                80        798,708                                    80        798,708   
 

Stock

                         
 

TSMC Nanjing

 

Investments accounted for using equity method

           Subsidiary                             1,630,700                                           1,603,461   
 

TSMC Global

 

Prepayments for Investments (Note 2)

           Subsidiary                             35,207,621                                           35,207,621   

TSMC Global

 

Corporate bond

                         
 

JPMorgan Chase & Co.

 

Available-for-sale financial assets

                       US$ 4,971             US$ 13,494             US$ 2,505      US$ 2,505                    US$ 16,152   
 

US Bank NA Cincinnati

 

                                     US$ 11,976             US$ 7,513      US$ 7,486      US$ 27             US$ 4,528   
 

JPMorgan Chase & Co.

 

Held-to-maturity financial assets

                       US$ 10,798             US$ 143,533                                         US$ 153,765   
 

Wells Fargo & Company

 

                                     US$ 150,008                                         US$ 150,007   
 

Goldman Sachs Group, Inc.

 

                                     US$ 100,000                                         US$ 100,000   
 

Westpac Banking Corporation

 

                                     US$ 100,000                                         US$ 100,000   
 

Commonwealth Bank of Australia

 

                                     US$ 50,000                                         US$ 50,000   
 

National Australia Bank

 

                                     US$ 50,000                                         US$ 50,000   
 

Bank of Nova Scotia

 

                                     US$ 49,978                                         US$ 49,979   
 

Government bond

                         
 

US Treasury N/B

 

Available-for-sale financial assets

                       US$ 26,702             US$ 43,762             US$ 31,946      US$ 31,915      US$ 31             US$ 38,908   
 

US Treasury Floating Rate Note

 

                                     US$ 39,304             US$ 17,642      US$ 17,631      US$ 11             US$ 21,667   
 

Treasury Inflation-Indexed N/B

 

                                     US$ 9,167                                         US$ 9,175   

(Continued)

 

- 63 -


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 Global

 

Agency bond

                         
 

Fnma Pool AL7191

 

Available-for-sale financial assets

                       US$ 5,864             US$ 9,855             US$ 1,353      US$ 1,542      US$ (189          US$ 14,450   
 

Fnma Pool 888577

 

                       US$             US$ 11,995             US$ 924      US$ 1,055      US$ (131          US$ 10,949   
 

Fnma Pool AV5062

 

                       US$             US$ 9,975             US$ 391      US$ 408      US$ (17          US$ 9,641   
 

Fnma Tba 15 Yr 2.5

 

                       US$ 3,964             US$ 11,998             US$ 16,006      US$ 15,978      US$ 28                 
 

Corporate issued asset-backed securities

                         
 

Citibank Credit Card Issuance Trust

 

Available-for-sale financial assets

                       US$ 9,756             US$ 11,268                                         US$ 21,062   
 

Chase Issuance Trust

 

                       US$ 15,507             US$ 10,984             US$ 5,744      US$ 5,753      US$ (9          US$ 20,809   
 

Capital One Multi Asset Execution Trust

 

                       US$ 8,961             US$ 13,178             US$ 1,999      US$ 1,996      US$ 3             US$ 20,195   
 

Money market fund

                         
 

Goldman Sachs US$ Liquid Reserves Fund

 

Available-for-sale financial assets

                                199,000      US$ 199,000        9,169      US$ 9,169      US$ 9,169               189,831      US$ 189,831   

 

Note 1: The ending balance includes the amortization of premium/discount on bonds investments, share of profits/losses of investees and other related adjustment.
Note 2: To lower the hedging cost, in February 2016, the Board of Directors of TSMC approved to inject US$2,000,000 thousand of capital into TSMC Global. This project was approved by the Investment Commission, Ministry of Economic Affairs, R.O.C. (MOEA). The prepayment for investment was US$1,081,200 thousand as of June 30, 2016 and the total injection is expected to be finished in the fourth quarter of 2016.

(Concluded)

 

- 64 -


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 SIX MONTHS ENDED JUNE 30, 2016

(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  

April 15, 2015 to February 17, 2016

  $ 362,111     

Monthly settlement by the construction progress and acceptance

 

Environetics Design Group Co., Ltd.

    N/A   N/A   N/A   N/A  

Bidding, price comparison and price negotiation

 

Manufacturing purpose

  None
 

Fab

 

September 17, 2015 to January 25, 2016

    3,201,800     

Monthly settlement by the construction progress and acceptance

 

DA CIN Construction Co., Ltd.

    N/A   N/A   N/A   N/A  

Bidding, price comparison and price negotiation

 

Manufacturing purpose

  None
 

Fab

 

December 10, 2015 to April 11, 2016

    3,167,768     

Monthly settlement by the construction progress and acceptance

 

Fu Tsu Construction Co., Ltd.

    N/A   N/A   N/A   N/A  

Bidding, price comparison and price negotiation

 

Manufacturing purpose

  None
 

Fab

 

December 31, 2015 to January 04, 2016

    1,250,000     

Monthly settlement by the construction progress and acceptance

 

China Steel Structure Co., Ltd.

    N/A   N/A   N/A   N/A  

Bidding, price comparison and price negotiation

 

Manufacturing purpose

  None
 

Fab

 

January 22, 2016 to January 25, 2016

    750,000     

Monthly settlement by the construction progress and acceptance

 

KEDGE Construction Co., Ltd.

    N/A   N/A   N/A   N/A  

Bidding, price comparison and price negotiation

 

Manufacturing purpose

  None

TSMC Nanjing Company Ltd.

 

Land use right

 

June 16, 2016

    RMB160,521     

100% payment

 

Nanjing Municipal Bureau of Land and Resources

    N/A   N/A   N/A   N/A  

Bidding

 

Manufacturing purpose

  None

 

- 65 -


TABLE 6

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

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

FOR THE SIX MONTHS ENDED JUNE 30, 2016

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

 

 

                    Notes/Accounts
Payable or

Receivable
       
           

Transaction Details

      Ending Balance              
               

Amount

(Foreign Currencies

    % to         Abnormal Transaction   (Foreign
Currencies in
    % to        

Company Name

 

Related Party

 

Nature of Relationships

 

Purchases/Sales

  in Thousands)     Total    

Payment Terms

  Unit Price   Payment Terms   Thousands)     Total     Note  

TSMC

 

TSMC North America

  Subsidiary   Sales   $ 264,580,092        61     

Net 30 days from invoice date (Note)

    Note   $ 69,202,508        63     
 

GUC

  Associate   Sales     2,035,267            

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

        391,735            
 

TSMC China

  Subsidiary   Purchases     8,451,002        26     

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

        (1,632,878     6     
 

WaferTech

  Indirect subsidiary   Purchases     4,437,485        14     

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

        (1,502,761     6     
 

VIS

  Associate   Purchases     3,307,255        10     

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

        (485,679     2     
 

SSMC

  Associate   Purchases     1,479,784        5     

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

        (257,953     1     

TSMC North America

 

GUC

  Associate of TSMC   Sales    

(US$

481,225

14,682

  

        

Net 30 days from invoice date

       

(US$

32,229

998

  

        

 

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.

 

- 66 -


TABLE 7

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

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

June 30, 2016

(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

   $ 70,386,041       43    $ 3,026,539          $ 4,085,293       $   
  

VIS

  

Associate

     1,296,830       Note 2                           
  

GUC

  

Associate

     531,798       39                           

TSMC China

  

TSMC

  

Parent company

    

(RMB

1,632,878

331,576)

  

  

   33                           

TSMC Technology

  

TSMC

  

Parent company

    

(US$

266,530

8,256

  

   Note 2                           

WaferTech

  

TSMC

  

Parent company

    

(US$

1,502,761

46,550

  

   45                           

 

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.

 

- 67 -


TABLE 8

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

FOR SIX MONTH ENDED JUNE 30, 2016

INTERCOMPANY RELATIONSHIPS AND SIGNIFICANT INTERCOMPANY TRANSACTIONS

(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

   $ 264,580,092          62%
           

Receivables from related parties

     69,202,508          4%
           

Other receivables from related parties

     1,183,533         
      TSMC Japan    1   

Marketing expenses - commission

     144,035         
      TSMC Europe    1   

Marketing expenses - commission

     223,879         
      TSMC China    1   

Purchases

     8,451,002          2%
           

Payables to related parties

     1,632,878         
      TSMC Canada    1   

Research and development expenses

     121,789         
      TSMC Technology    1   

Research and development expenses

     925,244         
           

Payables to related parties

     266,530         
      WaferTech    1   

Purchases

     4,437,485          1%
           

Payables to related parties

     1,502,761         

1

   TSMC China    TSMC Nanjing    3   

Other receivables from related parties

     1,700,825         

2

   VisEra Holding   

VisEra Tech

   3   

Other payables to related parties

     759,360         

 

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.

 

- 68 -


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 SIX MONTH ENDED JUNE 30, 2016

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

 

 

Investor
Company

 

Investee

Company

 

Location

 

Main Businesses

and Products

  Original Investment Amount     Balance as of June 30, 2016     Net Income    

Share of

Profits/Losses

   

Note

        June 30,
2016
(Foreign
Currencies in
Thousands)
    December 31,
2015
(Foreign
Currencies in
Thousands)
    Shares (In
Thousands)
    Percentage of
Ownership
  Carrying
Value
(Foreign
Currencies in
Thousands)
    (Losses) of the
Investee
(Foreign
Currencies in
Thousands)
    of Investee
(Note 1)
(Foreign
Currencies in
Thousands)
   

TSMC

  TSMC Global   Tortola, British Virgin Islands  

Investment activities

  $ 202,962,857      $ 167,755,236        5      100   $ 235,940,202      $ 1,136,615      $ 1,136,615      Subsidiary
          Note 3                 
  TSMC Partners   Tortola, British Virgin Islands  

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

    31,456,130        31,456,130        988,268      100     51,108,735        1,170,601        1,170,601      Subsidiary
  SSMC   Singapore  

Fabrication and supply of integrated circuits

    5,120,028        5,120,028        314      39     10,154,793        2,135,710        828,442      Associate
  VIS   Hsin-Chu, Taiwan  

Research, design, development, manufacture, packaging, testing and sale of memory integrated circuits, LSI, VLSI and related parts

    10,180,677        10,180,677        464,223      28     8,068,620        2,869,519        810,201      Associate
  TSMC North America   San Jose, California, U.S.A  

Selling and marketing of integrated circuits and semiconductor devices

    333,718        333,718        11,000      100     4,235,511        80,826        80,826      Subsidiary
  Xintec   Taoyuan, Taiwan  

Wafer level chip size packaging service

    1,309,969        1,309,969        92,778      35     2,089,346        (217,146     (74,738   Associate
  GUC   Hsin-Chu, Taiwan  

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

    386,568        386,568        46,688      35     1,063,883        260,622        91,170      Associate
  VTAF II   Cayman Islands  

Investing in new start-up technology companies

    608,562        608,562             98     533,531        1,533        1,503      Subsidiary
  Chi Cherng   Taipei, Taiwan  

Investment activities

    394,674        394,674        36,600      100     395,068        704        704      Subsidiary
  VTAF III   Cayman Islands  

Investing in new start-up technology companies

    1,499,452        1,499,452             98     351,190        (28,978     (28,399   Subsidiary
  TSMC Europe   Amsterdam, the Netherlands  

Marketing and engineering supporting activities

    15,749        15,749             100     349,104        19,916        19,916      Subsidiary
  TSMC Japan   Yokohama, Japan  

Marketing activities

    83,760        83,760        6      100     150,090        3,702        3,702      Subsidiary
  TSMC Korea   Seoul, Korea  

Customer service and technical supporting activities

    13,656        13,656        80      100     36,777        1,410        1,410      Subsidiary
  VTA Holdings   Delaware, U.S.A  

Investing in new start-up technology companies

                       7                        Subsidiary
  Emerging Alliance   Cayman Islands  

Investing in new start-up technology companies

           844,775                        (313     (311   Subsidiary
  TSMC Solar Europe GmbH   Hamburg, Germany  

Selling of solar related products and providing customer service

    25,266        25,266        1      100     (4,430     (5,747     (5,747   Subsidiary
  Motech   New Taipei, Taiwan  

Manufacturing and sales of solar cells, crystalline silicon solar cell, and test and measurement instruments and design and construction of solar power systems

    Note 4        5,221,931        Note 4      Note 4     Note 4        Note 4        93,030      Note 4

 

(Continued)

 

- 69 -


Investor

Company

 

Investee

Company

 

Location

 

Main Businesses

and Products

  Original Investment Amount     Balance as of June 30, 2016     Net Income    

Share of

Profits/Losses

   

Note

        June 30,
2016
(Foreign
Currencies in
Thousands)
    December 31,
2015
(Foreign
Currencies in
Thousands)
    Shares (In
Thousands)
    Percentage of
Ownership
  Carrying
Value
(Foreign
Currencies in
Thousands)
    (Losses) of the
Investee
(Foreign
Currencies in
Thousands)
    of Investee
(Note 1)
(Foreign
Currencies in
Thousands)
   

TSMC Partners

  TSMC Development   Delaware, U.S.A  

Investment activities

    0.03        0.03             100     26,521,288        962,584        Note 2      Subsidiary
        (US$ 0.001   (US$ 0.001       (US$ 821,525   (US$ 29,369    
  VisEra Holding   Cayman Islands  

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

   

(US$

4,881,332

151,204

  

   

(US$

4,881,332

151,204

  

    86,000      98    

(US$

7,083,239

219,411

  

   

(US$

90,633

2,765

  

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

Engineering support activities

    0.03        0.03             100     578,599        44,395        Note 2      Subsidiary
        (US$ 0.001   (US$ 0.001       (US$ 17,923   (US$ 1,354    
  ISDF II   Cayman Islands  

Investing in new start-up technology companies

   

(US$

300,200

9,299

  

   

(US$

300,200

9,299

  

    9,299      97    

(US$

290,900

9,011

  

   

(US$

2,745

84

  

    Note 2      Subsidiary
  TSMC Canada   Ontario, Canada  

Engineering support activities

    74,251        74,251        2,300      100     166,354        5,685        Note 2      Subsidiary
        (US$ 2,300   (US$ 2,300       (US$ 5,153   (US$ 173    
  ISDF   Cayman Islands  

Investing in new start-up technology companies

   

(US$

18,821

583

  

   

(US$

18,821

583

  

    583      97    

(US$

4,041

125

  

   

(US$

4

  

    Note 2      Subsidiary

VTAF III

  Growth Fund   Cayman Islands  

Investing in new start-up technology companies

   

(US$

47,190

1,462

  

   

(US$

47,190

1,462

  

         100    

(US$

30,224

936

  

   

(US$

4,632

141

  

    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$

168,281

5,212

  

   

(US$

168,281

5,212

  

    15,643      58    

(US$

18,432

571

  

   

(US$

(3,184

(97


)) 

    Note 2      Subsidiary
  VTA Holdings   Delaware, U.S.A  

Investing in new start-up technology companies

                       62                   Note 2      Subsidiary

VTAF II

  VTA Holdings   Delaware, U.S.A  

Investing in new start-up technology companies

                       31                   Note 2      Subsidiary

TSMC Development

  WaferTech   Washington, U.S.A  

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

  $      $        293,637      100   $

(US$

6,178,523

 191,386

  

  $

(US$

906,979

 27,672)

  

  

    Note 2      Subsidiary

VisEra Holding

  VisEra Tech   Hsin-Chu, Taiwan  

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

   

(US$

3,036,818

 94,069

  

   

(US$

3,036,818

 94,069

  

    253,120      87    

(US$

4,827,608

 149,540

  

   

(US$

254,988

 7,780

  

    Note 2      Subsidiary
  Xintec   Taoyuan, Taiwan  

Wafer level chip size packaging service

   

(US$

196,375

 6,083

  

   

(US$

196,375

 6,083

  

    18,504      6    

(US$

687,990

 21,311

  

   

(US$

(217,146

(6,625


)) 

    Note 2      Associate

 

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.
Note 3: To lower the hedging cost, in February 2016, the Board of Directors of TSMC approved to inject US$2,000,000 thousand of capital into TSMC Global. This project was approved by the Investment Commission, MOEA. The prepayment for investment was US$1,081,200 thousand as of June 30, 2016 and the total injection is expected to be finished in the fourth quarter of 2016.
Note 4: The Company has no longer served as Motech’s board of director starting June 2016. As a result, the Company exercises no significant influence over Motech. Therefore, Motech is no longer accounted for using the equity method.

(Concluded)

 

- 70 -


TABLE 10

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

INFORMATION ON INVESTMENT IN MAINLAND CHINA

FOR SIX MONTH ENDED JUNE 30, 2016

(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, 2016

(US$ in
Thousands)
   

 

Investment

Flows

    Accumulated
Outflow of
Investment from
Taiwan as of

June 30,
2016 (US$ in
Thousands)
    Net Income
(Losses) of the
Investee
Company
    Percentage of
Ownership
  Share of
Profits/Losses
    Carrying
Amount

as of
June 30,
2016
    Accumulated
Inward
Remittance of
Earnings as
of

June 30,
2016
 
          Outflow
(US$ in
Thousands)
    Inflow              

TSMC China

 

Manufacturing and selling of integrated circuits at the order of and pursuant to product design specifications provided by customers

  $

(RMB

18,939,667

4,502,080

  

    Note 1      $

(US$

18,939,667

596,000

  

  $      $      $

(US$

18,939,667

596,000

  

  $ 2,132,375      100%   $

 

1,990,114

(Note 2

  

  $ 40,532,453      $ —     

TSMC Nanjing

 

Manufacturing and selling of integrated circuits at the order of and pursuant to product design specifications provided by customers

   

(RMB

1,630,700

328,975

  

    Note 1              

(US$

1,630,700

50,000

  

          

(US$

1,630,700

50,000

  

    4,963      100%    

 

4,963

(Note 2

  

    1,603,461          

 

Accumulated Investment in Mainland China
as of June 30, 2016
(US$ in Thousands)
     Investment Amounts Authorized by
Investment Commission, MOEA
(US$ in Thousands)
     Upper Limit on Investment  
$

(US$

20,570,367

646,000

  

   $

(US$

119,412,667

3,596,000

  

   $ 718,398,587   

 

Note 1: TSMC directly invested US$596,000 thousand in TSMC China and US$50,000 thousands in TSMC Nanjing.
Note 2: Amount was recognized based on the reviewed financial statements.

 

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