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 May 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: May 7, 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

Three Months Ended March 31, 2018 and 2017 and

Independent Auditors’ Review Report

  


LOGO   LOGO

INDEPENDENT AUDITORS’ REVIEW REPORT

The Board of Directors and Shareholders

Taiwan Semiconductor Manufacturing Company Limited

Introduction

We have reviewed the accompanying consolidated financial statements of Taiwan Semiconductor Manufacturing Company Limited and its subsidiaries (the “Company”) as of March 31, 2018 and 2017 and the consolidated statements of comprehensive income, changes in equity and cash flows for the three-month periods then ended, and the notes to the consolidated financial statements, including a summary of significant accounting policies. 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 International Accounting Standard 34, “Interim Financial Reporting,” endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China. Our responsibility is to express a conclusion on the consolidated financial statements based on our reviews.

Scope of Review

We conducted our reviews in accordance with Statement of Auditing Standards No. 65 “Review of Financial Information Performed by the Independent Auditor of the Entity”. A review of consolidated financial statements consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our reviews, nothing has come to our attention that caused us to believe that the accompanying consolidated financial statements do not present fairly, in all material respects the financial position of the entity as at March 31, 2018 and 2017, and of its consolidated financial performance and its consolidated cash flows for the three-month periods then ended in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and International Accounting Standard 34, “Interim Financial Reporting,” endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China.

 

- 1 -


The engagement partners on the reviews resulting in this independent auditors’ review report are Mei Yen Chiang and Yu Feng Huang.

 

LOGO    LOGO

Deloitte & Touche

Taipei, Taiwan

Republic of China

April 20, 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 review such consolidated financial statements are those generally applied in the Republic of China.

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

 

- 2 -


Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED BALANCE SHEETS

(In Thousands of New Taiwan Dollars)

 

 

     March 31, 2018
(Reviewed)
     December 31, 2017
(Audited)
     March 31, 2017
(Reviewed)
 
     Amount      %      Amount      %      Amount      %  
                 

ASSETS

                 

CURRENT ASSETS

                 

Cash and cash equivalents (Note 6)

   $ 577,782,963        28      $ 553,391,696        28      $ 564,725,266        29  

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

     963,915               569,751               5,374,003         

Financial assets at fair value through other comprehensive income (Note 8)

     95,713,446        4                              

Available-for-sale financial assets (Note 9)

                   93,374,153        5        71,083,797        4  

Held-to-maturity financial assets (Note 10)

                   1,988,385               18,140,374        1  

Financial assets at amortized cost (Note 11)

     9,888,741        1                              

Hedging derivative financial assets (Note 13)

                   34,394                       

Hedging financial assets (Note 13)

     26,357                                     

Notes and accounts receivable, net (Note 14)

     106,601,372        5        121,133,248        6        108,532,829        6  

Receivables from related parties (Note 32)

     1,179,312               1,184,124               494,839         

Other receivables from related parties (Note 32)

     130,070               171,058               135,051         

Inventories (Note 15)

     85,215,899        4        73,880,747        4        50,389,022        3  

Other financial assets (Note 33)

     11,667,264        1        7,253,114               3,761,484         

Other current assets (Note 19)

     39,947,321        2        4,222,440               3,025,168         
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total current assets

     929,116,660        45        857,203,110        43        825,661,833        43  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

NONCURRENT ASSETS

                 

Financial assets at fair value through other comprehensive income (Note 8)

     6,035,904                                     

Held-to-maturity financial assets (Note 10)

                   18,833,329        1        20,499,458        1  

Financial assets at amortized cost (Note 11)

     10,033,241        1                              

Financial assets carried at cost (Note 12)

                   4,874,257               4,079,292         

Investments accounted for using equity method (Note 16)

     18,307,517        1        17,861,488        1        19,940,062        1  

Property, plant and equipment (Note 17)

     1,055,366,207        51        1,062,542,322        53        1,037,364,143        54  

Intangible assets (Note 18)

     13,674,295        1        14,175,140        1        14,278,436        1  

Deferred income tax assets (Note 4)

     12,987,042        1        12,105,463        1        10,644,401         

Refundable deposits

     2,121,209               1,283,414               572,005         

Other noncurrent assets (Note 19)

     1,513,731               2,983,120               1,624,131         
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total noncurrent assets

     1,120,039,146        55        1,134,658,533        57        1,109,001,928        57  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

TOTAL

   $ 2,049,155,806        100      $ 1,991,861,643        100      $ 1,934,663,761        100  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

LIABILITIES AND EQUITY

                 

CURRENT LIABILITIES

                 

Short-term loans (Notes 20 and 30)

   $ 56,731,350        3      $ 63,766,850        3      $ 54,666,000        3  

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

     170,673               26,709               124,935         

Hedging derivative financial liabilities (Note 13)

                   15,562               3,908         

Hedging financial liabilities (Note 13)

     79,182                                     

Accounts payable

     27,817,670        1        28,412,807        1        23,081,567        1  

Payables to related parties (Note 32)

     1,224,307               1,656,356               1,171,195         

Salary and bonus payable

     10,201,325        1        14,254,871        1        10,703,656        1  

Accrued profit sharing bonus to employees and compensation to directors and supervisors (Notes 24 and 29)

     29,529,009        1        23,419,135        1        28,857,625        1  

Payables to contractors and equipment suppliers

     47,828,289        2        55,723,774        3        57,671,953        3  

Income tax payable (Note 4)

     44,096,800        2        33,479,311        2        52,874,433        3  

Provisions (Note 21)

                   13,961,787        1        11,298,320        1  

Long-term liabilities - current portion (Note 22)

     49,356,740        2        58,401,122        3        44,909,680        2  

Accrued expenses and other current liabilities (Notes 23, 30 and 32)

     75,199,897        4        65,588,396        3        36,217,252        2  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total current liabilities

     342,235,242        16        358,706,680        18        321,580,524        17  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

NONCURRENT LIABILITIES

                 

Bonds payable (Notes 22 and 30)

     83,400,000        4        91,800,000        5        134,198,769        7  

Long-term bank loans

                                 19,360         

Deferred income tax liabilities (Note 4)

     285,644               302,205               90,944         

Net defined benefit liability (Note 4)

     8,818,705        1        8,850,704        1        8,537,369         

Guarantee deposits (Notes 23 and 30)

     5,991,361               7,586,790               12,321,468        1  

Others

     1,819,825               1,855,621               1,605,302         
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total noncurrent liabilities

     100,315,535        5        110,395,320        6        156,773,212        8  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total liabilities

     442,550,777        21        469,102,000        24        478,353,736        25  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

EQUITY ATTRIBUTABLE TO SHAREHOLDERS OF THE PARENT

                 

Capital stock (Note 24)

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

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Capital surplus (Note 24)

     56,305,751        3        56,309,536        3        56,282,118        3  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Retained earnings (Note 24)

                 

Appropriated as legal capital reserve

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

Unappropriated earnings

     1,082,967,237        53        991,639,347        49        951,339,122        49  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     1,324,689,900        65        1,233,362,010        61        1,159,637,067        60  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Others (Note 24)

     (34,401,067      (2      (26,917,818      (1      (19,709,627      (1
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Equity attributable to shareholders of the parent

     1,605,898,389        79        1,522,057,533        76        1,455,513,363        75  

NON-CONTROLLING INTERESTS

     706,640               702,110               796,662         
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total equity

     1,606,605,029        79        1,522,759,643        76        1,456,310,025        75  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

TOTAL

   $ 2,049,155,806        100      $ 1,991,861,643        100      $ 1,934,663,761        100  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

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

 

- 3 -


Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

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

(Reviewed, Not Audited)

 

 

     Three Months Ended March 31  
     2018      2017  
     Amount      %      Amount      %  
           

NET REVENUE (Notes 25, 32 and 37)

   $ 248,078,671        100      $ 233,914,400        100  

COST OF REVENUE (Notes 15, 29 and 32)

     123,103,977        50        112,428,734        48  
  

 

 

    

 

 

    

 

 

    

 

 

 

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

     124,974,694        50        121,485,666        52  

REALIZED (UNREALIZED) GROSS PROFIT ON SALES TO ASSOCIATES

     (117,155             3,970         
  

 

 

    

 

 

    

 

 

    

 

 

 

GROSS PROFIT

     124,857,539        50        121,489,636        52  
  

 

 

    

 

 

    

 

 

    

 

 

 

OPERATING EXPENSES (Notes 29 and 32)

           

Research and development

     20,428,594        8        19,412,393        8  

General and administrative

     4,851,708        2        5,247,603        2  

Marketing

     1,448,092        1        1,496,487        1  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total operating expenses

     26,728,394        11        26,156,483        11  
  

 

 

    

 

 

    

 

 

    

 

 

 

OTHER OPERATING INCOME AND EXPENSES, NET (Note 29)

     (1,302,199             19,237         
  

 

 

    

 

 

    

 

 

    

 

 

 

INCOME FROM OPERATIONS (Note 37)

     96,826,946        39        95,352,390        41  
  

 

 

    

 

 

    

 

 

    

 

 

 

NON-OPERATING INCOME AND EXPENSES

           

Share of profits of associates

     681,791               666,810         

Other income

     3,154,642        1        2,104,979        1  

Foreign exchange gain (loss), net (Note 36)

     (676,980             99,795         

Finance costs

     (807,966             (816,664       

Other gains and losses, net (Note 26)

     765,188               415,189         
  

 

 

    

 

 

    

 

 

    

 

 

 

Total non-operating income and expenses

     3,116,675        1        2,470,109        1  
  

 

 

    

 

 

    

 

 

    

 

 

 

INCOME BEFORE INCOME TAX

     99,943,621        40        97,822,499        42  

INCOME TAX EXPENSE (Notes 4 and 27)

     10,156,047        4        10,201,591        5  
  

 

 

    

 

 

    

 

 

    

 

 

 

NET INCOME

     89,787,574        36        87,620,908        37  
  

 

 

    

 

 

    

 

 

    

 

 

 

(Continued)

 

- 4 -


Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

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

(Reviewed, Not Audited)

 

 

     Three Months Ended March 31  
     2018      2017  
     Amount      %      Amount      %  
           

OTHER COMPREHENSIVE INCOME (LOSS) (Notes 24 and 27)

           

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

           

Unrealized loss on investments in equity instruments at fair value through other comprehensive income

   $ (19,507           $         

Gain on hedging instruments

     37,282                       

Share of other comprehensive income of associates

     62                       

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

     39,206                       
  

 

 

    

 

 

    

 

 

    

 

 

 
     57,043                       
  

 

 

    

 

 

    

 

 

    

 

 

 

Items that may be reclassified subsequently to profit or loss:

           

Exchange differences arising on translation of foreign operations

     (6,476,486      (3      (21,243,594      (9

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

                   (93,470       

Unrealized loss on investments in debt instruments at fair value through other comprehensive income

     (727,410                     

Share of other comprehensive loss of associates

     (39,352          —        (61,657       

Income tax benefit related to items that may be reclassified subsequently

                   46,400         
  

 

 

    

 

 

    

 

 

    

 

 

 
     (7,243,248      (3      (21,352,321      (9
  

 

 

    

 

 

    

 

 

    

 

 

 

Other comprehensive loss for the period, net of income tax

     (7,186,205      (3      (21,352,321      (9
  

 

 

    

 

 

    

 

 

    

 

 

 

TOTAL COMPREHENSIVE INCOME FOR THE PERIOD

   $ 82,601,369        33      $ 66,268,587        28  
  

 

 

    

 

 

    

 

 

    

 

 

 

NET INCOME (LOSS) ATTRIBUTABLE TO:

           

Shareholders of the parent

   $ 89,784,622        36      $ 87,628,898        37  

Non-controlling interests

     2,952               (7,990          —  
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 89,787,574        36      $ 87,620,908        37  
  

 

 

    

 

 

    

 

 

    

 

 

 

(Continued)

 

- 5 -


Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

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

(Reviewed, Not Audited)

 

 

     Three Months Ended March 31  
     2018      2017  
     Amount      %      Amount      %  
           

TOTAL COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO:

           

Shareholders of the parent

   $ 82,596,052        33      $ 66,274,790        28  

Non-controlling interests

     5,317               (6,203       
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 82,601,369        33      $ 66,268,587        28  
  

 

 

    

 

 

    

 

 

    

 

 

 
     2018      2017  
    

Income Attributable to
Shareholders of

the Parent

    

Income Attributable to

Shareholders of

the Parent

 
           

EARNINGS PER SHARE (NT$, Note 28)

           

Basic earnings per share

   $        3.46      $        3.38  
  

 

 

    

 

 

 

Diluted earnings per share

   $        3.46      $        3.38  
  

 

 

    

 

 

 

 

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

 

- 6 -


Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(In Thousands of New Taiwan Dollars)

(Reviewed, Not Audited)

 

 

     Equity Attributable to Shareholders of the Parent                
                                               Others                       
                                                            

Unrealized

Gain(Loss) on

Financial

Assets at Fair

Value Through

Other

Comprehensive

Income

                                                  
                                                                                                             
                                                     

Unrealized

Gain(Loss)

from

Available-

for-sale

Financial Assets

                                                     
                                                                                                         
                                              

Foreign

Currency

Translation

Reserve

                        

Unearned

Stock-Based

Employee

Compensation

                             
     Capital Stock - Common
Stock
            Retained Earnings                     

Gain(Loss) on

Hedging

Instruments

                                
     Shares                    Legal Capital      Unappropriated                     

Cash Flow

Hedges Reserve

                         Non-controlling      Total  
     (In Thousands)      Amount      Capital Surplus      Reserve      Earnings      Total                        Total      Total      Interests      Equity  
                                               

BALANCE, JANUARY 1, 2018

     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  

Effect of retrospective application

                                 1,556,319        1,556,319               214,074        (524,915      (4,226      4,226               (310,841      1,245,478        342        1,245,820  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

ADJUSTED BALANCE, JANUARY 1, 2018

     25,930,380        259,303,805        56,309,536        241,722,663        993,195,666        1,234,918,329        (26,697,680             (524,915             4,226        (10,290      (27,228,659      1,523,303,011        702,452        1,524,005,463  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Net income for the three months ended March 31, 2018

                                 89,784,622        89,784,622                                                         89,784,622        2,952        89,787,574  

Other comprehensive income (loss) for the three months ended March 31, 2018, net of income tax

                                               (6,515,676             (705,702             32,808               (7,188,570      (7,188,570      2,365        (7,186,205
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total comprehensive income (loss) for the three months ended March 31, 2018

                                 89,784,622        89,784,622        (6,515,676             (705,702             32,808               (7,188,570      82,596,052        5,317        82,601,369  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Disposal of investments in equity instruments at fair value through other comprehensive income

                                 (13,051      (13,051                    13,051                             13,051                       

Adjustments to share of changes in equities of associates

                   (3,825                                                              3,111        3,111        (714             (714

Donation from shareholders

                   40                                                                              40        6        46  

Decrease in non-controlling interests

                                                                                                       (1,135      (1,135
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

BALANCE, March 31, 2018

     25,930,380      $ 259,303,805      $ 56,305,751      $ 241,722,663      $ 1,082,967,237      $ 1,324,689,900      $ (33,213,356    $      $ (1,217,566    $      $ 37,034      $ (7,179    $ (34,401,067    $ 1,605,898,389      $ 706,640      $ 1,606,605,029  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

BALANCE, JANUARY 1, 2017

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

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

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

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

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

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

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

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

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Adjustments to share of changes in equities of associates

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

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

BALANCE, March 31, 2017

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

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

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

 

- 7 -


Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands of New Taiwan Dollars)

(Reviewed, Not Audited)

 

 

     Three Months Ended March 31  
     2018      2017  
     

CASH FLOWS FROM OPERATING ACTIVITIES

     

Income before income tax

   $ 99,943,621      $ 97,822,499  

Adjustments for:

     

Depreciation expense

     70,462,286        59,133,361  

Amortization expense

     1,035,591        1,038,824  

Reversal of expected credit losses on investments in debt instruments

     (1,757       

Finance costs

     807,966        816,664  

Share of profits of associates

     (681,791      (666,810

Interest income

     (3,154,189      (2,104,979

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

     582,384        (22,195

Gain on disposal of intangible assets, net

     (436       

Impairment loss on financial assets

            12,032  

Loss on financial instruments at fair value through profit or loss

     28,142         

Loss on disposal of investments in debt instruments at fair value through other comprehensive income

     252,328         

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

            8,982  

Unrealized (realized) gross profit on sales to associates

     117,155        (3,970

Gain on foreign exchange, net

     (1,205,272      (7,106,552

Dividend income

     (453       

Loss (gain) arising from fair value hedges, net

     (352      19,487  

Changes in operating assets and liabilities:

     

Financial instruments at fair value through profit or loss

     602,734        1,010,909  

Notes and accounts receivable, net

     13,296,988        18,227,303  

Receivables from related parties

     4,812        474,720  

Other receivables from related parties

     40,988        11,737  

Inventories

     (11,335,152      (1,706,789

Other financial assets

     (3,143,144      1,599,844  

Other current assets

     (1,402,930      369,473  

Other noncurrent assets

     25,301        (152,473

Accounts payable

     (984,571      (3,020,849

Payables to related parties

     (432,049      (90,979

Salary and bonus payable

     (4,053,546      (2,978,161

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

     6,109,874        5,963,619  

Accrued expenses and other current liabilities

     (5,776,314      (824,558

Provisions

            (6,696,992

Net defined benefit liability

     (31,999      (14,039
  

 

 

    

 

 

 

Cash generated from operations

     161,106,215        161,120,108  

Income taxes paid

     (380,297      (112,064
  

 

 

    

 

 

 

Net cash generated by operating activities

     160,725,918        161,008,044  
  

 

 

    

 

 

 

(Continued)

 

- 8 -


Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands of New Taiwan Dollars)

(Reviewed, Not Audited)

 

 

     Three Months Ended March 31  
     2018     2017  
    

CASH FLOWS FROM INVESTING ACTIVITIES

    

Acquisitions of:

    

Financial instruments at fair value through profit or loss - debt instruments

   $ (183,026   $  

Financial assets at fair value through other comprehensive income

     (24,382,829      

Available-for-sale financial assets

           (24,675,339

Held-to-maturity financial assets

           (1,695,771

Financial assets carried at cost

           (202,032

Property, plant and equipment

     (71,847,185     (102,505,595

Intangible assets

     (222,548     (917,636

Proceeds from disposal or redemption of:

    

Financial instruments at fair value through profit or loss - debt instruments

     49,438        

Financial assets at fair value through other comprehensive income

     20,123,921        

Available-for-sale financial assets

           18,436,274  

Held-to-maturity financial assets

           400,000  

Financial assets at amortized cost

     498,542        

Property, plant and equipment

     47,376       151,904  

Intangible assets

     492        

Derecognition of hedging derivative financial instruments

           (6,399

Derecognition of hedging financial instruments

     177,209        

Interest received

     3,139,610       1,950,176  

Other dividends received

     453        

Refundable deposits paid

     (1,048,245     (191,217

Refundable deposits refunded

     187,602       25,376  
  

 

 

   

 

 

 

Net cash used in investing activities

     (73,459,190     (109,230,259
  

 

 

   

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

    

Decrease in short-term loans

     (5,774,830     (250,365

Repayment of bonds and interest – prepaid

     (33,998,915      

Repayment of bonds

     (16,800,000     (10,000,000

Repayment of long-term bank loans

           (2,420

Interest paid

     (998,257     (1,257,295

Guarantee deposits received

     3,095       723,339  

Guarantee deposits refunded

     (57,230     (1,123,178

Donation from shareholders

     46        

Decrease in non-controlling interests

     (1,135      
  

 

 

   

 

 

 

Net cash used in financing activities

     (57,627,226     (11,909,919
  

 

 

   

 

 

 

(Continued)

 

- 9 -


Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands of New Taiwan Dollars)

(Reviewed, Not Audited)

 

 

     Three Months Ended March 31  
     2018      2017  
     

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS

   $ (5,248,235    $ (16,396,433
  

 

 

    

 

 

 

NET INCREASE IN CASH AND CASH EQUIVALENTS

     24,391,267        23,471,433  

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

     553,391,696        541,253,833  
  

 

 

    

 

 

 

CASH AND CASH EQUIVALENTS, END OF PERIOD

   $ 577,782,963      $ 564,725,266  
  

 

 

    

 

 

 

 

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

 

- 10 -


Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2018 and 2017

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

(Reviewed, Not Audited)

 

 

1. GENERAL

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

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

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

 

2. THE AUTHORIZATION OF FINANCIAL STATEMENTS

The accompanying consolidated financial statements were reported to the Board of Directors and issued on April 20, 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) IFRS 9 “Financial Instruments” and related amendment

IFRS 9 supersedes IAS 39 “Financial Instruments: Recognition and Measurement”, with consequential amendments to IFRS 7 “Financial Instruments: Disclosures” and other standards. IFRS 9 sets out the requirements for classification, measurement and impairment of financial assets and hedge accounting. Please refer to Note 4 for information relating to the relevant accounting policies.

Classification, measurement and impairment of financial assets and financial liabilities

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.

 

- 11 -


The 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 fair value through profit or loss (FVTPL)

    569,751       569,751    
 

Hedging instruments

 

Hedging instruments

    34,394       34,394    

Equity securities

 

Available-for-sale

 

Fair value through other comprehensive income (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

 

Held for trading

    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    

 

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)

 

- 12 -


  (1) Cash and cash equivalents, notes and accounts receivable (including related parties), other receivables and refundable deposits that 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 would result in a decrease in loss allowance for accounts receivable 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 non-controlling 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.

 

  (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.

 

- 13 -


Hedge accounting

The Company prospectively apply the requirements for hedge accounting upon initial application of IFRS 9. In addition, due to the amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers, all derivative and non-derivative financial assets and financial liabilities which are designated as hedging instruments are presented as financial assets and financial liabilities for hedging starting 2018.

 

  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. Please refer to Note 4 for information relating to the relevant accounting policies.

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

The 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.

 

- 14 -


  (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).

The impact of continuing the application of IAS18 instead of IFRS15 for the three months ended March 31, 2018 is detailed as follows:

Impact on Assets, Liabilities and Equity

 

    

March 31,

2018

 
  

Decrease in inventories

   $ (16,438

Increase in other financial assets-current

     30,434  

Increase in investments accounted for using equity method

     25,901  
  

 

 

 

Total effect on assets

   $ 39,897  
  

 

 

 

Decrease in provisions - current

   $ (14,382,288

Increase in accrued expenses and other current liabilities

     14,382,265  

Increase in income tax payable

     2,804  
  

 

 

 

Total effect on liabilities

   $ 2,781  
  

 

 

 

Increase in retained earnings

   $ 35,651  

Increase in non-controlling interests

     1,465  
  

 

 

 

Total effect on equity

   $ 37,116  
  

 

 

 

Impact on Total Comprehensive Income

 

     Three Months
Ended
March 31,
2018
 
  

Increase in net revenue

   $ 30,457  

Increase in cost of revenue

     (16,438

Increase in share of the profit or loss of associates

     25,901  

Increase in income tax expense

     (2,804
  

 

 

 

Increase in net income for the period

   $ 37,116  
  

 

 

 

Increase in net income/total comprehensive income attributable to:

  

Shareholders of the parent

   $ 35,651  

Non-controlling interests

     1,465  
  

 

 

 
   $ 37,116  
  

 

 

 

 

  3) Please refer to Note 30 for the disclosure of amendment to IAS 7 “Disclosure Initiative”

 

- 15 -


  b. 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 (Note 1)

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 (Note 3)

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 1: The FSC permits the election for early adoption of the amendments starting from 2018.
  Note 2: On December 19, 2017, the FSC announced that IFRS 16 will take effect starting from January 1, 2019.
  Note 3: The Company shall apply these amendments to plan amendments, curtailments or settlements occurring on or after 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 issued, the Company continues in evaluating the impact on its financial position and financial performance as a result of the initial adoption of the other standards or interpretations. The related impact will be disclosed when the Company completes the evaluation.

 

- 16 -


4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Except for the following, the accounting policies applied in these consolidated financial statements are consistent with those applied in the consolidated financial statements for the year ended December 31, 2017.

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

Statement of Compliance

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

Basis of Consolidation

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

The basis of preparation and the basis for the consolidated financial statements applied in these consolidated financial statements are consistent with those applied in the consolidated financial statements for the year ended December 31, 2017.

The subsidiaries in the consolidated financial statements

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

 

           

Establishment

and Operating

Location

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

March 31,

2018

    December 31,
2017
   

March 31,

2017

    Note  
             

TSMC

 

TSMC North America

 

Selling and marketing of integrated circuits and other semiconductor devices

 

San Jose, California, U.S.A.

    100%       100%       100%       —    
 

TSMC Europe B.V. (TSMC Europe)

 

Customer service and supporting activities

 

Amsterdam, the Netherlands

    100%       100%       100%       a)  
 

TSMC Japan Limited (TSMC Japan)

 

Customer service and supporting activities

 

Yokohama, Japan

    100%       100%       100%       a)  
 

TSMC Korea Limited (TSMC Korea)

 

Customer service and supporting activities

 

Seoul, Korea

    100%       100%       100%       a)  
 

TSMC Partners, Ltd. (TSMC Partners)

 

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

 

Tortola, British Virgin Islands

    100%       100%       100%       a)  
 

TSMC Global, Ltd. (TSMC Global)

 

Investment activities

 

Tortola, British Virgin Islands

    100%       100%       100%       —    
 

TSMC China Company Limited (TSMC China)

 

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

 

Shanghai, China

    100%       100%       100%       —    
 

TSMC Nanjing Company Limited (TSMC Nanjing)

 

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

 

Nanjing, China

    100%       100%       100%       b)  
 

VisEra Technologies Company Ltd. (VisEra Tech)

 

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

 

Hsin-Chu, Taiwan

    87%       87%       87%       —    
 

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

 

Investing in new start-up technology companies

 

Cayman Islands

    98%       98%       98%       a)  
 

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

 

Investing in new start-up technology companies

 

Cayman Islands

    98%       98%       98%       a)  
 

TSMC Solar Europe GmbH

 

Selling of solar related products and providing customer service

 

Hamburg, Germany

    100%       100%       100%       a) , c)  

 

(Continued)

 

- 17 -


           

Establishment

and Operating

Location

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

March 31,

2018

  December 31,
2017
 

March 31,

2017

  Note
             

TSMC Partners

 

TSMC Development, Inc. (TSMC Development)

 

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

 

Delaware, U.S.A.

  100%   100%   100%   —  
 

TSMC Technology, Inc. (TSMC Technology)

 

Engineering support activities

 

Delaware, U.S.A.

  100%   100%   100%   a)
 

TSMC Design Technology Canada Inc. (TSMC Canada)

 

Engineering support activities

 

Ontario, Canada

  100%   100%   100%   a)
 

InveStar Semiconductor Development Fund, Inc. (ISDF)

 

Investing in new start-up technology companies

 

Cayman Islands

  97%   97%   97%   a), d)
 

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

 

Investing in new start-up technology companies

 

Cayman Islands

  97%   97%   97%   a), d)

TSMC Development

 

WaferTech, LLC (WaferTech)

 

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

 

Washington, U.S.A.

  100%   100%   100%   —  

VTAF III

 

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

 

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

 

New Taipei, Taiwan

  39%   39%   58%   a), e)
 

Growth Fund Limited (Growth Fund)

 

Investing in new start-up technology companies

 

Cayman Islands

  100%   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), f)

(Concluded)

 

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

 

  Note b: Under the investment agreement entered into with the municipal government of Nanjing, China, 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.

 

  Note c: TSMC Solar Europe GmbH is under liquidation procedures.

 

  Note d: ISDF and ISDF II are under liquidation procedures.

 

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

Financial Assets

The classification of financial assets 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.

 

  a. Category of financial assets and measurement

2018

Financial assets are classified into the following categories: financial assets at FVTPL, investments in debt instruments and equity instruments at FVTOCI, and financial assets at amortized cost.

 

  1) Financial asset at FVTPL

For certain financial assets which include debt instruments that do not meet the criteria of amortized cost or FVTOCI, it is mandatorily required to measure them at FVTPL. Any gain or loss arising from remeasurement is recognized in profit or loss. The net gain or loss recognized in profit or loss incorporates any interest earned on the financial asset.

 

- 18 -


  2) Investments in debt instruments at FVTOCI

Debt instruments with contractual terms specifying that cash flows are solely payments of principal and interest on the principal amount outstanding, together with objective of collecting contractual cash flows and selling the financial assets, are measured at FVTOCI.

Interest income calculated using the effective interest method, foreign exchange gains and losses and impairment gains or losses on investments in debt instruments at FVTOCI are recognized in profit or loss. Other changes in the carrying amount of these debt instruments are recognized in other comprehensive income and will be reclassified to profit or loss when these debt instruments are disposed.

 

  3) Investments in equity instruments at FVTOCI

On initial recognition, the Company may irrevocably designate investments in equity investments that is not held for trading as at FVTOCI.

Investments in equity instruments at FVTOCI are subsequently measured at fair value with gains and losses arising from changes in fair value recognized in other comprehensive income and accumulated in other equity. The cumulative gain or loss will not be reclassified to profit or loss on disposal of the equity investments. Instead, they will be transferred to retained earnings.

Dividends on these investments in equity instruments at FVTOCI are recognized in profit or loss when the Company’s right to receive the dividends is established, unless the Company’s right clearly represent a recovery of part of the cost of the investment.

 

  4) Measured at amortized cost

Cash and cash equivalents, debt instrument investments, notes and accounts receivable (including related parties), other receivables and refundable deposits are measured at amortized cost.

Debt instruments with contractual terms specifying that cash flows are solely payments of principal and interest on the principal amount outstanding, together with objective of holding financial assets in order to collect contractual cash flows, are measured at amortized cost.

Subsequent to initial recognition, financial assets measured at amortized cost are measured at amortized cost, which equals to carrying amount determined by the effective interest method less any impairment loss.

2017

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.

 

  1) Financial asset at FVTPL

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.

 

- 19 -


  2) 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.

 

  3) 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.

 

  4) 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.

 

  b. Impairment of financial assets

2018

At the end of each reporting period, a loss allowance for expected credit loss is recognized for financial assets at amortized cost (including accounts receivable) and for investments in debt instruments that are measured at FVTOCI.

The loss allowance for accounts receivable is measured at an amount equal to lifetime expected credit losses. For financial assets at amortized cost and investments in debt instruments that are measured at FVTOCI, when the credit risk on the financial instrument has not increased significantly since initial recognition, a loss allowance is recognized at an amount equal to expected credit loss resulting from possible default events of a financial instrument within 12 months after the reporting date. If, on the other hand, there has been a significant increase in credit risk since initial recognition, a loss allowance is recognized at an amount equal to expected credit loss resulting from all possible default events over the expected life of a financial instrument.

 

- 20 -


The Company recognizes an impairment gain or loss in profit or loss for all financial instruments with a corresponding adjustment to their carrying amount through a loss allowance account, except for investments in debt instruments that are measured at FVTOCI, for which the loss allowance is recognized in other comprehensive income and does not reduce the carrying amount of the financial asset.

2017

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.

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.

Hedge Accounting

 

  a. Fair value hedges

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.

 

- 21 -


  b. Cash flow hedges

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 (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.

2018

The Company prospectively discontinues hedge accounting only when the hedging relationship ceases to meet the qualifying criteria; for instance when the hedging instrument expires or is sold, terminated or exercised.

2017

Hedge accounting was discontinued prospectively when the Company revoked the designated hedging relationship, when the hedging instrument expired or was sold, terminated, or exercised; or no longer met the criteria for hedge accounting.

Revenue Recognition

2018

The Company identifies the contract with the customers, and recognizes revenue when performance obligations are satisfied.

Revenue from the sale of goods is mainly recognized when a customer obtains control of promised goods, at which time the goods are delivered to the customer’s specific location and performance obligation is satisfied.

Revenue from sale of goods is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimated customer returns, rebates and other similar allowances. Provision for estimated sales returns and other allowances is generally made and adjusted based on historical experience and the consideration of varying contractual terms to recognize refund liabilities, which is classified under accrued expenses and other current liabilities.

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.

2017

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.

 

- 22 -


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.

Dividend and interest income

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.

Retirement Benefits

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

Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax. The interim period income tax expense is accrued using the tax rate that would be applicable to expected total annual earnings, that is, the estimated average annual effective income tax rate applied to the pre-tax income of the interim period. When tax rate changes during the interim period, the effect of the change in tax rate relating to transactions recognized outside scope of profit or loss is recognized in full in the period in which the change in tax rate occurs. The effect of the change in tax rate relating to transactions recognized in profit or loss is incorporated into estimation of the average annual income tax rate, with corresponding effect recognized throughout the interim periods.

 

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

Except for the following paragraphs, the same critical accounting judgments and key sources of estimates and uncertainty have been followed in these consolidated financial statements as were applied in the preparation of the Company’s consolidated financial statements for the year ended December 31, 2017.

For Level 3 fair value measurement on equity investments, the Company determines the estimated fair value by selecting appropriate valuation methods primarily based on investees’ financial positions, operation results and recent financing activities, the market transaction prices of the similar investments, market conditions, and the required discount factors. As such, the estimated fair value may be different from the actual disposal price in the future. The Company reassesses the fair value measurement quarterly based on the market conditions to ensure the appropriateness of the fair value measurement.

 

- 23 -


Please refer to Note 31 for information about the valuation techniques and inputs used in determining the fair value of various investments.

 

6. CASH AND CASH EQUIVALENTS

 

    

March 31,

2018

     December 31,
2017
    

March 31,

2017

 
        

Cash and deposits in banks

   $ 577,028,289      $ 551,919,770      $ 564,224,428  

Commercial paper

     754,674        695,901         

Agency bonds

            776,025         

Repurchase agreements collateralized by corporate bonds

                   500,838  
  

 

 

    

 

 

    

 

 

 
   $ 577,782,963      $ 553,391,696      $ 564,725,266  
  

 

 

    

 

 

    

 

 

 

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

 

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

 

    

March 31,

2018

     December 31,
2017
     March 31,
2017
 
Financial assets         

Mandatorily measured at FVTPL

        

Agency bonds/ Agency mortgage-backed securities

   $ 754,545      $      $  

Forward exchange contracts

     113,426             $  

Asset-backed securities

     95,944                
  

 

 

    

 

 

    

 

 

 
     963,915                
  

 

 

    

 

 

    

 

 

 

Held for trading

        

Forward exchange contracts

            569,751        23,432  
  

 

 

    

 

 

    

 

 

 

Designated as at FVTPL

        

Time deposit

                   5,344,256  

Forward exchange contracts

                   6,315  
  

 

 

    

 

 

    

 

 

 
                   5,350,571  
  

 

 

    

 

 

    

 

 

 
   $ 963,915      $ 569,751      $ 5,374,003  
  

 

 

    

 

 

    

 

 

 
Financial liabilities         

Held for trading

        

Forward exchange contracts

   $ 170,673      $ 26,709      $ 80,795  

Designated as at FVTPL

        

Forward exchange contracts

                   44,140  
  

 

 

    

 

 

    

 

 

 
   $ 170,673      $ 26,709      $ 124,935  
  

 

 

    

 

 

    

 

 

 

 

- 24 -


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.

Outstanding forward exchange contracts consisted of the following:

 

          Contract Amount  
     Maturity Date    (In Thousands)  
     

March 31, 2018

     

Sell NT$/Buy EUR

   April 2018 to May 2018      NT$3,561,313/EUR99,000  

Sell NT$/Buy JPY

   April 2018      NT$9,009,251/JPY32,550,000  

Sell US$/Buy RMB

   April 2018 to May 2018      US$629,000/RMB3,965,590  

Sell US$/Buy NT$

   April 2018 to June 2018      US$1,002,500/NT$29,129,055  

Sell US$/Buy JPY

   April 2018      US$4,923/JPY523,000  

Sell RMB /Buy EUR

   April 2018      RMB11,165/EUR1,432  

Sell RMB/Buy JPY

   April 2018 to May 2018      RMB215,531/JPY3,614,848  

Sell RMB/Buy GBP

   April 2018      RMB1,669/GBP187  

Sell RMB/Buy US$

   April 2018 to May 2018      RMB1,245,344/US$197,000  

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  

March 31, 2017

     

Sell NT$/Buy EUR

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

Sell NT$/Buy JPY

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

Sell US$/Buy EUR

   April 2017      US$109,848/EUR101,270  

Sell US$/Buy JPY

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

Sell US$/Buy NT$

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

Sell US$/Buy RMB

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

 

8. FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME-2018

 

    

March 31,

2018

 
  

Investments in debt instruments at FVTOCI

  

Corporate bonds

   $ 37,980,277  

Agency bonds/ Agency mortgage-backed securities

     32,189,767  

Asset-backed securities

     13,671,612  

Government bonds

     9,494,204  

Commercial paper

     57,877  
  

 

 

 
     93,393,737  
  

 

 

 

(Continued)

 

- 25 -


    

March 31,

2018

 
  

Investments in equity instruments at FVTOCI

  

Non-publicly traded stocks

   $ 3,032,070  

Funds

     3,003,834  

Publicly traded stocks

     2,319,709  
  

 

 

 
     8,355,613  
  

 

 

 
   $ 101,749,350  
  

 

 

 

Current

   $ 95,713,446  

Non-current

     6,035,904  
  

 

 

 
   $ 101,749,350  
  

 

 

 

(Concluded)

These investments in equity instruments are held for medium to long-term purposes and therefore are accounted for as FVTOCI.

For the three months ended March 31, 2018, the Company sold shares of stocks from merged non-publicly traded company for NT$45,210 thousand and the related other equity-unrealized gain/loss on financial assets at FVTOCI of NT$13,051 thousand were transferred to decrease retained earnings.

As of March 31, 2018, the cumulative loss allowance for expected credit loss of NT$29,792 thousand is recognized under investments in debt instruments at FVTOCI. Refer to Note 31 for information relating to their credit risk management and expected credit loss.

Investments in equity and debt instruments at FVTOCI were classified as available-for-sale financial assets and cost methods (only for equity instruments) under IAS 39. Refer to Notes 3, 9 and 12 (only for equity instruments) for information relating to their reclassification and comparative information for 2017.

 

9. AVAILABLE-FOR-SALE FINANCIAL ASSETS-2017

 

     December 31,
2017
    

March 31,

2017

 
     

Corporate bonds

   $ 40,165,148      $ 31,423,219  

Agency bonds/Agency mortgage-backed securities

     29,235,388        17,234,724  

Asset-backed securities

     13,459,545        11,252,756  

Government bonds

     7,817,723        7,831,260  

Publicly traded stocks

     2,548,054        2,849,231  

Commercial paper

     148,295        492,607  
  

 

 

    

 

 

 
   $ 93,374,153      $ 71,083,797  
  

 

 

    

 

 

 

 

- 26 -


10. HELD-TO-MATURITY FINANCIAL ASSETS-2017

 

     December 31,
2017
    

March 31,

2017

 
     

Corporate bonds

   $ 19,338,764      $ 22,241,885  

Structured product

     1,482,950        1,518,500  

Commercial paper

            10,323,947  

Negotiable certificate of deposit

            4,555,500  
  

 

 

    

 

 

 
   $ 20,821,714      $ 38,639,832  
  

 

 

    

 

 

 

Current portion

   $ 1,988,385      $ 18,140,374  

Noncurrent portion

     18,833,329        20,499,458  
  

 

 

    

 

 

 
   $ 20,821,714      $ 38,639,832  
  

 

 

    

 

 

 

 

11. FINANCIAL ASSETS AT AMORTIZED COST-2018

 

    

March 31,

2018

 
  

Corporate bonds

   $ 18,473,964  

Structured product

     1,454,650  

Less: Allowance for impairment loss

     (6,632
  

 

 

 
   $ 19,921,982  
  

 

 

 

Current portion

   $ 9,888,741  

Noncurrent portion

     10,033,241  
  

 

 

 
   $ 19,921,982  
  

 

 

 

Financial assets at amortized cost were classified as held-to-maturity financial assets under IAS 39. Refer to Notes 3 and 10 for information relating to their reclassification and comparative information for 2017. Refer to Note 31 for information relating to credit risk management and expected credit loss for financial assets at amortized cost.

 

12. FINANCIAL ASSETS CARRIED AT COST-2017

 

       December 31,  
2017
    

  March 31,  

2017

 
     

Non-publicly traded stocks

   $ 2,532,287      $ 2,791,642  

Funds

     2,341,970        1,287,650  
  

 

 

    

 

 

 
   $ 4,874,257      $ 4,079,292  
  

 

 

    

 

 

 

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

The stock of Aquantia was listed in November 2017. Accordingly, the Company reclassified the aforementioned investment from financial assets carried at cost to available-for-sale financial assets.

 

- 27 -


13. HEDGING FINANCIAL INSTRUMENTS

 

   2018

 

     March 31,
2018
 
  

Financial assets- current

  

Cash flow hedges

  

Forward exchange contracts

   $ 26,357  
  

 

 

 

Financial liabilities- current

  

Fair value hedges

  

Interest rate futures contracts

   $ 74,811  

Cash flow hedges

  

Forward exchange contracts

     4,371  
  

 

 

 
   $ 79,182  
  

 

 

 

Fair value hedge

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 hedge ratio is adjusted in response to the changes in the financial market and capped at 100%.

On the basis of economic relationships, the Company expects that the value of the interest rate futures contracts and the value of the hedged financial assets will change in opposite directions in response to movements in interest rates.

The main source of hedge ineffectiveness in these hedging relationships is the credit risk of the hedged financial assets, which is not reflected in the fair value of the interest rate future contracts. No other sources of ineffectiveness emerged from these hedging relationships.

The following tables summarize the information relating to the hedges for interest rate risk as of March 31, 2018.

 

Hedging Instruments   

Contract Amount

(US$ in Thousands)

     Maturity      Increase
(Decrease) in
Value Used for
Calculating
Hedge
Ineffectiveness
 
        
US treasury bonds interest rate futures contracts    US$ 264,400        June 2018      $ 53,811  

 

Hedged Items    Asset Carrying Amount
as of March 31, 2018
    

Asset
Accumulated

Amount of Fair

Value

Hedge
Adjustments

    

Increase
(Decrease) in
Value Used for
Calculating
Hedge

Ineffectiveness

 
        
Financial assets at FVTOCI    $ 13,990,841      $ (86,646    $ (53,459

 

- 28 -


The effect on comprehensive income for the three months ended March 31, 2018 is detailed below:

 

Comprehensive Income   

Amount of
Hedge

Ineffectiveness
Recognized in
Profit or Loss

     Line Item in which
Hedge Ineffectiveness
is Included
 
     

Fair value hedge

   $ 352        Other gains and losses  

Cash flow hedge

The Company entered into forward exchange contracts to partially hedge foreign exchange rate risks associated with certain highly probable forecast transactions (capital expenditures). The hedge ratio is adjusted in response to the changes in the financial market and capped at 100%. The forward exchange contracts have maturities of 12 months or less.

On the basis of economic relationships, the Company expects that the value of forward exchange contracts and the value of the hedged transactions will change in opposite directions in response to movements in foreign exchange rates.

The main source of hedge ineffectiveness in these hedging relationships is driven by the effect of the counterparty’s own credit risk on the fair value of forward exchange contracts. No other sources of ineffectiveness emerged from these hedging relationships.

The following tables summarize the information relating to the hedges for foreign currency risk.

 

Hedging Instruments   

Contract Amount

(in Thousands)

     Maturity     

Increase

(Decrease) in
Value Used

for Calculating

Hedge

Ineffectiveness

 
        

Forward exchange contracts

   NT$ 3,239,853 /EUR91,000       
April 2018 to
August 2018
 
 
   $ 37,282  

 

Hedged items   

Increase
(Decrease) in
Value Used for
Calculating
Hedge

Ineffectiveness

    

Balance in

Other Equity
(Continuing
Hedges)

 
     

Cash flow hedge

     

Forecast transaction (capital expenditures)

   $ (37,282    $ 37,034  

Refer to Note 24(d) for gain or loss arising from changes in the fair value of hedging instruments and the amount transferred to initial carrying amount of hedged items.

 

- 29 -


2017

The Company’s hedging policies for 2017 are the same as those mentioned previously in 2018, the instruments employed are as follows:

 

     December 31,
2017
    

March 31,

2017

 
     

Financial assets- current

     

Fair value hedges

     

Interest rate futures contracts

   $ 27,016      $  

Cash flow hedges

     

Forward exchange contracts

     7,378         
  

 

 

    

 

 

 
   $ 34,394      $  
  

 

 

    

 

 

 

Financial liabilities- current

     

Fair value hedges

     

Interest rate futures contracts

   $      $ 3,908  

Cash flow hedges

     

Forward exchange contracts

     15,562         
  

 

 

    

 

 

 
   $ 15,562      $ 3,908  
  

 

 

    

 

 

 

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  

March 31, 2017

  

June 2017

   US$ 52,400  

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

Outstanding forward exchange contracts consisted of the following:

 

     Maturity Date   

Contract Amount

(In Thousands)

     
December 31, 2017      
Sell NT$/Buy EUR    February 2018 to May 2018    NT$2,649,104/EUR75,000

 

- 30 -


14. NOTES AND ACCOUNTS RECEIVABLE, NET

 

    

  March 31,  

2018

     December 31,
2017
    

  March 31,  

2017

 
        

Notes and accounts receivable

   $ 106,771,905      $ 121,604,989      $ 109,010,938  

Less: Loss allowance

     (170,533      (471,741      (478,109
  

 

 

    

 

 

    

 

 

 

Notes and accounts receivable, net

   $ 106,601,372      $ 121,133,248      $ 108,532,829  
  

 

 

    

 

 

    

 

 

 

2018

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 when the invoice is issued. Aside from recognizing impairment loss for credit-impaired accounts receivable, the Company recognizes loss allowance based on the expected credit loss ratio of customers by different risk levels. Such risk levels are determined with factors of historical loss ratios and customers’ financial conditions, competitiveness and business outlook. For accounts receivable past due over 90 days without collaterals or guarantees, the Company recognizes loss allowance at full amount.

Aging analysis of notes and accounts receivable, net

 

     March 31,
2018
 
  

Not past due

   $ 95,872,716  

Past due

  

Past due within 30 days

     8,723,608  

Past due 31-60 days

     295,558  

Past due 61-120 days

     891,464  

Past due over 121 days

     818,026  
  

 

 

 
   $ 106,601,372  
  

 

 

 

Movements of the loss allowance for accounts receivable

 

Balance at January 1, 2018 (IAS 39)

   $ 471,741  

Effect of retrospective application of IFRS 9

     (244,773
  

 

 

 

Balance at January 1, 2018 (IFRS 9)

     226,968  

Provision(Reversal)

     (56,398

Effect of exchange rate changes

     (37
  

 

 

 

Balance at March 31, 2018

   $ 170,533  
  

 

 

 

For the three months ended March 31, 2018, the loss allowance decreased mainly due to the decrease in the balance of accounts receivable.

2017

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.

 

- 31 -


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
    

  March 31,  

2017

 
     

Neither past due nor impaired

   $ 105,295,219      $ 94,790,800  

Past due but not impaired

     

Past due within 30 days

     13,984,125        9,682,935  

Past due 31-60 days

     929,672        550,853  

Past due 61-120 days

     582,821        3,508,241  

Past due over 121 days

     341,411         
  

 

 

    

 

 

 
   $ 121,133,248      $ 108,532,829  
  

 

 

    

 

 

 

Movements of the allowance for doubtful receivables

 

     Individually
Assessed for
Impairment
     Collectively
Assessed for
Impairment
         Total      
        

Balance at January 1, 2017

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

Reversal/Write-off

     (1,848             (1,848

Effect of exchange rate changes

            (161      (161
  

 

 

    

 

 

    

 

 

 

Balance at March 31, 2017

   $      $ 478,109      $ 478,109  
  

 

 

    

 

 

    

 

 

 

 

15. INVENTORIES

 

    

  March 31,  

2018

     December 31,
2017
    

  March 31,  

2017

 
        

Finished goods

   $ 15,165,977      $ 9,923,338      $ 8,024,042  

Work in process

     57,012,785        53,362,160        34,535,606  

Raw materials

     8,940,795        7,143,806        5,239,223  

Supplies and spare parts

     4,096,342        3,451,443        2,590,151  
  

 

 

    

 

 

    

 

 

 
   $ 85,215,899      $ 73,880,747      $ 50,389,022  
  

 

 

    

 

 

    

 

 

 

Write-down of inventories to net realizable value and reversal of the reserve for inventory write-downs resulting from the increase in net realizable value in the amount of NT$700,440 thousand and NT$942,343 thousand, respectively, were included in the cost of revenue for the three months ended March 31, 2018 and 2017.

 

- 32 -


16. INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD

Associates consisted of the following:

 

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

Principal

Activities

   Incorporation
and Operation
  

March 31,

2018

     December 31,
2017
    

March 31,

2017

    

March 31,

2018

  December 31,
2017
 

March 31,

2017

                     

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

   $ 8,860,765      $ 8,568,344      $ 9,072,232      28%   28%   28%

Systems on Silicon Manufacturing Company Pte Ltd. (SSMC)

  

Manufacturing and selling of integrated circuits and other semiconductor devices

  

Singapore

     5,923,979        5,677,640        7,153,964      39%   39%   39%

Xintec Inc. (Xintec)

  

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

  

Taoyuan, Taiwan

     2,246,049        2,292,100        2,488,903      41%   41%   41%

Global Unichip Corporation (GUC)

  

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

  

Hsinchu, Taiwan

     1,255,013        1,300,194        1,224,963      35%   35%   35%

Mutual-Pak

  

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

  

New Taipei, Taiwan

     21,711        23,210             39%   39%  
        

 

 

    

 

 

    

 

 

        
         $ 18,307,517      $ 17,861,488      $ 19,940,062         
        

 

 

    

 

 

    

 

 

        

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.

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

 

Name of Associate   

March 31,

2018

     December 31,
2017
    

March 31,

2017

 
        

VIS

   $   31,102,974      $   30,638,751      $   26,832,118  
  

 

 

    

 

 

    

 

 

 

GUC

   $ 14,846,739      $ 11,905,404      $ 4,738,818  
  

 

 

    

 

 

    

 

 

 

Xintec

   $ 7,366,863      $ 9,180,759      $ 5,007,687  
  

 

 

    

 

 

    

 

 

 

 

17. PROPERTY, PLANT AND EQUIPMENT

 

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

Cost

                 

Balance at January 1, 2018

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

Additions

            18,168,937        36,110,432        1,904,943        6,903,141        63,087,453  

Disposals or retirements

            (12,295      (1,727,577      (50,750             (1,790,622

Effect of exchange rate changes

     (14,718      259,417        1,292,667        (15,246      (88,994      1,433,126  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Balance at March 31, 2018

   $ 3,968,525      $ 397,550,672      $ 2,523,427,787      $ 44,230,463      $ 174,167,637      $ 3,143,345,084  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

(Continued)

 

- 33 -


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

Accumulated depreciation and impairment

 

              

Balance at January 1, 2018

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

Additions

     6,688        5,841,659        63,281,950        1,331,989               70,462,286  

Disposals or retirements

            (2,922      (1,107,367      (50,573             (1,160,862

Effect of exchange rate changes

     (9,795      93,243        537,380        (16,180             604,648  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Balance at March 31, 2018

   $ 507,391      $ 200,378,501      $ 1,858,160,805      $ 28,932,180      $      $ 2,087,978,877  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Carrying amounts at January 1, 2018

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

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Carrying amounts at March 31, 2018

   $ 3,461,134      $ 197,172,171      $ 665,266,982      $ 15,298,283      $ 174,167,637      $ 1,055,366,207  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
Cost                                          

Balance at January 1, 2017

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

Additions (Deductions)

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

Disposals or retirements

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

Reclassification

                   8,791        1,507               10,298  

Effect of exchange rate changes

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

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Balance at March 31, 2017

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

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Accumulated depreciation and impairment

                 

Balance at January 1, 2017

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

Additions

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

Disposals or retirements

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

Reclassification

                   8,195        1,466               9,661  

Effect of exchange rate changes

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

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Balance at March 31, 2017

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

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Carrying amounts at March 31, 2017

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

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

(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.

 

18. INTANGIBLE ASSETS

 

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

Cost

              

Balance at January 1, 2018

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

Additions

            2,806        271,067        332,608        606,481  

Disposals or retirements

                   (1,193             (1,193

Effect of exchange rate changes

     (76,856      (2,328      4,795        3,020        (71,369
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Balance at March 31, 2018

   $ 5,571,846      $ 10,443,735      $ 25,460,887      $ 6,051,774      $ 47,528,242  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Accumulated amortization and impairment

              

Balance at January 1, 2018

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

Additions

            281,528        626,140        127,923        1,035,591  

Disposals or retirements

                   (1,137             (1,137

Effect of exchange rate changes

            (2,328      1,729        909        310  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Balance at March 31, 2018

   $      $ 7,974,057      $ 21,003,425      $ 4,876,465      $ 33,853,947  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Carrying amounts at January 1, 2018

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

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Carrying amounts at March 31, 2018

   $ 5,571,846      $ 2,469,678      $ 4,457,462      $ 1,175,309      $ 13,674,295  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

(Continued)

 

- 34 -


     Goodwill     

Technology
License

Fees

     Software and
System Design
Costs
     Patent and
Others
     Total  
              

Cost

              

Balance at January 1, 2017

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

Additions

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

Retirements

                   (75,237             (75,237

Reclassification

                   7,662        (17,960      (10,298

Effect of exchange rate changes

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

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Balance at March 31, 2017

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

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Accumulated amortization and impairment

              

Balance at January 1, 2017

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

Additions

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

Retirements

                   (75,237             (75,237

Reclassification

                   7,409        (17,070      (9,661

Effect of exchange rate changes

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

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Balance at March 31, 2017

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

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Carrying amounts at March 31, 2017

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

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

(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 rate of 8.5% in its test of impairment as of December 31, 2017 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.

 

19. OTHER ASSETS

 

    

March 31,

2018

     December 31,
2017
    

March 31,

2017

 
        

Repayment of bonds and interest - prepaid

   $    33,728,788      $      $  

Tax receivable

     4,471,031        4,021,602        1,921,963  

Prepaid expenses

     1,467,439        1,559,963        1,037,963  

Others

     1,793,794        1,623,995        1,689,373  
  

 

 

    

 

 

    

 

 

 
   $ 41,461,052      $    7,205,560      $    4,649,299  
  

 

 

    

 

 

    

 

 

 

Current portion

   $ 39,947,321      $ 4,222,440      $ 3,025,168  

Noncurrent portion

     1,513,731        2,983,120        1,624,131  
  

 

 

    

 

 

    

 

 

 
   $ 41,461,052      $ 7,205,560      $ 4,649,299  
  

 

 

    

 

 

    

 

 

 

Based on the contract terms of corporate bonds issued, prior to the date on which the principal or interests become due, the Company needs to transfer such amount in advance to a designated agent for repayment of principal and interest. The agent will repay the funds to the bond holders at maturity date.

 

- 35 -


20. SHORT-TERM LOANS

 

    

March 31,

2018

     December 31,
2017
    

March 31,

2017

 
        

Unsecured loans

        

Amount

   $ 56,731,350      $ 63,766,850      $ 54,666,000  
  

 

 

    

 

 

    

 

 

 

Original loan content

        

US$ (in thousands)

   $ 1,950,000      $ 2,150,000      $ 1,800,000  

Annual interest rate

     1.92%-2.22%        1.54%-1.82%        1.08%-1.23%  

Maturity date

    

Due by

May 2018

 

 

    
Due by
February 2018
 
 
    
Due by
April 2017

 

 

21. PROVISIONS

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

 

     Sales Returns
and Allowances
 
  

Three months ended March 31, 2017

  

Balance, beginning of period

   $ 18,037,789  

Provision

     8,556,743  

Payment

     (15,250,080

Effect of exchange rate changes

     (46,132
  

 

 

 

Balance, end of period

   $ 11,298,320  
  

 

 

 

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.

Starting from 2018, the Company recognizes the estimation of sales returns and allowance as refund liability (classified under accrued expenses and other current liabilities) upon initial application of IFRS 15.

 

22. BONDS PAYABLE

 

    

March 31,

2018

     December 31,
2017
    

March 31,

2017

 
        

Domestic unsecured bonds

   $ 99,300,000      $ 116,100,000      $ 144,200,000  

Overseas unsecured bonds

     33,456,950        34,107,850        34,925,500  
  

 

 

    

 

 

    

 

 

 
     132,756,950        150,207,850        179,125,500  

Less: Discounts on bonds payable

     (210      (6,728      (26,731

Less: Current portion

     (49,356,740      (58,401,122      (44,900,000
  

 

 

    

 

 

    

 

 

 
   $ 83,400,000      $ 91,800,000      $ 134,198,769  
  

 

 

    

 

 

    

 

 

 

 

- 36 -


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 2018

    1,150,000       1.625%    

Bullet repayment; interest payable
semi-annually

 

23. GUARANTEE DEPOSITS

 

    

March 31,

2018

     December 31,
2017
    

March 31,

2017

 
        

Capacity guarantee

   $ 11,637,200      $ 13,346,550      $ 18,222,000  

Receivables guarantee

     2,475,412        2,427,548        4,900,473  

Others

     251,267        306,521        173,876  
  

 

 

    

 

 

    

 

 

 
   $ 14,363,879      $ 16,080,619      $ 23,296,349  
  

 

 

    

 

 

    

 

 

 

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

   $ 8,372,518      $ 8,493,829      $ 10,974,881  

Noncurrent portion

     5,991,361        7,586,790        12,321,468  
  

 

 

    

 

 

    

 

 

 
   $ 14,363,879      $ 16,080,619      $ 23,296,349  
  

 

 

    

 

 

    

 

 

 

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

 

24. EQUITY

 

  a. Capital stock

 

    

March 31,

2018

     December 31,
2017
    

March 31,

2017

 
        

Authorized shares (in thousands)

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

 

 

    

 

 

    

 

 

 

Authorized capital

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

 

 

    

 

 

    

 

 

 

Issued and paid shares (in thousands)

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

 

 

    

 

 

    

 

 

 

Issued capital

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

 

 

    

 

 

    

 

 

 

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

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

As of March 31, 2018, 1,068,158 thousand ADSs of TSMC were traded on the NYSE. The number of common shares represented by the ADSs was 5,340,792 thousand shares (one ADS represents five common shares).

 

- 37 -


  b. Capital surplus

 

    

March 31,

2018

     December 31,
2017
    

March 31,

2017

 
                      

Additional paid-in capital

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

From merger

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

From convertible bonds

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

From share of changes in equities of subsidiaries

     118,792        118,792        107,798  

From share of changes in equities of associates

     285,415        289,240        291,969  

Donations

     19,248        19,208        55  
  

 

 

    

 

 

    

 

 

 
   $ 56,305,751      $ 56,309,536      $ 56,282,118  
  

 

 

    

 

 

    

 

 

 

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

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

 

  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 provide the policy about the profit sharing bonus to employees, please refer to Note 29.

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

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

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

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

 

- 38 -


The appropriations of 2017 and 2016 earnings have been approved by TSMC’s Board of Directors in its meeting held on February 13, 2018 and by TSMC’s shareholders in its meeting held on June 8, 2017, 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 2017      Year 2016      Year 2017    Year 2016
                         

Legal capital reserve

   $ 34,311,148      $ 33,424,718        

Special capital reserve

     26,907,527               

Cash dividends to shareholders

     207,443,044        181,512,663      $8    $7
  

 

 

    

 

 

       
   $       268,661,719      $       214,937,381        
  

 

 

    

 

 

       

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).

 

  d. Others

Changes in others were as follows:

 

     Three Months Ended March 31, 2018  
     Foreign
Currency
Translation
Reserve
     Unrealized
Gain (Loss) on
Financial
Assets at
FVTOCI
     Gain (Loss) on
Hedging
Instruments
     Unearned
Stock-Based
Compensation
     Total  
                                    

Balance at January 1, 2018 (IFRS9)

   $ (26,697,680    $ (524,915    $ 4,226      $ (10,290    $ (27,228,659

Exchange differences arising on translation of foreign operations

     (6,476,324                           (6,476,324

Unrealized gain (loss) on financial assets at FVTOCI

              

Equity instruments

            (22,034                    (22,034

Debt instruments

            (979,455                    (979,455

Cumulative unrealized gain (loss) of equity instruments transferred to retained earnings due to disposal

            13,051                      13,051  

Cumulative unrealized gain (loss) of debt instruments transferred to profit or loss due to disposal

            252,328                      252,328  

Loss allowance adjustments from debt instruments

            (283                    (283

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

                   37,282               37,282  

Share of other comprehensive income (loss) of associates

     (39,352      62                      (39,290

Share of unearned stock-based employee compensation of associates

                          3,111        3,111  

Income tax effect

            43,680        (4,474             39,206  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Balance, end of period

   $ (33,213,356    $ (1,217,566    $ 37,034      $ (7,179    $ (34,401,067
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

- 39 -


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

Balance, beginning of period

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

Exchange differences arising on translation of foreign operations

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

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

            (106,236                    (106,236

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

            9,796                      9,796  

Share of other comprehensive income (loss) of associates

     (61,681      24                      (61,657

Share of unearned stock-based employee compensation of associates

                          (19,502      (19,502

Income tax effect

            46,400                      46,400  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Balance, end of period

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

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

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

 

25. NET REVENUE

 

  a. Disaggregation of revenue from contracts with customers

 

Production   

Three Months
Ended

March 31,
2018

 
        

Wafer

   $ 219,691,663  

Others

     28,387,008  
  

 

 

 
   $ 248,078,671  
  

 

 

 
Region    Three Months
Ended
March 31,
2018
 
        

Taiwan

   $ 18,401,294  

United States

     145,216,734  

China

     46,513,034  

Europe, the Middle East and Africa

     17,460,367  

Japan

     16,546,283  

Others

     3,940,959  
  

 

 

 
   $ 248,078,671  
  

 

 

 

The Company categorized the net revenue mainly based on the country in which the customer is headquartered.

 

- 40 -


Application Type   

Three Months
Ended

March 31,
2018

 
        

Communication

   $ 136,894,555  

Industrial/Standard

     57,749,827  

Computer

     37,589,134  

Consumer

     15,845,155  
  

 

 

 
   $ 248,078,671  
  

 

 

 
Customer Type    Three Months
Ended
March 31,
2018
 
        

Fabless semiconductor companies/systems companies

   $ 204,360,744  

Integrated device manufacturers

     43,529,466  

Others

     188,461  
  

 

 

 
   $ 248,078,671  
  

 

 

 
Resolution    Three Months
Ended
March 31,
2018
 
        

10-nanometer

   $ 40,853,554  

16/20-nanometer

     47,322,891  

28-nanometer

     44,156,689  

40/45-nanometer

     25,240,238  

65-nanometer

     20,445,219  

90-nanometer

     10,038,144  

0.11/0.13 micron

     5,448,803  

0.15/0.18 micron

     19,293,863  

0.25 micron and above

     6,892,262  
  

 

 

 

Wafer revenue

   $ 219,691,663  
  

 

 

 

 

  b. Contract balances

 

     March 31,
2018
     January 1,
2018
 
               

Contract liabilities (classified under accrued expenses and other current liabilities)

   $ 27,076,312      $ 32,434,829  
  

 

 

    

 

 

 

 

The changes in the contract liability balances primarily result from the timing difference between the satisfaction of performance obligation and the customer’s payment.

In the first quarter of 2018, the Company recognized NT$26,965,981 thousand in revenue from the beginning balance of contract liability.

 

- 41 -


26. OTHER GAINS AND LOSSES

 

     Three Months Ended March 31  
     2018      2017  
               

Loss on disposal of financial assets, net

     

Investments in debt instruments at FVTOCI

   $ (252,328    $  

Available-for-sale financial assets

            (8,982

Other gains

     4,970        36,095  

Net gain on financial instruments at FVTPL

     

Held for trading

            373,140  

Mandatorily measured at FVTPL

     1,108,710         

Designated as at FVTPL

            50,134  

Gain (loss) arising from fair value hedges, net

     352        (19,487

Impairment loss of financial assets

     

Financial assets carried at cost

            (12,032

The reversal of expected credit loss of financial assets

     

Investments in debt instruments at FVTOCI

     283         

Financial assets at amortized cost

     1,474         

Other losses

     (98,273      (3,679
  

 

 

    

 

 

 
   $ 765,188      $   415,189  
  

 

 

    

 

 

 

 

27. INCOME TAX

 

  a. Income tax expense recognized in profit or loss

 

     Three Months Ended March 31  
     2018      2017  
               

Current income tax expense

     

Current tax expense recognized in the current period

   $ 10,984,946      $ 12,642,088  

Other income tax adjustments

     39,385        36,356  
  

 

 

    

 

 

 
     11,024,331        12,678,444  
  

 

 

    

 

 

 

Deferred income tax benefit

     

Effect of tax rate changes

     (376,065       

The origination and reversal of temporary differences

     (492,219      (1,039,536

Investment tax credits and operating loss carryforward

            (1,437,317
  

 

 

    

 

 

 
     (868,284      (2,476,853
  

 

 

    

 

 

 

Income tax expense recognized in profit or loss

   $ 10,156,047      $   10,201,591  
  

 

 

    

 

 

 

In 2018, the Income Tax Law in the R.O.C. was amended and, starting from 2018, the corporate income tax rate was adjusted from 17% to 20%. The effect of the change in tax rate on deferred tax income to be recognized in profit or loss is NT$1,474,808 thousand, of which NT$1,098,743 thousand has not been recognized as of March 31, 2018, with corresponding effect recognized throughout the interim periods. In addition, the tax rate applicable to unappropriated earnings was reduced from 10% to 5%.

 

- 42 -


  b. Income tax expense recognized in other comprehensive income

 

     Three Months Ended March 31  
     2018      2017  
               

Deferred income tax benefit (expense)

     

Related to unrealized gain/loss on financial assets at FVTOCI

   $ 43,680      $  

Related to gain/loss on cash flow hedges

     (4,474       

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

            46,400  
  

 

 

    

 

 

 
   $ 39,206      $   46,400  
  

 

 

    

 

 

 

 

  c. 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.

 

28. EARNINGS PER SHARE

 

     Three Months Ended March 31  
     2018      2017  
               

Basic EPS

   $ 3.46      $ 3.38  
  

 

 

    

 

 

 

Diluted EPS

   $ 3.46      $   3.38  
  

 

 

    

 

 

 

EPS is computed as follows:

 

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

Three months ended March 31,2018

        

Basic/Diluted EPS

        

Net income available to common shareholders of the parent

   $ 89,784,622        25,930,380      $                 3.46  
  

 

 

    

 

 

    

 

 

 

Three months ended March 31,2017

        

Basic/Diluted EPS

        

Net income available to common shareholders of the parent

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

 

 

    

 

 

    

 

 

 

 

- 43 -


29. ADDITIONAL INFORMATION OF EXPENSES BY NATURE

 

     Three Months Ended March 31  
     2018      2017  
     

a. Depreciation of property, plant and equipment

     

Recognized in cost of revenue

   $ 64,798,902      $ 54,492,962  

Recognized in operating expenses

     5,652,531        4,634,177  

Recognized in other operating income and expenses

     10,853        6,222  
  

 

 

    

 

 

 
   $ 70,462,286      $ 59,133,361  
  

 

 

    

 

 

 

b. Amortization of intangible assets

     

Recognized in cost of revenue

   $ 484,597      $ 527,908  

Recognized in operating expenses

     550,994        510,916  
  

 

 

    

 

 

 
   $ 1,035,591      $ 1,038,824  
  

 

 

    

 

 

 

c. Research and development expenses

   $ 20,428,594      $ 19,412,393  
  

 

 

    

 

 

 

d. Employee benefits expenses

     

Post-employment benefits

     

Defined contribution plans

   $ 619,490      $ 575,760  

Defined benefit plans

     70,436        67,875  
  

 

 

    

 

 

 
     689,926        643,635  

Other employee benefits

     26,391,042        25,289,182  
  

 

 

    

 

 

 
   $ 27,080,968      $ 25,932,817  
  

 

 

    

 

 

 

Employee benefits expense summarized by function

     

Recognized in cost of revenue

   $ 15,878,407      $ 15,228,900  

Recognized in operating expenses

     11,202,561        10,703,917  
  

 

 

    

 

 

 
   $ 27,080,968      $ 25,932,817  
  

 

 

    

 

 

 

According to TSMC’s Articles of Incorporation, 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$6,023,994 thousand and NT$5,877,094 thousand for the three months ended March 31, 2018 and 2017, respectively; compensation to directors was expensed based on estimated amount payable. If there is a change in the proposed amounts after the annual consolidated financial statements are authorized for issue, the differences are recorded as a change in accounting estimate.

TSMC’s profit sharing bonus to employees and compensation to directors in the amounts of NT$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.

 

- 44 -


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.

 

30. CASH FLOW INFORMATION

Reconciliation of liabilities arising from financing activities

 

                   Non-cash changes         
     Balance as of
January 1, 2018
     Financing Cash
Flow
     Foreign
Exchange
Movement
    

Other Changes

(Note)

     Balance as of
March 31, 2018
 
              

Short-term loans

   $ 63,766,850      $ (5,774,830    $ (1,260,670    $      $ 56,731,350  

Guarantee deposits

     16,080,619        (54,135      (182,905      (1,479,700      14,363,879  

Bonds payable

     150,201,122        (16,800,000      (650,823      6,441        132,756,740  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 230,048,591      $ (22,628,965    $ (2,094,398    $ (1,473,259    $ 203,851,969  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

  Note: Other changes includes amortization of bonds payable and guarantee deposits refunded to customers by offsetting related accounts receivable.

 

31. FINANCIAL INSTRUMENTS

 

  a. Categories of financial instruments

 

     March 31,
2018
 
  

Financial assets

  

Financial assets at FVTPL (Note 1)

   $ 963,915  

Financial assets at FVOCI (Note 2)

     101,749,350  

Hedging financial assets

     26,357  

Amortized cost (Note 3)

     719,404,172  
  

 

 

 
   $ 822,143,794  
  

 

 

 

Financial liabilities

  

FVTPL (Note 4)

   $ 170,673  

Hedging financial liabilities

     79,182  

Amortized cost (Note 5)

     320,473,302  
  

 

 

 
   $ 320,723,157  
  

 

 

 

 

  Note 1: Financial assets mandatorily measured at FVTPL.
  Note 2: Including debt and equity investments.
  Note 3: Including cash and cash equivalents, financial assets at amortized cost, notes and accounts receivable (including related parties), other receivables and refundable deposits.
  Note 4: Held for trading.
  Note 5: Including 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.

 

- 45 -


     December 31,
2017
    

March 31,

2017

 

Financial assets

     

FVTPL (Note 6)

   $ 569,751      $ 5,374,003  

Available-for-sale financial assets (Note 7)

     98,248,410        75,163,089  

Held-to-maturity financial assets

     20,821,714        38,639,832  

Hedging derivative financial assets

     34,394         

Loans and receivables (Note 8)

     684,416,654        678,221,474  
  

 

 

    

 

 

 
   $ 804,090,923      $ 797,398,398  
  

 

 

    

 

 

 

Financial liabilities

     

FVTPL (Note 6)

   $ 26,709      $ 124,935  

Hedging derivative financial liabilities

     15,562        3,908  

Amortized cost (Note 9)

     340,501,266        358,368,663  
  

 

 

    

 

 

 
   $ 340,543,537      $ 358,497,506  
  

 

 

    

 

 

 

 

  Note 6: Including held for trading and designated as at FVTPL.

 

  Note 7: Including financial assets carried at cost.

 

  Note 8: Including cash and cash equivalents, notes and accounts receivable (including related parties), other receivables and refundable deposits.

 

  Note 9: 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. A portion of these risks is hedged.

 

- 46 -


Foreign currency risk

Most of the Company’s revenues and expenditures 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 uses 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 the Company’s existing and certain forecasted currency exposure. These hedges will offset only a portion of, but do not eliminate, the financial impact from movements in foreign currency exchange rates.

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 three months ended March 31, 2018 and 2017 would have decreased by NT$1,060,765 thousand and NT$878,838 thousand, respectively, and the other comprehensive income for the three months ended March 31, 2018 would have decreased by NT$326,872 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. As of December 31, 2017, the Company had no outstanding long-term bank loans.

The Company classified its investments in fixed income securities as financial assets at FVTPL, financial assets at FVTOCI and financial assets at amortized costs starting from 2018; as available-for-sale and held-to-maturity financial assets in 2017. Because financial assets at amortized costs and 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, financial assets at FVTPL, financial assets at FVTOCI and 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 financial assets at FVTPL and FVTOCI and 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 profit or loss by 73,285 thousand for the three months ended March 31, 2018, and in a decrease in other comprehensive income by NT$2,243,927 thousand and NT$1,778,761 thousand for three months ended March 31, 2018 and 2017, respectively.

Other price risk

The Company is exposed to equity price risk for 2018 and 2017 arising from financial assets at FVTOCI and available-for-sale equity investments, respectively.

Assuming a hypothetical decrease of 5% in prices of the equity investments at the end of the reporting period for the three months ended March 31, 2018 and 2017, the other comprehensive income would have decreased by NT$395,686 thousand and NT$327,239 thousand, respectively.

 

- 47 -


  d. Credit risk management

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial losses to the Company. The Company is exposed to credit risks 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 equal to the carrying amount of financial assets.

Business related credit risk

The Company’s trade receivables are from its customers worldwide. The majority of the Company’s outstanding trade receivables are not covered by collaterals or guarantees. While the Company has procedures to monitor and manage credit risk exposure on trade receivables, there is no assurance such procedures will effectively eliminate losses resulting from its credit risk. This risk is heightened during periods when economic conditions worsen.

As of March 31, 2018, December 31, 2017 and March 31, 2017, the Company’s ten largest customers accounted for 76%, 70% and 73% 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.

The risk management of expected credit loss for financial assets at amortized cost and investments in debt instruments at FVTOCI is as follows:

The Company only invests in debt instruments that are rated as investment grade or higher. The credit rating information is supplied by external rating agencies. The Company assesses whether there has been a significant increase in credit risk since initial recognition by reviewing changes in external credit ratings, financial market and material information of the bond-issuers.

The Company assesses the 12-month expected credit loss and lifetime expected credit loss based on the probability of default and loss given default provided by external credit rating agencies. The current credit risk assessment policies are as follows:

 

Category    Description    Basis for Recognizing
Expected Credit Loss
  

Expected

Credit Loss

Ratio

        

Performing

  

Credit rating on trade date and valuation date:

(1) Within investment grade

(2) Between BB+ and BB-

  

12 months expected credit loss

   0~0.11%

Doubtful

  

Credit rating on trade date and valuation date:

(1) From investment grade to non-investment grade

(2) From BB+~BB-to B+~CCC-

  

Lifetime expected credit loss-not credit impaired

  

(Continued)

 

- 48 -


Category    Description    Basis for Recognizing
Expected Credit Loss
   Expected
Credit Loss
Ratio
 
        

In default

   Credit rating CC or below   

Lifetime expected credit loss-credit impaired

      

Write-off

  

There is evidence indicating that the debtor is in severe financial difficulty and the Company has no realistic prospect of recovery

  

Amount is written off

      

(Concluded)

For the three months ended March 31, 2018, the expected credit loss decreases NT$2,486 thousand, mainly attributed to increase in debt investments of higher credit rating.

 

  e. Liquidity risk management

The objective of liquidity risk management is to ensure the Company has sufficient liquidity to fund its business operations over the next 12 months. The Company manages its liquidity risk by maintaining adequate cash and cash equivalent, debt investment at FVTPL, financial assets at FVTOCI-Current, and financial assets amortized at cost-Current.

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

 

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

March 31, 2018

              

Non-derivative financial liabilities

              

Short-term loans

   $ 56,787,188      $      $      $      $ 56,787,188  

Accounts payable (including related parties)

     29,041,977                             29,041,977  

Payables to contractors and equipment suppliers

     47,828,289                             47,828,289  

Accrued expenses and other current liabilities

     39,751,067                             39,751,067  

Bonds payable

     51,058,202        62,362,560        17,128,725        6,143,816        136,693,303  

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

     8,372,518        5,908,158        83,203               14,363,879  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     232,839,241        68,270,718        17,211,928        6,143,816        324,465,703  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Derivative financial instruments

              

Forward exchange contracts

              

Outflows

     69,663,091                             69,663,091  

Inflows

     (69,633,869                           (69,633,869
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     29,222                             29,222  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   $ 232,868,463      $ 68,270,718      $ 17,211,928      $ 6,143,816      $ 324,494,925  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(Continued)

 

- 49 -


     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  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

March 31, 2017

              

Non-derivative financial liabilities

              

Short-term loans

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

Accounts payable (including related parties)

     24,252,762                             24,252,762  

Payables to contractors and equipment suppliers

     57,671,953                             57,671,953  

Accrued expenses and other current liabilities

     19,353,790                             19,353,790  

Bonds payable

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

Long-term bank loans

     10,463        19,954                      30,417  

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

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

 

 

    

 

 

    

 

 

    

 

 

    

 

 

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

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Derivative financial instruments

              

Forward exchange contracts

              

Outflows

     36,386,668                             36,386,668  

Inflows

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

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     44,848                             44,848  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

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

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

(Concluded)

 

  f. Fair value of financial instruments

 

  1) Fair value measurements recognized in the consolidated balance sheets

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

 

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

 

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

 

- 50 -


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

 

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

Fair value hierarchy

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

 

     March 31, 2018  
     Level 1      Level 2      Level 3      Total  
           

Financial assets at FVTPL

           

Mandatorily measured at FVTPL

           

Agency bonds/Agency mortgage-backed securities

   $      $ 754,545      $      $ 754,545  

Forward exchange contracts

            113,426               113,426  

Asset-backed securities

            95,944               95,944  
  

 

 

    

 

 

    

 

 

    

 

 

 
   $             —      $ 963,915      $             —      $ 963,915  
  

 

 

    

 

 

    

 

 

    

 

 

 

Financial assets at FVTOCI

           

Investments in debt instruments at FVTOCI

           

Corporate bonds

   $      $ 37,980,277      $      $ 37,980,277  

Agency bonds/Agency mortgage-backed securities

            32,189,767               32,189,767  

Asset-backed securities

            13,671,612               13,671,612  

Government bonds

     9,395,235        98,969               9,494,204  

Commercial paper

            57,877               57,877  

Investments in equity instruments at FVTOCI

           

Non-publicly traded stocks

                   3,032,070        3,032,070  

Funds

                   3,003,834        3,003,834  

Publicly traded stocks

     2,319,709                      2,319,709  
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 11,714,944      $ 83,998,502      $ 6,035,904      $ 101,749,350  
  

 

 

    

 

 

    

 

 

    

 

 

 

Hedging financial assets

           

Cash flow hedges

           

Forward exchange contracts

   $      $ 26,357      $      $ 26,357  
  

 

 

    

 

 

    

 

 

    

 

 

 

Financial liabilities at FVTPL

           

Held for trading

           

Forward exchange contracts

   $      $ 170,673      $      $ 170,673  
  

 

 

    

 

 

    

 

 

    

 

 

 

Hedging financial liabilities

           

Fair value hedges

           

Interest rate futures contracts

   $ 74,811      $      $      $ 74,811  

Cash flow hedges

           

Forward exchange contracts

            4,371               4,371  
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 74,811      $ 4,371      $      $ 79,182  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

- 51 -


     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  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

     March 31, 2017  
     Level 1      Level 2      Level 3      Total  
           

Financial assets at FVTPL

           

Held for trading

           

Forward exchange contracts

   $      $ 23,432      $                 —      $ 23,432  

Designated as at FVTPL

           

Time deposit

            5,344,256               5,344,256  

Forward exchange contracts

            6,315               6,315  
  

 

 

    

 

 

    

 

 

    

 

 

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

 

 

    

 

 

    

 

 

    

 

 

 

Available-for-sale financial assets

           

Corporate bonds

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

Agency bonds/Agency mortgage-backed securities

            17,234,724               17,234,724  

Asset-backed securities

            11,252,756               11,252,756  

Government bonds

     7,726,028        105,232               7,831,260  

Publicly traded stocks

     2,849,231                      2,849,231  

Commercial paper

            492,607               492,607  
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 10,575,259      $ 60,508,538      $      $ 71,083,797  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

 

(Continued)

 

- 52 -


     March 31, 2017  
     Level 1      Level 2      Level 3      Total  
           

Financial liabilities at FVTPL

           

Held for trading

           

Forward exchange contracts

   $      $ 80,795      $                 —      $ 80,795  

Designated as at FVTPL

           

Forward exchange contracts

            44,140               44,140  
  

 

 

    

 

 

    

 

 

    

 

 

 
   $      $ 124,935      $      $ 124,935  
  

 

 

    

 

 

    

 

 

    

 

 

 

Hedging derivative financial liabilities

           

Interest rate futures contracts

   $ 3,908      $      $      $ 3,908  
  

 

 

    

 

 

    

 

 

    

 

 

 

(Concluded)

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 transfers between Level 1 and Level 2 for the three months ended March 31, 2018.

Reconciliation of Level 3 fair value measurements of financial assets

The financial assets measured at Level 3 fair value were equity investments classified as financial assets at FVTOCI. Reconciliations for the three months ended March 31, 2018 were as follows:

 

Balance at January 1, 2018

   $ 5,841,384  

Additions

     128,951  

Total gains or losses recognized in other comprehensive income

     205,421  

Disposals

     (45,210

Effect of exchange rate changes

     (94,642
  

 

 

 

Balance at March 31, 2018

   $ 6,035,904  
  

 

 

 

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 provided by third party pricing services.

 

    Forward exchange contracts and cross currency swap contracts are measured using forward exchange rates and the discounted yield 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 yield curves that are derived from the quoted market prices.

 

- 53 -


Valuation techniques and assumptions used in Level 3 fair value Measurement

The fair values of non-public stocks and funds are mainly determined by using the asset approach, the income approach, and the market approach.

To determine the fair value for the funds, the Company utilizes the asset approach and takes into account the net asset value measured at the fair value by independent parties. On March 31, 2018, the Company uses unobservable inputs derived from discount for lack of marketability by 10%. When other inputs remain equal, the fair value will decrease by NT$31,078 thousand if discounts for lack of marketability increase by 1%.

The income approach utilizes discounted cash flows to determine the present value of the expected future economic benefits that will be derived from the investment. On March 31, 2018, the Company uses significant unobservable inputs, which include long term revenue growth rate of approximately 3%, discount rate of 8.5%, discount for lack of marketability of 10%, and discounts for lack of control of 10%. When other inputs remain equal, if long term revenue growth rate decreases by 1%, the fair value will decrease by NT$41,323 thousand; if discount rate increases by 1%, the fair value will decrease by NT$75,000 thousand; if discount for lack of marketability increases by 1%, the fair value will decrease by NT$21,520 thousand; if discount for lack of control increases by 1%, the fair value will decrease by NT$21,520 thousand.

For the remaining few investments, the market approach is used to arrive at their fair value, for which the recent financing activities of investees, the market transaction prices of the similar companies and market conditions are considered.

 

  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.

 

     March 31, 2018  
     Carrying
Amount
     Fair Value  
     

Financial assets

     

Financial assets at amortized costs

     

Corporate bonds

   $ 18,467,935      $ 18,618,060  

Structured product

     1,454,047        1,447,779  

Financial liabilities

     

Financial assets at amortized costs

     

Bonds payable

     132,756,740        134,616,063  

 

- 54 -


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

Financial assets

           

Held-to-maturity financial assets

           

Corporate bonds

   $ 19,338,764      $ 19,541,419      $ 22,241,885      $ 22,431,579  

Structured product

     1,482,950        1,475,350        1,518,500        1,513,549  

Commercial paper

                   10,323,947        10,343,339  

Negotiable certificate of deposit

                   4,555,500        4,568,438  

Financial liabilities

           

Measured at amortized cost

           

Bonds payable

     150,201,122        152,077,728        179,098,769        180,786,416  

Fair value hierarchy

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

 

     March 31, 2018  
     Level 1      Level 2      Level 3      Total  
           

Financial assets

           

Financial assets at amortized costs

           

Corporate bonds

   $  —      $ 18,618,060      $  —      $ 18,618,060  

Structured product

            1,447,779               1,447,779  
  

 

 

    

 

 

    

 

 

    

 

 

 
   $      $     20,065,839      $      $ 20,065,839  
  

 

 

    

 

 

    

 

 

    

 

 

 

Financial liabilities

           

Financial liabilities at amortized costs

           

Bonds payable

   $      $ 134,616,063      $      $ 134,616,063  
  

 

 

    

 

 

    

 

 

    

 

 

 
     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  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

- 55 -


     March 31, 2017  
     Level 1      Level 2      Level 3      Total  
           

Financial assets

           

Held-to-maturity securities

           

Corporate bonds

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

Commercial paper

            10,343,339               10,343,339  

Negotiable certificate of deposit

            4,568,438               4,568,438  

Structured product

            1,513,549               1,513,549  
  

 

 

    

 

 

    

 

 

    

 

 

 
   $      $ 38,856,905      $      $ 38,856,905  
  

 

 

    

 

 

    

 

 

    

 

 

 

Financial liabilities

           

Measured at amortized cost

           

Bonds payable

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

 

 

    

 

 

    

 

 

    

 

 

 

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 and negotiable certificate of deposit are determined by quoted market prices provided by third party pricing services. The fair value of structured products are determined by quoted market prices provided by the counterparty.

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

The fair value of the Company’s bonds payable is determined by quoted market prices provided by third party pricing services.

 

32. RELATED PARTY TRANSACTIONS

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

 

  a. 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

 

- 56 -


  b. Net revenue

 

            Three Months Ended March 31     
         2018      2017  
       

Item

  Related Party Categories      

Net revenue from sale of goods

  Associates    $ 2,174,536      $ 1,524,150  
    

 

 

    

 

 

 

Net revenue from royalties

  Associates    $ 126,102      $ 117,775  
    

 

 

    

 

 

 

 

  c. Purchases

 

         Three Months Ended March 31  
         2018      2017  
       

Related Party Categories

       

Associates

     $ 2,223,350      $ 2,628,068  
    

 

 

    

 

 

 

 

  d. Receivables from related parties

 

        

March 31,

2018

    

December 31,

2017

    

March 31,

2017

 
          

Item

  Related Party Name/Categories         

Receivables from related parties

  GUC    $ 1,119,260      $ 1,022,892      $ 494,839  
  Xintec      60,052        161,232         
    

 

 

    

 

 

    

 

 

 
     $ 1,179,312      $ 1,184,124      $ 494,839  
    

 

 

    

 

 

    

 

 

 

Other receivables from related parties

  VIS    $ 77,843      $ 78,141      $ 84,321  
  SSMC      49,604        83,099        50,474  
  Other associates      2,623        9,818        256  
    

 

 

    

 

 

    

 

 

 
     $ 130,070      $ 171,058      $ 135,051  
    

 

 

    

 

 

    

 

 

 

 

  e. Payables to related parties

 

        

March 31,

2018

    

December 31,

2017

    

March 31,

2017

 
          

Item

  Related Party Name         

Payables to related parties

  VIS    $ 452,091      $ 409,950      $ 604,897  
  Xintec      406,234        817,930        171,524  
  SSMC      359,001        406,959        383,246  
  Other associates      6,981        21,517        11,528  
    

 

 

    

 

 

    

 

 

 
     $ 1,224,307      $ 1,656,356      $ 1,171,195  
    

 

 

    

 

 

    

 

 

 

 

- 57 -


  f. Accrued expenses and other current liabilities

 

        

March 31,

2018

    

December 31,

2017

    

March 31,

2017

 
          

Item

  Related Party Categories         

Contract liabilities

  Associates    $ 17,402      $      $  
    

 

 

    

 

 

    

 

 

 

Advance receipts

 

Associates

   $      $ 96,502      $ 384,778  
    

 

 

    

 

 

    

 

 

 

 

  g. Others

 

         Three Months Ended March 31  
         2018      2017  
       

Item

  Related Party Categories      

Manufacturing expenses

  Associates    $ 672,932      $ 256,657  
    

 

 

    

 

 

 

General and administrative expenses

  Other related parties    $ 45,074      $ 12,000  
    

 

 

    

 

 

 

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.

 

  h. Compensation of key management personnel

The compensation to directors and other key management personnel for the three months ended March 31, 2018 and 2017 were as follows:

 

         Three Months Ended March 31  
         2018      2017  
       

Short-term employee benefits

     $ 534,943      $ 527,053  

Post-employment benefits

       21,645        1,146  
    

 

 

    

 

 

 
     $ 556,588      $ 528,199  
    

 

 

    

 

 

 

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.

 

- 58 -


33. PLEDGED ASSETS

The Company provided certificate of deposits recorded in other financial assets as collateral mainly for building lease agreements. As of March 31, 2018, December 31, 2017 and March 31, 2017, the aforementioned other financial assets amounted to NT$117,677 thousand, NT$165,618 thousand and NT$157,244 thousand, respectively.

 

34. SIGNIFICANT OPERATING LEASE ARRANGEMENTS

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

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

 

    

March 31,

2018

    

December 31,

2017

    

March 31,

2017

 
        

Not later than 1 year

   $ 4,853,387      $ 3,116,209      $ 1,272,661  

Later than 1 year and not later than 5 years

     5,088,935        5,174,729        3,639,334  

Later than 5 years

     9,318,985        8,905,848        6,727,624  
  

 

 

    

 

 

    

 

 

 
     $    19,261,307      $    17,196,786      $    11,639,619  
  

 

 

    

 

 

    

 

 

 

 

35. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNIZED COMMITMENTS

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

 

  a. Under a technical cooperation agreement with Industrial Technology Research Institute, the R.O.C. Government or its designee approved by TSMC can use up to 35% of TSMC’s capacity provided TSMC’s outstanding commitments to its customers are not prejudiced. The term of this agreement is for five years beginning from January 1, 1987 and is automatically renewed for successive periods of five years unless otherwise terminated by either party with one year prior notice. As of March 31, 2018, the R.O.C. Government did not invoke such right.

 

  b. Under a Shareholders Agreement entered into with Philips and EDB Investments Pte Ltd. on March 30, 1999, the parties formed a joint venture company, SSMC, which is an integrated circuit foundry in Singapore. TSMC’s equity interest in SSMC was 32%. Nevertheless, in September 2006, Philips spun-off its semiconductor subsidiary which was renamed as NXP B.V. Further, TSMC and NXP B.V. purchased all the SSMC shares owned by EDB Investments Pte Ltd. pro rata according to the Shareholders Agreement on November 15, 2006. After the purchase, TSMC and NXP B.V. currently own approximately 39% and 61% of the SSMC shares, respectively. TSMC and NXP B.V. are required, in the aggregate, to purchase at least 70% of SSMC’s capacity, but TSMC alone is not required to purchase more than 28% of the capacity. If any party defaults on the commitment and the capacity utilization of SSMC falls below a specific percentage of its capacity, the defaulting party is required to compensate SSMC for all related unavoidable costs. There was no default from the aforementioned commitment as of March 31, 2018.

 

- 59 -


  c. In May 2017, 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. Cohen’s case has been transferred to and consolidated with the responsive declaratory judgment case for non-infringement of Cohen’s asserted patents filed by TSMC and TSMC North America 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.

 

  d. On September 28, 2017, TSMC was contacted by the European Commission (the “Commission”), which has asked us for information and documents concerning alleged anti-competitive practices in relation to semiconductor sales. We are cooperating with the Commission to provide the requested information and documents. In light of the fact that this proceeding is still in its preliminary stage, it is premature to predict how the case will proceed, the outcome of the proceeding or its impact.

 

  e. 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.

 

  f. Amounts available under unused letters of credit as of March 31, 2018, December 31, 2017 and March 31, 2017 were NT$66,914 thousand, NT$94,909 thousand and NT$97,184 thousand, respectively.

 

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

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

 

    

Foreign
Currencies

(In Thousands)

    

Exchange Rate

(Note 1)

   

Carrying
Amount

(In Thousands)

 
       

March 31, 2018

       

Financial assets

       

Monetary items

       

USD

   $ 4,428,364        29.093     $ 128,834,383  

USD

     651,633        6.264 (Note 2)      18,957,968  

EUR

     74,176        35.92       2,664,388  

JPY

     711,970        0.2746       195,507  

Non-monetary items

       

HKD

     216,534        3.71       803,343  

Financial liabilities

       

Monetary items

       

USD

     4,040,810        29.093       117,559,276  

EUR

     184,925        35.92       6,642,497  

JPY

     38,476,708        0.2746       10,565,704  

(Continued)

 

- 60 -


    

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  

March 31, 2017

       

Financial assets

       

Monetary items

       

USD

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

USD

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

EUR

     12,694        32.61       413,957  

JPY

     418,699        0.2731       114,347  

Non-monetary items

       

HKD

     203,027        3.91       793,837  

Financial liabilities

       

Monetary items

       

USD

     4,228,469        30.370       128,418,618  

EUR

     211,843        32.61       6,908,184  

JPY

     53,477,096        0.2731       14,604,595  

(Concluded)

 

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

 

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

Please refer to the consolidated statements of comprehensive income for the total of realized and unrealized foreign exchange gain and loss for the three months ended March 31, 2018 and 2017, 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.

 

- 61 -


37. OPERATING SEGMENTS INFORMATION

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

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

 

38. ADDITIONAL DISCLOSURES

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

 

  a. Financings provided: Please see Table 1 attached;

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

  i. Information about the derivative financial instruments transaction: Please see Notes 7 and 13;

 

  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.

 

- 62 -


TABLE 1

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

FINANCINGS PROVIDED

FOR THE THREE MONTHS ENDED MARCH 31, 2018

(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

(US$

45,908,750

5,500,000

700,000

 

) & 

  $

(RMB

(US$

45,908,750

5,500,000

700,000)

 

) & 

 

  $

(RMB

(US$

22,012,290

3,800,000

150,000

 

) & 

    1.30%-1.88%    

The need for short-term and long-term financing

  $    

Operating capital

  $       $       $53,530,304       $53,530,304  

2

 

TSMC Global

 

TSMC

 

Other receivables from related parties

  Yes    

(US$

43,639,500

1,500,000

 

                   

The need for short-term financing

       

Operating capital

                  362,900,046       362,900,046  

 

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.

 

 

- 63 -


TABLE 2

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

ENDORSEMENTS/GUARANTEES PROVIDED

FOR THE THREE MONTHS ENDED MARCH 31, 2018

(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   $ 401,474,597     $

(US$

33,456,950

1,150,000

 

  $

(US$

33,456,950

1,150,000

 

  $

(US$

33,456,950

1,150,000

 

  $       2.08%     $ 401,474,597       Yes       No       No  
    TSMC North America   Subsidiary     401,474,597      

(US$

2,420,925

83,213

 

   

(US$

2,420,925

83,213

 

   

(US$

2,420,925

83,213

 

          0.15%       401,474,597       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.

 

- 64 -


TABLE 3

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

MARKETABLE SECURITIES HELD

MARCH 31, 2018

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

 

 

Held Company
Name

 

Marketable Securities Type and Name

  Relationship
with the
Company
 

Financial Statement Account

  March 31, 2018     Note  
        Shares/Units
(In Thousands)
    Carrying Value
(Foreign
Currencies
in Thousands)
    Percentage of
Ownership (%)
    Fair Value
(Foreign
Currencies
in Thousands)
   

    

               

TSMC

  Common stock              
  Motech    

Financial assets at fair value through other comprehensive income

    58,320     $ 1,306,363       11     $ 1,306,363    
 

Semiconductor Manufacturing International Corporation

        21,105       803,343             803,343    
  United Industrial Gases Co., Ltd.         21,230       558,744       10       558,744    
  Shin-Etsu Handotai Taiwan Co., Ltd.         10,500       353,303       7       353,303    
  Global Investment Holding Inc.         11,124       94,543       6       94,543    
  W.K. Technology Fund IV         1,152       9,587       2       9,587    
  Fund              
  Horizon Ventures Fund    

Financial assets at fair value through other comprehensive income

          6,715       12       6,715    
  Crimson Asia Capital               5,863       1       5,863    

TSMC Partners

  Common stock              
  Tela Innovations    

Financial assets at fair value through other comprehensive income

    10,440     US$ 65,000       25     US$ 65,000    
  Mcube Inc.         6,333             12          
  Fund              
  Shanghai Walden Venture Capital Enterprise    

Financial assets at fair value through other comprehensive income

        US$ 14,447       6     US$ 14,447    
  China Walden Venture Investments II, L.P.             US$ 8,048       9     US$ 8,048    
  China Walden Venture Investments III, L.P.             US$ 1,400       5     US$ 1,400    

TSMC Global

  Corporate bond              
  Bank of America Corp    

Financial assets at fair value through other comprehensive income

        US$ 41,775       N/A     US$ 41,775    
  Morgan Stanley             US$ 41,616       N/A     US$ 41,616    
  JPMorgan Chase & Co             US$ 40,145       N/A     US$ 40,145    
  Goldman Sachs Group Inc/The             US$ 33,315       N/A     US$ 33,315    
  Citigroup Inc             US$ 28,536       N/A     US$ 28,536    
  AT&T Inc             US$ 26,534       N/A     US$ 26,534    
  CVS Health Corp             US$ 24,628       N/A     US$ 24,628    
  Verizon Communications Inc             US$ 18,854       N/A     US$ 18,854    
  Ford Motor Credit Co LLC             US$ 16,938       N/A     US$ 16,938    
  Apple Inc             US$ 15,096       N/A     US$ 15,096    
  Credit Suisse AG/New York NY             US$ 13,451       N/A     US$ 13,451    
  Anheuser-Busch InBev Finance Inc             US$ 13,224       N/A     US$ 13,224    
  Celgene Corp             US$ 12,459       N/A     US$ 12,459    
  PNC Bank NA             US$ 12,269       N/A     US$ 12,269    
  BAT Capital Corp             US$ 12,206       N/A     US$ 12,206    
  Daimler Finance North America LLC             US$ 11,917       N/A     US$ 11,917    
  AbbVie Inc             US$ 11,375       N/A     US$ 11,375    
  BP Capital Markets PLC             US$ 11,080       N/A     US$ 11,080    
  Southern Co/The             US$ 10,510       N/A     US$ 10,510    
  Cardinal Health Inc             US$ 10,333       N/A     US$ 10,333    
  ABN AMRO Bank NV             US$ 9,890       N/A     US$ 9,890    
  Wells Fargo & Co             US$ 9,709       N/A     US$ 9,709    
  HSBC Holdings PLC             US$ 9,695       N/A     US$ 9,695    

(Continued)

 

- 65 -


Held Company
Name

 

Marketable Securities Type and Name

  Relationship
with the
Company
 

Financial Statement Account

  March 31, 2018     Note  
        Shares/Units
(In Thousands)
    Carrying Value
(Foreign
Currencies
in Thousands)
    Percentage of
Ownership (%)
    Fair Value
(Foreign
Currencies
in Thousands)
   

    

               

TSMC Global

  Capital One NA/Mclean VA    

Financial assets at fair value through other comprehensive income

        US$ 9,277       N/A     US$ 9,277    
  Sumitomo Mitsui Financial Group Inc             US$ 9,250       N/A     US$ 9,250    
  Macquarie Group Ltd             US$ 9,100       N/A     US$ 9,100    
  Mitsubishi UFJ Financial Group Inc             US$ 8,975       N/A     US$ 8,975    
  Wells Fargo Bank NA             US$ 8,872       N/A     US$ 8,872    
  Analog Devices Inc             US$ 8,856       N/A     US$ 8,856    
  ERAC USA Finance LLC             US$ 8,652       N/A     US$ 8,652    
  Tyson Foods Inc             US$ 8,340       N/A     US$ 8,340    
  Toronto-Dominion Bank/The             US$ 8,241       N/A     US$ 8,241    
  Duke Energy Corp             US$ 8,162       N/A     US$ 8,162    
  American International Group Inc             US$ 7,861       N/A     US$ 7,861    
  Hewlett Packard Enterprise Co             US$ 7,813       N/A     US$ 7,813    
  Svenska Handelsbanken AB             US$ 7,762       N/A     US$ 7,762    
  Huntington National Bank/The             US$ 7,717       N/A     US$ 7,717    
  Tencent Holdings Ltd             US$ 7,685       N/A     US$ 7,685    
  UBS Group Funding Switzerland AG             US$ 7,396       N/A     US$ 7,396    
  Westpac Banking Corp             US$ 7,371       N/A     US$ 7,371    
  Reckitt Benckiser Treasury Services PLC             US$ 7,349       N/A     US$ 7,349    
  ANZ New Zealand Int’l Ltd/London             US$ 7,255       N/A     US$ 7,255    
  Deutsche Telekom International Finance BV             US$ 7,126       N/A     US$ 7,126    
  Microsoft Corp             US$ 7,106       N/A     US$ 7,106    
  Skandinaviska Enskilda Banken AB             US$ 7,070       N/A     US$ 7,070    
  Banque Federative du Credit Mutuel SA             US$ 7,028       N/A     US$ 7,028    
  Bank of New York Mellon Corp/The             US$ 7,014       N/A     US$ 7,014    
  Siemens Financieringsmaatschappij NV             US$ 6,977       N/A     US$ 6,977    
  Hyundai Capital America             US$ 6,948       N/A     US$ 6,948    
  Barclays PLC             US$ 6,898       N/A     US$ 6,898    
  Dominion Energy Inc             US$ 6,796       N/A     US$ 6,796    
  Marriott International Inc/MD             US$ 6,793       N/A     US$ 6,793    
  Citizens Bank NA/Providence RI             US$ 6,630       N/A     US$ 6,630    
  QUALCOMM Inc             US$ 6,529       N/A     US$ 6,529    
  Mizuho Financial Group Inc             US$ 6,402       N/A     US$ 6,402    
  Reliance Standard Life Global Funding II             US$ 6,400       N/A     US$ 6,400    
  Fifth Third Bancorp             US$ 6,390       N/A     US$ 6,390    
  Banco Santander SA             US$ 6,289       N/A     US$ 6,289    
  21st Century Fox America Inc             US$ 6,245       N/A     US$ 6,245    
  Dow Chemical Co/The             US$ 6,214       N/A     US$ 6,214    
  Welltower Inc             US$ 6,172       N/A     US$ 6,172    
  Santander UK Group Holdings PLC             US$ 6,101       N/A     US$ 6,101    
  Northrop Grumman Corp             US$ 6,052       N/A     US$ 6,052    
  Nordea Bank AB             US$ 6,046       N/A     US$ 6,046    
  SMBC Aviation Capital Finance DAC             US$ 5,869       N/A     US$ 5,869    
  KeyCorp             US$ 5,823       N/A     US$ 5,823    
  Manufacturers & Traders Trust Co             US$ 5,801       N/A     US$ 5,801    
  UBS AG/London             US$ 5,770       N/A     US$ 5,770    
  Schlumberger Holdings Corp             US$ 5,704       N/A     US$ 5,704    
  Oracle Corp             US$ 5,702       N/A     US$ 5,702    
  Air Lease Corp             US$ 5,596       N/A     US$ 5,596    
  Santander UK PLC             US$ 5,592       N/A     US$ 5,592    
  Toyota Motor Credit Corp             US$ 5,592       N/A     US$ 5,592    
 

Penske Truck Leasing Co Lp / PTL Finance Corp

            US$ 5,521       N/A     US$ 5,521    
  UBS AG/Stamford CT             US$ 5,458       N/A     US$ 5,458    
  ITC Holdings Corp             US$ 5,385       N/A     US$ 5,385    
  Amgen Inc             US$ 5,215       N/A     US$ 5,215    
 

International Bank for Reconstruction & Development

            US$ 5,164       N/A     US$ 5,164    
  Montpelier Re Holdings Ltd             US$ 5,163       N/A     US$ 5,163    
  McCormick & Co Inc/MD             US$ 5,146       N/A     US$ 5,146    

(Continued)

 

- 66 -


Held Company
Name

 

Marketable Securities Type and Name

  Relationship
with the
Company
 

Financial Statement Account

  March 31, 2018     Note  
        Shares/Units
(In Thousands)
    Carrying Value
(Foreign
Currencies
in Thousands)
    Percentage of
Ownership (%)
    Fair Value
(Foreign
Currencies
in Thousands)
   
               

TSMC Global

  Jackson National Life Global Funding    

Financial assets at fair value through other comprehensive income

        US$ 5,073       N/A     US$ 5,073    
  Branch Banking & Trust Co             US$ 5,025       N/A     US$ 5,025    
  Aviation Capital Group Corp             US$ 5,009       N/A     US$ 5,009    
  KeyBank NA/Cleveland OH             US$ 4,980       N/A     US$ 4,980    
  Cigna Corp             US$ 4,968       N/A     US$ 4,968    
  Rockwell Collins Inc             US$ 4,933       N/A     US$ 4,933    
  BB&T Corp             US$ 4,875       N/A     US$ 4,875    
  US Bancorp             US$ 4,841       N/A     US$ 4,841    
  Cox Communications Inc             US$ 4,795       N/A     US$ 4,795    
  BPCE SA             US$ 4,765       N/A     US$ 4,765    
  American Express Credit Corp             US$ 4,748       N/A     US$ 4,748    
  Five Corners Funding Trust             US$ 4,700       N/A     US$ 4,700    
  Shell International Finance BV             US$ 4,681       N/A     US$ 4,681    
  Air Liquide Finance SA             US$ 4,672       N/A     US$ 4,672    
  SunTrust Banks Inc             US$ 4,567       N/A     US$ 4,567    
  AEP Texas Inc             US$ 4,480       N/A     US$ 4,480    
  Ryder System Inc             US$ 4,427       N/A     US$ 4,427    
  New York Life Global Funding             US$ 4,415       N/A     US$ 4,415    
  US Bank NA/Cincinnati OH             US$ 4,341       N/A     US$ 4,341    
  Bank of Montreal             US$ 4,306       N/A     US$ 4,306    
  Enterprise Products Operating LLC             US$ 4,299       N/A     US$ 4,299    
  Lloyds Bank PLC             US$ 4,185       N/A     US$ 4,185    
  Exelon Generation Co LLC             US$ 4,037       N/A     US$ 4,037    
  Ventas Realty LP / Ventas Capital Corp             US$ 3,982       N/A     US$ 3,982    
 

Mondelez International Holdings Netherlands BV

            US$ 3,979       N/A     US$ 3,979    
  Nuveen Finance LLC             US$ 3,927       N/A     US$ 3,927    
  European Investment Bank             US$ 3,899       N/A     US$ 3,899    
  Bank of Nova Scotia             US$ 3,877       N/A     US$ 3,877    
  Intercontinental Exchange Inc             US$ 3,862       N/A     US$ 3,862    
  Royal Bank of Canada             US$ 3,823       N/A     US$ 3,823    
  Edison International             US$ 3,814       N/A     US$ 3,814    
  NextEra Energy Capital Holdings Inc             US$ 3,793       N/A     US$ 3,793    
  Express Scripts Holding Co             US$ 3,788       N/A     US$ 3,788    
  Suncorp-Metway Ltd             US$ 3,756       N/A     US$ 3,756    
  Husky Energy Inc             US$ 3,683       N/A     US$ 3,683    
  Alimentation Couche-Tard Inc             US$ 3,670       N/A     US$ 3,670    
  Canadian Imperial Bank of Commerce             US$ 3,596       N/A     US$ 3,596    
  Credit Agricole SA/London             US$ 3,588       N/A     US$ 3,588    
  Credit Suisse Group Funding Guernsey Ltd             US$ 3,557       N/A     US$ 3,557    
  Protective Life Global Funding             US$ 3,527       N/A     US$ 3,527    
  SES GLOBAL Americas Holdings GP             US$ 3,513       N/A     US$ 3,513    
  LyondellBasell Industries NV             US$ 3,431       N/A     US$ 3,431    
  Kroger Co/The             US$ 3,292       N/A     US$ 3,292    
 

Sprint Spectrum Co LLC / Sprint Spectrum Co II LLC / Sprint Spectrum Co III LLC

            US$ 3,209       N/A     US$ 3,209    
  Digital Realty Trust LP             US$ 3,149       N/A     US$ 3,149    
  BNP Paribas SA             US$ 3,048       N/A     US$ 3,048    
  African Development Bank             US$ 2,998       N/A     US$ 2,998    
  Macquarie Bank Ltd             US$ 2,965       N/A     US$ 2,965    
  Time Warner Inc             US$ 2,945       N/A     US$ 2,945    
  Enel Finance International NV             US$ 2,928       N/A     US$ 2,928    
  Anthem Inc             US$ 2,850       N/A     US$ 2,850    
 

Australia & New Zealand Banking Group Ltd/New York NY

            US$ 2,690       N/A     US$ 2,690    
  Lloyds Banking Group PLC             US$ 2,685       N/A     US$ 2,685    
 

Delta Air Lines 2007-1 Class A Pass Through Trust

            US$ 2,678       N/A     US$ 2,678    
  Fifth Third Bank/Cincinnati OH             US$ 2,677       N/A     US$ 2,677    
  AutoZone Inc             US$ 2,657       N/A     US$ 2,657    

(Continued)

 

- 67 -


Held Company
Name

 

Marketable Securities Type and Name

  Relationship
with the
Company
 

Financial Statement Account

  March 31, 2018     Note  
        Shares/Units
(In Thousands)
    Carrying Value
(Foreign
Currencies
in Thousands)
    Percentage of
Ownership (%)
    Fair Value
(Foreign
Currencies
in Thousands)
   
               

TSMC Global

  PartnerRe Finance B LLC    

Financial assets at fair value through other comprehensive income

        US$ 2,623       N/A     US$ 2,623    
  DXC Technology Co             US$ 2,596       N/A     US$ 2,596    
  WR Berkley Corp             US$ 2,534       N/A     US$ 2,534    
  NiSource Inc             US$ 2,533       N/A     US$ 2,533    
  Metropolitan Life Global Funding I             US$ 2,504       N/A     US$ 2,504    
  Pacific Gas & Electric Co             US$ 2,497       N/A     US$ 2,497    
  Barclays Bank PLC             US$ 2,472       N/A     US$ 2,472    
  Capital One Financial Corp             US$ 2,456       N/A     US$ 2,456    
  Anheuser-Busch InBev Worldwide Inc             US$ 2,455       N/A     US$ 2,455    
  Eastman Chemical Co             US$ 2,398       N/A     US$ 2,398    
  Danske Bank A/S             US$ 2,389       N/A     US$ 2,389    
  Xylem Inc/NY             US$ 2,380       N/A     US$ 2,380    
  Aetna Inc             US$ 2,331       N/A     US$ 2,331    
  EI du Pont de Nemours & Co             US$ 2,316       N/A     US$ 2,316    
  SunTrust Bank/Atlanta GA             US$ 2,312       N/A     US$ 2,312    
  Bank of Tokyo-Mitsubishi UFJ Ltd/The             US$ 2,288       N/A     US$ 2,288    
  NBCUniversal Media LLC             US$ 2,286       N/A     US$ 2,286    
  Simon Property Group LP             US$ 2,265       N/A     US$ 2,265    
  Kimco Realty Corp             US$ 2,241       N/A     US$ 2,241    
  ING Groep NV             US$ 2,229       N/A     US$ 2,229    
  BAT International Finance PLC             US$ 2,188       N/A     US$ 2,188    
  Pricoa Global Funding I             US$ 2,186       N/A     US$ 2,186    
  BMW US Capital LLC             US$ 2,178       N/A     US$ 2,178    
  Cintas Corp No 2             US$ 2,166       N/A     US$ 2,166    
  ProAssurance Corp             US$ 2,155       N/A     US$ 2,155    
  National Australia Bank Ltd/New York             US$ 2,127       N/A     US$ 2,127    
  Wm Wrigley Jr Co             US$ 2,124       N/A     US$ 2,124    
  Walgreens Boots Alliance Inc             US$ 2,091       N/A     US$ 2,091    
 

Commonwealth Bank of Australia/New York NY

            US$ 2,087       N/A     US$ 2,087    
  HCP Inc             US$ 2,068       N/A     US$ 2,068    
  EOG Resources Inc             US$ 2,013       N/A     US$ 2,013    
  British Telecommunications PLC             US$ 1,993       N/A     US$ 1,993    
  Bank of New York Mellon Corp/The             US$ 1,991       N/A     US$ 1,991    
  Realty Income Corp             US$ 1,976       N/A     US$ 1,976    
  Duke Realty LP             US$ 1,916       N/A     US$ 1,916    
  Societe Generale SA             US$ 1,888       N/A     US$ 1,888    
  Magellan Midstream Partners LP             US$ 1,886       N/A     US$ 1,886    
  Sempra Energy             US$ 1,884       N/A     US$ 1,884    
 

American Airlines 2013-2 Class A Pass Through Trust

            US$ 1,833       N/A     US$ 1,833    
  Orange SA             US$ 1,817       N/A     US$ 1,817    
  Lam Research Corp             US$ 1,800       N/A     US$ 1,800    
  Philip Morris International Inc             US$ 1,795       N/A     US$ 1,795    
  WestRock RKT Co             US$ 1,789       N/A     US$ 1,789    
  Brambles USA Inc             US$ 1,769       N/A     US$ 1,769    
  State Grid Overseas Investment Ltd             US$ 1,765       N/A     US$ 1,765    
  Visa Inc             US$ 1,747       N/A     US$ 1,747    
  Regency Centers LP             US$ 1,744       N/A     US$ 1,744    
  Dominion Energy Gas Holdings LLC             US$ 1,733       N/A     US$ 1,733    
  Inter American Development Bank             US$ 1,710       N/A     US$ 1,710    
  Citibank NA             US$ 1,708       N/A     US$ 1,708    
  Regions Financial Corp             US$ 1,670       N/A     US$ 1,670    
  General Electric Co             US$ 1,607       N/A     US$ 1,607    
  Amazon.com Inc             US$ 1,600       N/A     US$ 1,600    
 

Ontario Teachers’ Cadillac Fairview Properties Trust

            US$ 1,591       N/A     US$ 1,591    
  Gilead Sciences Inc             US$ 1,589       N/A     US$ 1,589    
  Weyerhaeuser Co             US$ 1,571       N/A     US$ 1,571    
  Lincoln National Corp             US$ 1,563       N/A     US$ 1,563    

(Continued)

 

- 68 -


Held Company
Name

 

Marketable Securities Type and Name

  Relationship
with the
Company
 

Financial Statement Account

  March 31, 2018     Note  
        Shares/Units
(In Thousands)
    Carrying Value
(Foreign
Currencies
in Thousands)
    Percentage of
Ownership (%)
    Fair Value
(Foreign
Currencies
in Thousands)
   
               

TSMC Global

  Principal Life Global Funding II    

Financial assets at fair value through other comprehensive income

        US$ 1,561       N/A     US$ 1,561    
 

Phillips 66

            US$ 1,557       N/A     US$ 1,557    
 

Sinopec Capital Ltd

            US$ 1,554       N/A     US$ 1,554    
 

Berkshire Hathaway Energy Co

            US$ 1,551       N/A     US$ 1,551    
 

Chevron Corp

            US$ 1,527       N/A     US$ 1,527    
 

Caterpillar Financial Services Corp

            US$ 1,518       N/A     US$ 1,518    
 

PSEG Power LLC

            US$ 1,495       N/A     US$ 1,495    
 

McKesson Corp

            US$ 1,492       N/A     US$ 1,492    
 

O’Reilly Automotive Inc

            US$ 1,492       N/A     US$ 1,492    
 

Ares Capital Corp

            US$ 1,491       N/A     US$ 1,491    
 

Harley-Davidson Financial Services Inc

            US$ 1,488       N/A     US$ 1,488    
 

Standard Chartered PLC

            US$ 1,480       N/A     US$ 1,480    
 

Abbott Laboratories

            US$ 1,474       N/A     US$ 1,474    
 

HSBC USA Inc

            US$ 1,462       N/A     US$ 1,462    
 

Guardian Life Global Funding

            US$ 1,452       N/A     US$ 1,452    
 

CBS Corp

            US$ 1,441       N/A     US$ 1,441    
 

Cooperatieve Rabobank UA/NY

            US$ 1,439       N/A     US$ 1,439    
 

Sumitomo Mitsui Banking Corp

            US$ 1,437       N/A     US$ 1,437    
 

Oesterreichische Kontrollbank AG

            US$ 1,437       N/A     US$ 1,437    
 

HSBC Bank PLC

            US$ 1,431       N/A     US$ 1,431    
 

American Express Co

            US$ 1,416       N/A     US$ 1,416    
 

Monongahela Power Co

            US$ 1,398       N/A     US$ 1,398    
 

Sysco Corp

            US$ 1,389       N/A     US$ 1,389    
 

AIG Global Funding

            US$ 1,378       N/A     US$ 1,378    
 

Georgia-Pacific LLC

            US$ 1,374       N/A     US$ 1,374    
 

Texas Eastern Transmission LP

            US$ 1,369       N/A     US$ 1,369    
 

Cboe Global Markets Inc

            US$ 1,359       N/A     US$ 1,359    
 

CNA Financial Corp

            US$ 1,273       N/A     US$ 1,273    
 

GATX Corp

            US$ 1,266       N/A     US$ 1,266    
 

Entergy Arkansas Inc

            US$ 1,256       N/A     US$ 1,256    
 

Nissan Motor Acceptance Corp

            US$ 1,251       N/A     US$ 1,251    
 

Western Union Co/The

            US$ 1,249       N/A     US$ 1,249    
 

Entergy Corp

            US$ 1,245       N/A     US$ 1,245    
 

Consolidated Edison Inc

            US$ 1,199       N/A     US$ 1,199    
 

Glencore Funding LLC

            US$ 1,198       N/A     US$ 1,198    
 

Stryker Corp

            US$ 1,142       N/A     US$ 1,142    
 

Kreditanstalt fuer Wiederaufbau

            US$ 1,131       N/A     US$ 1,131    
 

Public Service Enterprise Group Inc

            US$ 1,128       N/A     US$ 1,128    
 

ERP Operating LP

            US$ 1,110       N/A     US$ 1,110    
 

Marsh & McLennan Cos Inc

            US$ 1,077       N/A     US$ 1,077    
 

CA Inc

            US$ 1,059       N/A     US$ 1,059    
 

Swedbank AB

            US$ 1,058       N/A     US$ 1,058    
 

Reinsurance Group of America Inc

            US$ 1,049       N/A     US$ 1,049    
 

International Paper Co

            US$ 1,048       N/A     US$ 1,048    
 

Merck & Co Inc

            US$ 1,042       N/A     US$ 1,042    
 

Glencore Finance Canada Ltd

            US$ 1,042       N/A     US$ 1,042    
 

Commonwealth Edison Co

            US$ 1,023       N/A     US$ 1,023    
 

Athene Global Funding

            US$ 1,021       N/A     US$ 1,021    
 

Scentre Group Trust 1 / Scentre Group Trust 2

            US$ 1,014       N/A     US$ 1,014    
 

Statoil ASA

            US$ 999       N/A     US$ 999    
 

Holcim US Finance Sarl & Cie SCS

            US$ 996       N/A     US$ 996    
 

Bank Nederlandse Gemeenten NV

            US$ 994       N/A     US$ 994    
 

Biogen Inc

            US$ 994       N/A     US$ 994    
 

Laboratory Corp of America Holdings

  —         —       US$ 992       N/A     US$ 992    
 

Unum Group

  —         —       US$ 992       N/A     US$ 992    
 

Entergy Texas Inc

  —         —       US$ 980       N/A     US$ 980    
 

Healthcare Trust of America Holdings LP

  —         —       US$ 978       N/A     US$ 978    

(Continued)

 

- 69 -


                March 31, 2018     Note  

Held Company
Name

 

Marketable Securities Type and Name

  Relationship
with the
Company
 

Financial Statement Account

  Shares/Units
(In Thousands)
    Carrying Value
(Foreign
Currencies
in Thousands)
    Percentage of
Ownership (%)
    Fair Value
(Foreign
Currencies
in Thousands)
   
               

TSMC Global

  UnitedHealth Group Inc    

Financial assets at fair value through other comprehensive income

        US$ 977       N/A     US$ 977    
 

XLIT Ltd

            US$ 972       N/A     US$ 972    
 

TransCanada PipeLines Ltd

            US$ 967       N/A     US$ 967    
 

Bunge Ltd Finance Corp

            US$ 967       N/A     US$ 967    
 

National Retail Properties Inc

            US$ 949       N/A     US$ 949    
 

PPL Capital Funding Inc

            US$ 931       N/A     US$ 931    
 

Duke Energy Progress LLC

            US$ 916       N/A     US$ 916    
 

Coca-Cola Femsa SAB de CV

            US$ 901       N/A     US$ 901    
 

Southern Electric Generating Co

            US$ 898       N/A     US$ 898    
 

Lockheed Martin Corp

            US$ 892       N/A     US$ 892    
 

Walmart Inc

            US$ 882       N/A     US$ 882    
 

CNOOC Finance Ltd

            US$ 870       N/A     US$ 870    
 

Intesa Sanpaolo SpA

            US$ 849       N/A     US$ 849    
 

Valero Energy Corp

            US$ 846       N/A     US$ 846    
 

Mastercard Inc

            US$ 844       N/A     US$ 844    
 

Baker Hughes a GE Co LLC / Baker Hughes Co-Obligor Inc

            US$ 842       N/A     US$ 842    
 

Consolidated Edison Co of New York Inc

            US$ 822       N/A     US$ 822    
 

Huntington Bancshares Inc/OH

            US$ 814       N/A     US$ 814    
 

Alterra Finance LLC

            US$ 805       N/A     US$ 805    
 

Nucor Corp

            US$ 804       N/A     US$ 804    
 

MetLife Inc

            US$ 804       N/A     US$ 804    
 

Aon PLC

            US$ 802       N/A     US$ 802    
 

Danone SA

            US$ 799       N/A     US$ 799    
 

Continental Airlines 2000-1 Class A-1 Pass Through Trust

            US$ 792       N/A     US$ 792    
 

AXIS Specialty Finance LLC

            US$ 789       N/A     US$ 789    
 

ONEOK Partners LP

            US$ 787       N/A     US$ 787    
 

Incitec Pivot Finance LLC

            US$ 783       N/A     US$ 783    
 

Manulife Financial Corp

            US$ 782       N/A     US$ 782    
 

Spectra Energy Partners LP

            US$ 781       N/A     US$ 781    
 

Activision Blizzard Inc

            US$ 776       N/A     US$ 776    
 

United Technologies Corp

            US$ 756       N/A     US$ 756    
 

Baidu Inc

            US$ 745       N/A     US$ 745    
 

John Deere Capital Corp

            US$ 738       N/A     US$ 738    
 

Duke Energy Progress LLC

            US$ 721       N/A     US$ 721    
 

DTE Energy Co

            US$ 707       N/A     US$ 707    
 

Baker Hughes a GE Co LLC

            US$ 702       N/A     US$ 702    
 

APT Pipelines Ltd

            US$ 701       N/A     US$ 701    
 

American Honda Finance Corp

            US$ 698       N/A     US$ 698    
 

TTX Co

            US$ 697       N/A     US$ 697    
 

Sumitomo Mitsui Trust Bank Ltd

            US$ 688       N/A     US$ 688    
 

Norfolk Southern Railway Co

            US$ 686       N/A     US$ 686    
 

Vornado Realty LP

            US$ 682       N/A     US$ 682    
 

Three Gorges Finance I Cayman Islands Ltd

            US$ 680       N/A     US$ 680    
 

Rochester Gas & Electric Corp

            US$ 673       N/A     US$ 673    
 

ING Bank NV

            US$ 672       N/A     US$ 672    
 

National Oilwell Varco Inc

            US$ 669       N/A     US$ 669    
 

Continental Airlines 2007-1 Class A Pass Through Trust

            US$ 646       N/A     US$ 646    
 

Ohio Power Co

            US$ 646       N/A     US$ 646    
 

Entergy Gulf States Louisiana LLC

            US$ 642       N/A     US$ 642    
 

Georgia Power Co

            US$ 635       N/A     US$ 635    
 

RBC USA Holdco Corp

            US$ 632       N/A     US$ 632    
 

Hyatt Hotels Corp

            US$ 629       N/A     US$ 629    
 

Alexandria Real Estate Equities Inc

            US$ 625       N/A     US$ 625    
 

Grupo Bimbo SAB de CV

            US$ 621       N/A     US$ 621    
 

Liberty Property LP

            US$ 621       N/A     US$ 621    
 

Potash Corp of Saskatchewan Inc

            US$ 618       N/A     US$ 618    
 

Woolworths Group Ltd

            US$ 617       N/A     US$ 617    
 

OneBeacon US Holdings Inc

            US$ 603       N/A     US$ 603    

(Continued)

 

- 70 -


                March 31, 2018     Note  

Held Company
Name

 

Marketable Securities Type and Name

  Relationship
with the
Company
 

Financial Statement Account

  Shares/Units
(In Thousands)
    Carrying Value
(Foreign
Currencies
in Thousands)
    Percentage of
Ownership (%)
    Fair Value
(Foreign
Currencies
in Thousands)
   
               

TSMC Global

  Daiwa Securities Group Inc    

Financial assets at fair value through other comprehensive income

        US$ 602       N/A     US$ 602    
 

Life Technologies Corp

            US$ 599       N/A     US$ 599    
 

BOC Aviation Ltd

            US$ 598       N/A     US$ 598    
 

Dr Pepper Snapple Group Inc

            US$ 598       N/A     US$ 598    
 

Altria Group Inc

            US$ 596       N/A     US$ 596    
 

MUFG Union Bank NA

            US$ 596       N/A     US$ 596    
 

Kimberly-Clark Corp

            US$ 595       N/A     US$ 595    
 

ABC Inc

            US$ 587       N/A     US$ 587    
 

Host Hotels & Resorts LP

            US$ 576       N/A     US$ 576    
 

AXIS Specialty Finance PLC

            US$ 574       N/A     US$ 574    
 

Mizuho Bank Ltd

            US$ 571       N/A     US$ 571    
 

AvalonBay Communities Inc

            US$ 567       N/A     US$ 567    
 

Regions Bank/Birmingham AL

            US$ 549       N/A     US$ 549    
 

Exxon Mobil Corp

            US$ 542       N/A     US$ 542    
 

Bunge Ltd Finance Corp

            US$ 531       N/A     US$ 531    
 

Prudential Financial Inc

            US$ 523       N/A     US$ 523    
 

MUFG Americas Holdings Corp

            US$ 517       N/A     US$ 517    
 

Southwestern Electric Power Co

            US$ 514       N/A     US$ 514    
 

American Electric Power Co Inc

            US$ 514       N/A     US$ 514    
 

Fulton Financial Corp

            US$ 510       N/A     US$ 510    
 

TD Ameritrade Holding Corp

            US$ 509       N/A     US$ 509    
 

Regency Centers Corp

            US$ 503       N/A     US$ 503    
 

BNP Paribas / BNP Paribas US Medium-Term Note Program LLC

            US$ 500       N/A     US$ 500    
 

Halliburton Co

            US$ 499       N/A     US$ 499    
 

Highwoods Realty LP

            US$ 496       N/A     US$ 496    
 

ORIX Corp

            US$ 492       N/A     US$ 492    
 

MassMutual Global Funding II

            US$ 478       N/A     US$ 478    
 

Comerica Inc

            US$ 471       N/A     US$ 471    
 

Eaton Corp

            US$ 465       N/A     US$ 465    
 

Narragansett Electric Co/The

            US$ 462       N/A     US$ 462    
 

Spire Inc

            US$ 459       N/A     US$ 459    
 

CenterPoint Energy Inc

            US$ 455       N/A     US$ 455    
 

Canadian Pacific Railway Co

            US$ 428       N/A     US$ 428    
 

Texas-New Mexico Power Co

            US$ 426       N/A     US$ 426    
 

Volkswagen Group of America Finance LLC

            US$ 399       N/A     US$ 399    
 

Southern Power Co

            US$ 389       N/A     US$ 389    
 

IBM Credit LLC

            US$ 388       N/A     US$ 388    
 

Aon Corp

            US$ 382       N/A     US$ 382    
 

StanCorp Financial Group Inc

            US$ 382       N/A     US$ 382    
 

First Niagara Financial Group Inc

            US$ 373       N/A     US$ 373    
 

Nationwide Financial Services Inc

            US$ 369       N/A     US$ 369    
 

NetApp Inc

            US$ 359       N/A     US$ 359    
 

CenterPoint Energy Resources Corp

            US$ 359       N/A     US$ 359    
 

Deutsche Bank AG

            US$ 349       N/A     US$ 349    
 

Cisco Systems Inc

            US$ 319       N/A     US$ 319    
 

PacifiCorp

            US$ 311       N/A     US$ 311    
 

eBay Inc

            US$ 299       N/A     US$ 299    
 

Schlumberger Finance Canada Ltd

            US$ 296       N/A     US$ 296    
 

Eli Lilly & Co

            US$ 288       N/A     US$ 288    
 

Amphenol Corp

            US$ 286       N/A     US$ 286    
 

BAE Systems Holdings Inc

            US$ 286       N/A     US$ 286    
 

EMD Finance LLC

            US$ 277       N/A     US$ 277    
 

Nomura Holdings Inc

            US$ 250       N/A     US$ 250    
 

NBCUniversal Enterprise Inc

            US$ 248       N/A     US$ 248    
 

CMS Energy Corp

            US$ 237       N/A     US$ 237    
 

Comcast Corp

            US$ 236       N/A     US$ 236    
 

Hartford Financial Services Group Inc/The

            US$ 232       N/A     US$ 232    
 

Protective Life Corp

            US$ 223       N/A     US$ 223    

(Continued)

 

- 71 -


                March 31, 2018        

Held Company
Name

 

Marketable Securities Type and Name

  Relationship
with the
Company
 

Financial Statement Account

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

TSMC Global

  WestRock MWV LLC    

Financial assets at fair value through other comprehensive income

        US$ 222       N/A     US$ 222    
 

Rolls-Royce PLC

            US$ 221       N/A     US$ 221    
 

Fidelity National Information Services Inc

            US$ 203       N/A     US$ 203    
 

Commonwealth Bank of Australia

            US$ 201       N/A     US$ 201    
 

Pinnacle West Capital Corp

            US$ 195       N/A     US$ 195    
 

Equifax Inc

            US$ 175       N/A     US$ 175    
 

Packaging Corp of America

            US$ 157       N/A     US$ 157    
 

Schneider Electric SE

            US$ 157       N/A     US$ 157    
 

Berkshire Hathaway Finance Corp

            US$ 134       N/A     US$ 134    
 

Duke Energy Florida LLC

            US$ 104       N/A     US$ 104    
  Wells Fargo & Co    

Financial assets at amortized cost

        US$ 149,943       N/A     US$ 151,431    
 

JPMorgan Chase & Co.

            US$ 124,948       N/A     US$ 126,789    
 

Westpac Banking Corp.

            US$ 99,987       N/A     US$ 100,455    
 

Goldman Sachs Group, Inc.

            US$ 99,959       N/A     US$ 100,728    
 

Commonwealth Bank of Australia

            US$ 49,993       N/A     US$ 50,214    
 

National Australia Bank

            US$ 49,993       N/A     US$ 50,178    
 

Bank of Nova Scotia

            US$ 49,971       N/A     US$ 50,150    
 

Industrial and Commercial Bank of China

            US$ 9,996       N/A     US$ 10,006    
 

Government bond

             
  United States Treasury Note/Bond    

Financial assets at fair value through other comprehensive income

        US$ 322,938       N/A     US$ 322,938    
 

Abu Dhabi Government International Bond

            US$ 3,402       N/A     US$ 3,402    
 

Agency bonds/Agency mortgage-backed securities

           
  Government National Mortgage Association    

Financial assets at fair value through profit or loss

        US$ 11,633       N/A     US$ 11,633    
 

Fannie Mae

            US$ 9,260       N/A     US$ 9,260    
 

Freddie Mac

            US$ 5,042       N/A     US$ 5,042    
  Fannie Mae    

Financial assets at fair value through other comprehensive income

        US$ 665,741       N/A     US$ 665,741    
 

Freddie Mac

            US$ 264,453       N/A     US$ 264,453    
 

Government National Mortgage Association

            US$ 126,064       N/A     US$ 126,064    
 

Ginnie Mae

            US$ 27,221       N/A     US$ 27,221    
 

Federal Home Loan Banks

            US$ 6,138       N/A     US$ 6,138    
 

Freddie Mac Multifamily Structured Pass Through Certificates

            US$ 3,744       N/A     US$ 3,744    
 

Export-Import Bank of Korea

            US$ 3,004       N/A     US$ 3,004    
 

Export Development Canada

            US$ 2,977       N/A     US$ 2,977    
 

Province of Quebec Canada

            US$ 2,521       N/A     US$ 2,521    
 

NCUA Guaranteed Notes Trust 2010-R2

            US$ 1,416       N/A     US$ 1,416    
 

CPPIB Capital Inc

            US$ 1,177       N/A     US$ 1,177    
 

Federal Farm Credit Banks

            US$ 888       N/A     US$ 888    
 

Kowloon-Canton Railway Corp

            US$ 564       N/A     US$ 564    
 

FHLMC-GNMA

            US$ 535       N/A     US$ 535    
 

Asset-backed securities

             
  Hyundai Auto Receivables Trust    

Financial assets at fair value through profit or loss

        US$ 1,992       N/A     US$ 1,992    
 

Ford Credit Auto Owner Trust

            US$ 1,306       N/A     US$ 1,306    
  Citibank Credit Card Issuance Trust    

Financial assets at fair value through other comprehensive income

        US$ 53,963       N/A     US$ 53,963    
 

Discover Card Execution Note Trust

            US$ 45,298       N/A     US$ 45,298    
 

Chase Issuance Trust

            US$ 43,924       N/A     US$ 43,924    
 

American Express Credit Account Master Trust

            US$ 35,584       N/A     US$ 35,584    
 

Ford Credit Floorplan Master Owner Trust A

            US$ 26,781       N/A     US$ 26,781    
 

Ford Credit Auto Owner Trust/Ford Credit 2014-REV1

            US$ 13,762       N/A     US$ 13,762    
 

Toyota Auto Receivables 2014-C Owner Trust

            US$ 13,002       N/A     US$ 13,002    
 

UBS-Barclays Commercial Mortgage Trust 2012-C2

            US$ 12,523       N/A     US$ 12,523    

(Continued)

 

- 72 -


                March 31, 2018        

Held Company
Name

 

Marketable Securities Type and Name

  Relationship
with the
Company
 

Financial Statement Account

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

TSMC Global

  Capital One Multi-Asset Execution Trust    

Financial assets at fair value through other comprehensive income

        US$ 12,494       N/A     US$ 12,494    
 

Morgan Stanley Bank of America Merrill Lynch Trust

            US$ 11,598       N/A     US$ 11,598    
 

BA Credit Card Trust

            US$ 10,816       N/A     US$ 10,816    
 

COMM Mortgage Trust

            US$ 10,410       N/A     US$ 10,410    
 

Chesapeake Funding II LLC

            US$ 10,285       N/A     US$ 10,285    
 

Nissan Master Owner Trust Receivables

            US$ 10,004       N/A     US$ 10,004    
 

GM Financial Automobile Leasing Trust 2015-3

            US$ 9,408       N/A     US$ 9,408    
 

Hyundai Auto Lease Securitization Trust 2017-A

            US$ 9,108       N/A     US$ 9,108    
 

Honda Auto Receivables 2017-2 Owner Trust

            US$ 8,662       N/A     US$ 8,662    
 

JPMCC Commercial Mortgage Securities Trust 2017-JP7

            US$ 8,552       N/A     US$ 8,552    
 

Mercedes-Benz Master Owner Trust

            US$ 8,536       N/A     US$ 8,536    
 

BANK

            US$ 7,871       N/A     US$ 7,871    
 

CGDBB Commercial Mortgage Trust 2017-BIOC

            US$ 7,507       N/A     US$ 7,507    
 

GS Mortgage Securities Trust

            US$ 7,355       N/A     US$ 7,355    
 

Citigroup Commercial Mortgage Trust 2013-GC11

            US$ 6,590       N/A     US$ 6,590    
 

JPMBB Commercial Mortgage Securities Trust 2013-C12

            US$ 6,363       N/A     US$ 6,363    
 

Nissan Auto Lease Trust

            US$ 6,090       N/A     US$ 6,090    
 

Ford Credit Auto Owner Trust

            US$ 5,750       N/A     US$ 5,750    
 

BBCMS 2018-TALL Mortgage Trust

            US$ 5,469       N/A     US$ 5,469    
 

JPMDB Commercial Mortgage Securities Trust 2017-C7

            US$ 5,327       N/A     US$ 5,327    
 

Ford Credit Auto Lease Trust

            US$ 4,905       N/A     US$ 4,905    
 

BMW Vehicle Lease Trust

            US$ 4,794       N/A     US$ 4,794    
 

Volvo Financial Equipment Master Owner Trust 2017-A

            US$ 4,523       N/A     US$ 4,523    
 

Nissan Auto Receivables 2017-B Owner Trust

            US$ 4,405       N/A     US$ 4,405    
 

Wells Fargo Commercial Mortgage Trust 2015-LC20

            US$ 4,209       N/A     US$ 4,209    
 

GM Financial Consumer Automobile 2017-1

            US$ 3,922       N/A     US$ 3,922    
 

Morgan Stanley Capital I Trust

            US$ 3,885       N/A     US$ 3,885    
 

Cold Storage Trust 2017-ICE3

            US$ 3,813       N/A     US$ 3,813    
 

Wheels SPV 2 LLC

            US$ 3,579       N/A     US$ 3,579    
 

Hertz Fleet Lease Funding LP

            US$ 3,476       N/A     US$ 3,476    
 

Hyundai Auto Receivables Trust

            US$ 3,158       N/A     US$ 3,158    
 

BMW Floorplan Master Owner Trust

            US$ 2,440       N/A     US$ 2,440    
 

Mercedes-Benz Auto Lease Trust 2016-A

            US$ 1,892       N/A     US$ 1,892    
 

WFRBS Commercial Mortgage Trust 2013-C14

            US$ 1,828       N/A     US$ 1,828    
 

Enterprise Fleet Financing LLC

            US$ 1,603       N/A     US$ 1,603    
 

CFCRE Commercial Mortgage Trust 2011-C1

            US$ 892       N/A     US$ 892    
 

CarMax Auto Owner Trust

            US$ 873       N/A     US$ 873    
 

280 Park Avenue Mortgage Trust

            US$ 833       N/A     US$ 833    
 

DBUBS 2011-LC2 Mortgage Trust

            US$ 520       N/A     US$ 520    
 

ARI Fleet Lease Trust 2018-A

            US$ 508       N/A     US$ 508    
 

CD 2016-CD2 Mortgage Trust

            US$ 500       N/A     US$ 500    
 

Mercedes-Benz Auto Receivables Trust 2015-1

            US$ 339       N/A     US$ 339    
 

Structure product

           
  Bank of Tokyo-Mitsubishi UFJ    

Financial assets at amortized cost

        US$ 49,979       N/A     US$ 49,764    
 

Commercial paper

           
  Old Line Funding LLC    

Financial assets at fair value through other comprehensive income

        US$ 1,989       N/A     US$ 1,989    
 

Fund

           
  Primavera Capital Fund II L.P.    

Financial assets at fair value through other comprehensive income

        US$ 78,923       4     US$ 78,923    

VTAF II

 

Common stock

           
  Aquantia    

Financial assets at fair value through other comprehensive income

    460     US$ 7,218       1     US$ 7,218    
 

Sentelic

        903     US$ 1,864       4     US$ 1,864    
 

Aether Systems, Inc.

        1,085     US$ 373       20     US$ 373    
 

5V Technologies, Inc.

        963     US$ 331       2     US$ 331    

(Continued)

 

- 73 -


                March 31, 2018     Note  

Held Company
Name

 

Marketable Securities Type and Name

  Relationship
with the
Company
 

Financial Statement Account

  Shares/Units
(In Thousands)
    Carrying Value
(Foreign
Currencies
in Thousands)
    Percentage of
Ownership (%)
    Fair Value
(Foreign
Currencies
in Thousands)
   
               

VTAF II

 

Common stock

           
  Aquantia    

Financial assets at fair value through other comprehensive income

    460     US$ 7,218       1     US$ 7,218    
 

Sentelic

        903     US$ 1,864       4     US$ 1,864    
 

Aether Systems, Inc.

        1,085     US$ 373       20     US$ 373    
 

5V Technologies, Inc.

        963     US$ 331       2     US$ 331    

VTAF II

  Common stock              
  LiquidLeds Lighting Corp.   —    

Financial assets at fair value through other comprehensive income

    1,600     US$ 800       11     US$ 800    
 

Preferred stock

           
  Neoconix, Inc.   —    

Financial assets at fair value through other comprehensive income

    4,147     US$ 170       —       US$ 170    

ISDF

 

Preferred stock

           
  Sonics, Inc.   —    

Financial assets at fair value through other comprehensive income

    230       —         3       —      

ISDF II

 

Common stock

           
  Sonics, Inc.   —    

Financial assets at fair value through other comprehensive income

    278       —         4       —      
  Preferred stock              
  Sonics, Inc.   —    

Financial assets at fair value through other comprehensive income

    264       —         4       —      

Growth Fund

 

Common stock

           
  Innovium, Inc.   —    

Financial assets at fair value through other comprehensive income

    221     US$ 370       —       US$ 370    
 

Preferred stock

           
  Innovium, Inc.   —    

Financial assets at fair value through other comprehensive income

    230     US$ 384       —       US$ 384    

(Concluded)

 

- 74 -


TABLE 4

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

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

FOR THE THREE MONTHS ENDED MARCH 31, 2018

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

 

 

    Marketable                   Beginning Balance     Acquisition     Disposal     Ending Balance (Note 1)  

Company
Name

 

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

 

Stock

                         
 

TSMC Global

 

Investments accounted for using equity method

          Subsidiary       9     $ 309,211,877       2     $ 59,182,280           $     $     $       11     $ 362,900,046  
 

TSMC Nanjing

 

          Subsidiary             26,493,740             2,361,320                                     27,651,586  

TSMC Global

 

Corporate bond

                         
                           
 

CVS Health Corp

 

Financial assets at fair value through other comprehensive income

                    US$ 10,018           US$ 14,507                                   US$ 24,628  
 

Asian Development Bank

 

                    US$ 11,073                       US$ 11,075     US$ 11,075                    
 

Government bond

                         
 

United States Treasury Note/Bond

 

Financial assets at fair value through other comprehensive income

                    US$ 202,689           US$ 160,346           US$ 86,184     US$ 86,814     US$ (630         US$ 274,372  
 

United States Treasury Floating Rate Note

 

                    US$ 49,901           US$ 38,809           US$ 48,975     US$ 48,930     US$ 45           US$ 39,702  
 

United States Treasury Bill

 

                    US$ 2,997           US$ 48,775           US$ 51,413     US$ 51,407     US$ 6           US$ 396  
 

Agency bonds/Agency mortgage-backed securities

                         
 

FNMA TBA 30 Yr 4.5

 

Financial assets at fair value through other comprehensive income

                    US$ 15,758           US$ 45,336           US$ 31,918     US$ 32,128     US$ (210         US$ 29,067  
 

Government National Mortgage Association

 

                                US$ 12,707                                   US$ 12,674  
 

FNMA TBA 30 Yr 5

 

                                US$ 10,569                                   US$ 10,597  
 

GNMA II TBA 30 Yr 3.5

 

                    US$ 145           US$ 19,769           US$ 16,282     US$ 16,346     US$ (64         US$ 3,582  
 

GNMA II TBA 30 Yr 4

 

                    US$ 2,378           US$ 16,057           US$ 16,069     US$ 16,108     US$ (39         US$ 2,341  
 

FNMA TBA 30 Yr 3.5

 

                    US$ 2,866           US$ 11,140           US$ 11,662     US$ 11,719     US$ (57         US$ 2,301  
 

FNMA TBA 30 Yr 3

 

                                US$ 48,338           US$ 48,047     US$ 48,338     US$ (291            
 

Federal Home Loan Bank Discount Notes

 

                                US$ 29,498           US$ 29,500     US$ 29,499     US$ 1              
 

Asset-backed securities

                         
 

Citibank Credit Card Issuance Trust

 

Financial assets at fair value through other comprehensive income

                    US$ 48,328           US$ 12,594           US$ 6,802     US$ 6,800     US$ 2           US$ 53,963  

 

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

 

- 75 -


TABLE 5

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

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

FOR THE THREE MONTHS ENDED MARCH 31, 2018

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

 

 

Company   Types of      

Transaction
Amount

(Foreign
Currencies in

            Nature of     Prior Transaction of Related Counter-party     Price   Purpose of   Other

Name

 

Property

 

Transaction Date

  Thousands)    

Payment Term

 

Counter-party

  Relationships     Owner     Relationships     Transfer Date     Amount    

Reference

 

Acquisition

 

Terms

                         

TSMC

  Fab  

March 10, 2017 to January 25, 2018

  $ 303,592    

Monthly settlement by the construction progress and acceptance

 

HSIEH KUN CO., LTD

    —         N/A       N/A       N/A       N/A    

Price comparison and price negotiation

 

Manufacturing purpose

  None
  Fab  

March 17, 2017 to March 12, 2018

    301,341    

Monthly settlement by the construction progress and acceptance

 

Jer Yih Electrical Eng. Co.

    —         N/A       N/A       N/A       N/A    

Price comparison and price negotiation

 

Manufacturing purpose

  None
  Fab  

March 21, 2017 to January 8, 2018

    302,101    

Monthly settlement by the construction progress and acceptance

 

TRUSVAL TECHNOLOGY CO., LTD.

    —         N/A       N/A       N/A       N/A    

Price comparison and price negotiation

 

Manufacturing purpose

  None
  Fab  

April 10, 2017 to March 30, 2018

    382,672    

Monthly settlement by the construction progress and acceptance

 

M+W High Tech Project Taiwan Co., Ltd.

    —         N/A       N/A       N/A       N/A    

Price comparison and price negotiation

 

Manufacturing purpose

  None
  Fab  

April 25, 2017 to March 30, 2018

    559,250    

Monthly settlement by the construction progress and acceptance

 

YANKEY ENGINEERING CO., LTD.

    —         N/A       N/A       N/A       N/A    

Price comparison and price negotiation

 

Manufacturing purpose

  None
  Fab  

May 25, 2017 to March 29, 2018

    303,552    

Monthly settlement by the construction progress and acceptance

 

MEGA UNION TECHNOLOGY INCORPORATED

    —         N/A       N/A       N/A       N/A    

Price comparison and price negotiation

 

Manufacturing purpose

  None
  Fab  

August 16, 2017 to March 26, 2018

    322,134    

Monthly settlement by the construction progress and acceptance

 

Air Liquide Far Eastern

    —         N/A       N/A       N/A       N/A    

Price comparison and price negotiation

 

Manufacturing purpose

  None
  Fab  

September 5, 2017 to March 8, 2018

    809,171    

Monthly settlement by the construction progress and acceptance

 

Uangyih-Tech Industrial Co., Ltd.

    —         N/A       N/A       N/A       N/A    

Price comparison and price negotiation

 

Manufacturing purpose

  None
  Fab  

September 14, 2017 to March 22, 2018

    784,003    

Monthly settlement by the construction progress and acceptance

 

Siemens Ltd.

    —         N/A       N/A       N/A       N/A    

Price comparison and price negotiation

 

Manufacturing purpose

  None

(Continued)

 


Company   Types of      

Transaction
Amount

(Foreign
Currencies in

            Nature of   Prior Transaction of Related Counter-party   Price   Purpose of   Other

Name

 

Property

 

Transaction Date

  Thousands)    

Payment Term

 

Counter-party

  Relationships   Owner   Relationships   Transfer Date   Amount  

Reference

 

Acquisition

 

Terms

                         

TSMC

  Fab  

November 9, 2017 to March 16, 2018

    300,598    

Monthly settlement by the construction progress and acceptance

 

MARKETECH INTERNATIONAL CORP.

  —     N/A   N/A   N/A   N/A  

Price comparison and price negotiation

 

Manufacturing purpose

  None
  Fab  

December 5, 2017 to March 5, 2018

    300,150    

Monthly settlement by the construction progress and acceptance

 

UNITED INTEGRATED SERVICES CO., LTD.

  —     N/A   N/A   N/A   N/A  

Price comparison and price negotiation

 

Manufacturing purpose

  None
  Fab  

December 26, 2017 to February 13, 2018

    525,172    

Monthly settlement by the construction progress and acceptance

 

ABB Ltd.

  —     N/A   N/A   N/A   N/A  

Price comparison and price negotiation

 

Manufacturing purpose

  None
  Fab  

January 4, 2018

    747,551    

Monthly settlement by the construction progress and acceptance

 

KEDGE Construction Co., Ltd.

  —     N/A   N/A   N/A   N/A  

Price comparison and price negotiation

 

Manufacturing purpose

  None
  Fab  

February 5, 2018 to March 22, 2018

    2,067,841    

Monthly settlement by the construction progress and acceptance

 

L&K ENGINEERING CO.,LTD.

  —     N/A   N/A   N/A   N/A  

Price comparison and price negotiation

 

Manufacturing purpose

  None

(Concluded)

 

- 76 -


TABLE 6

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

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

FOR THE THREE MONTHS ENDED MARCH 31, 2018

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

 

 

Company Name

 

Related Party

 

Nature of Relationships

 

Transaction Details

  Abnormal Transaction     Notes/Accounts
Payable or
Receivable
    Note  
     

Purchases/ Sales

  Amount
(Foreign Currencies
in Thousands)
    % to
Total
   

Payment Terms

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

TSMC

 

TSMC North America

  Subsidiary   Sales   $ 152,751,762       59    

Net 30 days from invoice date (Note)

          Note     $ 73,470,052       70    
 

GUC

  Associate   Sales     1,592,532       1    

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

                843,572       1    
 

TSMC China

  Subsidiary   Purchases     4,524,097       22    

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

                (1,360,751     5    
 

WaferTech

  Indirect subsidiary   Purchases     1,984,763       10    

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

                (1,259,891     4    
 

VIS

  Associate   Purchases     1,311,213       7    

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

                (452,091     2    
 

SSMC

  Associate   Purchases     912,035       5    

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

                (358,899     1    

TSMC North America

 

GUC

  Associate of TSMC   Sales    

(US$

505,383

17,233

 

       

Net 30 days from invoice date

                275,688          
                  (US$ 9,476    

 

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.

 

- 77 -


TABLE 7

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

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

MARCH 31, 2018

(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

   $ 74,240,350        49      $ 1,450,406             $ 11,273,836      $  
  

TSMC Nanjing

  

Subsidiary

     1,201,519        Note 2                              
  

GUC

  

Associate

     843,572        46        301,502               317,927         

TSMC China

  

TSMC Nanjing

  

The same parent company

    

(RMB

22,122,110

4,763,282

 

     Note 2                              
                       
  

TSMC

  

Parent company

     1,360,751        28                              
         (RMB 293,418               

WaferTech

  

TSMC

  

The ultimate parent of the Company

    

(US$

1,259,891

43,305

 

     59       

(US$

634,996

21,826

 

           

(US$

634,996

21,826

 

      

TSMC Technology

  

TSMC

  

The ultimate parent of the Company

    

(US$

280,077

9,627

 

     Note 2                              

TSMC North America

  

GUC

  

Associate of TSMC

    

(US$

275,912

9,484

 

     47       

(US$

38,839

1,335

 

           

(US$

53,124

1,826

 

      

TSMC Japan

  

TSMC

  

Parent company

     103,541        Note 2                              
         (JPY 377,062               

 

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.

 

- 78 -


TABLE 8

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

INTERCOMPANY RELATIONSHIPS AND SIGNIFICANT INTERCOMPANY TRANSACTIONS

FOR THE THREE MONTHS ENDED MARCH 31, 2018

(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 sales of goods

   $ 152,751,762               62%  
           

Receivables from related parties

     73,470,052               4%  
           

Other receivables from related parties

     770,298                
      TSMC China      1     

Purchases

     4,524,097               2%  
           

Payables to related parties

     1,360,751                
      TSMC Nanjing      1     

Proceeds from disposal of property, plant and equipment

     1,892,937               1%  
           

Other receivables from related parties

     1,201,519                
      WaferTech      1     

Purchases

     1,984,763               1%  
           

Payables to related parties

     1,259,891                
      TSMC Technology      1     

Research and development expenses

     489,653                
           

Payables to related parties

     280,077                
      TSMC Europe      1     

Marketing expenses - commission

     116,994                
      TSMC Japan      1     

Payables to related parties

     103,541                

1

   TSMC China    TSMC Nanjing      3     

Other receivables from related parties

     22,122,110               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.

 

- 79 -


TABLE 9

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

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

FOR THE THREE MONTHS ENDED MARCH 31, 2018

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

 

 

                Original Investment Amount     Balance as of March 31, 2018     Net Income    

Share of

Profits/Losses

     

Investor
Company

 

Investee

Company

 

Location

 

Main Businesses
and Products

  March 31,
2018
(Foreign
Currencies in
Thousands)
    December 31,
2017
(Foreign
Currencies in
Thousands)
    Shares (In
Thousands)
    Percentage of
Ownership
    Carrying
Value

(Foreign
Currencies in
Thousands)
    (Losses) of the
Investee
(Foreign
Currencies in
Thousands)
    of Investee
(Note 1)
(Foreign
Currencies in
Thousands)
   

Note

                     

TSMC

  TSMC Global   Tortola, British Virgin Islands  

Investment activities

  $ 352,072,509     $ 292,890,229       11       100     $ 362,900,046     $ 1,848,060     $ 1,848,060     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       49,539,919       482,623       482,623     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       8,860,765       1,147,920       323,868     Associate
  SSMC   Singapore  

Manufacturing and selling of integrated circuits and other semiconductor devices

    5,120,028       5,120,028       314       39       5,923,979       908,118       352,259     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       4,701,334       24,829       21,586     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       3,961,984       37,634       37,634     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       2,246,049       (171,371     (64,815   Associate
  GUC   Hsin-Chu, Taiwan  

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

    386,568       386,568       46,688       35       1,255,013       206,599       71,979     Associate
  TSMC Europe   Amsterdam, the Netherlands  

Customer service and supporting activities

    15,749       15,749             100       423,206       10,528       10,528     Subsidiary
  VTAF II   Cayman Islands  

Investing in new start-up technology companies

    412,831       412,831             98       297,778       (1,497     (1,467   Subsidiary
  VTAF III   Cayman Islands  

Investing in new start-up technology companies

    1,318,885       1,318,885             98       147,653       (3,221     (3,156   Subsidiary
  TSMC Japan   Yokohama, Japan  

Customer service and supporting activities

    83,760       83,760       6       100       136,715       1,488       1,488     Subsidiary
  TSMC Korea   Seoul, Korea  

Customer service and supporting activities

    13,656       13,656       80       100       38,960       311       311     Subsidiary
  TSMC Solar Europe GmbH   Hamburg, Germany  

Selling of solar related products and providing customer service

    25,266       25,266       1       100       (20,500     (15     (15   Subsidiary
                     

TSMC Partners

  TSMC Development   Delaware, U.S.A  

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

    17,075,811       17,075,811             100       26,231,490       358,287       Note 2     Subsidiary
        (US$ 586,939   (US$ 586,939       (US$ 901,643   (US$ 12,217    
  TSMC Technology   Delaware, U.S.A  

Engineering support activities

    415,507       415,507             100       526,830       18,256       Note 2     Subsidiary
        (US$ 14,282   (US$ 14,282       (US$ 18,108   (US$ 623    
  TSMC Canada   Ontario, Canada  

Engineering support activities

    66,914       66,914       2,300       100       181,599       7,157       Note 2     Subsidiary
        (US$ 2,300   (US$ 2,300       (US$ 6,242   (US$ 244    
  ISDF   Cayman Islands  

Investing in new start-up technology companies

    13,825       13,825       583       97       483             Note 2     Subsidiary
        (US$ 475   (US$ 475       (US$ 17      
  ISDF II   Cayman Islands  

Investing in new start-up technology companies

                9,299       97             (6,781     Note 2     Subsidiary
                  (US$ (231 ))     

VTAF III

  Growth Fund   Cayman Islands  

Investing in new start-up technology companies

    62,660       62,660             100       45,159       (293     Note 2     Subsidiary
        (US$ 2,154   (US$ 2,154       (US$ 1,552   (US$ (10 ))     
  Mutual-Pak   New Taipei, Taiwan  

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

   

(US$

46,355

1,593

 

   

(US$

46,355

1,593

 

    4,693       39      

(US$

21,711

746

 

   

(US$

(3,849

(131


)) 

    Note 2     Associate

 

(Continued)

 

- 80 -


                Original Investment Amount     Balance as of March 31, 2018     Net Income    

Share of

Profits/Losses

     

Investor
Company

 

Investee

Company

 

Location

 

Main Businesses
and Products

  March 31,
2018
(Foreign
Currencies in
Thousands)
    December 31,
2017
(Foreign
Currencies in
Thousands)
    Shares (In
Thousands)
    Percentage of
Ownership
    Carrying
Value

(Foreign
Currencies in
Thousands)
    (Losses) of the
Investee
(Foreign
Currencies in
Thousands)
    of Investee
(Note 1)
(Foreign
Currencies in
Thousands)
   

Note

TSMC Development

  WaferTech   Washington, U.S.A  

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

  $     $       293,637       100     $

(US$

4,953,422

170,262

 

  $

(US$

284,221

9,692

 

    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)

 

- 81 -


TABLE 10

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

INFORMATION ON INVESTMENT IN MAINLAND CHINA

FOR THREE MONTHS ENDED MARCH 31, 2018

(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, 2018

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

March 31,
2018 (US$ in
Thousands)
    Net Income
(Losses) of the
Investee
Company
    Percentage of
Ownership
    Share of
Profits/Losses
    Carrying
Amount

as of
March 31,
2018
    Accumulated
Inward
Remittance of
Earnings as
of

March 31,
2018
 
          Outflow
(US$ in
Thousands)
    Inflow              
                       

TSMC China

 

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

  $

(RMB

18,939,667

4,502,080

 

    Note 1     $

(US$

18,939,667

596,000

 

  $     $     $

(US$

18,939,667

596,000

 

  $ 1,349,349       100%     $

 

1,348,879

(Note 2

 

  $ 53,431,777     $  

TSMC Nanjing

 

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

   

(RMB

30,521,412

6,650,119

 

    Note 1      

(US$

28,160,092

920,000

 

   

(US$

2,361,320

80,000

 

         

(US$

30,521,412

1,000,000

 

    (1,746,699     100%      

(1,746,699

(Note 2


    27,651,586        

 

Accumulated Investment in Mainland China
as of March 31, 2018
(US$ in Thousands)
   Investment Amounts Authorized by
Investment Commission, MOEA
(US$ in Thousands)
     Upper Limit on Investment  
     
$        49,461,079

(US$      1,596,000)

    

$       119,412,667

(US$      3,596,000)

 

 

     Note 3  

 

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

 

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