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 February 2018

 

 

Taiwan Semiconductor Manufacturing Company Ltd.

(Translation of Registrant’s Name Into English)

 

 

No. 8, Li-Hsin Rd. 6,

Hsinchu Science Park,

Taiwan

(Address of Principal Executive Offices)

 

 

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

Form 20-F  ☒            Form 40-F  ☐

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

Yes  ☐            No  ☒

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

 

 

 


SIGNATURES

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

 

    Taiwan Semiconductor Manufacturing Company Ltd.
Date: Feb 26, 2018   By  

/s/ Lora Ho

      Lora Ho
      Senior Vice President & Chief Financial Officer


  

Taiwan Semiconductor Manufacturing

Company Limited and Subsidiaries

  
  

Consolidated Financial Statements for the

Years Ended December 31, 2017 and 2016 and

Independent Auditors’ Report

  


REPRESENTATION LETTER

The entities that are required to be included in the combined financial statements of Taiwan Semiconductor Manufacturing Company Limited as of and for the year ended December 31, 2017, under the Criteria Governing the Preparation of Affiliation Reports, Consolidated Business Reports and Consolidated Financial Statements of Affiliated Enterprises are the same as those included in the consolidated financial statements prepared in conformity with the International Financial Reporting Standard 10, “Consolidated Financial Statements.” In addition, the information required to be disclosed in the combined financial statements is included in the consolidated financial statements. Consequently, Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries do not prepare a separate set of combined financial statements.

 

Very truly yours,
TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LIMITED
By

 

MORRIS CHANG
Chairman

 

February 13, 2018

 

- 1 -


INDEPENDENT AUDITORS’ REPORT

The Board of Directors and Shareholders

Taiwan Semiconductor Manufacturing Company Limited

Opinion

We have audited the accompanying consolidated financial statements of Taiwan Semiconductor Manufacturing Company Limited and subsidiaries (the “Company”), which comprise the consolidated balance sheets as of December 31, 2017 and 2016, and the consolidated statements of comprehensive income, changes in equity and cash flows for the years then ended, and the notes to the consolidated financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2017 and 2016, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), IFRIC Interpretations (IFRIC), and SIC Interpretations (SIC) endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China.

Basis for Opinion

We conducted our audits in accordance with the Regulations Governing Auditing and Attestation of Financial Statements by Certified Public Accountants and auditing standards generally accepted in the Republic of China. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Company in accordance with The Norm of Professional Ethics for Certified Public Accountant of the Republic of China and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements for the year ended December 31, 2017. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Key audit matters for the Company’s consolidated financial statements for the year ended December 31, 2017 are stated as follows:

Provision for sales returns and allowances

In consideration of business volume and market conditions, the Company provides a variety of business incentives to specific customers or products. The provision for sales returns and allowance is based on historical experience and the varying contractual terms. Please refer to Notes 4, 5 and 19 to the consolidated financial statements for the details of the information about provision for sales returns and allowances. Since the provision for sales returns and allowances is subject to accounting judgment and estimation, and the result could also affect the net revenue in the consolidated financial statements, it has been identified as a key audit matter.

 

- 2 -


Our key audit procedures performed in respect of the above area included the following:

 

1. Understood and tested the design and operating effectiveness of the key controls over provision for sales returns and allowances;

 

2. Understood and assessed the reasonableness of assumptions made and methodology used in estimating provision for sales returns and allowances;

 

3. Sampled and inspected the sales contracts of main products by agreeing the contractual terms and performed an analysis to challenge the estimation on possibility that specific products could meet business incentives condition to verify the reasonableness of the accrual of the provision;

 

4. Performed a retrospective review to comparatively analyze the historical accuracy of judgments with reference to actual sales returns and allowance paid.

Timing to commence depreciation of property, plant and equipment (PP&E)

The Company continues to invest in capital expenditures to develop and build capacity in leading-edge technologies to meet customers’ demand. Please refer to Notes 4 and 15 to the consolidated financial statements for the details of the information and accounting policy about the depreciation of PP&E. According to IAS 16, depreciation of PP&E should commence when the assets are available for their intended use. Due to the significant capital expenditures incurred by the Company, the appropriateness of the timing to commerce depreciation of PP&E could have a material impact on its financial performance. Consequently, the validity of the timing to commence depreciation of PP&E is identified as a key audit matter.

Our key audit procedures performed in respect of the above area included the following:

 

1. Understood and tested the design and operating effectiveness of the key controls over the timing to commence depreciation of PP&E;

 

2. Understood the criteria the assets are defined as available for their intended use and the corresponding accounting treatments;

 

3. Sampled and reviewed the appropriateness of the timing for commencing depreciation after the assets met the criteria of available for use in current year;

 

4. Performed an observation on the physical count of equipment under installation and construction in progress; sampled and inspected the supporting documentation to verify that the status of equipment under installation and construction in progress are not available for use;

 

5. Sampled equipment under installation and construction in progress which met the criteria of available for use and were transferred in the subsequent period to evaluate the reasonableness of the timing for commencing depreciation;

 

6. Sampled and reviewed the appropriateness of the equipment under installation and construction in progress which are not available for their intended use.

Other Matter

We have also audited the parent company only financial statements of Taiwan Semiconductor Manufacturing Company Limited as of and for the years ended December 31, 2017 and 2016 on which we have issued an unmodified opinion.

 

- 3 -


Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the IFRS, IAS, IFRIC, and SIC endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Those charged with governance (including members of the Audit Committee) are responsible for overseeing the Company’s financial reporting process.

Auditors’ Responsibilities for the Audit of the Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the auditing standards generally accepted in the Republic of China will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with the auditing standards generally accepted in the Republic of China, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

 

1. Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

 

2. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control.

 

3. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

 

4. Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the Company to cease to continue as a going concern.

 

- 4 -


5. Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

 

6. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Company to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements for the year ended December 31, 2017 and are therefore the key audit matters. We describe these matters in our auditors’ report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

The engagement partners on the audit resulting in this independent auditors’ report are Yih-Shin Kao and Yu Feng Huang.

Deloitte & Touche

Taipei, Taiwan

Republic of China

February 13, 2018

Notice to Readers

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

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

 

- 5 -


Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED BALANCE SHEETS

(In Thousands of New Taiwan Dollars)

 

 

    December 31, 2017     December 31, 2016  
    Amount     %     Amount     %  

ASSETS

       
CURRENT ASSETS                        

Cash and cash equivalents (Note 6)

  $ 553,391,696       28     $ 541,253,833       29  

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

    569,751             6,451,112        

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

    93,374,153       5       67,788,767       4  

Held-to-maturity financial assets (Note 9)

    1,988,385             16,610,116       1  

Hedging derivative financial assets (Note 10)

    34,394             5,550        

Notes and accounts receivable, net (Note 11)

    121,133,248       6       128,335,271       7  

Receivables from related parties (Note 34)

    1,184,124             969,559        

Other receivables from related parties (Note 34)

    171,058             146,788        

Inventories (Notes 5, 12 and 38)

    73,880,747       4       48,682,233       3  

Other financial assets (Notes 35 and 38)

    7,253,114             4,100,475        

Other current assets (Note 17)

    4,222,440             3,385,422        
 

 

 

   

 

 

   

 

 

   

 

 

 

Total current assets

    857,203,110       43       817,729,126       44  
 

 

 

   

 

 

   

 

 

   

 

 

 

NONCURRENT ASSETS

       

Held-to-maturity financial assets (Note 9)

    18,833,329       1       22,307,561       1  

Financial assets carried at cost (Note 13)

    4,874,257             4,102,467        

Investments accounted for using equity method (Notes 5 and 14)

    17,861,488       1       19,743,888       1  

Property, plant and equipment (Notes 5 and 15)

    1,062,542,322       53       997,777,687       53  

Intangible assets (Notes 5 and 16)

    14,175,140       1       14,614,846       1  

Deferred income tax assets (Notes 5 and 29)

    12,105,463       1       8,271,421        

Refundable deposits

    1,283,414             407,874        

Other noncurrent assets (Note 17)

    2,983,120             1,500,432        
 

 

 

   

 

 

   

 

 

   

 

 

 

Total noncurrent assets

    1,134,658,533       57       1,068,726,176       56  
 

 

 

   

 

 

   

 

 

   

 

 

 

TOTAL

  $ 1,991,861,643       100     $ 1,886,455,302       100  
 

 

 

   

 

 

   

 

 

   

 

 

 

LIABILITIES AND EQUITY

       

CURRENT LIABILITIES

       

Short-term loans (Note 18)

  $ 63,766,850       3     $ 57,958,200       3  

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

    26,709             191,135        

Hedging derivative financial liabilities (Note 10)

    15,562                    

Accounts payable

    28,412,807       1       26,062,351       2  

Payables to related parties (Note 34)

    1,656,356             1,262,174        

Salary and bonus payable

    14,254,871       1       13,681,817       1  

Accrued profit sharing bonus to employees and compensation to directors and supervisors (Notes 23 and 31)

    23,419,135       1       22,894,006       1  

Payables to contractors and equipment suppliers

    55,723,774       3       63,154,514       3  

Income tax payable (Notes 5 and 29)

    33,479,311       2       40,306,054       2  

Provisions (Notes 5 and 19)

    13,961,787       1       18,037,789       1  

Long-term liabilities - current portion (Note 20)

    58,401,122       3       38,109,680       2  

Accrued expenses and other current liabilities (Note 22)

    65,588,396       3       36,581,553       2  
 

 

 

   

 

 

   

 

 

   

 

 

 

Total current liabilities

    358,706,680       18       318,239,273       17  
 

 

 

   

 

 

   

 

 

   

 

 

 

NONCURRENT LIABILITIES

       

Bonds payable (Note 20)

    91,800,000       5       153,093,557       8  

Long-term bank loans

                21,780        

Deferred income tax liabilities (Notes 5 and 29)

    302,205             141,183        

Net defined benefit liability (Notes 5 and 21)

    8,850,704       1       8,551,408        

Guarantee deposits (Note 22)

    7,586,790             14,670,433       1  

Others

    1,855,621             1,686,542        
 

 

 

   

 

 

   

 

 

   

 

 

 

Total noncurrent liabilities

    110,395,320       6       178,164,903       9  

Total liabilities

    469,102,000       24       496,404,176       26  

EQUITY ATTRIBUTABLE TO SHAREHOLDERS OF THE PARENT

       

Capital stock (Note 23)

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

 

 

   

 

 

   

 

 

   

 

 

 

Capital surplus (Note 23)

    56,309,536       3       56,272,304       3  
 

 

 

   

 

 

   

 

 

   

 

 

 

Retained earnings (Note 23)

       

Appropriated as legal capital reserve

    241,722,663       12       208,297,945       11  

Unappropriated earnings

    991,639,347       49       863,710,224       46  
 

 

 

   

 

 

   

 

 

   

 

 

 
    1,233,362,010       61       1,072,008,169       57  

Others (Note 23)

    (26,917,818     (1     1,663,983        
 

 

 

   

 

 

   

 

 

   

 

 

 

Equity attributable to shareholders of the parent

    1,522,057,533       76       1,389,248,261       74  

NONCONTROLLING INTERESTS

    702,110             802,865        
 

 

 

   

 

 

   

 

 

   

 

 

 

Total equity

    1,522,759,643       76       1,390,051,126       74  
 

 

 

   

 

 

   

 

 

   

 

 

 

TOTAL

  $ 1,991,861,643       100     $ 1,886,455,302       100  

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

 

- 6 -


Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

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

 

 

    2017     2016  
    Amount     %     Amount     %  

NET REVENUE (Notes 5, 24, 34 and 40)

  $ 977,447,241       100     $ 947,938,344       100  

COST OF REVENUE (Notes 5, 12, 31, 34 and 38)

    482,616,286       49       473,077,173       50  
 

 

 

   

 

 

   

 

 

   

 

 

 

GROSS PROFIT BEFORE UNREALIZED GROSS PROFIT ON SALES TO ASSOCIATES

    494,830,955       51       474,861,171       50  

UNREALIZED GROSS PROFIT ON SALES TO ASSOCIATES

    (4,553           (29,073      
 

 

 

   

 

 

   

 

 

   

 

 

 

GROSS PROFIT

    494,826,402       51       474,832,098       50  
 

 

 

   

 

 

   

 

 

   

 

 

 

OPERATING EXPENSES (Notes 5, 31 and 34)

       

Research and development

    80,732,463       8       71,207,703       7  

General and administrative

    21,196,717       2       19,795,593       2  

Marketing

    5,972,488       1       5,900,837       1  
 

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

    107,901,668       11       96,904,133       10  
 

 

 

   

 

 

   

 

 

   

 

 

 

OTHER OPERATING INCOME AND EXPENSES, NET (Notes 16, 25 and 31)

    (1,365,511     (1     29,813        
 

 

 

   

 

 

   

 

 

   

 

 

 

INCOME FROM OPERATIONS (Note 40)

    385,559,223       39       377,957,778       40  
 

 

 

   

 

 

   

 

 

   

 

 

 

NON-OPERATING INCOME AND EXPENSES

       

Share of profits of associates (Note 14)

    2,985,941       1       3,495,600        

Other income (Note 26)

    9,610,294       1       6,454,901       1  

Foreign exchange gain (loss), net (Note 39)

    (1,509,473           1,161,322        

Finance costs (Note 27)

    (3,330,313           (3,306,153      

Other gains and losses, net (Note 28)

    2,817,358             195,932        
 

 

 

   

 

 

   

 

 

   

 

 

 

Total non-operating income and expenses

    10,573,807       2       8,001,602       1  
 

 

 

   

 

 

   

 

 

   

 

 

 

INCOME BEFORE INCOME TAX

    396,133,030       41       385,959,380       41  

INCOME TAX EXPENSE (Notes 5 and 29)

    52,986,182       6       51,621,144       6  
 

 

 

   

 

 

   

 

 

   

 

 

 

NET INCOME

    343,146,848       35       334,338,236       35  
 

 

 

   

 

 

   

 

 

   

 

 

 

(Continued)

 

- 7 -


Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

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

 

 

     2017      2016  
     Amount      %      Amount      %  

OTHER COMPREHENSIVE INCOME (LOSS) (Notes 14, 21, 23 and 29)

           

Items that will not be reclassified subsequently to profit or loss:

           

Remeasurement of defined benefit obligation

   $ (254,681           $ (1,057,220       

Share of other comprehensive loss of associates

     (20,853             (19,961       

Income tax benefit related to items that will not be reclassified subsequently

     30,562               126,867         
  

 

 

    

 

 

    

 

 

    

 

 

 
     (244,972             (950,314       
  

 

 

    

 

 

    

 

 

    

 

 

 

Items that may be reclassified subsequently to profit or loss:

           

Exchange differences arising on translation of foreign operations

     (28,259,627      (3      (9,379,477      (1

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

     (218,832             (692,523       

Cash flow hedges

     4,683                       

Share of other comprehensive income (loss) of associates

     (99,347             16,301         

Income tax expense related to items that may be reclassified subsequently

     (3,536             (61,176       
  

 

 

    

 

 

    

 

 

    

 

 

 
     (28,576,659      (3      (10,116,875      (1
  

 

 

    

 

 

    

 

 

    

 

 

 

Other comprehensive loss for the year, net of income tax

     (28,821,631      (3      (11,067,189      (1
  

 

 

    

 

 

    

 

 

    

 

 

 

TOTAL COMPREHENSIVE INCOME FOR THE YEAR

   $ 314,325,217        32      $ 323,271,047        34  
  

 

 

    

 

 

    

 

 

    

 

 

 

NET INCOME ATTRIBUTABLE TO:

           

Shareholders of the parent

   $ 343,111,476        35      $ 334,247,180        35  

Noncontrolling interests

     35,372               91,056         
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 343,146,848        35      $ 334,338,236        35  
  

 

 

    

 

 

    

 

 

    

 

 

 

TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO:

           

Shareholders of the parent

   $ 314,294,993        32      $ 323,186,736        34  

Noncontrolling interests

     30,224               84,311         
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 314,325,217        32      $ 323,271,047        34  
  

 

 

    

 

 

    

 

 

    

 

 

 

(Continued)

 

- 8 -


Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

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

 

 

     2017      2016  
    

Income Attributable to
Shareholders of

the Parent

    

Income Attributable to

Shareholders of

the Parent

 

EARNINGS PER SHARE (NT$, Note 30)

           

Basic earnings per share

        $         13.23           $         12.89  
     

 

 

       

 

 

 

Diluted earnings per share

        $         13.23           $         12.89  
     

 

 

       

 

 

 

 

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

 

- 9 -


Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

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

 

 

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

Shares

(In Thousands)

    Amount     Capital Surplus     Legal Capital
Reserve
    Unappropriated
Earnings
    Total     Translation
Reserve
    for-sale
Financial Assets
   

Cash Flow

Hedges Reserve

    Employee
Compensation
    Total     Total     Noncontrolling
Interests
   

Total

Equity

 

BALANCE, JANUARY 1, 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 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 in 2016

                            334,247,180       334,247,180                                     334,247,180       91,056       334,338,236  

Other comprehensive income (loss) in 2016, net of income tax

                            (950,314     (950,314     (9,378,712     (732,130     712             (10,110,130     (11,060,444     (6,745     (11,067,189
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income (loss) in 2016

                            333,296,866       333,296,866       (9,378,712     (732,130     712             (10,110,130     323,186,736       84,311       323,271,047  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Disposal of investments accounted for using equity method

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

Adjustments to share of changes in equities of associates

                21,221                                                       21,221       9       21,230  

From share of changes in equities of subsidiaries

                7,037                                                       7,037       (7,037      

Decrease in noncontrolling interests

                                                                            (235,224     (235,224

Effect of disposal of subsidiary

                                                                            (1,954     (1,954
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

BALANCE, DECEMBER 31, 2016

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

Appropriations of prior year’s earnings

                           

Legal capital reserve

                      33,424,718       (33,424,718                                                      

Cash dividends to shareholders - NT$7 per share

                            (181,512,663     (181,512,663                                   (181,512,663           (181,512,663
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

                      33,424,718       (214,937,381     (181,512,663                                   (181,512,663           (181,512,663
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income in 2017

                            343,111,476       343,111,476                                     343,111,476       35,372       343,146,848  

Other comprehensive income (loss) in 2017, net of income tax

                            (244,972     (244,972     (28,358,917     (216,715     4,121             (28,571,511     (28,816,483     (5,148     (28,821,631
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income (loss) in 2017

                            342,866,504       342,866,504       (28,358,917     (216,715     4,121             (28,571,511     314,294,993       30,224       314,325,217  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjustments to share of changes in equities of associates

                7,085                                           (10,290     (10,290     (3,205           (3,205

From share of changes in equities of subsidiaries

                10,994                                                       10,994       (10,994      

Donation from shareholders

                19,153                                                       19,153       1,684       20,837  

Decrease in noncontrolling interests

                                                                            (113,675     (113,675

Effect of disposal of subsidiary

                                                                            (7,994     (7,994
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

BALANCE, DECEMBER 31, 2017

    25,930,380     $ 259,303,805     $ 56,309,536     $ 241,722,663     $ 991,639,347     $ 1,233,362,010     $ (26,697,680   $ (214,074   $ 4,226     $ (10,290   $ (26,917,818   $ 1,522,057,533     $ 702,110     $ 1,522,759,643  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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

 

- 10 -


Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands of New Taiwan Dollars)

 

 

     2017      2016  

CASH FLOWS FROM OPERATING ACTIVITIES

     

Income before income tax

   $ 396,133,030      $ 385,959,380  

Adjustments for:

     

Depreciation expense

     255,795,962        220,084,998  

Amortization expense

     4,346,736        3,743,406  

Finance costs

     3,330,313        3,306,153  

Share of profits of associates

     (2,985,941      (3,495,600

Interest income

     (9,464,706      (6,317,500

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

     1,097,908        (46,548

Impairment loss on intangible assets

     13,520        —    

Impairment loss on financial assets

     29,603        122,240  

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

     (76,986      4,014  

Gain on disposal of financial assets carried at cost, net

     (12,809      (37,241

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

     —          259,960  

Loss (gain) from disposal of subsidiaries

     (17,343      36,105  

Unrealized gross profit on sales to associates

     4,553        29,073  

Gain on foreign exchange, net

     (9,118,580      (2,656,406

Dividend income

     (145,588      (137,401

Loss (gain) arising from fair value hedges, net

     30,293        (16,973

Changes in operating assets and liabilities:

     

Financial instruments at fair value through profit or loss

     5,645,093        (6,326,561

Notes and accounts receivable, net

     1,061,805        (49,342,698

Receivables from related parties

     (214,565      (463,837

Other receivables from related parties

     (13,873      (21,770

Inventories

     (25,229,101      18,370,037  

Other financial assets

     (502,306      (41,554

Other current assets

     12,085        94,512  

Other noncurrent assets

     (1,276,130      (349,771

Accounts payable

     2,572,072        7,295,491  

Payables to related parties

     394,182        139,818  

Salary and bonus payable

     582,054        1,979,775  

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

     525,129        1,935,113  

Accrued expenses and other current liabilities

     30,435,424        3,693,638  

Provisions

     (4,057,900      7,931,877  

Net defined benefit liability

     44,615        46,163  
  

 

 

    

 

 

 

Cash generated from operations

     648,938,549        585,777,893  

Income taxes paid

     (63,620,382      (45,943,301
  

 

 

    

 

 

 

Net cash generated by operating activities

     585,318,167        539,834,592  
  

 

 

    

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES

     

Acquisitions of:

     

Available-for-sale financial assets

     (100,510,905      (83,275,573

Held-to-maturity financial assets

     (1,997,076      (33,625,353

Financial assets carried at cost

     (1,313,124      (533,745

Property, plant and equipment

     (330,588,188      (328,045,270

Intangible assets

     (4,480,588      (4,243,087

Land use right

     (819,694      (805,318

(Continued)

 

- 11 -


Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands of New Taiwan Dollars)

 

 

     2017      2016  

Proceeds from disposal or redemption of:

     

Available-for-sale financial assets

   $ 69,480,675      $ 29,967,979  

Held-to-maturity financial assets

     17,980,640        10,550,000  

Financial assets carried at cost

     58,237        160,498  

Property, plant and equipment

     326,232        98,069  

Proceeds from return of capital of financial assets carried at cost

     14,828        65,087  

Derecognition of hedging derivative financial instruments

     33,008        8,868  

Interest received

     9,526,253        6,353,195  

Proceeds from government grants - property, plant and equipment

     2,629,747        738,643  

Proceeds from government grants - land use right and others

     1,811        798,469  

Cash outflow from disposal of subsidiary

     (4,080       

Other dividends received

     145,588        137,420  

Dividends received from investments accounted for using equity method

     4,245,772        5,478,790  

Refundable deposits paid

     (1,326,983      (144,982

Refundable deposits refunded

     432,944        169,912  

Decrease in receivables for temporary payments

            706,718  
  

 

 

    

 

 

 

Net cash used in investing activities

     (336,164,903      (395,439,680
  

 

 

    

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

     

Increase in short-term loans

     10,394,290        18,968,936  

Repayment of bonds

     (38,100,000      (23,471,600

Repayment of long-term bank loans

     (31,460      (8,540

Interest paid

     (3,482,703      (3,302,420

Guarantee deposits received

     950,928        6,354,677  

Guarantee deposits refunded

     (3,823,183      (523,234

Cash dividends

     (181,512,663      (155,582,283

Donation from shareholders

     20,837         

Decrease in noncontrolling interests

     (113,675      (235,733
  

 

 

    

 

 

 

Net cash used in financing activities

     (215,697,629      (157,800,197
  

 

 

    

 

 

 

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS

     (21,317,772      (8,029,812
  

 

 

    

 

 

 

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

     12,137,863        (21,435,097

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR

     541,253,833        562,688,930  
  

 

 

    

 

 

 

CASH AND CASH EQUIVALENTS, END OF YEAR

   $ 553,391,696      $ 541,253,833  
  

 

 

    

 

 

 

 

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

 

- 12 -


Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016

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

 

 

1. GENERAL

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

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

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

 

2. THE AUTHORIZATION OF FINANCIAL STATEMENTS

The accompanying consolidated financial statements were approved and authorized for issue by the Board of Directors on February 13, 2018.

 

3. APPLICATION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS

 

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

Except for the following, the initial application of the amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers and the IFRSs endorsed and issued into effect by the FSC did not have a significant effect on TSMC and its subsidiaries’ (collectively as the “Company”) accounting policies:

 

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

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

When the amendments are applied retrospectively from January 1, 2017, the disclosure of related party transactions is enhanced, please refer to Note 34.

 

- 13 -


  b. The IFRSs issued by International Accounting Standards Board (IASB) and endorsed by FSC with effective date starting 2018

 

New, Revised or Amended Standards and Interpretations

  

Effective Date Issued
by IASB

Annual Improvements to IFRSs 2014-2016 Cycle

  

Note 1

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

IFRS 15 “Revenue from Contracts with Customers”

  

January 1, 2018

Amendment to IFRS 15 “Clarifications to IFRS 15”

  

January 1, 2018

Amendment to IAS 7 “Disclosure Initiative”

  

January 1, 2017

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

  

January 1, 2017

IFRIC 22 “Foreign Currency Transactions and Advance Consideration”

  

January 1, 2018

 

  Note 1: The amendment to IFRS 12 is retrospectively applied for annual periods beginning on or after January 1, 2017; the amendment to IAS 28 is retrospectively applied for annual periods beginning on or after January 1, 2018.

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

 

  1) IFRS 9 “Financial Instruments” and related amendments

Classification, measurement and impairment of financial assets

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 invested debt instruments, 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 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 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 (FVTOCI) 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.

 

- 14 -


The other financial assets which do not meet the aforementioned criteria should be measured at the fair value through profit or loss (FVTPL). However, the entity may irrevocably designate an investment in equity instruments that is not held for trading as measured at FVTOCI. 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 investments in debt instruments measured at fair value through other comprehensive income. If the credit risk on a financial instrument has not increased significantly since initial recognition, the loss allowance for that financial instrument should be measured 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 loss allowance for that financial instrument should be measured at an amount equal to the lifetime expected credit losses. A simplified approach is allowed for accounts receivables and the loss allowance could be measured at an amount equal to lifetime expected credit losses.

The Company elects not to restate prior reporting period when applying the requirements for the classification, measurement and impairment of financial assets and financial liabilities under IFRS 9 with the cumulative effect of the initial application recognized at the date of initial application.

The anticipated impact on measurement categories, carrying amount and related reconciliation for each class of the Company’s financial assets and financial liabilities when retrospectively applying IFRS 9 on January 1, 2018 is detailed below:

 

     Measurement Category    Carrying Amount         
Financial Assets    IAS 39    IFRS 9    IAS 39      IFRS 9      Note  

Cash and cash equivalents

   Loans and receivables    Amortized cost    $ 553,391,696      $ 553,391,696        (1

Derivatives

   Held for trading    Mandatorily at FVTPL      569,751        569,751     
   Hedging instruments    Hedging instruments      34,394        34,394     

Equity securities

   Available-for-sale    FVTOCI      7,422,311        8,389,438        (2

Debt securities

   Available-for-sale    Mandatorily at FVTPL      —          779,489        (3
      FVTOCI      90,826,099        90,046,610        (3
   Held-to-maturity    Amortized cost      20,821,714        20,813,462        (4

Notes and accounts receivable (including related parties), other receivables and refundable deposits

   Loans and receivables    Amortized cost      131,024,958        131,269,731        (1
Financial Liabilities                               

Derivatives

   Held for trading    Mandatorily at FVTPL    $ 26,709      $ 26,709     
   Hedging instruments    Hedging instruments      15,562        15,562     

Short-term loans, accounts payable (including related parties), payables to contractors and equipment suppliers, accrued expenses and other current liabilities, bonds payable and guarantee deposits

   Amortized cost    Amortized cost      340,501,266        340,501,266     

 

- 15 -


Financial Assets   

Carrying

Amount as of

December 31,

2017

(IAS 39)

    

Reclassifi-

cations

    

Remea-

surements

    

Carrying

Amount as of

January 1, 2018
(IFRS 9)

    

Retained

Earnings

Effect on

January 1,

2018

    

Other Equity

Effect on

January 1,

2018

     Note  

FVTPL

   $ 569,751      $      $      $ 569,751      $      $ —       

- Debt instruments

                    

Add: From available for sale

            779,489               779,489        (10,085      10,085        (3
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    
     569,751        779,489               1,349,240        (10,085      10,085     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

FVTOCI

                                            

- Equity instruments

                    

Add: From available for sale

            7,422,311        967,127        8,389,438        1,294,528       
(325,858
 
     (2

- Debt instruments

                    

Add: From available for sale

            90,046,610               90,046,610        (30,658      30,658        (3
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    
            97,468,921        967,127        98,436,048        1,263,870        (295,200   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Amortized cost

                                            

Add: From held to maturity

            20,821,714        (8,252      20,813,462        (8,252             (4

Add: From loans and receivables

            684,416,654        244,773        684,661,427        244,773               (1
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    
            705,238,368        236,521        705,474,889        236,521            
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Hedging instruments

     34,394                      34,394                   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Total

   $ 604,145      $ 803,486,778      $ 1,203,648      $ 805,294,571      $ 1,490,306      $ (285,115   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

    

Carrying

Amount as of

December 31,

2017

(IAS 39)

     Adjustments
Arising from
Initial
Application
    

Carrying

Amount as of

January 1, 2018

(IFRS 9)

    

Retained

Earnings

Effect on

January 1,

2018

    

Other Equity

Effect on

January 1,

2018

     Note  

Investments accounted for using equity method

   $ 17,861,488      $ 8,258      $ 17,869,746      $ 33,984      $ (25,726      (5

 

  (1) Cash and cash equivalents, notes and accounts receivable (including related parties), other receivables and refundable deposits were classified as loans and receivables under IAS 39 are now classified at amortized cost with assessment of future 12-month or lifetime expected credit loss under IFRS 9. As a result of retrospective application, the adjustments for accounts receivable would result in a decrease in loss of allowance of NT$244,773 thousand and an increase in retained earnings of NT$244,773 thousand on January 1, 2018.
  (2) As equity investments that were previously classified as available-for-sale financial assets under IAS 39 are not held for trading, the Company elected to designate all of these investments as at FVTOCI under IFRS 9. As a result, the related other equity-unrealized gain/loss on available-for-sale financial assets of NT$228,304 thousand is reclassified to increase other equity - unrealized gain/loss on financial assets at FVTOCI.

As equity investments previously measured at cost under IAS 39 are remeasured at fair value under IFRS 9, the adjustments would result in an increase in financial assets at FVTOCI of NT$967,127 thousand, an increase in other equity-unrealized gain/loss on financial assets at FVTOCI of NT$968,670 thousand and a decrease in noncontrolling interests of NT$1,543 thousand on January 1, 2018.

For those equity investments previously classified as available-for-sale financial assets (including measured at cost financial assets) under IAS 39, the impairment losses that the Company had recognized have been accumulated in retained earnings. Since these investments were designated as at FVTOCI under IFRS 9 and no impairment assessment is required, the adjustments would result in a decrease in other equity - unrealized gain/loss on financial assets at FVTOCI of NT$1,294,528 thousand and an increase in retained earnings of NT$1,294,528 thousand on January 1, 2018.

 

- 16 -


  (3) Debt investments were previously classified as available-for-sale financial assets under IAS 39. Under IFRS 9, except for debt instruments of NT$779,489 thousand whose contractual cash flows are not solely payments of principal and interest on the principal outstanding and therefore are classified as at FVTPL with the related other equity-unrealized gain/loss on available-for-sale financial assets of NT$10,085 thousand being consequently reclassified to decrease retained earnings, the remaining debt investments are classified as at FVTOCI with assessment of future 12-month expected credit loss because these investments are held within a business model whose objective is both to collect the contractual cash flows and sell the financial assets. The related other equity-unrealized gain/loss on available-for-sale financial assets of NT$434,403 thousand is reclassified to decrease other equity-unrealized gain/loss on financial assets at FVTOCI. As a result of retrospective application of future 12-month expected credit loss, the adjustments would result in an increase in other equity - unrealized gain/loss on financial assets at FVTOCI of NT$30,658 thousand and a decrease in retained earnings of NT$30,658 thousand on January 1, 2018.
  (4) Debt investments previously classified as held-to-maturity financial assets and measured at amortized cost under IAS 39 are classified as measured at amortized cost with assessment of future 12-month expected credit loss under IFRS 9 because the contractual cash flows are solely payments of principal and interest on the principal outstanding and these investments are held within a business model whose objective is to collect the contractual cash flows. As a result of retrospective application of future 12-month expected credit loss, the adjustments would result in an increase in loss allowance of NT$8,252 thousand and a decrease in retained earnings of NT$8,252 thousand on January 1, 2018.
  (5) With the retrospective adoption of IFRS 9 by associates accounted for using equity method, the corresponding adjustments made by the Company would result in an increase in investments accounted for using equity method of NT$8,258 thousand, a decrease in other equity- unrealized gain/loss on financial assets at FVTOCI of NT$23,616 thousand, a decrease in other equity- unrealized gain/loss on available-for-sale financial assets of NT$2,110 thousand and an increase in retained earnings of NT$33,984 thousand on January 1, 2018.

Hedge accounting

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

A preliminary assessment of the Company’s current hedging relationships indicates that they will qualify as continuing hedging relationships under IFRS 9. The Company will prospectively apply the requirements for hedge accounting upon initial application of IFRS 9.

 

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

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;

 

- 17 -


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

 

    Recognize revenue when the entity satisfies a performance obligation.

The Company elects only to retrospectively apply IFRS 15 to contracts that were not completed on January 1, 2018 and elects not to restate prior reporting period with the cumulative effect of the initial application recognized at the date of initial application.

The anticipated impact on assets, liabilities and equity when retrospectively applying IFRS 15 on January 1, 2018 is detailed below:

 

    

Carrying
Amount as of
December 31,
2017

(IAS 18 and
Revenue-related
Interpretations)

     Adjustments
Arising from
Initial
Application
     Carrying
Amount as of
January 1, 2018
(IFRS 15)
     Note  

Inventories

   $ 73,880,747      $ (19,746    $ 73,861,001        (1

Other financial assets-current

     7,253,114        34,177        7,287,291        (1

Investments accounted for using equity method

     17,861,488        19,483        17,880,971        (1
     

 

 

       

Total effect on assets

      $ 33,914        
     

 

 

       

Provisions - current

     13,961,787      $ (13,961,787             (2

Accrued expenses and other current liabilities

     65,588,396        13,961,787        79,550,183        (2
     

 

 

       

Total effect on liabilities

      $        
     

 

 

       

Retained earnings

     1,233,362,010      $ 32,029        1,233,394,039        (1

Non-controlling interests

     702,110        1,885        703,995        (1
     

 

 

       

Total effect on equity

      $ 33,914        
     

 

 

       

 

  (1) Prior to the application of IFRS 15, the Company recognizes revenue based on the accounting treatment of the sales of goods. Under IFRS 15, certain subsidiaries and associates accounted for using equity method will change to recognize revenue over time because customers are deemed to have control over the products when the products are manufactured. As a result, the Company will recognize contract assets (classified under other financial assets) and adjust related assets and equity accordingly.
  (2) Prior to the application of IFRS 15, the Company recognized the estimation of sales returns and allowance as provisions. Under IFRS 15, the Company recognizes such estimation as refund liability (classified under accrued expenses and other current liabilities).

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

 

- 18 -


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

 

New, Revised or Amended Standards and Interpretations

   Effective Date Issued
by IASB

Annual Improvements to IFRSs 2015–2017 Cycle

   January 1, 2019

Amendments to IFRS 9 “Prepayment Features with Negative Compensation”

   January 1, 2019

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

   To be determined by IASB

IFRS 16 “Leases”

   January 1, 2019 (Note 2)

Amendments to IAS 19 “Plan Amendment, Curtailment or Settlement”

   January 1, 2019

Amendments to IAS 28 “Long-term Interests in Associates and Joint Ventures”

   January 1, 2019

IFRIC 23 “Uncertainty over Income Tax Treatments”

   January 1, 2019

 

  Note 2: On December 19, 2017, the FSC announced that IFRS 16 will take effect starting January 1, 2019.

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

 

  1) IFRS 16 “Leases”

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

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

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

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

 

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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.

 

- 19 -


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 the IFRSs endorsed by the FSC with the effective dates (collectively, “Taiwan-IFRSs”).

Basis of Preparation

The accompanying consolidated financial statements have been prepared on the historical cost basis except for financial instruments that are measured at fair values, as explained in the accounting policies below. Historical cost is generally based on the fair value of the consideration given in exchange for the assets.

Basis of Consolidation

The basis for the consolidated financial statements

The consolidated financial statements incorporate the financial statements of TSMC and entities controlled by TSMC (its subsidiaries).

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

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

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

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

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

 

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

 

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

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

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

 

- 20 -


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     December 31,
2017
  December 31,
2016
  Note

TSMC

 

TSMC North America

 

Selling and marketing of integrated circuits and other semiconductor devices

 

San Jose, California, U.S.A.

  100%   100%  
 

TSMC Japan Limited (TSMC Japan)

 

Customer service and supporting activities

 

Yokohama, Japan

  100%   100%   a)
 

TSMC Partners, Ltd. (TSMC Partners)

 

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

 

Tortola, British Virgin Islands

  100%   100%   a)
 

TSMC Korea Limited (TSMC Korea)

 

Customer service and supporting activities

 

Seoul, Korea

  100%   100%   a)
 

TSMC Europe B.V. (TSMC Europe)

 

Customer service and supporting activities

 

Amsterdam, the Netherlands

  100%   100%   a)
 

TSMC Global, Ltd. (TSMC Global)

 

Investment activities

 

Tortola, British Virgin Islands

  100%   100%  
 

TSMC China Company Limited (TSMC China)

 

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

 

Shanghai, China

  100%   100%  
 

TSMC Nanjing Company Limited (TSMC Nanjing)

 

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

 

Nanjing, China

  100%   100%   b)
 

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

 

Investing in new start-up technology companies

 

Cayman Islands

  98%   98%   a)
 

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

 

Investing in new start-up technology companies

 

Cayman Islands

  98%   98%   a)
 

TSMC Solar Europe GmbH

 

Selling of solar related products and providing customer service

 

Hamburg, Germany

  100%   100%   a), c)
 

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

 

Hsinchu, Taiwan

  87%   87%   d)

TSMC Partners

 

TSMC Design Technology Canada Inc. (TSMC Canada)

 

Engineering support activities

 

Ontario, Canada

  100%   100%   a)
 

TSMC Technology, Inc. (TSMC Technology)

 

Engineering support activities

 

Delaware, U.S.A.

  100%   100%   a)
 

TSMC Development, Inc. (TSMC Development)

 

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

 

Delaware, U.S.A.

  100%   100%  
 

InveStar Semiconductor Development Fund, Inc. (ISDF)

 

Investing in new start-up technology companies

 

Cayman Islands

  97%   97%   a), e)
 

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

 

Investing in new start-up technology companies

 

Cayman Islands

  97%   97%   a), e)

TSMC Development

 

WaferTech, LLC (WaferTech)

 

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

 

Washington, U.S.A.

  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

  39%   58%   a), f)
 

Growth Fund Limited (Growth Fund)

 

Investing in new start-up technology companies

 

Cayman Islands

  100%   100%   a)

VTAF III, VTAF II and TSMC

 

VentureTech Alliance Holdings, LLC (VTA Holdings)

 

Investing in new start-up technology companies

 

Delaware, U.S.A.

    100%   a), g)

 

  Note a: This is an immaterial subsidiary for which the consolidated financial statements are not audited by the Company’s independent accountants.
  Note b: Under the investment agreement entered into with the municipal government of Nanjing, China on March 28, 2016, the Company will make an investment in Nanjing in the amount of approximately US$3 billion to establish a subsidiary operating a 300mm wafer fab with the capacity of 20,000 12-inch wafers per month, and a design service center. TSMC Nanjing was established in May 2016.
  Note c: TSMC Solar Europe GmbH is under liquidation procedures.
  Note d: To simplify investment structure, VisEra Tech owned by VisEra Holding Company (VisEra Holding) was transferred to TSMC in the third quarter of 2016. In October 2016, VisEra Holding was incorporated into TSMC Partners, the subsidiary of TSMC.
  Note e: ISDF and ISDF II are under liquidation procedures.
  Note f: Starting December 2017, the Company no longer had the majority of voting power and control over Mutual-Pak. As a result, Mutual-Pak is no longer consolidated and is accounted for using the equity method.
  Note g: VTA Holdings completed the liquidation procedures in April 2017.

 

- 21 -


Foreign Currencies

The financial statements of each individual consolidated entity were expressed in the currency which reflected its primary economic environment (functional currency). The functional currency of TSMC and presentation currency of the consolidated financial statements are both New Taiwan Dollars (NT$). In preparing the consolidated financial statements, the operating results and financial positions of each consolidated entity are translated into NT$.

In preparing the financial statements of each individual consolidated entity, transactions in currencies other than the entity’s functional currency (foreign currencies) are recognized at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Such exchange differences are recognized in profit or loss in the year in which they arise. Non-monetary items measured at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Exchange differences arising on the retranslation of non-monetary items are included in profit or loss for the year except for exchange differences arising on the retranslation of non-monetary items in respect of which gains and losses are recognized directly in other comprehensive income, in which case, the exchange differences are also recognized directly in other comprehensive income. Non-monetary items that are measured in terms of historical cost in foreign currencies are not retranslated.

For the purposes of presenting consolidated financial statements, the assets and liabilities of the Company’s foreign operations are translated into NT$ using exchange rates prevailing at the end of each reporting period. Income and expense items are translated at the average exchange rates for the period. Exchange differences arising, if any, are recognized in other comprehensive income and accumulated in equity (attributed to noncontrolling interests as appropriate).

Classification of Current and Noncurrent Assets and Liabilities

Current assets are assets held for trading purposes and assets expected to be converted to cash, sold or consumed within one year from the end of the reporting period. Current liabilities are obligations incurred for trading purposes and obligations expected to be settled within one year from the end of the reporting period. Assets and liabilities that are not classified as current are noncurrent assets and liabilities, respectively.

Cash Equivalents

Cash equivalents, for the purpose of meeting short-term cash commitments, consist of highly liquid time deposits and investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

Financial Instruments

Financial assets and liabilities shall be recognized when the Company becomes a party to the contractual provisions of the instruments.

Financial assets and liabilities are initially recognized at fair values. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognized immediately in profit or loss.

Financial Assets

Financial assets are classified into the following specified categories: Financial assets “at FVTPL”, “held-to-maturity” financial assets, “available-for-sale” financial assets and “loans and receivables”. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. Regular way purchases or sales of financial assets are recognized and derecognized on a trade date or settlement date basis for which financial assets were classified in the same way, respectively. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace.

 

- 22 -


Financial assets at fair value through profit or loss

Financial assets are classified as at fair value through profit or loss when the financial asset is either held for trading or it is designated as at fair value through profit or loss.

Financial assets at fair value through profit or loss are stated at fair value, with any gains or losses arising on remeasurement recognized in profit or loss.

Held-to-maturity financial assets

Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturity dates that the Company has the positive intent and ability to hold to maturity. Subsequent to initial recognition, held-to-maturity financial assets are measured at amortized cost using the effective interest method less any impairment.

Available-for-sale financial assets

Available-for-sale financial assets are non-derivative financial assets that are either designated as available-for-sale or are not classified as (a) loans and receivables, (b) held-to-maturity financial assets or (c) financial assets at fair value through profit or loss.

Available-for-sale financial assets are measured at fair value. Interest income from available-for-sale monetary financial assets and dividends on available-for-sale equity investments are recognized in profit or loss. Other changes in the carrying amount of available-for-sale financial assets are recognized in other comprehensive income. When the investment is disposed of or is determined to be impaired, the cumulative gain or loss previously recognized in other comprehensive income is reclassified to profit or loss.

Dividends on available-for-sale equity instruments are recognized in profit or loss when the Company’s right to receive the dividends is established.

Available-for-sale equity instruments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured are measured at cost less any identified impairment losses at the end of each reporting period. Such equity instruments are subsequently remeasured at fair value when their fair value can be reliably measured, and the difference between the carrying amount and fair value is recognized in profit or loss or other comprehensive income.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables including cash and cash equivalents, notes and accounts receivable and other receivables are measured at amortized cost using the effective interest method, less any impairment, except for those loans and receivables with immaterial discounted effect.

Impairment of financial assets

Financial assets, other than those carried at FVTPL, are assessed for indicators of impairment at the end of each reporting period. Those financial assets are considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial assets, their estimated future cash flows have been affected.

For financial assets carried at amortized cost, such as trade receivables, assets that are assessed not to be impaired individually are, in addition, assessed for impairment on a collective basis. The Company assesses the collectability of receivables by performing the account aging analysis and examining current trends in the credit quality of its customers.

 

- 23 -


For financial assets carried at amortized cost, the amount of the impairment loss is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the financial asset’s original effective interest rate.

For financial assets measured at amortized cost, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment loss was recognized, the previously recognized impairment loss is reversed through profit or loss to the extent that the carrying amount of the financial assets at the date the impairment loss is reversed does not exceed what the amortized cost would have been had the impairment loss not been recognized.

When an available-for-sale financial asset is considered to be impaired, cumulative gains or losses previously recognized in other comprehensive income are reclassified to profit or loss in the year.

In respect of available-for-sale equity instruments, impairment losses previously recognized in profit or loss are not reversed through profit or loss. Any increase in fair value subsequent to the recognition of an impairment loss is recognized in other comprehensive income and accumulated under the heading of unrealized gains or losses from available-for-sale financial assets.

For financial assets carried at cost, the amount of the impairment loss is measured as the difference between the asset’s carrying amount and the present value of the estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment loss will not be reversed in subsequent periods.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account.

Derecognition of financial assets

The Company derecognizes a financial asset only when the contractual rights to the cash flows from the financial asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the financial asset to another entity.

On derecognition of a financial asset in its entirety, the difference between the financial asset’s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognized in other comprehensive income and accumulated in equity is recognized in profit or loss.

Financial Liabilities and Equity Instruments

Classification as debt or equity

Debt and equity instruments issued by the Company are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.

Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Company are recognized at the proceeds received, net of direct issue costs.

 

- 24 -


Financial liabilities

Financial liabilities are subsequently measured either at amortized cost using effective interest method or at FVTPL.

Financial liabilities are classified as at fair value through profit or loss when the financial liability is either held for trading or is designated as at fair value through profit or loss.

Financial liabilities at fair value through profit or loss are stated at fair value, with any gains or losses arising on remeasurement recognized in profit or loss.

Financial liabilities other than those held for trading purposes and designated as at FVTPL are subsequently measured at amortized cost at the end of each reporting period.

Derecognition of financial liabilities

The Company derecognizes financial liabilities when, and only when, the Company’s obligations are discharged, cancelled or they expire. The difference between the carrying amount of the financial liability derecognized and the consideration paid and payable is recognized in profit or loss.

Derivative Financial Instruments

Derivative financial instruments are initially recognized at fair value at the date the derivative contracts are entered into and are subsequently remeasured to their fair value at the end of each reporting period. The resulting gain or loss is recognized in profit or loss immediately unless the derivative financial instrument is designated and effective as a hedging instrument, in which event the timing of the recognition in profit or loss depends on the nature of the hedge relationship.

Financial Instruments Designated as at Fair Value through Profit or Loss

A financial instrument may be designated as at 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.

Hedge Accounting

Fair Value Hedge

The Company designates certain hedging instruments, such as interest rate futures contracts, to partially hedge against the price risk caused by changes in interest rates in the Company’s investments in fixed income securities as fair value hedge. Changes in the fair value of hedging instrument that are designated and qualify as fair value hedges are recognized in profit or loss immediately, together with any changes in the fair value of the hedged asset that are attributable to the hedged risk.

Cash Flow Hedge

The Company designates certain hedging instruments, such as forward exchange contracts, to partially hedge its foreign exchange rate risks associated with certain highly probable forecast transactions, such as capital expenditures. The effective portion of changes in the fair value of hedging instruments is recognized in other comprehensive income. When the forecast transactions actually take place, the associated gains or losses that were recognized in other comprehensive income are removed from equity and included in the initial cost of the hedged items. The gains or losses from hedging instruments relating to the ineffective portion are recognized immediately in profit or loss.

 

- 25 -


For the aforementioned fair value hedge and cash flow hedge, hedge accounting is discontinued prospectively when the Company revokes the designated hedging relationship, or when the hedging instruments expire or are sold, terminated, or exercised, or no longer meet the criteria for hedge accounting.

Inventories

Inventories are stated at the lower of cost or net realizable value. Inventories are recorded at standard cost and adjusted to approximate weighted-average cost at the end of the reporting period. Net realizable value represents the estimated selling price of inventories less all estimated costs of completion and costs necessary to make the sale.

Investments Accounted for Using Equity Method

Investments accounted for using the equity method are investments in associates.

An associate is an entity over which the Company has significant influence and that is neither a subsidiary nor a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies.

The operating results and assets and liabilities of associates are incorporated in these consolidated financial statements using the equity method of accounting. Under the equity method, an investment in an associate is initially recognized in the consolidated statement of financial position at cost and adjusted thereafter to recognize the Company’s share of profit or loss and other comprehensive income of the associate as well as the distribution received. The Company also recognizes its share in the changes in the equities of associates.

Any excess of the cost of acquisition over the Company’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities of an associate recognized at the date of acquisition is recognized as goodwill, which is included within the carrying amount of the investment. Any excess of the Company’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition, after reassessment, is recognized immediately in profit or loss.

When necessary, the entire carrying amount of the investment (including goodwill) is tested for impairment as a single asset by comparing its recoverable amount (higher of value in use and fair value less costs to sell) with its carrying amount. Any impairment loss recognized forms part of the carrying amount of the investment. Any reversal of that impairment loss is recognized to the extent that the recoverable amount of the investment subsequently increases.

The Company discontinues the use of the equity method from the date when the Company ceases to have significant influence over an associate. When the Company retains an interest in the former associate, the Company measures the retained interest at fair value at that date. The difference between the carrying amount of the associate at the date the equity method was discontinued, and the fair value of any retained interest and any proceeds from disposing of a part interest in the associate is included in the determination of the gain or loss on disposal of the associate. In addition, the Company shall account for all amounts recognized in other comprehensive income in relation to that associate on the same basis as would be required if the associate had directly disposed of the related assets or liabilities. If the Company’s ownership interest in an associate is reduced as a result of disposal, but the investment continues to be an associate, the Company should reclassify to profit or loss only a proportionate amount of the gain or loss previously recognized in other comprehensive income.

When the Company subscribes to additional shares in an associate at a percentage different from its existing ownership percentage, the resulting carrying amount of the investment differs from the amount of the Company’s proportionate interest in the net assets of the associate. The Company records such a difference as an adjustment to investments with the corresponding amount charged or credited to capital surplus. If the Company’s ownership interest is reduced due to the additional subscription to the shares of associate by other investors, the proportionate amount of the gains or losses previously recognized in other comprehensive income in relation to that associate shall be reclassified to profit or loss on the same basis as would be required if the associate had directly disposed of the related assets or liabilities.

 

- 26 -


When a consolidated entity transacts with an associate, profits and losses resulting from the transactions with the associate are recognized in the Company’s consolidated financial statements only to the extent of interests in the associate that are not owned by the Company.

Property, Plant and Equipment

Property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment. Costs include any incremental costs that are directly attributable to the construction or acquisition of the item of property, plant and equipment.

Properties in the course of construction for production, supply or administrative purposes are carried at cost, less any recognized impairment loss. Such properties are classified to the appropriate categories of property, plant and equipment when completed and ready for intended use. Depreciation of these assets, on the same basis as other property assets, commences when the assets are ready for their intended use.

Depreciation is recognized so as to write off the cost of the assets less their residual values over their useful lives, and it is computed using the straight-line method over the following estimated useful lives: land improvements - 20 years; buildings - 10 to 20 years; machinery and equipment - 2 to 5 years; office equipment - 3 to 5 years; and leased assets - 20 years. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimates accounted for on a prospective basis. Land is not depreciated.

Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets. However, when there is no reasonable certainty that ownership will be obtained by the end of the lease term, assets are depreciated over the shorter of the lease term and their useful lives.

An item of property, plant and equipment is derecognized upon disposal or when no future economic benefits are expected to arise from the continued use of the assets. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognized in profit or loss.

Leases

Leases are classified as finance lease whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

The Company as lessor

Rental income from operating leases is recognized on a straight-line basis over the term of the relevant lease.

The Company as lessee

Assets held under finance lease are initially recognized as assets of the Company at the fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is recognized as an obligation under finance lease.

Lease payments are apportioned between finance expense and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability.

Operating lease payments are recognized as an expense on a straight-line basis over the lease term.

 

- 27 -


Intangible Assets

Goodwill

Goodwill arising on an acquisition of a business is carried at cost as established at the date of acquisition of the business less accumulated impairment losses, if any.

Other intangible assets

Other separately acquired intangible assets with finite useful lives are carried at cost less accumulated amortization and accumulated impairment losses. Amortization is recognized using the straight-line method over the following estimated useful lives: Technology license fees - the estimated life of the technology or the term of the technology transfer contract; software and system design costs - 3 years or contract period; patent and others - the economic life or contract period. The estimated useful life and amortization method are reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted for on a prospective basis.

Impairment of Tangible and Intangible Assets

Goodwill

Goodwill is not amortized and instead is tested for impairment annually, or more frequently when there is an indication that the cash generating unit may be impaired. For the purpose of impairment testing, goodwill is allocated to each of the Company’s cash-generating units or groups of cash-generating units that are expected to benefit from the synergies of the combination. If the recoverable amount of a cash-generating unit is less than its carrying amount, the difference is allocated first to reduce the carrying amount of any goodwill allocated to such cash generating unit and then to the other assets of the cash generating unit pro rata based on the carrying amount of each asset in the cash generating unit. Any impairment loss for goodwill is recognized directly in profit or loss. An impairment loss recognized for goodwill is not reversed in subsequent periods.

Other tangible and intangible assets

At the end of each reporting period, the Company reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss. When it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash-generating unit to which the asset belongs. When a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying amount, the carrying amount of the asset or cash-generating unit is reduced to its recoverable amount. An impairment loss is recognized immediately in profit or loss.

When an impairment loss subsequently reverses, the carrying amount of the asset or a cash-generating unit is increased to the revised estimate of its recoverable amount, but the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset or cash-generating unit in prior years. A reversal of an impairment loss is recognized immediately in profit or loss.

 

- 28 -


Provision

Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that the Company will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.

The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows.

Guarantee Deposit

Guarantee deposit mainly consists of cash received under deposit agreements with customers to ensure they have access to the Company’s specified capacity; and as guarantee of accounts receivable to ensure payment from customers. Cash received from customers is recorded as guarantee deposit upon receipt. Guarantee deposits are refunded to customers when terms and conditions set forth in the deposit agreements have been satisfied.

Revenue Recognition

Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimated customer returns, rebates and other similar allowances.

Sale of goods

Revenue from the sale of goods is recognized when the goods are delivered and titles have passed, at which time all the following conditions are satisfied:

 

    The Company has transferred to the buyer the significant risks and rewards of ownership of the goods;

 

    The Company retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;

 

    The amount of revenue can be measured reliably;

 

    It is probable that the economic benefits associated with the transaction will flow to the Company; and

 

    The costs incurred or to be incurred in respect of the transaction can be measured reliably.

In principle, 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. Due to the short term nature of the receivables from sale of goods with the immaterial discounted effect, the Company measures them at the original invoice amounts without discounting.

Royalties, dividend and interest income

Revenue from royalties is recognized on an accrual basis in accordance with the substance of the relevant agreement, provided that it is probable that the economic benefits will flow to the Company and the amount of revenue can be measured reliably.

Dividend income from investments is recognized when the shareholder’s right to receive payment has been established, provided that it is probable that the economic benefits will flow to the Company and the amount of income can be measured reliably.

Interest income from a financial asset is recognized when it is probable that the economic benefits will flow to the Company and the amount of income can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable.

 

- 29 -


Employee Benefits

Short-term employee benefits

Liabilities recognized in respect of short-term employee benefits are measured at the undiscounted amount of the benefits expected to be paid in exchange for service rendered by employees.

Retirement benefits

For defined contribution retirement benefit plans, payments to the benefit plan are recognized as an expense when the employees have rendered service entitling them to the contribution. For defined benefit retirement benefit plans, the cost of providing benefit is recognized based on actuarial calculations.

Defined benefit costs (including service cost, net interest and remeasurement) under the defined benefit retirement benefit plans are determined using the Projected Unit Credit Method. Service cost (including current service cost), and net interest on the net defined benefit liability (asset) are recognized as employee benefits expense in the period they occur. Remeasurement, comprising actuarial gains and losses and the return on plan assets (excluding interest), is recognized in other comprehensive income in the period in which they occur. Remeasurement recognized in other comprehensive income is reflected immediately in retained earnings and will not be reclassified to profit or loss.

Net defined benefit liability represents the actual deficit in the Company’s defined benefit plan.

Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax.

Current tax

Income tax on unappropriated earnings (excluding earnings from foreign consolidated subsidiaries) is expensed in the year the shareholders approved the appropriation of earnings which is the year subsequent to the year the earnings are generated.

Adjustments of prior years’ tax liabilities are added to or deducted from the current year’s tax provision.

Deferred tax

Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally recognized for all deductible temporary differences, net operating loss carryforwards and tax credits for research and development expenses to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized.

Deferred tax liabilities are recognized for taxable temporary differences associated with investments in subsidiaries and associates, except where the Company is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments are only recognized to the extent that it is probable that there will be sufficient taxable profits against which to utilize the benefits of the temporary differences and they are expected to reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the deferred tax asset to be recovered. The deferred tax assets which originally not recognized is also reviewed at the end of each reporting period and recognized to the extent that it is probable that sufficient taxable profits will be available to allow all or part of the deferred tax asset to be recovered.

 

- 30 -


Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the year in which the liability is settled or the asset is realized, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

Current and deferred tax for the year

Current and deferred tax are recognized in profit or loss, except when they relate to items that are recognized in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognized in other comprehensive income or directly in equity, respectively.

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

In the application of the aforementioned Company’s accounting policies, the Company is required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the year in which the estimate is revised if the revision affects only that year, or in the year of the revision and future years if the revision affects both current and future years.

Revenue Recognition

The Company recognizes revenue when the conditions described in Note 4 are satisfied. The Company also records a provision for estimated future returns and other allowances in the same period the related revenue is recorded. Provision for estimated sales returns and other allowances is generally made and adjusted based on historical experience and the consideration of varying contractual terms, and the Company periodically reviews the adequacy of the estimation used.

 

- 31 -


Impairment of Tangible and Intangible Assets Other than Goodwill

In the process of evaluating the potential impairment of tangible and intangible assets other than goodwill, the Company is required to make subjective judgments in determining the independent cash flows, useful lives, expected future revenue and expenses related to the specific asset groups with the consideration of the nature of semiconductor industry. Any changes in these estimates based on changed economic conditions or business strategies could result in significant impairment charges or reversal in future years.

Impairment of Goodwill

The assessment of impairment of goodwill requires the Company to make subjective judgment to determine the identified cash-generating units, allocate the goodwill to relevant cash-generating units and estimate the recoverable amount of relevant cash-generating units.

Impairment Assessment on Investment Using Equity Method

The Company assesses the impairment of investments accounted for using the equity method whenever triggering events or changes in circumstances indicate that an investment may be impaired and carrying value may not be recoverable. The Company measures the impairment based on a projected future cash flow of the investees, including the underlying assumptions of sales growth rate and capacity utilization rate formulated by such investees’ internal management team. The Company also takes into account market conditions and the relevant industry trends to ensure the reasonableness of such assumptions.

Realization of Deferred Income Tax Assets

Deferred tax assets are recognized to the extent that it is probable that future taxable profits will be available against which those deferred tax assets can be utilized. Assessment of the realization of the deferred tax assets requires the Company’s subjective judgment and estimate, including the future revenue growth and profitability, tax holidays, the amount of tax credits can be utilized and feasible tax planning strategies. Any changes in the global economic environment, the industry trends and relevant laws and regulations could result in significant adjustments to the deferred tax assets.

Valuation of Inventory

Inventories are stated at the lower of cost or net realizable value, and the Company uses judgment and estimate to determine the net realizable value of inventory at the end of each reporting period.

Due to the rapid technological changes, the Company estimates the net realizable value of inventory for obsolescence and unmarketable items at the end of reporting period and then writes down the cost of inventories to net realizable value. The net realizable value of the inventory is mainly determined based on assumptions of future demand within a specific time horizon.

Recognition and Measurement of Defined Benefit Plans

Net defined benefit liability and the resulting defined benefit costs under defined benefit pension plans are calculated using the Projected Unit Credit Method. Actuarial assumptions comprise the discount rate, rate of employee turnover, and future salary increase rate. Changes in economic circumstances and market conditions will affect these assumptions and may have a material impact on the amount of the expense and the liability.

 

- 32 -


6. CASH AND CASH EQUIVALENTS

 

    

December 31,

2017

     December 31,
2016
 

Cash and deposits in banks

   $ 551,919,770      $ 536,895,344  

Agency bonds

     776,025         

Commercial paper

     695,901        1,997,239  

Repurchase agreements collateralized by corporate bonds

            2,361,250  
  

 

 

    

 

 

 
   $ 553,391,696      $ 541,253,833  
  

 

 

    

 

 

 

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

 

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

 

    

December 31,

2017

     December 31,
2016
 

Financial assets

     

Held for trading

     

Forward exchange contracts

   $ 569,751      $ 142,406  

Cross currency swap contracts

            10,976  
  

 

 

    

 

 

 
     569,751        153,382  
  

 

 

    

 

 

 

Designated as at FVTPL

     

Time deposit

            6,297,708  

Forward exchange contracts

            22  
  

 

 

    

 

 

 
            6,297,730  
  

 

 

    

 

 

 
   $ 569,751      $ 6,451,112  
  

 

 

    

 

 

 

Financial liabilities

     

Held for trading

     

Forward exchange contracts

   $ 26,709      $ 91,585  

Designated as at FVTPL

     

Forward exchange contracts

            99,550  
  

 

 

    

 

 

 
   $ 26,709      $ 191,135  
  

 

 

    

 

 

 

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

 

- 33 -


Outstanding forward exchange contracts consisted of the following:

 

            Contract Amount  
     Maturity Date      (In Thousands)  

December 31, 2017

     

Sell NT$/Buy EUR

     January 2018 to February 2018        NT$6,002,786/EUR169,000  

Sell NT$/Buy JPY

     February 2018        NT$996,294/JPY3,800,000  

Sell US$/Buy JPY

     January 2018        US$2,191/JPY246,724  

Sell US$/Buy RMB

     January 2018        US$558,000/RMB3,679,575  

Sell US$/Buy NT$

     January 2018 to February 2018        US$1,661,500/NT$49,673,320  

Sell RMB /Buy EUR

     January 2018        RMB38,967/EUR4,994  

Sell RMB/Buy JPY

     January 2018        RMB409,744/JPY7,062,536  

Sell RMB/Buy GBP

     January 2018        RMB3,637/GBP413  

December 31, 2016

     

Sell NT$/Buy EUR

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

Sell NT$/Buy JPY

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

Sell US$/Buy EUR

     January 2017        US$4,180/EUR4,000  

Sell US$/Buy JPY

     January 2017        US$428/JPY50,000  

Sell US$/Buy NT$

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

Sell US$/Buy RMB

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

Outstanding cross currency swap contracts consisted of the following:

 

Maturity Date   

Contract Amount

(In Thousands)

    

Range of

    Interest Rates    
Paid

    

Range of

    Interest Rates    
Received

 

December 31, 2016

        

January 2017

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

 

8. AVAILABLE-FOR-SALE FINANCIAL ASSETS

 

    

  December 31,  

2017

    

  December 31,  

2016

 

Corporate bonds

   $ 40,165,148      $ 29,999,508  

Agency bonds/Agency mortgage-backed securities

     29,235,388        14,880,482  

Asset-backed securities

     13,459,545        11,254,757  

Government bonds

     7,817,723        8,457,362  

Publicly traded stocks

     2,548,054        3,196,658  

Commercial paper

     148,295         
  

 

 

    

 

 

 
   $ 93,374,153      $ 67,788,767  
  

 

 

    

 

 

 

 

- 34 -


9. HELD-TO-MATURITY FINANCIAL ASSETS

 

    

     December 31,     

2017

    

     December 31,     

2016

 

Corporate bonds

   $ 19,338,764      $ 23,849,701  

Structured product

     1,482,950        1,609,950  

Commercial paper

            8,628,176  

Negotiable certificate of deposit

            4,829,850  
  

 

 

    

 

 

 
   $ 20,821,714      $ 38,917,677  
  

 

 

    

 

 

 

Current portion

   $ 1,988,385      $ 16,610,116  

Noncurrent portion

     18,833,329        22,307,561  
  

 

 

    

 

 

 
   $ 20,821,714      $ 38,917,677  
  

 

 

    

 

 

 

 

10. HEDGING DERIVATIVE FINANCIAL INSTRUMENTS

 

    

     December 31,    

2017

          December 31,     
2016
 

Financial assets- current

     

Fair value hedges

     

Interest rate futures contracts

   $ 27,016      $ 5,550  

Cash flow hedges

     

Forward exchange contracts

     7,378         
  

 

 

    

 

 

 
   $ 34,394      $ 5,550  
  

 

 

    

 

 

 

Financial liabilities- current

     

Cash flow hedges

     

Forward exchange contracts

   $ 15,562      $  
  

 

 

    

 

 

 

The Company entered into interest rate futures contracts, which are used to hedge against the 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)

 

December 31, 2017

  

March 2018

   US$ 169,400  

December 31, 2016

  

March 2017

   US$ 53,600  

The Company entered into forward exchange contracts to partially hedge foreign exchange rate risks associated with certain highly probable forecast transactions, such as capital expenditures. These contracts have maturities of 12 months or less.

 

- 35 -


Outstanding forward exchange contracts consisted of the following:

 

          Contract Amount
     Maturity Date    (In Thousands)
December 31, 2017      
Sell NT$/Buy EUR    February 2018 to May 2018    NT$2,649,104/EUR75,000

 

11. NOTES AND ACCOUNTS RECEIVABLE, NET

 

    

     December 31,     

2017

          December 31,     
2016
 

Notes and accounts receivable

   $ 121,604,989      $ 128,815,389  

Allowance for doubtful receivables

     (471,741      (480,118
  

 

 

    

 

 

 

Notes and accounts receivable, net

   $ 121,133,248      $ 128,335,271  
  

 

 

    

 

 

 

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. There was no impairment concern for the accounts receivable that were past due without recognizing a specific allowance for doubtful receivables since there was no significant change in the credit quality of its customers after the assessment. In addition, the Company has obtained guarantee against certain receivables.

Aging analysis of notes and accounts receivable, net

 

    

     December 31,     

2017

          December 31,     
2016
 

Neither past due nor impaired

   $ 105,295,219      $ 108,411,408  

Past due but not impaired

     

Past due within 30 days

     13,984,125        15,017,824  

Past due 31-60 days

     929,672        1,844,726  

Past due 61-120 days

     582,821        3,061,313  

Past due over 121 days

     341,411         
  

 

 

    

 

 

 
   $ 121,133,248      $ 128,335,271  
  

 

 

    

 

 

 

 

- 36 -


Movements of the allowance for doubtful receivables

 

     Individually
Assessed for
Impairment
     Collectively
Assessed for
Impairment
     Total  

Balance at January 1, 2017

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

Reversal/Write-off

     (1,848      (6,305      (8,153

Effect of exchange rate changes

            (224      (224
  

 

 

    

 

 

    

 

 

 

Balance at December 31, 2017

   $      $ 471,741      $ 471,741  
  

 

 

    

 

 

    

 

 

 

Balance at January 1, 2016

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

Provision

            321        321  

Reversal/Write-off

     (8,393             (8,393

Effect of exchange rate changes

            (61      (61
  

 

 

    

 

 

    

 

 

 

Balance at December 31, 2016

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

 

 

    

 

 

    

 

 

 

Aging analysis of accounts receivable that is individually determined as impaired

 

    

 December 31, 

2017

     December 31,
2016
 

Past due over 121 days

   $      $ 1,848  
  

 

 

    

 

 

 

 

12. INVENTORIES

 

    

  December 31,  

2017

       December 31,  
2016
 

Finished goods

   $ 9,923,338      $ 8,521,873  

Work in process

     53,362,160        33,330,870  

Raw materials

     7,143,806        4,012,190  

Supplies and spare parts

     3,451,443        2,817,300  
  

 

 

    

 

 

 
   $ 73,880,747      $ 48,682,233  
  

 

 

    

 

 

 

Reversal of write-down of inventories resulting from the increase in net realizable value (excluding earthquake losses) and write-down of inventories to net realizable value (excluding earthquake losses) in the amount of NT$840,861 thousand and NT$1,542,779 thousand, respectively, were included in the cost of revenue for the years ended December 31, 2017 and 2016. Please refer to related earthquake losses in Note 38.

 

13. FINANCIAL ASSETS CARRIED AT COST

 

    

  December 31,  

2017

       December 31,  
2016
 

Non-publicly traded stocks

   $ 2,532,287      $ 2,944,859  

Mutual funds

     2,341,970        1,157,608  
  

 

 

    

 

 

 
   $ 4,874,257      $ 4,102,467  
  

 

 

    

 

 

 

 

- 37 -


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 stocks of Aquantia and Impinj, Inc. were listed in November 2017 and July 2016, respectively. Accordingly, the Company reclassified the aforementioned investments from financial assets carried at cost to available-for-sale financial assets.

 

14. INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD

Associates consisted of the following:

 

          Place of    Carrying Amount      % of Ownership and Voting
Rights Held by the Company
Name of Associate    Principal Activities    Incorporation
and Operation
   December 31,
2017
     December 31,
2016
     December 31,
2017
  December 31,
2016

Vanguard International Semiconductor Corporation (VIS)

  

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

  

Hsinchu, Taiwan

   $  8,568,344      $  8,806,384      28%   28%

Systems on Silicon Manufacturing Company Pte Ltd. (SSMC)

  

Manufacturing and selling of integrated circuits and other semiconductor devices

  

Singapore

     5,677,640        7,163,516      39%   39%

Xintec Inc. (Xintec)

  

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

  

Taoyuan, Taiwan

     2,292,100        2,599,807      41%   41%

Global Unichip Corporation (GUC)

  

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

  

Hsinchu, Taiwan

     1,300,194        1,174,181      35%   35%

Mutual-Pak

  

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

  

New Taipei, Taiwan

     23,210             39%  
        

 

 

    

 

 

      
         $  17,861,488      $  19,743,888       
     

 

 

    

 

 

      

Starting December 2017, the Company no longer had the majority of voting power and control over Mutual-Pak. As a result, Mutual-Pak is no longer consolidated and is accounted for using the equity method.

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.

As of December 31, 2017, no investments in associates are individually material to the Company. As of December 31, 2016, the summarized financial information in respect of each of the Company’s material associates is set out below. The summarized financial information below represents amounts shown in the associate’s financial statements prepared in accordance with Taiwan-IFRSs adjusted by the Company using the equity method of accounting.

 

- 38 -


  a. VIS

 

       December 31,  
2016
 

Current assets

   $ 25,662,921  
  

 

 

 

Noncurrent assets

   $ 9,501,442  
  

 

 

 

Current liabilities

   $ 5,476,672  
  

 

 

 

Noncurrent liabilities

   $ 804,107  
  

 

 

 

 

     Year Ended
  December 31,  
2016
 

Net revenue

   $ 25,828,634  
  

 

 

 

Income from operations

   $ 6,083,625  
  

 

 

 

Net income

   $ 5,520,645  
  

 

 

 

Other comprehensive income

   $ 5,592  
  

 

 

 

Total comprehensive income

   $ 5,526,237  
  

 

 

 

Cash dividends received

   $ 1,206,981  
  

 

 

 

Reconciliation of the above summarized financial information to the carrying amount of the interest in the associate was as follows:

 

       December 31,  
2016
 

Net assets

   $ 28,883,584  

Percentage of ownership

     28%  
  

 

 

 

The Company’s share of net assets of the associate

     8,179,830  

Goodwill

     626,554  
  

 

 

 

Carrying amount of the investment

   $ 8,806,384  
  

 

 

 

 

  b. SSMC

 

       December 31,  
2016
 

Current assets

   $ 14,585,150  
  

 

 

 

Noncurrent assets

   $ 5,360,076  
  

 

 

 

Current liabilities

   $ 1,746,602  
  

 

 

 

Noncurrent liabilities

   $ 286,340  
  

 

 

 

 

     Year Ended
  December 31,  
2016
 

Net revenue

   $ 14,045,927  
  

 

 

 

Income from operations

   $ 4,921,735  
  

 

 

 

Net income

   $ 4,918,140  
  

 

 

 

Total comprehensive income

   $ 4,918,140  
  

 

 

 

Cash dividends received

   $ 4,076,170  
  

 

 

 

 

- 39 -


Reconciliation of the above summarized financial information to the carrying amount of the interest in the associate was as follows:

 

       December 31,  
2016
 

Net assets

   $ 17,912,284  

Percentage of ownership

     39%  
  

 

 

 

The Company’s share of net assets of the associate

     6,948,175  

Goodwill

     213,984  

Other adjustments

     1,357  
  

 

 

 

Carrying amount of the investment

   $ 7,163,516  
  

 

 

 

Aggregate information of associates that are not individually material was summarized as follows:

 

     Year Ended
  December 31,  
2016
 

The Company’s share of profits of associates

   $ 23,140  
  

 

 

 

The Company’s share of other comprehensive loss of associates

   $ (5,244
  

 

 

 

The Company’s share of total comprehensive income of associates

   $ 17,896  
  

 

 

 

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

 

Name of Associate   

December 31,

2017

     December 31,
2016
 

VIS

   $ 30,638,751      $ 26,089,360  
  

 

 

    

 

 

 

GUC

   $ 11,905,404      $ 3,664,997  
  

 

 

    

 

 

 

Xintec

   $ 9,180,759      $ 3,622,227  
  

 

 

    

 

 

 

 

15. PROPERTY, PLANT AND EQUIPMENT

 

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

Cost

             

Balance at January 1, 2017

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

Additions (Deductions)

          75,594,667       458,605,807       8,195,896             (219,902,510     322,493,860  

Disposals or retirements

          (36,957     (9,552,995     (377,798                 (9,967,750

Reclassification

                8,791       1,507                   10,298  

Effect of disposal of subsidiary

                (51,216     (14,750           (518     (66,484

Effect of exchange rate changes

    (66,049     (827,571     (4,125,866     (142,979           56,843       (5,105,622
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at December 31, 2017

  $ 3,983,243     $ 379,134,613     $ 2,487,752,265     $ 42,391,516     $     $ 167,353,490     $ 3,080,615,127  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

(Continued)

 

- 40 -


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

Accumulated depreciation and impairment

             

Balance at January 1, 2017

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

Additions

    27,790       20,844,584       229,985,588       4,938,000                   255,795,962  

Disposals or retirements

          (28,816     (8,114,327     (377,470                 (8,520,613

Reclassification

                8,195       1,466                   9,661  

Effect of disposal of subsidiary

                (42,830     (13,838                 (56,668

Effect of exchange rate changes

    (42,137     (718,324     (3,765,293     (102,921                 (4,628,675
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at December 31, 2017

  $ 510,498     $ 194,446,521     $ 1,795,448,842     $ 27,666,944     $     $     $ 2,018,072,805  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Carrying amounts at December 31, 2017

  $ 3,472,745     $ 184,688,092     $ 692,303,423     $ 14,724,572     $     $ 167,353,490     $ 1,062,542,322  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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

          9,113,314       156,874,203       4,584,087             195,255,966       365,827,570  

Disposals or retirements

          (13,372     (3,094,143     (469,235                 (3,576,750

Reclassification

                      7,113       (7,113            

Effect of exchange rate changes

    (18,099     (1,497,332     (4,401,920     (92,374           (167,839     (6,177,564
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at December 31, 2016

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

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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

    29,440       17,540,470       198,189,423       4,325,665                   220,084,998  

Disposals or retirements

          (7,326     (3,049,502     (468,401                 (3,525,229

Reclassification

                      7,113       (7,113            

Effect of exchange rate changes

    (10,780     (1,094,222     (3,620,067     (68,739                 (4,793,808
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at December 31, 2016

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

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Carrying amounts at December 31, 2016

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

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

(Concluded)

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.

 

16. INTANGIBLE ASSETS

 

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

Cost

              

Balance at January 1, 2017

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

Additions

            897,861        3,021,085        349,265        4,268,211  

Retirements

                   (75,237             (75,237

Reclassification

                   7,662        (17,960      (10,298

Effect of disposal of subsidiary

     (13,499             (7,662             (21,161

Effect of exchange rate changes

     (345,774      (611      (3,225      (1,594      (351,204
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Balance at December 31, 2017

   $ 5,648,702      $ 10,443,257      $ 25,186,218      $ 5,716,146      $ 46,994,323  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

(Continued)

 

- 41 -


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

Accumulated amortization and impairment

              

Balance at January 1, 2017

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

Additions

            1,548,263        2,310,742        487,731        4,346,736  

Retirements

                   (75,237             (75,237

Reclassification

                   7,409        (17,070      (9,661

Impairment

     13,520                             13,520  

Effect of disposal of subsidiary

     (13,499             (7,554             (21,053

Effect of exchange rate changes

     (21      (606      (3,095      (566      (4,288
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Balance at December 31, 2017

   $      $ 7,694,857      $ 20,376,693      $ 4,747,633      $ 32,819,183  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Carrying amounts at December 31, 2017

   $ 5,648,702      $ 2,748,400      $ 4,809,525      $ 968,513      $ 14,175,140  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Cost

              

Balance at January 1, 2016

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

Additions

            1,091,261        2,788,512        519,289        4,399,062  

Retirements

                   (5,273             (5,273

Effect of exchange rate changes

     (96,809      442        (14,072      (11,880      (122,319
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Balance at December 31, 2016

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

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Accumulated amortization and impairment

              

Balance at January 1, 2016

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

Additions

            1,367,370        1,730,834        645,202        3,743,406  

Retirements

                   (5,273             (5,273

Effect of exchange rate changes

            442        (12,799      (3,272      (15,629
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Balance at December 31, 2016

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

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Carrying amounts at December 31, 2016

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

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

(Concluded)

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 rates of 8.5% and 8.4% in its test of impairment as of December 31, 2017 and 2016, respectively, to reflect the relevant specific risk in the cash-generating unit.

For the year ended December 31, 2017, the Company assessed goodwill impairment and recognized an impairment loss of NT$13,520 thousand related to a subsidiary since the operating result of this cash generating unit was not as expected and the recoverable amount of goodwill was nil. Such impairment loss was recognized in other operating income and expenses. For the year ended December 31, 2016, the Company did not recognize any impairment loss on goodwill.

 

17. OTHER ASSETS

 

    

  December 31,  

2017

       December 31,  
2016
 

Tax receivable

   $  4,021,602      $  2,325,825  

Prepaid expenses

     1,559,963        1,007,026  

Others

     1,623,995        1,553,003  
  

 

 

    

 

 

 
   $ 7,205,560      $ 4,885,854  
  

 

 

    

 

 

 

Current portion

   $  4,222,440      $ 3,385,422  

Noncurrent portion

     2,983,120        1,500,432  
  

 

 

    

 

 

 
   $ 7,205,560      $ 4,885,854  
  

 

 

    

 

 

 

 

- 42 -


18. SHORT-TERM LOANS

 

    

December 31,

2017

     December 31,
2016
 

Unsecured loans

     

Amount

   $ 63,766,850      $ 57,958,200  
  

 

 

    

 

 

 

Original loan content

     

US$(in thousands)

   $ 2,150,000      $ 1,800,000  

Annual interest rate

     1.54%-1.82%        0.87%-1.07%  

Maturity date

    
Due by
February 2018
 
 
    
Due by
January 2017
 
 

 

19. PROVISIONS

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

 

     Sales Returns
and Allowances
 

Year ended December 31, 2017

  

Balance, beginning of year

   $ 18,037,789  

Provision

     44,833,557  

Payment

     (48,884,704

Effect of exchange rate changes

     (24,855
  

 

 

 

Balance, end of year

   $ 13,961,787  
  

 

 

 

Year ended December 31, 2016

  

Balance, beginning of year

   $ 10,163,536  

Provision

     36,519,312  

Payment

     (28,569,318

Effect of exchange rate changes

     (75,741
  

 

 

 

Balance, end of year

   $ 18,037,789  
  

 

 

 

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

 

20. BONDS PAYABLE

 

    

December 31,

2017

     December 31,
2016
 

Domestic unsecured bonds

   $ 116,100,000      $ 154,200,000  

Overseas unsecured bonds

     34,107,850        37,028,850  
  

 

 

    

 

 

 
     150,207,850        191,228,850  

Less: Discounts on bonds payable

     (6,728      (35,293

Less: Current portion

     (58,401,122      (38,100,000
  

 

 

    

 

 

 
   $     91,800,000      $    153,093,557  
  

 

 

    

 

 

 

 

- 43 -


The major terms of domestic unsecured bonds are as follows:

 

Issuance    Tranche    Issuance Period    Total Amount      Coupon
Rate
 

Repayment and

Interest Payment

100-1    A   

September 2011 to September 2016

   $ 10,500,000      1.40%  

Bullet repayment; interest payable annually

   B   

September 2011 to September 2018

     7,500,000      1.63%  

The same as above

100-2    A   

January 2012 to January 2017

     10,000,000      1.29%  

The same as above

100-2    B   

January 2012 to January 2019

   $ 7,000,000      1.46%  

Bullet repayment; interest payable annually

101-1    A   

August 2012 to August 2017

     9,900,000      1.28%  

The same as above

   B   

August 2012 to August 2019

     9,000,000      1.40%  

The same as above

101-2    A   

September 2012 to September 2017

     12,700,000      1.28%  

The same as above

   B   

September 2012 to September 2019

     9,000,000      1.39%  

The same as above

101-3      

October 2012 to October 2022

     4,400,000      1.53%  

The same as above

101-4    A   

January 2013 to January 2018

     10,600,000      1.23%  

The same as above

   B   

January 2013 to January 2020

     10,000,000      1.35%  

The same as above

   C   

January 2013 to January 2023

     3,000,000      1.49%  

The same as above

102-1    A   

February 2013 to February 2018

     6,200,000      1.23%  

The same as above

   B   

February 2013 to February 2020

     11,600,000      1.38%  

The same as above

   C   

February 2013 to February 2023

     3,600,000      1.50%  

The same as above

102-2    A   

July 2013 to July 2020

     10,200,000      1.50%  

The same as above

   B   

July 2013 to July 2023

     3,500,000      1.70%  

The same as above

102-3    A   

August 2013 to August 2017

     4,000,000      1.34%  

The same as above

   B   

August 2013 to August 2019

     8,500,000      1.52%  

The same as above

102-4    A   

September 2013 to September 2016

     1,500,000      1.35%  

The same as above

   B   

September 2013 to September 2017

     1,500,000      1.45%  

The same as above

102-4    C   

September 2013 to March 2019

     1,400,000      1.60%  

Bullet repayment; interest payable annually (interest for the six months prior to maturity will accrue on the basis of actual days and be repayable at maturity)

   D   

September 2013 to March 2021

     2,600,000      1.85%  

The same as above

   E   

September 2013 to March 2023

     5,400,000      2.05%  

The same as above

   F   

September 2013 to September 2023

     2,600,000      2.10%  

Bullet repayment; interest payable annually

 

- 44 -


The major terms of overseas unsecured bonds are as follows:

 

Issuance Period   

Total Amount
(US$

in Thousands)

     Coupon Rate  

Repayment and Interest

Payment

April 2013 to April 2016

   $ 350,000      0.95%  

Bullet repayment; interest payable semi-annually

April 2013 to April 2018

     1,150,000      1.625%  

The same as above

 

21. RETIREMENT BENEFIT PLANS

 

  a. Defined contribution plans

The plan under the R.O.C. Labor Pension Act (the “Act”) is deemed a defined contribution plan. Pursuant to the Act, TSMC, Mutual-Pak and VisEra Tech have made monthly contributions equal to 6% of each employee’s monthly salary to employees’ pension accounts. Furthermore, TSMC North America, TSMC China, TSMC Nanjing, TSMC Europe, TSMC Canada, TSMC Technology and TSMC Solar Europe GmbH also make monthly contributions at certain percentages of the basic salary of their employees. Accordingly, the Company recognized expenses of NT$2,369,940 thousand and NT$2,164,900 thousand for the years ended December 31, 2017 and 2016, respectively.

 

  b. Defined benefit plans

TSMC has defined benefit plans under the R.O.C. Labor Standards Law that provide benefits based on an employee’s length of service and average monthly salary for the six-month period prior to retirement. The Company contributes an amount equal to 2% of salaries paid each month to their respective pension funds (the Funds), which are administered by the Labor Pension Fund Supervisory Committee (the Committee) and deposited in the Committee’s name in the Bank of Taiwan. Before the end of each year, the Company assesses the balance in the Funds. If the amount of the balance in the Funds is inadequate to pay retirement benefits for employees who conform to retirement requirements in the next year, the Company is required to fund the difference in one appropriation that should be made before the end of March of the next year. The Funds are operated and managed by the government’s designated authorities; as such, the Company does not have any right to intervene in the investments of the Funds.

Amounts recognized in respect of these defined benefit plans were as follows:

 

     Years Ended December 31  
     2017      2016  

Current service cost

   $ 145,026      $ 132,786  

Net interest expense

     126,525        139,355  
  

 

 

    

 

 

 

Components of defined benefit costs recognized in profit or loss

     271,551        272,141  
  

 

 

    

 

 

 

Remeasurement on the net defined benefit liability:

     

Return on plan assets (excluding amounts included in net interest expense)

     29,290        45,721  

Actuarial loss arising from experience adjustments

     483,846        38,195  

Actuarial loss(gain) arising from changes in financial assumptions

     (258,455      694,632  

Actuarial loss arising from changes in demographic assumptions

            278,672  
  

 

 

    

 

 

 

Components of defined benefit costs recognized in other comprehensive income

     254,681        1,057,220  
  

 

 

    

 

 

 

Total

   $ 526,232      $ 1,329,361  
  

 

 

    

 

 

 

 

- 45 -


The pension costs of the aforementioned defined benefit plans were recognized in profit or loss by the following categories:

 

     Years Ended December 31  
     2017      2016  

Cost of revenue

   $ 175,357      $ 176,977  

Research and development expenses

     75,340        73,395  

General and administrative expenses

     16,669        17,367  

Marketing expenses

     4,185        4,402  
  

 

 

    

 

 

 
   $ 271,551      $ 272,141  
  

 

 

    

 

 

 

The amounts arising from the defined benefit obligation of the Company were as follows:

 

    

December 31,

2017

     December 31,
2016
 

Present value of defined benefit obligation

   $ 12,774,593      $ 12,480,480  

Fair value of plan assets

     (3,923,889      (3,929,072
  

 

 

    

 

 

 

Net defined benefit liability

   $ 8,850,704      $ 8,551,408  
  

 

 

    

 

 

 

Movements in the present value of the defined benefit obligation were as follows:

 

     Years Ended December 31  
     2017      2016  

Balance, beginning of year

   $ 12,480,480      $ 11,318,174  

Current service cost

     145,026        132,786  

Interest expense

     185,561        212,909  

Remeasurement losses (gains):

     

Actuarial loss arising from experience adjustments

     483,846        38,195  

Actuarial loss (gain) arising from changes in financial assumptions

     (258,455      694,632  

Actuarial loss arising from changes in demographic assumptions

            278,672  

Benefits paid from plan assets

     (261,865      (194,888
  

 

 

    

 

 

 

Balance, end of year

   $ 12,774,593      $ 12,480,480  
  

 

 

    

 

 

 

Movements in the fair value of the plan assets were as follows:

 

     Years Ended December 31  
     2017      2016  

Balance, beginning of year

   $ 3,929,072      $ 3,870,148  

Interest income

     59,036        73,554  

Remeasurement losses:

     

Return on plan assets (excluding amounts included in net interest expense)

     (29,290      (45,721

Contributions from employer

     226,936        225,979  

Benefits paid from plan assets

     (261,865      (194,888
  

 

 

    

 

 

 

Balance, end of year

   $ 3,923,889      $ 3,929,072  
  

 

 

    

 

 

 

 

- 46 -


The fair value of the plan assets by major categories at the end of reporting period was as follows:

 

    

December 31,

2017

     December 31,
2016
 

Cash

   $ 707,477      $ 818,426  

Equity instruments

     1,993,336        1,852,950  

Debt instruments

     1,223,076        1,257,696  
  

 

 

    

 

 

 
   $ 3,923,889      $ 3,929,072  
  

 

 

    

 

 

 

The actuarial valuations of the present value of the defined benefit obligation were carried out by qualified actuaries. The principal assumptions of the actuarial valuation were as follows:

 

     Measurement Date
    

   December 31,   

2017

       December 31,   
2016

Discount rate

   1.65%   1.50%

Future salary increase rate

   3.00%   3.00%

Through the defined benefit plans under the R.O.C. Labor Standards Law, the Company is exposed to the following risks:

 

  1) Investment risk: The pension funds are invested in equity and debt securities, bank deposits, etc. The investment is conducted at the discretion of the government’s designated authorities or under the mandated management. However, under the R.O.C. Labor Standards Law, the rate of return on assets shall not be less than the average interest rate on a two-year time deposit published by the local banks and the government is responsible for any shortfall in the event that the rate of return is less than the required rate of return.

 

  2) Interest risk: A decrease in the government bond interest rate will increase the present value of the defined benefit obligation; however, this will be partially offset by an increase in the return on the debt investments of the plan assets.

Assuming a hypothetical decrease in interest rate at the end of the reporting period contributed to a decrease of 0.5% in the discount rate and all other assumptions were held constant, the present value of the defined benefit obligation would increase by NT$890,116 thousand and NT$970,282 thousand as of December 31, 2017 and 2016, respectively.

 

  3) Salary risk: The present value of the defined benefit obligation is calculated by reference to the future salaries of plan participants. As such, an increase in the salary of the plan participants will increase the present value of the defined benefit obligation.

Assuming the expected salary rate increases by 0.5% at the end of the reporting period and all other assumptions were held constant, the present value of the defined benefit obligation would increase by NT$873,801 thousand and NT$951,424 thousand as of December 31, 2017 and 2016, respectively.

The sensitivity analysis presented above may not be representative of the actual change in the defined benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated.

 

- 47 -


Furthermore, in presenting the above sensitivity analysis, the present value of the defined benefit obligation has been calculated using the projected unit credit method at the end of the reporting period, which is the same as that applied in calculating the defined benefit obligation liability.

The Company expects to make contributions of NT$233,745 thousand to the defined benefit plans in the next year starting from December 31, 2017. The weighted average duration of the defined benefit obligation is 13 years.

 

22. GUARANTEE DEPOSITS

 

    

December 31,

2017

     December 31,
2016
 

Capacity guarantee

   $ 13,346,550      $ 20,929,350  

Receivables guarantee

     2,427,548        5,559,960  

Others

     306,521        181,312  
  

 

 

    

 

 

 
   $ 16,080,619      $ 26,670,622  
  

 

 

    

 

 

 

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

   $ 8,493,829      $ 12,000,189  

Noncurrent portion

     7,586,790        14,670,433  
  

 

 

    

 

 

 
   $ 16,080,619      $ 26,670,622  
  

 

 

    

 

 

 

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

 

23. EQUITY

 

  a. Capital stock

 

                                         
    

December 31,

2017

     December 31,
2016
 

Authorized shares (in thousands)

     28,050,000        28,050,000  
  

 

 

    

 

 

 

Authorized capital

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

 

 

    

 

 

 

Issued and paid shares (in thousands)

     25,930,380        25,930,380  
  

 

 

    

 

 

 

Issued capital

   $ 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 December 31, 2017, 1,068,165 thousand ADSs of TSMC were traded on the NYSE. The number of common shares represented by the ADSs was 5,340,823 thousand shares (one ADS represents five common shares).

 

- 48 -


  b. Capital surplus

 

                                         
    

December 31,

2017

     December 31,
2016
 

Additional paid-in capital

   $ 24,184,939      $ 24,184,939  

From merger

     22,804,510        22,804,510  

From convertible bonds

     8,892,847        8,892,847  

From share of changes in equities of subsidiaries

     118,792        107,798  

From share of changes in equities of associates

     289,240        282,155  

Donations

     19,208        55  
  

 

 

    

 

 

 
   $ 56,309,536      $ 56,272,304  
  

 

 

    

 

 

 

Under the relevant laws, the capital surplus generated from donations and the excess of the issuance price over the par value of capital stock (including the stock issued for new capital, mergers and convertible bonds) may be used to offset a deficit; in addition, when the Company has no deficit, such capital surplus may be distributed as cash dividends or stock dividends up to a certain percentage of TSMC’s paid-in capital. The capital surplus from share of changes in equities of subsidiaries and associates and dividend of a claim extinguished by a prescription may be used to offset a deficit; however, when generated from issuance of restricted shares for employees, such capital surplus may not be used for any purpose.

 

  c. Retained earnings and dividend policy

In accordance with the amendments to the R.O.C. Company Act in May 2015, the recipients of dividends and bonuses are limited to shareholders and do not include employees. The amendments to TSMC’s Articles of Incorporation on earnings distribution policy had been approved by TSMC’s shareholders in its meeting held on June 7, 2016. For policy about the profit sharing bonus to employees, please refer to Note 31.

TSMC’s amended Articles of Incorporation provide that, when allocating the net profits for each fiscal year, TSMC shall first offset its losses in previous years and then set aside the following items accordingly:

 

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

 

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

 

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

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

 

- 49 -


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.

The appropriations of 2016 and 2015 earnings have been approved by TSMC’s shareholders in its meetings held on June 8, 2017 and June 7, 2016, respectively. The appropriations and dividends per share were as follows:

 

                                                                                           
     Appropriation of Earnings      Dividends Per Share
(NT$)
 
     For Fiscal      For Fiscal      For Fiscal      For Fiscal  
     Year 2016      Year 2015      Year 2016      Year 2015  

Legal capital reserve

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

Cash dividends to shareholders

     181,512,663        155,582,283      $ 7      $ 6  
  

 

 

    

 

 

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

 

 

    

 

 

       

TSMC’s appropriations of earnings for 2017 had been approved in the meeting of the Board of Directors held on February 13, 2018. The appropriations and dividends per share were as follows:

 

                                             
       Appropriation  
of Earnings
       Dividends Per  
Share (NT$)
 
    

For Fiscal

Year 2017

    

For Fiscal

Year 2017

 

Legal capital reserve

   $ 34,311,148     

Special capital reserve

     26,907,527     

Cash dividends to shareholders

     207,443,044      $ 8  
  

 

 

    
   $ 268,661,719     
  

 

 

    

The appropriations of earnings for 2017 are to be presented for approval in the TSMC’s shareholders’ meeting to be held on June 5, 2018 (expected).

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

 

- 50 -


  d. Others

Changes in others were as follows:

 

                                                                                                                  
    Year Ended December 31, 2017  
    Foreign
Currency
Translation
Reserve
    Unrealized
Gain/Loss from
Available-for-
sale Financial
Assets
    Cash Flow
Hedges Reserve
   

Unearned
Stock-Based

Employee
Compensation

    Total  

Balance, beginning of year

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

Exchange differences arising on translation of foreign operations

    (28,257,449                       (28,257,449

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

          (154,680                 (154,680

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

          (61,182                 (61,182

Gain/(loss) arising on changes in the fair value of hedging instruments

                99,534             99,534  

Transferred to initial carrying amount of hedged items

                (94,851           (94,851

Share of other comprehensive income (loss) of associates

    (101,468     2,121                   (99,347

Share of unearned stock-based employee compensation of associates

                      (10,290     (10,290

Income tax effect

          (2,974     (562           (3,536
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance, end of year

  $ (26,697,680   $ (214,074   $ 4,226     $ (10,290   $ (26,917,818
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

                                                                                           
     Year Ended December 31, 2016  
    

Foreign
Currency
Translation

Reserve

     Unrealized
Gain/Loss from
Available-for-
sale Financial
Assets
     Cash Flow
Hedges Reserve
     Total  

Balance, beginning of year

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

Exchange differences arising on translation of foreign operations

     (9,409,190                    (9,409,190

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

            (696,240             (696,240

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

            4,071               4,071  

Share of other comprehensive income (loss) of associates

     (915      24,684        712        24,481  

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

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

Income tax effect

            (61,176             (61,176
  

 

 

    

 

 

    

 

 

    

 

 

 

Balance, end of year

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

 

 

    

 

 

    

 

 

    

 

 

 

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

 

- 51 -


24. NET REVENUE

 

                                             
     Years Ended December 31  
     2017      2016  

Net revenue from sale of goods

   $ 976,923,256      $ 947,415,900  

Net revenue from royalties

     523,985        522,444  
  

 

 

    

 

 

 
   $ 977,447,241      $ 947,938,344  
  

 

 

    

 

 

 

 

25. OTHER OPERATING INCOME AND EXPENSES, NET

 

     Years Ended December 31  
     2017      2016  

Gain (loss) on disposal or retirement of property, plant and equipment, net

   $ (1,097,908    $ 46,548  

Others

     (267,603      (16,735
  

 

 

    

 

 

 
   $ (1,365,511    $ 29,813  
  

 

 

    

 

 

 

 

26. OTHER INCOME

 

     Years Ended December 31  
     2017      2016  

Interest income

     

Bank deposits

   $ 6,412,823      $ 4,892,652  

Available-for-sale financial assets

     2,091,435        816,185  

Held-to-maturity financial assets

     568,552        383,261  

Structured product

     391,896        225,402  
  

 

 

    

 

 

 
     9,464,706        6,317,500  

Dividend income

     145,588        137,401  
  

 

 

    

 

 

 
   $ 9,610,294      $ 6,454,901  
  

 

 

    

 

 

 

 

27. FINANCE COSTS

 

     Years Ended December 31  
     2017      2016  

Interest expense

     

Corporate bonds

   $ 2,563,544      $ 3,014,753  

Bank loans

     766,625        291,178  

Others

     144        222  
  

 

 

    

 

 

 
   $ 3,330,313      $ 3,306,153  
  

 

 

    

 

 

 

 

- 52 -


28. OTHER GAINS AND LOSSES, NET

 

     Years Ended December 31  
     2017      2016  

Gain (loss) on disposal of financial assets, net

     

Available-for-sale financial assets

   $ 76,986      $ (4,014

Financial assets carried at cost

     12,809        37,241  

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

            (259,960

Gain (loss) from disposal of subsidiaries

     17,343        (36,105

Other gains

     409,852        176,734  

Net gain (loss) on financial instruments at FVTPL

     

Held for trading

     2,253,651        467,051  

Designated as at FVTPL

     131,037        (37,369

Gain (loss) arising from fair value hedges, net

     (30,293      16,973  

Impairment loss of financial assets

     

Financial assets carried at cost

     (29,603      (122,240

Other losses

     (24,424      (42,379
  

 

 

    

 

 

 
   $ 2,817,358      $ 195,932  
  

 

 

    

 

 

 

 

29. INCOME TAX

 

  a. Income tax expense recognized in profit or loss

Income tax expense consisted of the following:

 

     Years Ended December 31  
     2017      2016  

Current income tax expense

     

Current tax expense recognized in the current year

   $ 57,503,831      $ 54,315,433  

Income tax adjustments on prior years

     (896,147      (1,041,762

Other income tax adjustments

     152,790        122,461  
  

 

 

    

 

 

 
     56,760,474        53,396,132  
  

 

 

    

 

 

 

Deferred income tax expense (benefit)

     

Effect of tax rate changes

     561,818         

The origination and reversal of temporary differences

     (4,336,110      (1,775,023

Investment tax credits and operating loss carryforward

            35  
  

 

 

    

 

 

 
     (3,774,292      (1,774,988
  

 

 

    

 

 

 

Income tax expense recognized in profit or loss

   $   52,986,182      $   51,621,144  
  

 

 

    

 

 

 

 

- 53 -


A reconciliation of income before income tax and income tax expense recognized in profit or loss was as follows:

 

     Years Ended December 31  
     2017      2016  

Income before tax

   $ 396,133,030      $ 385,959,380  
  

 

 

    

 

 

 

Income tax expense at the statutory rate

   $ 69,608,602      $ 66,945,088  

Tax effect of adjusting items:

     

Deductible items in determining taxable income

     (1,410,955      (51,324

Tax-exempt income

     (16,901,134      (19,594,962

Additional income tax on unappropriated earnings

     11,835,948        11,957,213  

Effect of tax rate changes on deferred income tax

     561,818         

The origination and reversal of temporary differences

     (4,336,110      (1,775,023

Income tax credits

     (5,628,630      (4,940,147

Remeasurement of operating loss carryforward

            (400
  

 

 

    

 

 

 
     53,729,539        52,540,445  

Income tax adjustments on prior years

     (896,147      (1,041,762

Other income tax adjustments

     152,790        122,461  
  

 

 

    

 

 

 

Income tax expense recognized in profit or loss

   $ 52,986,182      $ 51,621,144  
  

 

 

    

 

 

 

For the years ended December 31, 2017 and 2016, the Company applied a tax rate of 17% for entities subject to the R.O.C. Income Tax Law; for other jurisdictions, the Company measures taxes by using the applicable tax rate for each individual jurisdiction.

In January 2018, it was announced that the Income Tax Law in the R.O.C. was amended and, starting from 2018, the corporate income tax rate will be adjusted from 17% to 20%. In addition, the tax rate applicable to unappropriated earnings will be reduced from 10% to 5%. Deferred tax assets and deferred tax liabilities recognized as of December 31, 2017 are expected to be adjusted and would increase by NT$1,473,065 thousand and NT$15,096 thousand, respectively, in 2018.

 

  b. Income tax expense recognized in other comprehensive income

 

                                                         
     Years Ended December 31  
     2017      2016  

Deferred income tax benefit (expense)

     

Related to remeasurement of defined benefit obligation

   $ 30,562      $ 126,867  

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

     (2,974      (61,176

Related to gain/loss on cash flow hedges

     (562       
  

 

 

    

 

 

 
   $ 27,026      $ 65,691  
  

 

 

    

 

 

 

 

- 54 -


  c. Deferred income tax balance

The analysis of deferred income tax assets and liabilities was as follows:

 

                                                     
    

December 31,

2017

     December 31,
2016
 

Deferred income tax assets

     

Temporary differences

     

Depreciation

   $ 8,401,266      $ 4,244,214  

Provision for sales returns and allowance

     1,637,713        1,512,061  

Net defined benefit liability

     975,324        939,543  

Unrealized loss on inventories

     629,442        737,247  

Deferred compensation cost

     266,521        378,740  

Others

     195,197        445,133  

Operating loss carryforward

            14,483  
  

 

 

    

 

 

 
   $ 12,105,463      $ 8,271,421  
  

 

 

    

 

 

 

Deferred income tax liabilities

     

Temporary differences

     

Unrealized exchange gains

   $ (169,480    $ (48,736

Available-for-sale financial assets

     (95,421      (92,447

Cash flow hedges

     (37,304       
  

 

 

    

 

 

 
   $ (302,205    $ (141,183
  

 

 

    

 

 

 

 

                                                                                                                 
     Year Ended December 31, 2017  
            Recognized in                       
     Balance,
Beginning of
Year
     Profit or Loss      Other
Comprehensive
Income
     Effect of
Disposal of
Subsidiary
     Effect of
Exchange Rate
Changes
     Balance, End of
Year
 

Deferred income tax assets

                 

Temporary differences

                 

Depreciation

   $ 4,244,214      $ 4,207,209      $      $      $ (50,157    $ 8,401,266  

Provision for sales returns and allowance

     1,512,061        129,971                      (4,319      1,637,713  

Net defined benefit liability

     939,543        5,219        30,562                      975,324  

Unrealized loss on inventories

     737,247        (105,068                    (2,737      629,442  

Deferred compensation cost

     378,740        (83,124                    (29,095      266,521  

Others

     445,133        (222,429                    (27,507      195,197  

Operating loss carryforward

     14,483                      (14,483              
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   $ 8,271,421      $ 3,931,778      $ 30,562      $ (14,483    $ (113,815    $ 12,105,463  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Deferred income tax liabilities

                 

Temporary differences

                 

Unrealized exchange gains

   $ (48,736    $ (120,744    $      $      $      $ (169,480

Available-for-sale financial assets

     (92,447             (2,974                    (95,421

Cash flow hedges

            (36,742      (562                    (37,304
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   $ (141,183    $ (157,486    $ (3,536    $      $      $ (302,205
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

- 55 -


                                                                                              
    Year Ended December 31, 2016  
          Recognized in              
   

Balance,
Beginning of

Year

    Profit or Loss    

Other
Comprehensive

Income

    Effect of
Exchange Rate
Changes
    Balance, End of
Year
 

Deferred income tax assets

         

Temporary differences

         

Depreciation

  $ 2,852,961     $ 1,437,648     $     $ (46,395   $ 4,244,214  

Provision for sales returns and allowance

    1,141,511       371,410             (860     1,512,061  

Net defined benefit liability

    895,486       (82,810     126,867             939,543  

Unrealized loss on inventories

    622,741       115,490             (984     737,247  

Deferred compensation cost

    316,283       69,311             (6,854     378,740  

Goodwill from business combination

    10,025       (9,836           (189      

Others

    531,449       (77,454           (8,862     445,133  

Operating loss carryforward

    14,518       (35                 14,483  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  $ 6,384,974     $ 1,823,724     $ 126,867     $ (64,144   $ 8,271,421  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Deferred income tax liabilities

         

Temporary differences

         

Available-for-sale financial assets

  $ (31,271   $     $ (61,176   $     $ (92,447

Unrealized exchange gains

          (48,736                 (48,736
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  $ (31,271   $ (48,736   $ (61,176   $     $ (141,183
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

  d. The investment operating loss carryforward and deductible temporary differences for which no deferred income tax assets have been recognized

The information of the operating loss carryforward for which no deferred tax assets have been recognized was as follows:

 

    

December 31,

2017

     December 31,
2016
 

Expiry period

     

1 - 4 years

   $      $ 136,703  

5 - 10 years

            41,389  
  

 

 

    

 

 

 
   $      $ 178,092  
  

 

 

    

 

 

 

As of December 31, 2017 and 2016, the aggregate deductible temporary differences for which no deferred income tax assets have been recognized amounted to NT$26,536,307 thousand and NT$1,919,784 thousand, respectively.

 

  e. Unused tax-exemption information

As of December 31, 2017, the profits generated from the following projects of TSMC are exempt from income tax for a five-year period:

 

     Tax-exemption Period  

Construction and expansion of 2007 by TSMC

     2014 to 2018  

Construction and expansion of 2008 by TSMC

     2015 to 2019  

Construction and expansion of 2009 by TSMC

     2018 to 2022  

 

  f. The information of unrecognized deferred income tax liabilities associated with investments

As of December 31, 2017 and 2016, the aggregate taxable temporary differences associated with investments in subsidiaries not recognized as deferred income tax liabilities amounted to NT$95,003,344 thousand and NT$83,181,401 thousand, respectively.

 

- 56 -


  g. Integrated income tax information

 

    

December 31,

2017

     December 31,
2016
 

Balance of the Imputation

     

Credit Account - TSMC

   $ 114,264,283      $ 82,072,562  
  

 

 

    

 

 

 

The estimated and actual creditable ratio for distribution of TSMC’s earnings of 2017 and 2016 were 14.69% and 13.90%, respectively; while the creditable ratio for individual shareholders residing in the R.O.C. is half of the original creditable ratio according to the R.O.C. Income Tax Law. However, effective from January 1, 2018, integrated income tax system were abrogated and imputation credit account is no longer applicable based on amended R.O.C. Income Tax Law in January 2018.

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

 

  h. Income tax examination

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

 

30. EARNINGS PER SHARE

 

     Years Ended December 31  
     2017      2016  

Basic EPS

   $ 13.23      $ 12.89  
  

 

 

    

 

 

 

Diluted EPS

   $                13.23      $             12.89  
  

 

 

    

 

 

 

EPS is computed as follows:

 

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

Year ended December 31, 2017

        

Basic/Diluted EPS

        

Net income available to common shareholders of the parent

   $ 343,111,476        25,930,380      $ 13.23  
  

 

 

    

 

 

    

 

 

 

Year ended December 31, 2016

        

Basic/Diluted EPS

        

Net income available to common shareholders of the parent

   $ 334,247,180        25,930,380      $ 12.89  
  

 

 

    

 

 

    

 

 

 

 

- 57 -


31. ADDITIONAL INFORMATION OF EXPENSES BY NATURE

 

     Years Ended December 31  
     2017      2016  

a. Depreciation of property, plant and equipment

     

Recognized in cost of revenue

   $ 235,985,189      $ 203,476,848  

Recognized in operating expenses

     19,746,263        16,583,067  

Recognized in other operating income and expenses

     64,510        25,083  
  

 

 

    

 

 

 
   $ 255,795,962      $ 220,084,998  
  

 

 

    

 

 

 

b. Amortization of intangible assets

     

Recognized in cost of revenue

   $ 2,135,521      $ 2,028,492  

Recognized in operating expenses

     2,211,215        1,714,914  
  

 

 

    

 

 

 
   $ 4,346,736      $ 3,743,406  
  

 

 

    

 

 

 

c. Research and development expenses

   $ 80,732,463      $ 71,207,703  
  

 

 

    

 

 

 

d. Employee benefits expenses

     

Post-employment benefits

     

Defined contribution plans

   $ 2,369,940      $ 2,164,900  

Defined benefit plans

     271,551        272,141  
  

 

 

    

 

 

 
     2,641,491        2,437,041  

Other employee benefits

     101,488,608        97,248,082  
  

 

 

    

 

 

 
   $ 104,130,099      $ 99,685,123  
  

 

 

    

 

 

 

Employee benefits expense summarized by function

     

Recognized in cost of revenue

   $ 61,026,107      $ 58,493,500  

Recognized in operating expenses

     43,103,992        41,191,623  
  

 

 

    

 

 

 
   $      104,130,099      $ 99,685,123  
  

 

 

    

 

 

 

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

TSMC accrued profit sharing bonus to employees based on a percentage of net income before income tax, profit sharing bonus to employees and compensation to directors during the period, which amounted to NT$23,019,082 thousand and NT$22,418,339 thousand for the years ended December 31, 2017 and 2016, respectively; compensation to directors was expensed based on estimated amount payable. If there is a change in the proposed amounts after the annual consolidated financial statements are authorized for issue, the differences are recorded as a change in accounting estimate.

 

- 58 -


TSMC’s profit sharing bonus to employees and compensation to directors in the amounts of NT$23,019,082 thousand and NT$368,919 thousand in cash for 2017, respectively, and profit sharing bonus to employees and compensation to directors in the amounts of NT$22,418,339 thousand and NT$376,432 thousand in cash for 2016, respectively, had been approved by the Board of Directors of TSMC held on February 13, 2018 and February 14, 2017, respectively. There is no significant difference between the aforementioned approved amounts and the amounts charged against earnings of 2017 and 2016, respectively.

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

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

 

32. CAPITAL MANAGEMENT

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

 

33. FINANCIAL INSTRUMENTS

 

  a. Categories of financial instruments

 

    

December 31,

2017

     December 31,
2016
 

Financial assets

     

FVTPL (Note 1)

   $ 569,751      $ 6,451,112  

Available-for-sale financial assets (Note 2)

     98,248,410        71,891,234  

Held-to-maturity financial assets

     20,821,714        38,917,677  

Hedging derivative financial assets

     34,394        5,550  

Loans and receivables (Note 3)

     684,416,654        673,592,938  
  

 

 

    

 

 

 
   $ 804,090,923      $ 790,858,511  
  

 

 

    

 

 

 

Financial liabilities

     

FVTPL (Note 1)

   $ 26,709      $ 191,135  

Hedging derivative financial liabilities

     15,562         

Amortized cost (Note 4)

     340,501,266        387,046,137  
  

 

 

    

 

 

 
   $ 340,543,537      $ 387,237,272  
  

 

 

    

 

 

 

 

  Note 1: Including held for trading and designated as at FVTPL.
  Note 2: Including financial assets carried at cost.

 

- 59 -


 

  Note 3: Including cash and cash equivalents, notes and accounts receivable (including related parties), other receivables and refundable deposits.
  Note 4: Including short-term loans, accounts payable (including related parties), payables to contractors and equipment suppliers, accrued expenses and other current liabilities, bonds payable, long-term bank loans, and guarantee deposits.

 

  b. Financial risk management objectives

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

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

 

  c. Market risk

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

Foreign currency risk

Most of the Company’s operating activities are denominated in foreign currencies. Consequently, the Company is exposed to foreign currency risk. To protect against reductions in value and the volatility of future cash flows caused by changes in foreign exchange rates, the Company utilizes derivative financial instruments, such as forward exchange contracts and cross currency swaps, and non-derivative financial instruments, such as foreign currency-denominated debt, to partially hedge its currency exposure.

The Company’s sensitivity analysis of foreign currency risk mainly focuses on the foreign currency monetary items and the derivatives financial instruments at the end of the reporting period. Assuming an unfavorable 10% movement in the levels of foreign exchanges relative to the New Taiwan dollar, the net income for the years ended December 31, 2017 and 2016 would have decreased by NT$867,910 thousand and NT$111,347 thousand, respectively, and the other comprehensive income for the year ended December 31, 2017 would have decreased by NT$265,875 thousand.

Interest rate risk

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

Assuming the amount of the long-term bank loans at the end of the reporting period had been outstanding for the entire period and all other variables were held constant, a hypothetical 100 basis point (1.00%) increase in interest rates would have resulted in an increase in the interest expense, net of tax, by approximately NT$261 thousand for the year ended December 31, 2016. As of December 31, 2017, the Company had no outstanding long-term bank loans.

 

- 60 -


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

Based on a sensitivity analysis performed at the end of the reporting period, a hypothetical 100 basis points (1.00%) increase in interest rates across all maturities would have resulted in a decrease in other comprehensive income by NT$2,119,713 thousand and NT$1,600,929 thousand for the years ended December 31, 2017 and 2016, respectively.

Other price risk

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

Assuming a hypothetical decrease of 5% in prices of the equity investments at the end of the reporting period for the years ended December 31, 2017 and 2016, the other comprehensive income would have decreased by NT$351,520 thousand and NT$342,565 thousand, respectively.

 

  d. Credit risk management

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

Business related credit risk

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

As of December 31, 2017 and 2016, the Company’s ten largest customers accounted for 70% and 74% of accounts receivable, respectively. The Company believes the concentration of credit risk is not material for the remaining accounts receivable.

Financial credit risk

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

 

  e. Liquidity risk management

The objective of liquidity risk management is to ensure the Company has sufficient liquidity to fund its business requirements associated with existing operations over the next 12 months. The Company manages its liquidity risk by maintaining adequate cash and cash equivalent, short-term available-for-sale financial assets and short-term held-to-maturity financial assets.

 

- 61 -


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  

December 31, 2017

              

Non-derivative financial liabilities

              

Short-term loans

   $ 63,801,977      $      $      $      $ 63,801,977  

Accounts payable (including related parties)

     30,069,163                             30,069,163  

Payables to contractors and equipment suppliers

     55,723,774                             55,723,774  

Accrued expenses and other current liabilities

     24,659,738                             24,659,738  

Bonds payable

     60,176,818        68,378,787        7,777,715        18,203,601        154,536,921  

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

     8,493,829        7,503,151        83,639               16,080,619  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     242,925,299        75,881,938        7,861,354        18,203,601        344,872,192  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Derivative financial instruments

              

Forward exchange contracts

              

Outflows

     67,393,539                             67,393,539  

Inflows

     (67,957,919                           (67,957,919
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     (564,380                           (564,380
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   $ 242,360,919      $ 75,881,938      $ 7,861,354      $ 18,203,601      $ 344,307,812  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

December 31, 2016

              

Non-derivative financial liabilities

              

Short-term loans

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

Accounts payable (including related parties)

     27,324,525                             27,324,525  

Payables to contractors and equipment suppliers

     63,154,514                             63,154,514  

Accrued expenses and other current liabilities

     20,713,259                             20,713,259  

Bonds payable

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

Long-term bank loans

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

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

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

 

 

    

 

 

    

 

 

    

 

 

    

 

 

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

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Derivative financial instruments

              

Forward exchange contracts

              

Outflows

     40,571,841                             40,571,841  

Inflows

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

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     (14,503                           (14,503
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Cross currency swap contracts

              

Outflows

     5,478,066                             5,478,066  

Inflows

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

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     (9,534                           (9,534
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

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

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

- 62 -


  f. Fair value of financial instruments

 

  1) Fair value measurements recognized in the consolidated balance sheets

Fair value measurements are grouped into Levels 1 to 3 based on the degree to which the fair value is observable:

 

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

 

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

 

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

 

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

Fair value hierarchy

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

 

     December 31, 2017  
     Level 1      Level 2      Level 3      Total  

Financial assets at FVTPL

           

Held for trading

           

Forward exchange contracts

   $      $ 569,751      $      $ 569,751  
  

 

 

    

 

 

    

 

 

    

 

 

 

Available-for-sale financial assets

           

Corporate bonds

   $      $ 40,165,148      $      $ 40,165,148  

Agency bonds/Agency mortgage-backed securities

            29,235,388               29,235,388  

Asset-backed securities

            13,459,545               13,459,545  

Government bonds

     7,715,980        101,743               7,817,723  

Publicly traded stocks

     2,548,054                      2,548,054  

Commercial paper

            148,295               148,295  
  

 

 

    

 

 

    

 

 

    

 

 

 
   $   10,264,034      $   83,110,119      $      $   93,374,153  
  

 

 

    

 

 

    

 

 

    

 

 

 

Hedging derivative financial assets

           

Fair value hedges

           

Interest rate futures contracts

   $ 27,016      $      $      $ 27,016  

Cash flow hedges

           

Forward exchange contracts

            7,378               7,378  
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 27,016      $ 7,378      $                 —      $   34,394  
  

 

 

    

 

 

    

 

 

    

 

 

 

Financial liabilities at FVTPL

           

Held for trading

           

Forward exchange contracts

   $      $ 26,709      $      $ 26,709  
  

 

 

    

 

 

    

 

 

    

 

 

 

Hedging derivative financial liabilities

           

Cash flow hedges

           

Forward exchange contracts

   $      $ 15,562      $      $ 15,562  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

- 63 -


     December 31, 2016  
     Level 1      Level 2      Level 3      Total  

Financial assets at FVTPL

           

Held for trading

           

Forward exchange contracts

   $      $ 142,406      $             —      $ 142,406  

Cross currency swap contracts

            10,976               10,976  

Designated as at FVTPL

           

Time deposit

            6,297,708               6,297,708  

Forward exchange contracts

            22               22  
  

 

 

    

 

 

    

 

 

    

 

 

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

 

 

    

 

 

    

 

 

    

 

 

 

Available-for-sale financial assets

           

Corporate bonds

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

Agency bonds/Agency mortgage-backed securities

            14,880,482               14,880,482  

Asset-backed securities

            11,254,757               11,254,757  

Government bonds

     8,346,989        110,373               8,457,362  

Publicly traded stocks

     3,196,658                      3,196,658  
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 11,543,647      $   56,245,120      $      $ 67,788,767  
  

 

 

    

 

 

    

 

 

    

 

 

 

Hedging derivative financial assets

           

Fair value hedges

           

Interest rate futures contracts

   $ 5,550      $      $      $ 5,550  
  

 

 

    

 

 

    

 

 

    

 

 

 
Financial liabilities at FVTPL                            

Held for trading

           

Forward exchange contracts

   $      $ 91,585      $      $ 91,585  

Designated as at FVTPL

           

Forward exchange contracts

            99,550               99,550  
  

 

 

    

 

 

    

 

 

    

 

 

 
   $      $ 191,135      $      $ 191,135  
  

 

 

    

 

 

    

 

 

    

 

 

 

In the fourth quarter of 2017, the Company reassessed the bid-ask spread and the transaction volume of the fixed income securities in determining whether there were quoted prices in active markets. Accordingly, the Company classified the fair value hierarchy levels of corporate bonds, agency bonds, agency mortgage-backed securities and some government bonds as level 2. To have consistent comparative basis, the Company had revised prior year classification from level 1 to level 2.

There were no purchases and disposals for assets classified as Level 3 for the years ended December 31, 2017 and 2016, respectively.

Valuation techniques and assumptions used in Level 2 fair value measurement

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

 

    The fair values of corporate bonds, agency bonds, agency mortgage-backed securities, asset-backed securities, and government bonds are determined by quoted market prices.

 

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

 

- 64 -


  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 in the consolidated financial statements that are not measured at fair value approximate their fair values.

 

     December 31, 2017      December 31, 2016  
     Carrying
Amount
     Fair Value      Carrying
Amount
     Fair Value  
Financial assets                            

Held-to-maturity financial assets

           

Corporate bonds

   $ 19,338,764      $ 19,541,419      $ 23,849,701      $ 23,996,429  

Structured product

     1,482,950        1,475,350        1,609,950        1,609,738  

Commercial paper

                   8,628,176        8,630,769  

Negotiable certificate of deposit

                   4,829,850        4,847,785  
Financial liabilities                            

Measured at amortized cost

           

Bonds payable

     150,201,122        152,077,728        191,193,557        192,845,296  

Fair value hierarchy

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

 

     December 31, 2017  
     Level 1      Level 2      Level 3      Total  
Financial assets                            

Held-to-maturity securities

           

Corporate bonds

   $      $ 19,541,419      $                 —      $ 19,541,419  

Structured product

            1,475,350               1,475,350  
  

 

 

    

 

 

    

 

 

    

 

 

 
   $      $ 21,016,769      $      $ 21,016,769  
  

 

 

    

 

 

    

 

 

    

 

 

 
Financial liabilities                            

Measured at amortized cost

           

Bonds payable

   $                 —      $   152,077,728      $      $ 152,077,728  
  

 

 

    

 

 

    

 

 

    

 

 

 
     December 31, 2016  
     Level 1      Level 2      Level 3      Total  
Financial assets                            

Held-to-maturity securities

           

Corporate bonds

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

Commercial paper

            8,630,769               8,630,769  

Negotiable certificate of deposit

            4,847,785               4,847,785  

Structured product

            1,609,738               1,609,738  
  

 

 

    

 

 

    

 

 

    

 

 

 
   $      $ 39,084,721      $      $ 39,084,721  
  

 

 

    

 

 

    

 

 

    

 

 

 
Financial liabilities                            

Measured at amortized cost

           

Bonds payable

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

 

 

    

 

 

    

 

 

    

 

 

 

 

- 65 -


In the fourth quarter of 2017, the Company reassessed the bid-ask spread and the transaction volume of the fixed income securities in determining whether there were quoted prices in active markets. Accordingly, the Company classified the fair value hierarchy levels of corporate bonds and bonds payable as level 2. To have consistent comparative basis, the Company had revised prior year classification from level 1 to level 2.

Valuation techniques and assumptions used in Level 2 fair value measurement

The fair values of corporate bonds, negotiable certificate of deposit, and structured products are determined by quoted market prices.

The fair value of commercial paper is determined by the present value of future cash flows based on the discounted curves that are derived from the quoted market prices.

The fair value of the Company’s bonds payable is determined by quoted market prices.

 

34. RELATED PARTY TRANSACTIONS

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

 

  a. Related party name and categories

 

Related Party Name

  

Related Party Categories

GUC    Associates
VIS    Associates
SSMC    Associates
Xintec    Associates
Mutual-Pak    Associates
TSMC Education and Culture Foundation    Other related parties
TSMC Charity Foundation    Other related parties

 

  b. Net revenue

 

             Years Ended December 31      
         2017      2016  

Item

  Related Party Categories      

Net revenue from sale of goods

  Associates    $ 8,495,937      $ 5,929,141  
  Other related parties      133         
    

 

 

    

 

 

 
     $ 8,496,070      $ 5,929,141  
    

 

 

    

 

 

 

Net revenue from royalties

  Associates    $ 482,537      $ 516,749  
    

 

 

    

 

 

 

 

- 66 -


  c. Purchases

 

     Years Ended December 31  
     2017      2016  

Related Party Categories

     

Associates

   $ 9,904,637      $ 10,108,210  
  

 

 

    

 

 

 

 

  d. Receivables from related parties

 

        

December 31,

2017

       December 31,
2016
 

Item

  Related Party Name/Categories        

Receivables from related parties

  GUC    $ 1,022,892        $ 969,136  
  Xintec      161,232          423  
    

 

 

      

 

 

 
     $ 1,184,124        $ 969,559  
    

 

 

      

 

 

 

Other receivables from related parties

  SSMC    $ 83,099        $ 60,641  
  VIS      78,141          86,038  
  Other Associates      9,818          109  
    

 

 

      

 

 

 
     $ 171,058        $ 146,788  
    

 

 

      

 

 

 

 

  e. Payables to related parties

 

        

December 31,

2017

       December 31,
2016
 

Item

  Related Party Name/Categories        

Payables to related parties

  Xintec    $ 817,930        $ 124,541  
  VIS      409,950          587,407  
  SSMC      406,959          506,121  
  Other Associates      21,517          44,105  
    

 

 

      

 

 

 
     $ 1,656,356        $ 1,262,174  
    

 

 

      

 

 

 

 

  f. Others

 

             Years Ended December 31      
         2017        2016  

Item

  Related Party Categories        

Manufacturing expenses

  Associates    $ 2,196,141        $ 1,389,164  
    

 

 

      

 

 

 

Research and development expenses

  Associates    $ 69,841        $ 161,735  
    

 

 

      

 

 

 

General and administrative expenses

  Other related parties    $ 101,500        $ 60,000  
    

 

 

      

 

 

 

 

- 67 -


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

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

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

 

  g. Compensation of key management personnel

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

 

     Years Ended December 31  
     2017      2016  

Short-term employee benefits

   $ 2,170,280      $ 2,023,971  

Post-employment benefits

     3,727        3,992  
  

 

 

    

 

 

 
   $ 2,174,007      $ 2,027,963  
  

 

 

    

 

 

 

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.

 

35. PLEDGED ASSETS

The Company provided certificate of deposits recorded in other financial assets as collateral mainly for building lease agreements. As of December 31, 2017 and 2016, the aforementioned other financial assets amounted to NT$165,618 thousand and NT$185,698 thousand, respectively.

 

36. SIGNIFICANT OPERATING LEASE ARRANGEMENTS

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

The Company expensed the lease payments as follows:

 

     Years Ended December 31  
     2017      2016  

Minimum lease payments

   $ 2,178,054      $ 1,135,735  
  

 

 

    

 

 

 

 

- 68 -


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

 

    

December 31,

2017

     December 31,
2016
 

Not later than 1 year

   $ 3,116,209      $ 1,321,546  

Later than 1 year and not later than 5 years

     5,174,729        3,677,432  

Later than 5 years

     8,905,848        6,623,957  
  

 

 

    

 

 

 
   $ 17,196,786      $ 11,622,935  
  

 

 

    

 

 

 

 

37. 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 December 31, 2017, the R.O.C. Government did not invoke such right.

 

  b. Under a Shareholders Agreement entered into with Philips and EDB Investments Pte Ltd. on March 30, 1999, the parties formed a joint venture company, SSMC, which is an integrated circuit foundry in Singapore. TSMC’s equity interest in SSMC was 32%. Nevertheless, in September 2006, Philips spun-off its semiconductor subsidiary which was renamed as NXP B.V. Further, TSMC and NXP B.V. purchased all the SSMC shares owned by EDB Investments Pte Ltd. pro rata according to the Shareholders Agreement on November 15, 2006. After the purchase, TSMC and NXP B.V. currently own approximately 39% and 61% of the SSMC shares, respectively. TSMC and NXP B.V. are required, in the aggregate, to purchase at least 70% of SSMC’s capacity, but TSMC alone is not required to purchase more than 28% of the capacity. If any party defaults on the commitment and the capacity utilization of SSMC falls below a specific percentage of its capacity, the defaulting party is required to compensate SSMC for all related unavoidable costs. There was no default from the aforementioned commitment as of December 31, 2017.

 

  c. TSMC joined the Customer Co-Investment Program of ASML and entered into the investment agreement in August 2012. The agreement includes an investment of EUR837,816 thousand by TSMC Global to acquire 5% of ASML’s equity with a lock-up period of 2.5 years. TSMC Global has acquired the aforementioned equity on October 31, 2012. The lock-up period expired on May 1, 2015 and as of October 8, 2015, all ASML shares had been disposed.

Both parties also signed the research and development funding agreement whereby TSMC shall provide EUR276,000 thousand to ASML’s research and development programs from 2013 to 2017. As of September 30, 2017, the amount has been fully paid.

 

  d. In May 2017, Mr. Uri Cohen filed a complaint in the U.S. District Court for the Eastern District of Texas alleging that TSMC, TSMC North America and other companies infringe four U.S. patents. In response, TSMC and TSMC North America filed a declaratory judgment complaint against Cohen in the U.S. District Court for the Northern District of California seeking a judgment declaring that there is no infringement of the same four patents. TSMC also filed a motion to transfer Cohen’s lawsuit in the U.S. District Court for the Eastern District of Texas to the U.S. District Court for the Northern District of California. Cohen agreed to the transfer, and as of December 2017, the cases are consolidated and pending in the U.S. District Court for the Northern District of California. The outcome cannot be determined and the Company cannot make a reliable estimate of the contingent liability at this time.

 

- 69 -


  e. On September 28, 2017, TSMC was contacted by the European Commission (“Commission”) for information and documents concerning alleged anti-competitive practices of TSMC in relation to semiconductor sales. This proceeding is still in its preliminary stage, and it is premature to predict how the case will proceed, the outcome of the proceeding or its impact. TSMC will continue to cooperate fully with the Commission.

 

  f. TSMC entered into long-term purchase agreements of silicon wafer with multiple suppliers. The relative minimum purchase quantity and price are specified in the agreements.

 

  g. Amounts available under unused letters of credit as of December 31, 2017 and 2016 were NT$94,909 thousand and NT$122,356 thousand, respectively.

 

38. SIGNIFICANT LOSS FROM DISASTER

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

 

39. 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)

 

December 31, 2017

       

Financial assets

       

Monetary items

       

USD

   $ 5,668,611        29.659     $ 168,125,342  

USD

     580,555        6.512  (Note 2)      17,218,674  

EUR

     236,474        35.45       8,383,015  

JPY

     34,335,661        0.2629       9,026,845  

Non-monetary items

       

HKD

     285,336        3.80       1,084,276  

Financial liabilities

       

Monetary items

       

USD

     4,048,384        29.659       120,071,030  

EUR

     415,819        35.45       14,740,766  

JPY

     43,205,838        0.2629       11,358,815  

(Continued)

 

- 70 -


    

Foreign
Currencies

(In Thousands)

     Exchange Rate
(Note 1)
    

Carrying
Amount

(In Thousands)

 

December 31, 2016

        

Financial assets

        

Monetary items

        

USD

   $ 5,042,715        32.199      $ 162,370,381  

EUR

     19,556        34.30        670,767  

JPY

     37,024,347        0.2775        10,274,256  

Non-monetary items

        

HKD

     257,056        4.15        1,066,780  

Financial liabilities

        

Monetary items

        

USD

     4,000,930        32.199        128,825,952  

EUR

     183,922        34.30        6,308,513  

JPY

     61,062,114        0.2775        16,944,737  

(Concluded)

 

Note 1:    Except as otherwise noted, exchange rate represents the number of N.T. dollars for which one foreign currency could be exchanged.
Note 2:    The exchange rate represents the number of RMB for which one USD dollars could be exchanged.

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

 

40. OPERATING SEGMENTS INFORMATION

 

  a. Operating segments, segment revenue and operating results

From 2016, the Company has only one operating segment, the foundry segment. The foundry segment engages mainly in the manufacturing, selling, packaging, testing and computer-aided design of integrated circuits and other semiconductor devices and the manufacturing of masks.

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

 

- 71 -


  b. Geographic information

 

     Net Revenue from External
Customers
     Non-current Assets  
     Years Ended December 31      December 31,      December 31,  
     2017      2016      2017      2016  

Taiwan

   $ 90,129,390      $ 127,062,984      $ 1,027,963,202      $ 991,567,870  

United States

     620,948,718        610,371,107        7,515,835        8,245,054  

Asia

     194,477,093        146,907,470        44,213,422        14,071,364  

Europe, the Middle East and Africa

     68,538,366        58,042,311        8,123        8,677  

Others

     3,353,674        5,554,472                
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 977,447,241      $ 947,938,344      $ 1,079,700,582      $ 1,013,892,965  
  

 

 

    

 

 

    

 

 

    

 

 

 

The Company categorized the net revenue mainly based on the country in which the customer is headquartered. Non-current assets include property, plant and equipment, intangible assets and other noncurrent assets.

 

  c. Production information

 

       Years Ended December 31    
Production    2017      2016  

Wafer

   $ 874,572,620      $ 861,170,855  

Others

     102,874,621        86,767,489  
  

 

 

    

 

 

 
   $ 977,447,241      $ 947,938,344  
  

 

 

    

 

 

 

Starting in 2017, revenue from packaging and testing services is reclassified from wafer revenue to other revenue. To have consistent comparative basis, the Company had revised prior year classification.

 

  d. Major customers representing at least 10% of net revenue

 

     Years Ended December 31  
     2017      2016  
     Amount      %      Amount      %  

Customer A

   $ 214,228,766        22      $ 157,185,418        17  

Customer B

     64,096,227        7        107,463,238        11  

 

41. ADDITIONAL DISCLOSURES

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

 

  a. Financings provided: Please see Table 1 attached;

 

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

 

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

 

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

 

- 72 -


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

 

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

 

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

 

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

 

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

 

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

 

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

 

  l. Information on investment in mainland China

 

  1) The name of the investee in mainland China, the main businesses and products, its issued capital, method of investment, information on inflow or outflow of capital, percentage of ownership, income (losses) of the investee, share of profits/losses of investee, ending balance, amount received as dividends from the investee, and the limitation on investee: Please see Table 10 attached.

 

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

 

- 73 -


TABLE 1

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

FINANCINGS PROVIDED

FOR THE YEAR ENDED DECEMBER 31, 2017

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

 

 

No.

  Financing
Company
  Counter-
party
  Financial
Statement
Account
  Related
Party
  Maximum
Balance for
the Period
(Foreign

Currencies in
Thousands)

(Note 3)
    Ending
Balance
(Foreign
Currencies in
Thousands)

(Note 3)
    Amount
Actually Drawn

(Foreign
Currencies
in Thousands)
    Interest
Rate
  Nature
for
Financing

(Note 4)
  Transaction
Amounts
    Reason
for
Financing

(Note 4)
  Allowance
for Bad
Debt
   

 

Collateral

    Financing
Limits for
Each
Borrowing
Company

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

(Notes 1
and 2)
 
                          Item     Value      

1

  TSMC
China
  TSMC
Nanjing
  Other
receivables
from
related
parties
  Yes   $

(RMB

20,950,700

 4,600,000

 

  $

(RMB

20,950,700

 4,600,000

 

  $

(RMB

20,039,800

 4,400,000

 

  1.3%-1.5%   The need
for short-term /
long-term
financing
  $     Operating
capital
  $           $     $ 51,161,815     $ 51,161,815  

2

  TSMC
Global
  TSMC   Other
receivables
from
related
parties
  Yes    

(US$

44,488,500

1,500,000

 

   

(US$

44,488,500

1,500,000

 

        1.08%-1.45%   The need
for short-term
financing
        Operating
capital
                      309,211,877       309,211,877  

 

Note 1:   The total amount available for lending purpose shall not exceed the net worth of TSMC China. The total amount for lending to a company for funding for a short-term period shall not exceed ten percent (10%) of the net worth of TSMC China. In addition, the total amount lendable to any one borrower shall be no more than thirty percent (30%) of the borrower’s net worth. The above restriction does not apply to the subsidiaries whose voting shares are 100% owned, directly or indirectly, by TSMC. However, the total amount lendable to any such subsidiary of TSMC shall not exceed forty percent (40%) of the net worth of TSMC China. When there is a lending for funding needs by TSMC China to TSMC, or to the subsidiaries whose voting shares are 100% owned, directly or indirectly, by TSMC, which are not located in Taiwan, the lending will not be subject to the restriction set forth in the above paragraph of this Article. Notwithstanding the foregoing, the aggregate amount available for lending to such borrowers and the total amount lendable to each of such borrowers still shall not exceed the net worth of TSMC China.
Note 2:   The total amount available for lending purpose shall not exceed the net worth of TSMC Global. The total amount for lending to a company for funding for a short-term period shall not exceed ten percent (10%) of the net worth of TSMC Global. In addition, the total amount lendable to any one borrower shall be no more than thirty percent (30%) of the borrower’s net worth. While TSMC, or foreign subsidiaries whose voting shares are 100% owned, directly or indirectly, by TSMC will not be subject to this restriction, their total borrowing amount still shall not exceed the net worth of TSMC Global. Notwithstanding the foregoing, the aggregate amount for lending to Taiwan companies other than TSMC shall not exceed forty percent (40%) of the net worth of TSMC Global.
Note 3:   The maximum balance for the period and ending balance represent the amounts approved by the Board of Directors.
Note 4:   The restriction of the term of each loan for funding not exceeding one year shall not apply to inter-company loans for funding between offshore subsidiaries in which the Company holds, directly or indirectly, 100% of the voting shares.

 

- 74 -


TABLE 2

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

ENDORSEMENTS/GUARANTEES PROVIDED

FOR THE YEAR ENDED DECEMBER 31, 2017

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

 

 

No.

   Endorsement/
Guarantee Provider
  

 

Guaranteed Party

   Limits on
Endorsement/
Guarantee
Amount
Provided to Each
Guaranteed
Party

(Notes 1 and 2)
     Maximum
Balance
for the Period
(US$ in
Thousands)

(Note 3)
     Ending
Balance
(US$ in
Thousands)

(Note 3)
     Amount
Actually
Drawn
(US$ in
Thousands)
     Amount of
Endorsement/
Guarantee
Collateralized
by Properties
     Ratio of
Accumulated
Endorsement/
Guarantee to
Net Equity
per Latest
Financial
Statements
   Maximum
Endorsement/
Guarantee
Amount
Allowable

(Note 2)
     Guarantee
Provided
by Parent
Company
   Guarantee
Provided by
A Subsidiary
   Guarantee
Provided to
Subsidiaries
in Mainland
China
      Name    Nature of
Relationship
                             

0

   TSMC    TSMC Global    Subsidiary    $ 380,514,383      $

(US$

34,107,850

 1,150,000

 

   $

(US$

34,107,850

 1,150,000

 

   $

(US$

34,107,850

 1,150,000

 

   $      2.24%    $ 380,514,383      Yes    No    No
      TSMC North America    Subsidiary      380,514,383       

(US$

2,468,023

83,213

 

    

(US$

2,468,023

83,213

 

    

(US$

2,468,023

83,213

 

          0.16%      380,514,383      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.

 

- 75 -


TABLE 3

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

MARKETABLE SECURITIES HELD

DECEMBER 31, 2017

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

 

 

Held Company
Name

 

Marketable Securities Type and Name

  Relationship
with the
Company
   

Financial Statement Account

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

TSMC

 

Common stock

             
 

Motech

        Available-for-sale financial assets     58,320     $ 1,309,279       12     $ 1,309,279    
 

Semiconductor Manufacturing International Corporation

            21,105       1,084,276             1,084,276    
 

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

            1,152       4,041       2       4,041    
 

Fund

             
 

Horizon Ventures Fund

        Financial assets carried at cost           6,975       12       6,975    
 

Crimson Asia Capital

                  6,410       1       6,410    

TSMC Partners

 

Common stock

             
 

Tela Innovations

        Financial assets carried at cost     10,440     US$ 65,000       25     US$ 65,000    
 

Mcube Inc.

            6,333             12          
 

Fund

             
 

China Walden Venture Investments II, L.P.

        Financial assets carried at cost         US$ 8,607       9     US$ 8,607    
 

Shanghai Walden Venture Capital Enterprise

                US$ 4,270       6     US$ 4,270    

TSMC Global

 

Corporate bond

             
 

Morgan Stanley

        Available-for-sale financial assets         US$     43,115       N/A     US$ 43,115    
 

Bank of America Corp

                US$ 42,703       N/A     US$ 42,703    
 

JPMorgan Chase & Co

                US$ 40,101       N/A     US$ 40,101    
 

Goldman Sachs Group Inc/The

                US$ 38,465       N/A     US$ 38,465    
 

Citigroup Inc

                US$ 29,911       N/A     US$ 29,911    
 

AT&T Inc

                US$ 26,867       N/A     US$ 26,867    
 

Ford Motor Credit Co LLC

                US$ 18,533       N/A     US$ 18,533    
 

Verizon Communications Inc

                US$ 18,298       N/A     US$ 18,298    
 

BAT Capital Corp

                US$ 17,024       N/A     US$ 17,024    
 

Apple Inc

                US$ 16,463       N/A     US$ 16,463    
 

PNC Bank NA

                US$ 14,412       N/A     US$ 14,412    
 

Credit Suisse AG/New York NY

                US$ 13,623       N/A     US$ 13,623    
 

Anheuser-Busch InBev Finance Inc

                US$ 13,406       N/A     US$ 13,406    
 

Tyson Foods Inc

                US$ 12,214       N/A     US$ 12,214    
 

Southern Co/The

                US$ 12,015       N/A     US$ 12,015    
 

AbbVie Inc

                US$ 11,097       N/A     US$ 11,097    
 

Asian Development Bank

                US$ 11,073       N/A     US$ 11,073    
 

Mitsubishi UFJ Financial Group Inc

                US$ 10,791       N/A     US$ 10,791    
 

Capital One NA/Mclean VA

                US$ 10,465       N/A     US$ 10,465    
 

Westpac Banking Corp

                US$ 10,464       N/A     US$ 10,464    
 

Cardinal Health Inc

                US$ 10,383       N/A     US$ 10,383    
 

BP Capital Markets PLC

                US$     10,264       N/A     US$ 10,264    
 

CVS Health Corp

                US$ 10,018       N/A     US$ 10,018    
 

Wells Fargo & Co

                US$ 9,868       N/A     US$ 9,868    
 

Svenska Handelsbanken AB

                US$ 9,862       N/A     US$ 9,862    
 

Aviation Capital Group Corp

       

        US$     9,620       N/A     US$ 9,620    
 

American International Group Inc

                US$ 9,410       N/A     US$ 9,410    
 

Sumitomo Mitsui Financial Group Inc

                US$ 9,396       N/A     US$ 9,396    
 

Microsoft Corp

                US$ 9,301       N/A     US$ 9,301    

 

(Continued)

 

- 76 -


Held Company
Name

 

Marketable Securities Type and Name

  Relationship
with the
Company
 

Financial Statement Account

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

TSMC Global

 

HSBC Holdings PLC

   

Available-for-sale financial assets

        US$ 9,099     N/A   US$ 9,099    
 

ERAC USA Finance LLC

            US$ 8,759     N/A   US$ 8,759    
 

Dominion Energy Inc

            US$ 8,626     N/A   US$ 8,626    
 

Hewlett Packard Enterprise Co

            US$ 8,604     N/A   US$ 8,604    
 

Ventas Realty LP/Ventas Capital Corp

            US$ 8,506     N/A   US$ 8,506    
 

Duke Energy Corp

            US$ 8,337     N/A   US$ 8,337    
 

Daimler Finance North America LLC

            US$ 8,041     N/A   US$ 8,041    
 

International Bank for Reconstruction & Development

            US$ 7,992     N/A   US$ 7,992    
 

Huntington National Bank/The

            US$ 7,873     N/A   US$ 7,873    
 

Oracle Corp

            US$ 7,794     N/A   US$ 7,794    
 

UBS Group Funding Switzerland AG

            US$ 7,505     N/A   US$ 7,505    
 

ANZ New Zealand Int’l Ltd/London

            US$ 7,353     N/A   US$ 7,353    
 

Toronto-Dominion Bank/The

            US$ 7,327     N/A   US$ 7,327    
 

Deutsche Telekom International Finance BV

            US$ 7,252     N/A   US$ 7,252    
 

ABN AMRO Bank NV

            US$ 7,100     N/A   US$ 7,100    
 

Siemens Financieringsmaatschappij NV

            US$ 7,073     N/A   US$ 7,073    
 

Banque Federative du Credit Mutuel SA

            US$ 7,072     N/A   US$ 7,072    
 

Reckitt Benckiser Treasury Services PLC

            US$ 7,010     N/A   US$ 7,010    
 

Barclays PLC

            US$ 6,994     N/A   US$ 6,994    
 

Hyundai Capital America

            US$ 6,971     N/A   US$ 6,971    
 

Air Lease Corp

            US$ 6,971     N/A   US$ 6,971    
 

Marriott International Inc/MD

            US$ 6,900     N/A   US$ 6,900    
 

21st Century Fox America Inc

            US$ 6,882     N/A   US$ 6,882    
 

QUALCOMM Inc

            US$ 6,866     N/A   US$ 6,866    
 

Citizens Bank NA/Providence RI

            US$ 6,726     N/A   US$ 6,726    
 

Fifth Third Bancorp

            US$ 6,543     N/A   US$ 6,543    
 

Skandinaviska Enskilda Banken AB

            US$ 6,531     N/A   US$ 6,531    
 

Mizuho Financial Group Inc

            US$ 6,484     N/A   US$ 6,484    
 

Reliance Standard Life Global Funding II

            US$ 6,483     N/A   US$ 6,483    
 

Banco Santander SA

            US$ 6,347     N/A   US$ 6,347    
 

Dow Chemical Co/The

            US$ 6,336     N/A   US$ 6,336    
 

Bank of New York Mellon Corp/The

            US$ 6,306     N/A   US$ 6,306    
 

Welltower Inc

            US$ 6,301     N/A   US$ 6,301    
 

Santander UK Group Holdings PLC

            US$ 6,219     N/A   US$ 6,219    
 

Celgene Corp

            US$ 6,181     N/A   US$ 6,181    
 

Northrop Grumman Corp

            US$ 6,180     N/A   US$ 6,180    
 

SMBC Aviation Capital Finance DAC

            US$ 5,938     N/A   US$ 5,938    
 

Manufacturers & Traders Trust Co

            US$ 5,925     N/A   US$ 5,925    
 

KeyCorp

            US$ 5,901     N/A   US$ 5,901    
 

UBS AG/London

            US$ 5,858     N/A   US$ 5,858    
 

NextEra Energy Capital Holdings Inc

            US$ 5,847     N/A   US$ 5,847    
 

Schlumberger Holdings Corp

            US$ 5,769     N/A   US$ 5,769    
 

Danone SA

            US$ 5,768     N/A   US$ 5,768    
 

Aspen Insurance Holdings Ltd

            US$ 5,723     N/A   US$ 5,723    
 

Santander UK PLC

            US$ 5,675     N/A   US$ 5,675    
 

Toyota Motor Credit Corp

            US$ 5,643     N/A   US$ 5,643    
 

Penske Truck Leasing Co Lp/PTL Finance Corp

            US$ 5,605     N/A   US$ 5,605    
 

Nordea Bank AB

            US$ 5,571     N/A   US$ 5,571    
 

ITC Holdings Corp

            US$ 5,536     N/A   US$ 5,536    
 

McCormick & Co Inc/MD

            US$ 5,297     N/A   US$ 5,297    
 

Montpelier Re Holdings Ltd

            US$ 5,259     N/A   US$ 5,259    
 

Amgen Inc

            US$ 5,243     N/A   US$ 5,243    
 

Jackson National Life Global Funding

            US$ 5,145     N/A   US$ 5,145    
 

Branch Banking & Trust Co

   

        US$     5,089     N/A   US$ 5,089    
 

Cigna Corp

            US$ 5,065     N/A   US$ 5,065    
 

Rockwell Collins Inc

            US$ 5,043     N/A   US$ 5,043    
 

KeyBank NA/Cleveland OH

            US$ 5,032     N/A   US$ 5,032    
 

UBS AG/Stamford CT

            US$ 5,005     N/A   US$ 5,005    
 

International Finance Corp

            US$ 5,000     N/A   US$ 5,000    

 

(Continued)

 

- 77 -


Held Company
Name

 

Marketable Securities Type and Name

  Relationship
with the
Company
 

Financial Statement Account

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

TSMC Global

 

Analog Devices Inc

   

Available-for-sale financial assets

        US$ 4,948     N/A   US$ 4,948    
 

US Bancorp

            US$ 4,935     N/A   US$ 4,935    
 

Cox Communications Inc

            US$ 4,917     N/A   US$ 4,917    
 

Macquarie Group Ltd

            US$ 4,908     N/A   US$ 4,908    
 

Five Corners Funding Trust

            US$ 4,819     N/A   US$ 4,819    
 

American Express Credit Corp

            US$ 4,782     N/A   US$ 4,782    
 

Air Liquide Finance SA

            US$ 4,740     N/A   US$ 4,740    
 

Shell International Finance BV

            US$ 4,735     N/A   US$ 4,735    
 

Citibank NA

            US$ 4,724     N/A   US$ 4,724    
 

European Investment Bank

            US$ 4,689     N/A   US$ 4,689    
 

Ontario Teachers’ Cadillac Fairview Properties Trust

            US$ 4,659     N/A   US$ 4,659    
 

SunTrust Banks Inc

            US$ 4,642     N/A   US$ 4,642    
 

Lam Research Corp

            US$ 4,587     N/A   US$ 4,587    
 

AEP Texas Inc

            US$ 4,583     N/A   US$ 4,583    
 

Ryder System Inc

            US$ 4,472     N/A   US$ 4,472    
 

New York Life Global Funding

            US$ 4,446     N/A   US$ 4,446    
 

Royal Bank of Canada

            US$ 4,391     N/A   US$ 4,391    
 

US Bank NA/Cincinnati OH

            US$ 4,367     N/A   US$ 4,367    
 

Lloyds Bank PLC

            US$ 4,208     N/A   US$ 4,208    
 

Enterprise Products Operating LLC

            US$ 4,119     N/A   US$ 4,119    
 

Exelon Generation Co LLC

            US$ 4,098     N/A   US$ 4,098    
 

Intel Corp

            US$ 3,990     N/A   US$ 3,990    
 

Mondelez International Holdings Netherlands BV

            US$ 3,982     N/A   US$ 3,982    
 

Intercontinental Exchange Inc

            US$ 3,961     N/A   US$ 3,961    
 

BB&T Corp

            US$ 3,939     N/A   US$ 3,939    
 

Edison International

            US$ 3,911     N/A   US$ 3,911    
 

Wells Fargo Bank NA

            US$ 3,888     N/A   US$ 3,888    
 

Express Scripts Holding Co

            US$ 3,864     N/A   US$ 3,864    
 

Bank of Nova Scotia

            US$ 3,825     N/A   US$ 3,825    
 

Suncorp-Metway Ltd

            US$ 3,787     N/A   US$ 3,787    
 

Husky Energy Inc

            US$ 3,738     N/A   US$ 3,738    
 

Alimentation Couche-Tard Inc

            US$ 3,736     N/A   US$ 3,736    
 

Credit Agricole SA/London

            US$ 3,663     N/A   US$ 3,663    
 

Canadian Imperial Bank of Commerce

            US$ 3,609     N/A   US$ 3,609    
 

Pacific Gas & Electric Co

            US$ 3,587     N/A   US$ 3,587    
 

Protective Life Global Funding

            US$ 3,574     N/A   US$ 3,574    
 

Nuveen Finance LLC

            US$ 3,568     N/A   US$ 3,568    
 

SES GLOBAL Americas Holdings GP

            US$ 3,521     N/A   US$ 3,521    
 

LyondellBasell Industries NV

            US$ 3,515     N/A   US$ 3,515    
 

Sprint Spectrum Co LLC/Sprint Spectrum Co II LLC/Sprint Spectrum Co III LLC

            US$ 3,481     N/A   US$ 3,481    
 

Kroger Co/The

            US$ 3,360     N/A   US$ 3,360    
 

State Street Corp

            US$ 3,355     N/A   US$ 3,355    
 

Digital Realty Trust LP

            US$ 3,225     N/A   US$ 3,225    
 

DXC Technology Co

            US$ 3,122     N/A   US$ 3,122    
 

BNP Paribas SA

            US$ 3,115     N/A   US$ 3,115    
 

Anheuser-Busch InBev Worldwide Inc

            US$ 3,020     N/A   US$ 3,020    
 

Macquarie Bank Ltd

            US$ 3,012     N/A   US$ 3,012    
 

Time Warner Inc

            US$ 2,995     N/A   US$ 2,995    
 

Enel Finance International NV

   

        US$     2,990     N/A   US$ 2,990    
 

Anthem Inc

            US$ 2,924     N/A   US$ 2,924    
 

Aetna Inc

            US$ 2,882     N/A   US$ 2,882    
 

Delta Air Lines 2007-1 Class A Pass Through Trust

            US$ 2,865     N/A   US$ 2,865    
 

Lloyds Banking Group PLC

            US$ 2,777     N/A   US$ 2,777    
 

BMW US Capital LLC

            US$ 2,719     N/A   US$ 2,719    
 

AutoZone Inc

            US$ 2,693     N/A   US$ 2,693    
 

Fifth Third Bank/Cincinnati OH

            US$ 2,689     N/A   US$ 2,689    
 

PartnerRe Finance B LLC

            US$ 2,657     N/A   US$ 2,657    
 

NiSource Finance Corp

            US$ 2,589     N/A   US$ 2,589    

 

(Continued)

 

- 78 -


Held Company
Name

 

Marketable Securities Type and Name

  Relationship
with the
Company
 

Financial Statement Account

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

TSMC Global

 

Realty Income Corp

   

Available-for-sale financial assets

        US$ 2,556     N/A   US$  2,556    
 

Metropolitan Life Global Funding I

            US$ 2,519     N/A   US$ 2,519    
 

Capital One Financial Corp

            US$ 2,501     N/A   US$ 2,501    
 

Credit Suisse Group Funding Guernsey Ltd

            US$ 2,490     N/A   US$ 2,490    
 

Wm Wrigley Jr Co

            US$ 2,489     N/A   US$ 2,489    
 

UnitedHealth Group Inc

            US$ 2,485     N/A   US$ 2,485    
 

Eastman Chemical Co

            US$ 2,439     N/A   US$ 2,439    
 

Xylem Inc/NY

            US$ 2,426     N/A   US$ 2,426    
 

EI du Pont de Nemours & Co

            US$ 2,337     N/A   US$ 2,337    
 

NBCUniversal Media LLC

            US$ 2,331     N/A   US$ 2,331    
 

National Australia Bank Ltd/New York

            US$ 2,317     N/A   US$ 2,317    
 

Bank of Tokyo-Mitsubishi UFJ Ltd/The

            US$ 2,301     N/A   US$ 2,301    
 

Simon Property Group LP

            US$ 2,300     N/A   US$ 2,300    
 

Voya Financial Inc

            US$ 2,289     N/A   US$ 2,289    
 

Kimco Realty Corp

            US$ 2,280     N/A   US$ 2,280    
 

ING Groep NV

            US$ 2,241     N/A   US$ 2,241    
 

Inter American Development Bank

            US$ 2,227     N/A   US$ 2,227    
 

Cintas Corp No 2

            US$ 2,218     N/A   US$ 2,218    
 

Pricoa Global Funding I

            US$ 2,206     N/A   US$ 2,206    
 

ProAssurance Corp

            US$ 2,150     N/A   US$ 2,150    
 

WR Berkley Corp

            US$ 2,136     N/A   US$ 2,136    
 

Bank of Montreal

            US$ 2,130     N/A   US$ 2,130    
 

HCP Inc

            US$ 2,113     N/A   US$ 2,113    
 

Sysco Corp

            US$ 2,005     N/A   US$ 2,005    
 

British Telecommunications PLC

            US$ 2,002     N/A   US$ 2,002    
 

Johnson Controls International plc

            US$ 2,001     N/A   US$ 2,001    
 

Danske Bank A/S

            US$ 1,962     N/A   US$ 1,962    
 

American Airlines 2013-2 Class A Pass Through Trust

            US$ 1,960     N/A   US$ 1,960    
 

Duke Realty LP

            US$ 1,954     N/A   US$ 1,954    
 

Stryker Corp

            US$ 1,947     N/A   US$ 1,947    
 

BPCE SA

            US$ 1,924     N/A   US$ 1,924    
 

Magellan Midstream Partners LP

            US$ 1,920     N/A   US$ 1,920    
 

Societe Generale SA

            US$ 1,913     N/A   US$ 1,913    
 

Bear Stearns Cos LLC/The

            US$ 1,908     N/A   US$ 1,908    
 

SunTrust Bank/Atlanta GA

            US$ 1,836     N/A   US$ 1,836    
 

WestRock RKT Co

            US$ 1,832     N/A   US$ 1,832    
 

Orange SA

            US$ 1,831     N/A   US$ 1,831    
 

Philip Morris International Inc

            US$ 1,809     N/A   US$ 1,809    
 

Australia & New Zealand Banking Group Ltd/New York NY

            US$ 1,794     N/A   US$ 1,794    
 

Brambles USA Inc

            US$ 1,791     N/A   US$ 1,791    
 

State Grid Overseas Investment Ltd

            US$ 1,775     N/A   US$ 1,775    
 

Visa Inc

            US$ 1,773     N/A   US$ 1,773    
 

Dominion Energy Gas Holdings LLC

            US$ 1,762     N/A   US$ 1,762    
 

United Technologies Corp

            US$ 1,761     N/A   US$ 1,761    
 

Regency Centers LP

            US$ 1,758     N/A   US$ 1,758    
 

Commonwealth Bank of Australia/New York NY

   

        US$     1,751     N/A   US$ 1,751    
 

Alterra Finance LLC

            US$ 1,741     N/A   US$ 1,741    
 

Regions Financial Corp

            US$ 1,708     N/A   US$ 1,708    
 

Sumitomo Mitsui Trust Bank Ltd

            US$ 1,691     N/A   US$ 1,691    
 

Sumitomo Mitsui Banking Corp

            US$ 1,629     N/A   US$ 1,629    
 

Amazon.com Inc

            US$ 1,626     N/A   US$ 1,626    
 

Gilead Sciences Inc

            US$ 1,608     N/A   US$ 1,608    
 

Weyerhaeuser Co

            US$  1,602     N/A   US$ 1,602    
 

BAT International Finance PLC

            US$ 1,594     N/A   US$ 1,594    
 

Principal Life Global Funding II

            US$ 1,588     N/A   US$ 1,588    
 

Caterpillar Financial Services Corp

            US$ 1,536     N/A   US$ 1,536    
 

Chevron Corp

            US$ 1,532     N/A   US$ 1,532    
 

O’Reilly Automotive Inc

            US$ 1,527     N/A   US$ 1,527    
 

PSEG Power LLC

            US$ 1,510     N/A   US$ 1,510    

 

(Continued)

 

- 79 -


Held Company
Name

 

Marketable Securities Type and Name

  Relationship
with the
Company
 

Financial Statement Account

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

TSMC Global

 

McKesson Corp

   

Available-for-sale financial assets

        US$  1,500     N/A   US$  1,500    
 

Harley-Davidson Financial Services Inc

            US$ 1,498     N/A   US$ 1,498    
 

Standard Chartered PLC

            US$ 1,497     N/A   US$ 1,497    
 

CBS Corp

            US$ 1,495     N/A   US$ 1,495    
 

HSBC USA Inc

            US$ 1,470     N/A   US$ 1,470    
 

Guardian Life Global Funding

            US$ 1,469     N/A   US$ 1,469    
 

HSBC Bank PLC

            US$ 1,459     N/A   US$ 1,459    
 

Cooperatieve Rabobank UA/NY

            US$ 1,450     N/A   US$ 1,450    
 

Oesterreichische Kontrollbank AG

            US$ 1,444     N/A   US$ 1,444    
 

Monongahela Power Co

            US$ 1,429     N/A   US$ 1,429    
 

Texas Eastern Transmission LP

            US$ 1,408     N/A   US$ 1,408    
 

Georgia-Pacific LLC

            US$ 1,401     N/A   US$ 1,401    
 

AIG Global Funding

            US$ 1,387     N/A   US$ 1,387    
 

Cboe Global Markets Inc

            US$ 1,366     N/A   US$ 1,366    
 

Entergy Arkansas Inc

            US$ 1,284     N/A   US$ 1,284    
 

GATX Corp

            US$ 1,277     N/A   US$ 1,277    
 

Entergy Corp

            US$ 1,273     N/A   US$ 1,273    
 

Western Union Co/The

            US$ 1,266     N/A   US$ 1,266    
 

Nissan Motor Acceptance Corp

            US$ 1,261     N/A   US$ 1,261    
 

Comcast Corp

            US$ 1,256     N/A   US$ 1,256    
 

Consolidated Edison Inc

            US$ 1,213     N/A   US$ 1,213    
 

Glencore Funding LLC

            US$ 1,206     N/A   US$ 1,206    
 

Sempra Energy

            US$ 1,179     N/A   US$ 1,179    
 

Public Service Enterprise Group Inc

            US$ 1,136     N/A   US$ 1,136    
 

Kreditanstalt fuer Wiederaufbau

            US$ 1,134     N/A   US$ 1,134    
 

ERP Operating LP

            US$ 1,118     N/A   US$ 1,118    
 

Wesfarmers Ltd

            US$ 1,095     N/A   US$ 1,095    
 

Marsh & McLennan Cos Inc

            US$ 1,085     N/A   US$ 1,085    
 

International Paper Co

            US$ 1,075     N/A   US$ 1,075    
 

Glencore Finance Canada Ltd

            US$ 1,067     N/A   US$ 1,067    
 

African Development Bank

            US$ 1,064     N/A   US$ 1,064    
 

CA Inc

            US$ 1,064     N/A   US$ 1,064    
 

General Electric Co

            US$ 1,050     N/A   US$ 1,050    
 

Merck & Co Inc

            US$ 1,049     N/A   US$ 1,049    
 

EOG Resources Inc

            US$ 1,042     N/A   US$ 1,042    
 

Commonwealth Edison Co

            US$ 1,037     N/A   US$ 1,037    
 

Athene Global Funding

            US$ 1,032     N/A   US$ 1,032    
 

Lincoln National Corp

            US$ 1,029     N/A   US$ 1,029    
 

Statoil ASA

            US$ 1,016     N/A   US$ 1,016    
 

Biogen Inc

            US$ 1,013     N/A   US$ 1,013    
 

Berkshire Hathaway Energy Co

            US$ 1,009     N/A   US$ 1,009    
 

Unum Group

            US$ 1,007     N/A   US$ 1,007    
 

Tencent Holdings Ltd

            US$ 1,006     N/A   US$ 1,006    
 

Ares Capital Corp

            US$ 1,004     N/A   US$ 1,004    
 

Laboratory Corp of America Holdings

            US$ 1,002     N/A   US$ 1,002    
 

Home Depot Inc/The

            US$ 1,000     N/A   US$ 1,000    
 

John Deere Capital Corp

            US$ 999     N/A   US$ 999    
 

JM Smucker Co/The

   

        US$ 998     N/A   US$ 998    
 

Healthcare Trust of America Holdings LP

            US$ 997     N/A   US$ 997    
 

Bunge Ltd Finance Corp

            US$        992     N/A   US$ 992    
 

Entergy Texas Inc

            US$ 992     N/A   US$ 992    
 

XLIT Ltd

            US$ 988     N/A   US$ 988    
 

Capital One Bank USA NA

            US$ 976     N/A   US$ 976    
 

National Retail Properties Inc

            US$ 965     N/A   US$ 965    
 

PPL Capital Funding Inc

            US$ 932     N/A   US$ 932    
 

Duke Energy Progress LLC

            US$ 929     N/A   US$ 929    
 

Coca-Cola Femsa SAB de CV

            US$ 917     N/A   US$ 917    
 

Lockheed Martin Corp

            US$ 905     N/A   US$ 905    
 

Southern Electric Generating Co

            US$ 901     N/A   US$ 901    

 

(Continued)

 

- 80 -


Held Company
Name

 

Marketable Securities Type and Name

  Relationship
with the
Company
 

Financial Statement Account

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

TSMC Global

 

Wal-Mart Stores Inc

   

Available-for-sale financial assets

        US$  894     N/A   US$  894    
 

CNOOC Finance Ltd

            US$ 884     N/A   US$ 884    
 

Federal Realty Investment Trust

            US$ 863     N/A   US$ 863    
 

Baker Hughes a GE Co LLC/Baker Hughes Co-Obligor Inc

            US$ 858     N/A   US$ 858    

TSMC Global

 

Mastercard Inc

    Available-for-sale financial assets         US$ 849     N/A   US$ 849    
 

Huntington Bancshares Inc/OH

            US$ 836     N/A   US$ 836    
 

Consolidated Edison Co of New York Inc

            US$ 835     N/A   US$ 835    
 

MetLife Inc

            US$ 819     N/A   US$ 819    
 

Continental Airlines 2000-1 Class A-1 Pass Through Trust

            US$ 817     N/A   US$ 817    
 

Aon PLC

            US$ 812     N/A   US$ 812    
 

Nucor Corp

            US$ 812     N/A   US$ 812    
 

ONEOK Partners LP

            US$ 805     N/A   US$ 805    
 

AXIS Specialty Finance LLC

            US$ 802     N/A   US$ 802    
 

Activision Blizzard Inc

            US$ 794     N/A   US$ 794    
 

Incitec Pivot Finance LLC

            US$ 794     N/A   US$ 794    
 

Manulife Financial Corp

            US$ 793     N/A   US$ 793    
 

Spectra Energy Partners LP

            US$ 785     N/A   US$ 785    
 

Sinopec Capital Ltd

            US$ 779     N/A   US$ 779    
 

Baidu Inc

            US$ 753     N/A   US$ 753    
 

Crown Castle Towers LLC

            US$ 737     N/A   US$ 737    
 

Duke Energy Progress LLC

            US$ 720     N/A   US$ 720    
 

APT Pipelines Ltd

            US$ 719     N/A   US$ 719    
 

Baker Hughes a GE Co LLC

            US$ 715     N/A   US$ 715    
 

DTE Energy Co

            US$ 714     N/A   US$ 714    
 

American Honda Finance Corp

            US$ 706     N/A   US$ 706    
 

Total Capital International SA

            US$ 700     N/A   US$ 700    
 

Norfolk Southern Railway Co

            US$ 700     N/A   US$ 700    
 

Scentre Group Trust 1/Scentre Group Trust 2

            US$ 698     N/A   US$ 698    
 

TTX Co

            US$ 698     N/A   US$ 698    
 

Vornado Realty LP

            US$ 697     N/A   US$ 697    
 

Three Gorges Finance I Cayman Islands Ltd

            US$ 687     N/A   US$ 687    
 

Rochester Gas & Electric Corp

            US$ 681     N/A   US$ 681    
 

ING Bank NV

            US$ 675     N/A   US$ 675    
 

Ohio Power Co

            US$ 659     N/A   US$ 659    
 

Continental Airlines 2007-1 Class A Pass Through Trust

            US$ 658     N/A   US$ 658    
 

Entergy Gulf States Louisiana LLC

            US$ 649     N/A   US$ 649    
 

Georgia Power Co

            US$ 646     N/A   US$ 646    
 

Fortive Corp

            US$ 644     N/A   US$ 644    
 

RBC USA Holdco Corp

            US$ 642     N/A   US$ 642    
 

Alexandria Real Estate Equities Inc

            US$ 637     N/A   US$ 637    
 

Liberty Property LP

            US$ 631     N/A   US$ 631    
 

Grupo Bimbo SAB de CV

            US$ 631     N/A   US$ 631    
 

Potash Corp of Saskatchewan Inc

            US$ 628     N/A   US$ 628    
 

Daiwa Securities Group Inc

            US$ 613     N/A   US$ 613    
 

Dr Pepper Snapple Group Inc

            US$ 612     N/A   US$ 612    
 

BOC Aviation Ltd

            US$ 612     N/A   US$ 612    
 

Life Technologies Corp

            US$ 610     N/A   US$ 610    
 

Altria Group Inc

            US$ 604     N/A   US$ 604    
 

Kimberly-Clark Corp

            US$ 598     N/A   US$ 598    
 

American Express Co

            US$ 592     N/A   US$ 592    
 

ABC Inc

            US$ 591     N/A   US$ 591    
 

Host Hotels & Resorts LP

   

        US$        588     N/A   US$ 588    
 

Mizuho Bank Ltd

            US$ 578     N/A   US$ 578    
 

AvalonBay Communities Inc

            US$ 576     N/A   US$ 576    
 

AXIS Specialty Finance PLC

            US$ 573     N/A   US$ 573    
 

Boston Properties LP

            US$ 552     N/A   US$ 552    
 

Caisse Centrale Desjardins

            US$ 550     N/A   US$ 550    
 

Exxon Mobil Corp

            US$ 548     N/A   US$ 548    
 

Bunge Ltd Finance Corp

            US$ 542     N/A   US$ 542    

 

(Continued)

 

- 81 -


Held Company
Name

 

Marketable Securities Type and Name

  Relationship
with the
Company
 

Financial Statement Account

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

TSMC Global

 

Prudential Financial Inc

   

Available-for-sale financial assets

        US$  536     N/A   US$  536    
 

American Electric Power Co Inc

   

        US$ 522     N/A   US$ 522    
 

Southwestern Electric Power Co

            US$ 521     N/A   US$ 521    
 

Fulton Financial Corp

            US$ 517     N/A   US$ 517    
 

TD Ameritrade Holding Corp

            US$ 516     N/A   US$ 516    
 

Regency Centers Corp

            US$ 512     N/A   US$ 512    
 

Burlington Northern Santa Fe LLC

            US$ 504     N/A   US$ 504    
 

Walgreens Boots Alliance Inc

            US$ 503     N/A   US$ 503    
 

ORIX Corp

            US$ 501     N/A   US$ 501    
 

BNP Paribas/BNP Paribas US Medium-Term Note Program LLC

            US$ 501     N/A   US$ 501    
 

Swedbank AB

            US$ 501     N/A   US$ 501    
 

Halliburton Co

            US$ 500     N/A   US$ 500    
 

MassMutual Global Funding II

            US$ 486     N/A   US$ 486    
 

Comerica Inc

            US$ 473     N/A   US$ 473    
 

Eaton Corp

            US$ 470     N/A   US$ 470    
 

Narragansett Electric Co/The

            US$ 466     N/A   US$ 466    
 

CenterPoint Energy Inc

            US$ 463     N/A   US$ 463    
 

Spire Inc

            US$ 458     N/A   US$ 458    
 

Equifax Inc

            US$ 454     N/A   US$ 454    
 

Canadian Pacific Railway Co

            US$ 437     N/A   US$ 437    
 

Texas-New Mexico Power Co

            US$ 434     N/A   US$ 434    
 

Nationwide Building Society

            US$ 431     N/A   US$ 431    
 

Valero Energy Corp

            US$ 431     N/A   US$ 431    
 

Woolworths Group Ltd

            US$ 415     N/A   US$ 415    
 

TransCanada PipeLines Ltd

            US$ 415     N/A   US$ 415    
 

Volkswagen Group of America Finance LLC

            US$ 399     N/A   US$ 399    
 

Southern Power Co

            US$ 396     N/A   US$ 396    
 

IBM Credit LLC

            US$ 394     N/A   US$ 394    
 

StanCorp Financial Group Inc

            US$ 391     N/A   US$ 391    
 

Aon Corp

            US$ 390     N/A   US$ 390    
 

First Niagara Financial Group Inc

            US$ 382     N/A   US$ 382    
 

Nationwide Financial Services Inc

            US$ 377     N/A   US$ 377    
 

CenterPoint Energy Resources Corp

            US$ 364     N/A   US$ 364    
 

NetApp Inc

            US$ 362     N/A   US$ 362    
 

Deutsche Bank AG

            US$ 351     N/A   US$ 351    
 

Phillips 66

            US$ 325     N/A   US$ 325    
 

Cisco Systems Inc

            US$ 322     N/A   US$ 322    
 

PacifiCorp

            US$ 314     N/A   US$ 314    
 

eBay Inc

            US$ 303     N/A   US$ 303    
 

Schlumberger Finance Canada Ltd

            US$ 298     N/A   US$ 298    
 

Eli Lilly & Co

            US$ 294     N/A   US$ 294    
 

BAE Systems Holdings Inc

            US$ 289     N/A   US$ 289    
 

Barclays Bank PLC

            US$ 289     N/A   US$ 289    
 

Amphenol Corp

            US$ 288     N/A   US$ 288    
 

EMD Finance LLC

            US$ 279     N/A   US$ 279    
 

Nomura Holdings Inc

            US$ 252     N/A   US$ 252    
 

NBCUniversal Enterprise Inc

            US$ 249     N/A   US$ 249    
 

CMS Energy Corp

   

        US$        243     N/A   US$ 243    
 

Kansas City Power & Light Co

            US$ 237     N/A   US$ 237    
 

Hartford Financial Services Group Inc/The

            US$ 237     N/A   US$ 237    
 

Protective Life Corp

            US$ 228     N/A   US$ 228    
 

WestRock MWV LLC

            US$ 227     N/A   US$ 227    
 

Rolls-Royce PLC

            US$ 223     N/A   US$ 223    
 

Assurant Inc

            US$ 210     N/A   US$ 210    
 

Fidelity National Information Services Inc

            US$ 206     N/A   US$ 206    
 

Commonwealth Bank of Australia

            US$ 201     N/A   US$ 201    
 

Pinnacle West Capital Corp

            US$ 199     N/A   US$ 199    
 

Schneider Electric SE

            US$ 161     N/A   US$ 161    

 

(Continued)

 

- 82 -


Held Company
Name

 

Marketable Securities Type and Name

  Relationship
with the
Company
 

Financial Statement Account

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

TSMC Global

 

Packaging Corp of America

   

Available-for-sale financial assets

        US$  160     N/A   US$  160    
 

Berkshire Hathaway Finance Corp

            US$ 135     N/A   US$ 135    
 

Duke Energy Florida LLC

            US$ 120     N/A   US$ 120    
 

Wells Fargo & Co

    Held-to-maturity financial assets         US$ 150,005     N/A   US$ 152,279    
 

JPMorgan Chase & Co.

            US$  142,042     N/A   US$  143,994    
 

Goldman Sachs Group, Inc.

            US$ 100,000     N/A   US$ 100,943    
 

Westpac Banking Corp.

            US$ 100,000     N/A   US$ 100,774    
 

Commonwealth Bank of Australia

            US$ 50,000     N/A   US$ 50,363    
 

National Australia Bank

            US$ 50,000     N/A   US$ 50,277    
 

Bank of Nova Scotia

            US$ 49,990     N/A   US$ 50,236    
 

Industrial and Commercial Bank of China

            US$ 10,000     N/A   US$ 10,005    
 

Government bond

             
 

United States Treasury Note/Bond

    Available-for-sale financial assets         US$ 260,156     N/A   US$ 260,156    
 

Abu Dhabi Government International Bond

            US$ 3,430     N/A   US$ 3,430    
 

Agency bonds/Agency mortgage-backed securities

             
 

Fannie Mae

    Available-for-sale financial assets         US$ 590,123     N/A   US$ 590,123    
 

Freddie Mac

            US$ 233,117     N/A   US$ 233,117    
 

Government National Mortgage Association

            US$ 111,741     N/A   US$ 111,741    
 

Ginnie Mae

            US$ 28,254     N/A   US$ 28,254    
 

Federal Home Loan Banks

            US$ 6,147     N/A   US$ 6,147    
 

Freddie Mac Multifamily Structured Pass Through Certificates

            US$ 3,865     N/A   US$ 3,865    
 

Export-Import Bank of Korea

            US$ 3,004     N/A   US$ 3,004    
 

Export Development Canada

            US$ 2,990     N/A   US$ 2,990    
 

Province of Quebec Canada

            US$ 2,551     N/A   US$ 2,551    
 

NCUA Guaranteed Notes Trust 2010-R2

            US$ 1,537     N/A   US$ 1,537    
 

CPPIB Capital Inc

            US$ 1,180     N/A   US$ 1,180    
 

Federal Farm Credit Banks

            US$ 894     N/A   US$ 894    
 

FHLMC-GNMA

            US$ 313     N/A   US$ 313    
 

Asset-backed securities

             
 

Citibank Credit Card Issuance Trust

    Available-for-sale financial assets         US$ 48,328     N/A   US$ 48,328    
 

Discover Card Execution Note Trust

            US$ 45,722     N/A   US$ 45,722    
 

Chase Issuance Trust

            US$ 39,211     N/A   US$ 39,211    
 

American Express Credit Account Master Trust

            US$ 31,060     N/A   US$ 31,060    
 

Capital One Multi-Asset Execution Trust

            US$ 22,544     N/A   US$ 22,544    
 

Ford Credit Floorplan Master Owner Trust A

            US$ 20,808     N/A   US$ 20,808    
 

Ford Credit Auto Owner Trust/Ford Credit 2014-REV1

            US$ 13,904     N/A   US$ 13,904    
 

UBS-Barclays Commercial Mortgage Trust 2012-C2

            US$ 12,792     N/A   US$ 12,792    
 

COMM Mortgage Trust

            US$ 12,234     N/A   US$ 12,234    
 

Morgan Stanley Bank of America Merrill Lynch Trust

            US$ 12,002     N/A   US$ 12,002    
 

Toyota Auto Receivables 2014-C Owner Trust

            US$ 11,431     N/A   US$ 11,431    
 

Chesapeake Funding II LLC

            US$ 10,953     N/A   US$ 10,953    
 

BA Credit Card Trust

            US$ 10,821     N/A   US$ 10,821    
 

GM Financial Automobile Leasing Trust 2015-3

            US$ 10,359     N/A   US$ 10,359    
 

Mercedes-Benz Master Owner Trust

            US$ 10,049     N/A   US$ 10,049    
 

JPMCC Commercial Mortgage Securities Trust 2017-JP7

            US$ 9,335     N/A   US$ 9,335    
 

Hyundai Auto Lease Securitization Trust 2017-A

            US$ 9,179     N/A   US$ 9,179    
 

Honda Auto Receivables 2017-2 Owner Trust

            US$ 8,787     N/A   US$ 8,787    
 

BANK

            US$ 8,047     N/A   US$ 8,047    
 

CGDBB Commercial Mortgage Trust 2017-BIOC

            US$ 7,509     N/A   US$ 7,509    
 

Nissan Auto Lease Trust

            US$ 7,114     N/A   US$ 7,114    
 

GS Mortgage Securities Trust

            US$ 7,001     N/A   US$ 7,001    
 

Ford Credit Auto Owner Trust

            US$ 6,859     N/A   US$ 6,859    
 

Citigroup Commercial Mortgage Trust 2013-GC11

            US$ 6,769     N/A   US$ 6,769    
 

JPMBB Commercial Mortgage Securities Trust 2013-C12

            US$ 6,749     N/A   US$ 6,749    
 

Hyundai Auto Receivables Trust

            US$ 6,728     N/A   US$ 6,728    
 

Nissan Master Owner Trust Receivables

            US$ 6,511     N/A   US$ 6,511    
 

BMW Vehicle Lease Trust

            US$ 5,961     N/A   US$ 5,961    

 

(Continued)

 

- 83 -


Held Company
Name

 

Marketable Securities Type and Name

  Relationship
with the
Company
 

Financial Statement Account

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

TSMC Global

 

Nissan Auto Receivables 2017-B Owner Trust

   

Available-for-sale financial assets

        US$ 4,863     N/A   US$ 4,863    
 

Ford Credit Auto Lease Trust

            US$ 4,528     N/A   US$ 4,528    
 

GM Financial Consumer Automobile 2017-1

            US$ 3,970     N/A   US$ 3,970    
 

Cold Storage Trust 2017-ICE3

            US$ 3,811     N/A   US$ 3,811    
 

Wheels SPV 2 LLC

            US$ 3,624     N/A   US$ 3,624    
 

Hertz Fleet Lease Funding LP

            US$ 3,486     N/A   US$ 3,486    
 

Wells Fargo Commercial Mortgage Trust 2015-LC20

            US$ 3,434     N/A   US$ 3,434    
 

Volvo Financial Equipment Master Owner Trust 2017-A

            US$ 3,009     N/A   US$ 3,009    
 

CSMC OA LLC

            US$ 2,877     N/A   US$ 2,877    
 

BMW Floorplan Master Owner Trust

            US$ 2,442     N/A   US$ 2,442    
 

JPMDB Commercial Mortgage Securities Trust 2017-C7

            US$ 2,006     N/A   US$ 2,006    
 

Mercedes-Benz Auto Lease Trust 2016-A

            US$ 1,820     N/A   US$ 1,820    
 

Morgan Stanley Capital I Trust

            US$ 1,513     N/A   US$ 1,513    
 

CFCRE Commercial Mortgage Trust 2011-C1

            US$ 998     N/A   US$ 998    
 

Enterprise Fleet Financing LLC

            US$ 845     N/A   US$ 845    
 

280 Park Avenue Mortgage Trust

            US$ 831     N/A   US$ 831    
 

Mercedes-Benz Auto Receivables Trust 2015-1

            US$ 501     N/A   US$ 501    
 

WFRBS Commercial Mortgage Trust 2013-C14

            US$ 485     N/A   US$ 485    
 

Structure product

             
 

Bank of Tokyo-Mitsubishi UFJ

    Held-to-maturity financial assets         US$  50,000     N/A   US$  49,744    
 

Commercial paper

             
 

Societe Generale Instl

    Available-for-sale financial assets         US$ 2,000     N/A   US$ 2,000    
 

Norinchukin Bank

            US$ 2,000     N/A   US$ 2,000    
 

Bank of Tokyo-Mitsubishi UFJ

            US$ 1,000     N/A   US$ 1,000    
 

Fund

             
 

Primavera Capital Fund II L.P.

    Financial assets carried at cost         US$ 65,635     4   US$ 65,635    

 

(Continued)

 

- 84 -


Held Company
Name

 

Marketable Securities Type and Name

  Relationship
with the
Company
 

Financial Statement Account

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

VTAF III

 

Common stock

             
 

LiquidLeds Lighting Corp.

    Financial assets carried at cost     1,600     US$ 800     11   US$ 800    
 

Preferred stock

             
 

Neoconix, Inc.

    Financial assets carried at cost     4,147     US$ 170       US$ 170    

VTAF II

 

Common stock

             
 

Aquantia

    Available-for-sale financial assets     460     US$ 5,209     1   US$ 5,209    
 

Sentelic

    Financial assets carried at cost     903     US$ 2,607     4   US$ 2,607    
 

5V Technologies, Inc.

        963     US$ 2,168     2   US$ 2,168    
 

Aether Systems, Inc.

        1,085     US$ 339     20   US$ 339    

ISDF

 

Preferred stock

             
 

Sonics, Inc.

    Financial assets carried at cost     230           3        

ISDF II

 

Common stock

             
 

Sonics, Inc.

    Financial assets carried at cost     278           4        
 

Preferred stock

             
 

Sonics, Inc.

    Financial assets carried at cost     264           4        

Growth Fund

 

Common stock

             
 

Innovium, Inc.

    Financial assets carried at cost     221     US$ 370       US$ 370    
 

Preferred stock

             
 

Innovium, Inc.

    Financial assets carried at cost     230     US$ 384       US$ 384    

(Concluded)

 

- 85 -


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 YEAR ENDED DECEMBER 31, 2017

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

 

 

                    Beginning Balance     Acquisition     Disposal     Ending Balance (Note 1)  

Company Name

 

Marketable
Securities
Type and Name

 

Financial
Statement
Account

  Counter-party   Nature of
Relationship
  Shares/Units
(In Thousands)
    Amount     Shares/Units
(In Thousands)
    Amount     Shares/Units
(In Thousands)
    Amount     Carrying
Value
    Gain/Loss on
Disposal
    Shares/Units
(In Thousands)
    Amount  

TSMC

  Corporate bond                          
  CPC Corporation, Taiwan   Held-to-maturity financial assets             $ 1,967,303           $           $ 1,960,000     $ 1,960,000     $           $  
  Hon Hai Precision Ind. Co., Ltd.                 400,250                         400,000       400,000                    
  Commercial paper                          
  Taiwan Power Company   Held-to-maturity financial assets         865       8,628,176       170       1,695,771       1,035       10,350,000       10,350,000                    
  Stock                          
  TSMC Global   Investments accounted for using equity method     Subsidiary     7       265,634,729       2       60,683,010                               9       309,211,877  
  TSMC Nanjing       Subsidiary           6,331,094             21,724,892                                     26,493,740  

TSMC Partners

  Stock                          
                           
  ISDF II   Investments accounted for using equity method   Note
2
  Subsidiary     9,299     US$ 6,078                             US$ 15,552             9,299     US$ 28  

TSMC Global

  Corporate bond                          
  Bank of America Corp   Available-for-sale financial assets             US$ 27,973           US$ 30,914           US$ 18,071     US$ 18,205     US$ (134         US$ 40,876  
  Citigroup Inc               US$ 16,819           US$ 18,955           US$ 5,816     US$ 5,833     US$ (17         US$ 29,911  
  AT&T Inc               US$ 13,332           US$ 19,933           US$ 6,425     US$ 6,438     US$ (13         US$ 26,867  
  JPMorgan Chase & Co               US$ 22,330           US$ 16,030           US$ 12,151     US$ 12,258     US$ (107         US$ 26,159  
  Goldman Sachs Group Inc/The               US$ 7,390           US$ 17,211           US$ 1,900     US$ 1,976     US$ (76         US$ 22,709  
  Morgan Stanley               US$ 11,237           US$ 16,115           US$ 9,018     US$ 8,973     US$ 45           US$ 18,505  
  Verizon Communications Inc               US$ 17,059           US$ 16,250           US$ 15,042     US$ 15,163     US$ (121         US$ 18,298  
  Ford Motor Credit Co LLC               US$ 7,877           US$ 11,849           US$ 1,964     US$ 2,016     US$ (52         US$ 17,732  
  BAT Capital Corp                           US$ 17,144                                   US$ 17,024  
  Apple Inc               US$ 2,607           US$ 14,737           US$ 854     US$ 862     US$ (8         US$ 16,463  
  Morgan Stanley                           US$ 12,683                 US$                 US$ 12,722  
  Tyson Foods Inc               US$ 1,704           US$ 10,762           US$ 201     US$ 200     US$ 1           US$ 12,214  
  JPMorgan Chase & Co                           US$ 11,600                                   US$ 11,613  
  Asian Development Bank               US$ 1,994           US$ 11,078           US$ 1,997     US$ 1,998     US$ (1         US$ 11,073  

 

(Continued)

 

- 86 -


                    Beginning Balance     Acquisition     Disposal     Ending Balance (Note 1)  

Company Name

 

Marketable
Securities
Type and Name

 

Financial
Statement
Account

  Counter-party   Nature of
Relationship
  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

  Microsoft Corp               US$ 2,905           US$ 11,279           US$ 5,076     US$ 4,992     US$ 84           US$ 9,301  
  QUALCOMM Inc                           US$ 10,425           US$ 3,561     US$ 3,548     US$ 13           US$ 6,866  
  BMW US Capital LLC               US$ 7,180           US$ 5,995           US$ 10,552     US$ 10,495     US$       57           US$ 2,719  
  Gilead Sciences Inc               US$ 11,850                       US$ 10,340     US$ 10,606     US$ (266         US$ 1,608  
  Aetna Inc               US$ 11,618                       US$ 10,656     US$ 10,570     US$ 86           US$ 1,099  
  Government bond                          
  United States Treasury Note/Bond   Available-for-sale financial assets             US$  195,285           US$  396,552           US$  393,853     US$  394,514     US$ (661         US$  202,689  
  United States Treasury Floating Rate Note               US$ 30,756           US$ 182,629           US$ 163,600     US$ 163,487     US$ 113           US$ 49,901  
  United States Treasury Bill                           US$ 28,180           US$ 25,197     US$ 25,187     US$ 10           US$ 2,997  
  United States Treasury Bill                           US$ 97,678           US$ 97,712     US$ 97,678     US$ 34              
  United States Treasury Inflation Indexed Bonds               US$ 19,349           US$ 8,060           US$ 27,343     US$ 27,515     US$ (172            

 

(Continued)

 

- 87 -


                        Beginning Balance     Acquisition     Disposal     Ending Balance (Note 1)  

Company Name

 

Marketable
Securities
Type and Name

 

Financial
Statement
Account

  Counter-party     Nature of
Relationship
    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 bonds/Agency mortgage-backed securities                          
  FNMA POOL BM3196   Available-for-sale financial assets                                 US$ 49,619                                   US$
 

49,526
 
 
  FNMA POOL BM1948                                   US$ 43,322           US$ 1,609     US$ 1,826     US$ (217         US$
 

41,275
 
 
  FNMA POOL BM1886                                   US$ 18,827           US$ 495     US$ 538     US$ (43         US$
 

18,109
 
 
  Government National Mortgage Association                                   US$ 16,497           US$ 81     US$ 87     US$ (6 )          US$
 

16,739
 
 
  Fannie Mae                                   US$ 15,777           US$ 43     US$ 114     US$ (71         US$
 

16,012
 
 
  FNMA TBA 30 Yr 4.5                                   US$ 59,134           US$ 43,295     US$ 43,330     US$ (35         US$
 

15,758
 
 
  Fannie Mae                                   US$ 14,877           US$ 80     US$ 123     US$ (43         US$
 

14,512
 
 
  Government National Mortgage Association                                   US$ 14,352                 US$ 10     US$ (10         US$
 

14,415
 
 
  FNMA POOL AL9903                                   US$ 12,520           US$ 904     US$ 1,010     US$ (106         US$
 

11,426
 
 
  FNMA TBA 30 Yr 3.5                                   US$ 65,279           US$ 62,406     US$ 62,406     US$           US$ 2,866  
  GNMA II TBA 30 Yr 4                                   US$ 42,194           US$ 39,813     US$ 39,808     US$ 5           US$ 2,378  
  FNMA TBA 15 Yr 3                                   US$ 38,710           US$ 36,709     US$ 36,692     US$ 17           US$ 2,015  
  GNMA II TBA 30 Yr 3.5                                   US$ 27,241           US$ 27,087     US$ 27,096     US$ (9         US$ 145  
  FNMA TBA 30 Yr 3                                   US$ 154,404           US$ 154,494     US$ 154,404     US$ 90              
  FNMA TBA 30 Yr 4                                   US$ 21,721           US$ 21,726     US$ 21,721     US$ 5              
  FNMA TBA 30 Yr 5                                   US$ 11,128           US$ 11,134     US$ 11,128     US$ 6              
  Federal Home Loan Bank Discount Notes                                   US$  152,578           US$  152,605     US$  152,578     US$ 27              
  FED HM LN PC Pool G07375                       US$ 10           US$ 12,123           US$ 12,081     US$ 12,121     US$ (40            
  GNMA II TBA 30 Yr 3                                   US$ 12,544           US$ 12,541     US$ 12,544     US$ (3            
  Asset-backed securities                          
  Citibank Credit Card Issuance Trust   Available-for-sale financial assets                     US$  22,585           US$ 33,402           US$ 7,567     US$ 7,766     US$ (199         US$ 48,328  
  Discover Card Execution Note Trust                       US$ 23,076           US$ 36,655           US$  13,991     US$ 14,003     US$ (12         US$ 45,722  
  Chase Issuance Trust                       US$ 31,276           US$ 20,538           US$ 12,607     US$ 12,604     US$ 3           US$ 39,211  
  Capital One Multi-Asset Execution Trust                       US$ 39,626           US$ 1,214           US$ 18,303     US$ 18,384     US$ (81         US$ 22,544  
  Ford Credit Floorplan Master Owner Trust A                       US$ 11,944           US$ 14,793           US$ 5,927     US$ 5,924     US$ 3           US$ 20,808  
  BA Credit Card Trust                       US$ 17,465           US$ 7,784           US$ 14,407     US$ 14,416     US$ (9         US$ 10,821  
  Fund                          
  Primavera Capital Fund II L.P.   Financial assets carried at cost                     US$ 23,784           US$ 41,851                                   US$ 65,635  

ISDF II

  Stock                          
  Alchip Technologies Limited   Available-for-sale financial assets                 6,581     US$ 6,387                   6,581     US$ 17,960     US$ 3,207     US$ 14,753              

 

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: The disposal is primarily consisted of capital return.

(Concluded)

 

- 88 -


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 YEAR ENDED DECEMBER 31, 2017

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

 

 

Company Name

 

Types of

Property

 

Transaction Date

  Transaction
Amount

(Foreign
Currencies in
Thousands)
   

Payment Term

 

Counter-party

  Nature of
Relationships
 

 

Prior Transaction of Related Counter-party

 

Price Reference

 

Purpose of
Acquisition

  Other
Terms
              Owner   Relationships   Transfer Date   Amount      

TSMC

 

Fab

 

August 2, 2016 to December 5, 2017

  $ 642,837    

Monthly settlement by the construction progress and acceptance

 

UNITED INTEGRATED SERVICES CO., LTD.

    N/A   N/A   N/A   N/A  

Bidding, price comparison and price negotiation

 

Manufacturing purpose

  None
 

Fab

 

August 10, 2016 to December 28, 2017

    6,833,577    

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

 

September 22, 2016 to September 5, 2017

    302,620    

Monthly settlement by the construction progress and acceptance

 

Uangyih-Tech Industrial Co., Ltd.

    N/A   N/A   N/A   N/A  

Bidding, price comparison and price negotiation

 

Manufacturing purpose

  None
 

Fab

 

January 13, 2017 to December 14, 2017

    307,199    

Monthly settlement by the construction progress and acceptance

 

WHOLETECH SYSTEM HITECH LIMITED

    N/A   N/A   N/A   N/A  

Bidding, price comparison and price negotiation

 

Manufacturing purpose

  None
 

Fab

 

January 18, 2017

    352,766    

Monthly settlement by the construction progress and acceptance

 

TASA Construction Corporation

    N/A   N/A   N/A   N/A  

Bidding, price comparison and price negotiation

 

Manufacturing purpose

  None
 

Fab

 

March 15, 2017 to November 2, 2017

    310,151    

Monthly settlement by the construction progress and acceptance

 

MARKETECH INTERNATIONAL CORP.

    N/A   N/A   N/A   N/A  

Bidding, price comparison and price negotiation

 

Manufacturing purpose

  None
 

Fab

 

March 15, 2017 to December 15, 2017

    317,397    

Monthly settlement by the construction progress and acceptance

 

LI JIE INDUSTRIAL Co., Ltd

    N/A   N/A   N/A   N/A  

Bidding, price comparison and price negotiation

 

Manufacturing purpose

  None

TSMC

 

Fab

 

March 17, 2017 to December 15, 2017

    358,354    

Monthly settlement by the construction progress and acceptance

 

TUN YI INDUSTRIAL Co., Ltd.

    N/A   N/A   N/A   N/A  

Bidding, price comparison and price negotiation

 

Manufacturing purpose

  None
 

Fab

 

March 21, 2017 to November 30, 2017

    303,996    

Monthly settlement by the construction progress and acceptance

 

Taiwan Puritic Corp.

    N/A   N/A   N/A   N/A  

Bidding, price comparison and price negotiation

 

Manufacturing purpose

  None
 

Fab

 

March 21, 2017 to December 25, 2017

    300,748    

Monthly settlement by the construction progress and acceptance

 

Gold Stone Development Co., Ltd.

    N/A   N/A   N/A   N/A  

Bidding, price comparison and price negotiation

 

Manufacturing purpose

  None
 

Fab

 

March 27, 2017 to
December 27, 2017

    758,991    

Monthly settlement by the construction progress and acceptance

 

Cica-Huntek Chemical Technology Taiwan Co., Ltd

    N/A   N/A   N/A   N/A  

Bidding, price comparison and price negotiation

 

Manufacturing purpose

  None
 

Fab

 

April 14, 2017 to
September 29, 2017

    485,131    

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
 

Fab

 

April 18, 2017 to November 3, 2017

    522,566    

Monthly settlement by the construction progress and acceptance

 

Chen Yuan International Co., Ltd

    N/A   N/A   N/A   N/A  

Bidding, price comparison and price negotiation

 

Manufacturing purpose

  None
 

Fab

 

May 25, 2017 to December 29, 2017

    6,898,386    

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

 

(Continued)

 

- 89 -


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 Nanjing Company Ltd.

 

Fab

 

March 21, 2017 to June 23, 2017

   
RMB
183,300
 
 
 

Monthly settlement by the construction progress and acceptance

 

China Construction First Division Group Construction & Development Co., Ltd.

    N/A   N/A   N/A   N/A  

Bidding, price comparison and price negotiation

 

Manufacturing purpose

  None
 

Fab

 

May 25, 2017

   
RMB
119,027
 
 
 

Monthly settlement by the construction progress and acceptance

 

Renchong Interior Decoration(Shanghai) Co., Ltd.

    N/A   N/A   N/A   N/A  

Bidding, price comparison and price negotiation

 

Manufacturing purpose

  None
 

Fab

 

June 22, 2017 to June 27, 2017

   
RMB
98,000
 
 
 

Monthly settlement by the construction progress and acceptance

 

Shanghai Baoye Group Co., Ltd.

    N/A   N/A   N/A   N/A  

Bidding, price comparison and price negotiation

 

Manufacturing purpose

  None
 

Land use right

 

December 18, 2017

   
RMB
180,042
 
 
 

100% payment

 

Nanjing Municipal Bureau of Land and Resources

    N/A   N/A   N/A   N/A  

Bidding

 

Manufacturing purpose

  None

(Concluded)

 

- 90 -


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 YEAR ENDED DECEMBER 31, 2017

(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   $ 650,351,537       64    

Net 30 days from invoice date (Note 1)

    Note   $ 91,329,510       77    
 

GUC

  Associate   Sales     6,864,165       1    

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

        777,730       1    
 

TSMC Nanjing

  Subsidiary   Sales     416,672          

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

                 
 

TSMC China

  Subsidiary   Purchases     22,059,850       27    

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

        (1,440,141     5    
 

WaferTech

  Indirect subsidiary   Purchases     8,783,741       11    

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

        (1,328,094     4    
 

VIS

  Associate   Purchases     5,755,727       7    

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

        (409,950     1    
 

SSMC

  Associate   Purchases     4,148,190       5    

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

        (406,959     1    

TSMC North America

 

GUC

  Associate of TSMC   Sales     1,038,560          

Net 30 days from invoice date

        245,162          
        (US$ 34,149           (US$ 8,266    

VisEra Tech

 

Xintec

  Associate of TSMC   Sales     401,210       16    

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

        161,232          

TSMC China

 

SSMC

  Associate of TSMC   Sales    

115,075

(RMB 25,304

 

    1    

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

                 

 

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.

 

- 91 -


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

DECEMBER 31, 2017

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

 

 

Company Name

  

Related Party

  

Nature of Relationships

   Ending Balance
(Foreign Currencies
in Thousands)
     Turnover Days
(Note 1)
  

 

Overdue

   Amounts Received
in Subsequent
Period
     Allowance for
Bad Debts
 
               Amount      Action Taken      

TSMC

  

TSMC North America

  

Subsidiary

   $ 92,575,611      50    $ 7,340,068         $ 17,269,052      $  
  

TSMC Nanjing

  

Subsidiary

     1,754,484      Note 2                        
  

GUC

  

Associate

     777,730      45      521,739           571,010         

TSMC China

  

TSMC

  

Parent company

     1,440,141      26      671           671         
         (RMB     316,238       (RMB     147       (RMB     147   
  

TSMC Nanjing

  

The same parent company

     20,167,025      Note 2                        
         (RMB 4,427,934               

TSMC Technology

  

TSMC

  

The ultimate parent of the Company

    

(US$

266,599

8,989

 

   Note 2                        

WaferTech

  

TSMC

  

The ultimate parent of the Company

    

(US$

1,328,094

44,779

 

   54     

(US$

1,554

52

 

       

(US$

1,554

52

 

      

VisEra Tech

  

Xintec

  

Associate of TSMC

     161,232      43                        

TSMC North America

  

GUC

  

Associate of TSMC

    

(US$

245,162

8,266

 

   50     

(US$

107,483

3,624

 

       

(US$

109,366

3,687

 

      

 

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.

 

- 92 -


TABLE 8

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

INTERCOMPANY RELATIONSHIPS AND SIGNIFICANT INTERCOMPANY TRANSACTIONS

FOR THE YEAR ENDED DECEMBER 31, 2017

(Amounts in Thousands of New Taiwan Dollars)

 

 

No.

  

Company Name

  

Counter Party

   Nature of
Relationship
(Note 1)
  

Intercompany Transactions

           

Financial Statements Item

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

0

   TSMC    TSMC North America    1   

Net revenue from sale of goods

   $ 650,351,537         67%
           

Receivables from related parties

     91,329,510         5%
           

Other receivables from related parties

     1,246,101        
      TSMC Japan    1   

Marketing expenses - commission

     210,136        
      TSMC Europe    1   

Marketing expenses - commission

     437,561        
      TSMC China    1   

Purchases

     22,059,850         2%
           

Marketing expenses - commission

     135,267        
           

Payables to related parties

     1,440,141        
      TSMC Nanjing    1   

Net revenue from sale of goods

     416,672        
           

Proceeds from disposal of property, plant and equipment

     14,336,846         1%
           

Other receivables from related parties

     1,754,484        
      TSMC Canada    1   

Research and development expenses

     251,800        
      TSMC Technology    1   

Research and development expenses

     1,894,942        
           

Payables to related parties

     266,599        
      WaferTech    1   

Purchases

     8,783,741         1%
           

Proceeds from disposal of property, plant and equipment

     120,790        
           

Payables to related parties

     1,328,094        

1

   TSMC China    TSMC Nanjing    3   

Other receivables from related parties

     20,167,025         1%

 

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.

 

- 93 -


TABLE 9

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

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

FOR THE YEAR ENDED DECEMBER 31, 2017

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

 

 

Investor
Company

 

Investee Company

 

Location

 

Main Businesses

and Products

  Original Investment Amount     Balance as of December 31, 2017     Net Income
(Losses) of the
Investee
(Foreign
Currencies in
Thousands)
    Share of
Profits/Losses

of Investee
(Note 1)
(Foreign
Currencies in
Thousands)
   

Note

        December 31,
2017
(Foreign
Currencies in
Thousands)
    December 31,
2016
(Foreign
Currencies in
Thousands)
    Shares (In
Thousands)
    Percentage
of
Ownership
  Carrying Value
(Foreign
Currencies in
Thousands)
       

TSMC

  TSMC Global   Tortola, British Virgin Islands  

Investment activities

  $ 292,890,229     $ 232,207,219       9     100   $ 309,211,877     $ 5,026,024     $ 5,026,024     Subsidiary
  TSMC Partners   Tortola, British Virgin Islands  

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

    31,456,130       31,456,130       988,268     100     49,684,287       2,225,601       2,225,601     Subsidiary
  VIS   Hsin-Chu, Taiwan  

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

    10,180,677       10,180,677       464,223     28     8,568,344       4,505,064       1,270,941     Associate
  SSMC   Singapore  

Manufacturing and selling of integrated circuits and other semiconductor devices

    5,120,028       5,120,028       314     39     5,677,640       4,444,634       1,724,073     Associate
  VisEra Tech   Hsin-Chu, Taiwan  

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

    5,005,171       5,005,171       253,120     87     4,667,162       207,557       180,424     Subsidiary
  TSMC North America   San Jose, California, U.S.A  

Selling and marketing of integrated circuits and other semiconductor devices

    333,718       333,718       11,000     100     4,001,003       5,859       5,859     Subsidiary
  Xintec   Taoyuan, Taiwan  

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

    1,988,317       1,988,317       111,282     41     2,292,100       (733,280     (304,493   Associate
  GUC   Hsin-Chu, Taiwan  

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

    386,568       386,568       46,688     35     1,300,194       854,809       297,816     Associate
  TSMC Europe   Amsterdam, the Netherlands  

Customer service and supporting activities

    15,749       15,749       —       100     407,324       40,557       40,557     Subsidiary
  VTAF II   Cayman Islands  

Investing in new start-up technology companies

    412,831       608,562       —       98     320,533       133,597       130,925     Subsidiary
  VTAF III   Cayman Islands  

Investing in new start-up technology companies

    1,318,885       1,355,417       —       98     152,836       (25,234     (24,729   Subsidiary
  TSMC Japan   Yokohama, Japan  

Customer service and supporting activities

    83,760       83,760       6     100     129,446       3,600       3,600     Subsidiary
  TSMC Korea   Seoul, Korea  

Customer service and supporting activities

    13,656       13,656       80     100     39,210       1,970       1,970     Subsidiary
  TSMC Solar Europe GmbH   Hamburg, Germany  

Selling of solar related products and providing customer service

    25,266       25,266       1     100     (20,217     (12,706     (12,706   Subsidiary

TSMC Partners

  TSMC Development   Delaware, U.S.A  

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

   

(US$

17,408,018

586,939

 

   

(US$

17,408,018

586,939

 

    —       100    

(US$

26,379,465

889,425

 

   

(US$

1,448,900

47,479

 

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

Engineering support activities

    423,590       423,590           100     518,616       18,990       Note 2     Subsidiary
        (US$ 14,282   (US$ 14,282       (US$ 17,486   (US$ 617    
  TSMC Canada   Ontario, Canada  

Engineering support activities

    68,216       68,216       2,300     100     182,321       15,597       Note 2     Subsidiary
        (US$ 2,300   (US$ 2,300       (US$ 6,147   (US$ 512    
  ISDF II   Cayman Islands  

Investing in new start-up technology companies

          154,044       9,299     97     839       378,299       Note 2     Subsidiary
          (US$ 5,194       (US$ 28   (US$ 12,491    
  ISDF   Cayman Islands  

Investing in new start-up technology companies

    14,094       14,094       583     97     492       44       Note 2     Subsidiary
        (US$ 475   (US$ 475       (US$ 17   (US$ 1    

VTAF III

  Growth Fund   Cayman Islands  

Investing in new start-up technology companies

    63,879       43,355       —       100     46,334       (1,385     Note 2     Subsidiary
        (US$ 2,154   (US$ 1,462       (US$ 1,562   (US$ (46 ) )     
  Mutual-Pak   New Taipei, Taiwan  

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

   

(US$

47,257

1,593

 

   

(US$

154,602

5,213

 

    4,693     39    

(US$

23,210

783

 

   

(US$

(18,028)

(589) )

 

 

    Note 2     Associate

 

(Continued)

 

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Investor
Company

 

Investee Company

 

Location

 

Main Businesses

and Products

  Original Investment
Amount
    Balance as of December 31, 2017     Net Income
(Losses) of the
Investee
(Foreign
Currencies in
Thousands)
    Share of
Profits/Losses

of Investee
(Note 1)
(Foreign
Currencies in
Thousands)
   

Note

        December 31,
2017
(Foreign
Currencies in
Thousands)
    December 31,
2016
(Foreign
Currencies in
Thousands)
    Shares (In
Thousands)
    Percentage
of
Ownership
  Carrying Value
(Foreign
Currencies in
Thousands)
       

TSMC Development

  WaferTech   Washington, U.S.A  

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

  $     $       293,637     100   $

(US$

4,762,342

160,570

 

  $

(US$

1,248,658

40,896

 

    Note 2     Subsidiary

 

Note 1: The share of profits/losses of investee includes the effect of unrealized gross profit on intercompany transactions.
Note 2: The share of profits/losses of the investee company is not reflected herein as such amount is already included in the share of profits/losses of the investor company.

(Concluded)

 

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TABLE 10

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

INFORMATION ON INVESTMENT IN MAINLAND CHINA

FOR YEAR ENDED DECEMBER 31, 2017

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

 

 

Investee Company

 

Main Businesses and
Products

  Total Amount of
Paid-in Capital

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

(US$ in
Thousands)
   

 

Investment

Flows

    Accumulated
Outflow of
Investment from
Taiwan as of

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

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

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

TSMC China

 

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

  $

 

18,939,667

(RMB 4,502,080

 

    Note 1     $

(US$

18,939,667

596,000

 

  $     $     $

(US$

18,939,667

596,000

 

  $ 8,938,933     100%   $

 

9,058,937

(Note 2

 

  $ 51,060,885     $  

TSMC Nanjing

 

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

   

28,160,092

(RMB 6,133,276

 

    Note 1      

(US$

6,435,200

200,000

 

   

(US$

21,724,892

720,000

 

         

(US$

28,160,092

920,000

 

    (867,563   100%    

(867,563

(Note 2


    26,493,740        

 

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

$    47,099,759

(US$      1,516,000

 

    

$  119,412,667

(US$      3,596,000

 

   Note 3

 

Note 1: TSMC directly invested US$596,000 thousand in TSMC China and US$920,000 thousands in TSMC Nanjing.
Note 2: Amount was recognized based on the audited financial statements.
Note 3: As the Company has obtained the certificate of being qualified for operating headquarters issued by Industrial Development Bureau, MOEA on August 2016, the upper limit on investment in mainland China pursuant to “Principle of investment or Technical Cooperation in Mainland China” is not applicable.

 

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