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 November 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: November 16, 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 Nine Months Ended September 30, 2018 and 2017 and Independent Auditors’ Review Report

---

INDEPENDENT AUDITORS’ REVIEW REPORT

The Board of Directors and Shareholders

Taiwan Semiconductor Manufacturing Company Limited

Introduction

We have reviewed the accompanying consolidated balance sheets of Taiwan Semiconductor Manufacturing Company Limited and its subsidiaries (collectively, the “Company”) as of September 30, 2018 and 2017, the related consolidated statements of comprehensive income for the three months ended September 30, 2018 and 2017 and for the nine months ended September 30, 2018 and 2017, the consolidated statements of changes in equity and cash flows for the nine months then ended, and the related notes to the consolidated financial statements, including a summary of significant accounting policies (collectively referred to as the “consolidated financial statements”). Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and 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 consolidated financial position of the Company as of September 30, 2018 and 2017, its consolidated financial performance for the three months ended September 30, 2018 and 2017, and its consolidated financial performance and its consolidated cash flows for the nine months ended September 30, 2018 and 2017 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.

 

Deloitte & Touche

Taipei, Taiwan

Republic of China

November 13, 2018

Notice to Readers

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

 

 

		September 30, 2018 (Reviewed)								December 31, 2017 (Audited)								September 30, 2017 (Reviewed)
		Amount				%				Amount				%				Amount				%
ASSETS
CURRENT ASSETS
Cash and cash equivalents (Note 6)		$	488,732,121				25			$	553,391,696				28			$	408,077,695				22
Financial assets at fair value through profit or loss (Note 7)			4,057,240				—				569,751				—				1,125,668				—
Financial assets at fair value through other comprehensive income (Note 8)			99,214,066				5				—				—				—				—
Available-for-sale financial assets (Note 9)			—				—				93,374,153				5				84,953,011				5
Held-to-maturity financial assets (Note 10)			—				—				1,988,385				—				7,521,216				—
Financial assets at amortized cost (Note 11)			11,891,845				1				—				—				—				—
Hedging derivative financial assets (Note 13)			—				—				34,394				—				98,879				—
Hedging financial assets (Note 13)			124,242				—				—				—				—				—
Notes and accounts receivable, net (Note 14)			127,782,905				7				121,133,248				6				117,649,258				7
Receivables from related parties (Note 34)			1,757,073				—				1,184,124				—				1,076,438				—
Other receivables from related parties (Note 34)			64,385				—				171,058				—				165,929				—
Inventories (Note 15 and 38)			105,336,576				5				73,880,747				4				73,893,879				4
Other financial assets (Note 35)			15,178,774				1				7,253,114				—				5,209,635				—
Other current assets (Note 19)			5,084,478				—				4,222,440				—				5,090,170				—
Total current assets			859,223,705				44				857,203,110				43				704,861,778				38
NONCURRENT ASSETS
Financial assets at fair value through other comprehensive income (Note 8)			5,701,354				—				—				—				—				—
Held-to-maturity financial assets (Note 10)			—				—				18,833,329				1				18,899,177				1
Financial assets at amortized cost (Note 11)			7,470,742				—				—				—				—				—
Financial assets carried at cost (Note 12)			—				—				4,874,257				—				4,986,046				—
Investments accounted for using equity method (Note 16)			16,630,670				1				17,861,488				1				17,018,500				1
Property, plant and equipment (Note 17)			1,048,516,835				53				1,062,542,322				53				1,065,756,867				58
Intangible assets (Note 18)			13,989,184				1				14,175,140				1				14,841,399				1
Deferred income tax assets (Note 4)			14,697,325				1				12,105,463				1				11,237,149				1
Refundable deposits			1,968,751				—				1,283,414				—				1,241,028				—
Other noncurrent assets (Note 19)			1,690,222				—				2,983,120				—				2,582,438				—
Total noncurrent assets			1,110,665,083				56				1,134,658,533				57				1,136,562,604				62
TOTAL		$	1,969,888,788				100			$	1,991,861,643				100			$	1,841,424,382				100
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Short-term loans (Notes 20 and 32)		$	73,974,625				4			$	63,766,850				3			$	54,430,200				3
Financial liabilities at fair value through profit or loss (Note 7)			240,620				—				26,709				—				251,212				—
Hedging derivative financial liabilities (Note 13)			—				—				15,562				—				7,545				—
Hedging financial liabilities (Note 13)			3,750				—				—				—				—				—
Accounts payable			28,733,773				1				28,412,807				1				27,545,477				1
Payables to related parties (Note 34)			1,571,303				—				1,656,356				—				1,442,029				—
Salary and bonus payable			11,937,583				1				14,254,871				1				12,304,052				1
Accrued profit sharing bonus to employees and compensation to directors and supervisors (Notes 24 and 31)			17,789,768				1				23,419,135				1				17,067,133				1
Payables to contractors and equipment suppliers			58,590,057				3				55,723,774				3				47,975,461				3
Income tax payable (Note 4)			39,157,673				2				33,479,311				2				20,663,395				1
Provisions (Note 21)			—				—				13,961,787				1				14,123,509				1
Long-term liabilities - current portion (Note 22)			34,900,000				2				58,401,122				3				59,071,057				3
Accrued expenses and other current liabilities (Notes 23, 25, 32 and 34)			54,731,050				3				65,588,396				3				43,641,234				2
Total current liabilities			321,630,202				17				358,706,680				18				298,522,304				16
NONCURRENT LIABILITIES
Bonds payable (Notes 22 and 32)			56,900,000				3				91,800,000				5				91,800,000				5
Long-term bank loans			—				—				—				—				14,520				—
Deferred income tax liabilities (Note 4)			254,887				—				302,205				—				120,360				—
Net defined benefit liability (Note 4)			8,788,142				—				8,850,704				1				8,574,626				—
Guarantee deposits (Notes 23 and 32)			4,445,580				—				7,586,790				—				9,243,250				1
Others			2,039,976				—				1,855,621				—				1,736,633				—
Total noncurrent liabilities			72,428,585				3				110,395,320				6				111,489,389				6
Total liabilities			394,058,787				20				469,102,000				24				410,011,693				22
EQUITY ATTRIBUTABLE TO SHAREHOLDERS OF THE PARENT
Capital stock (Note 24)			259,303,805				13				259,303,805				13				259,303,805				14
Capital surplus (Note 24)			56,311,659				3				56,309,536				3				56,281,271				3
Retained earnings (Note 24)
Appropriated as legal capital reserve			276,033,811				14				241,722,663				12				241,722,663				13
Appropriated as special capital reserve			26,907,527				1				—				—				—				—
Unappropriated earnings			974,796,321				50				991,639,347				49				892,598,197				49
			1,277,737,659				65				1,233,362,010				61				1,134,320,860				62
Others (Note 24)			(18,181,209	)			(1	)			(26,917,818	)			(1	)			(19,189,089	)			(1	)
Equity attributable to shareholders of the parent			1,575,171,914				80				1,522,057,533				76				1,430,716,847				78
NON - CONTROLLING INTERESTS			658,087				—				702,110				—				695,842				—
Total equity			1,575,830,001				80				1,522,759,643				76				1,431,412,689				78
TOTAL		$	1,969,888,788				100			$	1,991,861,643				100			$	1,841,424,382				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)

 

 

		For the Three Months Ended September 30																For the Nine Months Ended September 30
		2018								2017								2018								2017
		Amount				%				Amount				%				Amount				%				Amount				%
NET REVENUE (Notes 25, 34 and 40)		$	260,347,882				100			$	252,107,345				100			$	741,703,364				100			$	699,876,957				100
COST OF REVENUE (Notes 15, 31, 34 and 38)			136,967,039				53				126,230,664				50				381,759,723				51				343,761,367				49
GROSS PROFIT BEFORE REALIZED (UNREALIZED) GROSS PROFIT ON SALES TO ASSOCIATES			123,380,843				47				125,876,681				50				359,943,641				49				356,115,590				51
REALIZED (UNREALIZED) GROSS PROFIT ON SALES TO ASSOCIATES			(14,203	)			—				3,467				—				(188,528	)			—				(37,152	)			—
GROSS PROFIT			123,366,640				47				125,880,148				50				359,755,113				49				356,078,438				51
OPERATING EXPENSES (Notes 31 and 34)
Research and development			21,886,199				8				21,045,439				8				62,206,346				8				59,515,288				8
General and administrative			4,656,730				2				5,003,679				2				14,579,032				2				15,178,441				2
Marketing			1,585,523				—				1,487,598				1				4,511,592				1				4,366,284				1
Total operating expenses			28,128,452				10				27,536,716				11				81,296,970				11				79,060,013				11
OTHER OPERATING INCOME AND EXPENSES, NET (Note 31)			6,993				—				(286,999	)			—				(1,957,870	)			(1	)			(354,201	)			—
INCOME FROM OPERATIONS (Note 40)			95,245,181				37				98,056,433				39				276,500,273				37				276,664,224				40
NON-OPERATING INCOME AND EXPENSES
Share of profits of associates			997,827				—				751,618				—				1,946,111				—				2,036,879				—
Other income (Note 26)			3,817,473				1				2,128,556				1				10,701,950				2				6,859,745				1
Foreign exchange gain (loss), net (Note 39)			444,202				—				(462,310	)			—				2,097,838				—				(914,048	)			—
Finance costs (Note 27)			(739,068	)			—				(843,214	)			—				(2,175,318	)			—				(2,499,791	)			—
Other gains and losses, net (Note 28)			(868,673	)			—				887,081				—				(2,642,683	)			—				2,311,121				—
Total non-operating income and expenses			3,651,761				1				2,461,731				1				9,927,898				2				7,793,906				1
INCOME BEFORE INCOME TAX			98,896,942				38				100,518,164				40				286,428,171				39				284,458,130				41
INCOME TAX EXPENSE (Notes 4 and 29)			9,798,870				4				10,568,936				4				35,249,150				5				40,617,342				6
NET INCOME			89,098,072				34				89,949,228				36				251,179,021				34				243,840,788				35
OTHER COMPREHENSIVE INCOME (LOSS) (Notes 24 and 29)
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			(418,111	)			—				—				—				(1,306,987	)			—				—				—
Gain on hedging instruments			8,544				—				—				—				23,887				—				—				—
Share of other comprehensive loss of associates			(9,719	)			—				—				—				(4,106	)			—				—				—
Income tax benefit related to items that will not be reclassified subsequently			30,458				—				—				—				66,843				—				—				—
			(388,828	)			—				—				—				(1,220,363	)			—				—				—
Items that may be reclassified subsequently to profit or loss:
Exchange differences arising on translation of foreign operations			(3,457,786	)			(1	)			(882,654	)			(1	)			10,375,886				1				(20,772,474	)			(3	)
Changes in fair value of available-for-sale financial assets			—				—				(43,684	)			—				—				—				(108,757	)			—
Cash flow hedges			—				—				19,522				—				—				—				38,519				—
Unrealized loss on investments in debt instruments at fair value through other comprehensive income			(30,572	)			—				—				—				(1,040,342	)			—				—				—
Share of other comprehensive income (loss) of associates			(3,820	)			—				1,710				—				73,283				—				(56,920	)			—
Income tax benefit related to items that may be reclassified subsequently			—				—				1,192				—				—				—				53,633				—
			(3,492,178	)			(1	)			(903,914	)			(1	)			9,408,827				1				(20,845,999	)			(3	)
Other comprehensive income (loss) for the period, net of income tax			(3,881,006	)			(1	)			(903,914	)			(1	)			8,188,464				1				(20,845,999	)			(3	)
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD		$	85,217,066				33			$	89,045,314				35			$	259,367,485				35			$	222,994,789				32
NET INCOME ATTRIBUTABLE TO:
Shareholders of the parent		$	89,071,628				34			$	89,925,437				36			$	251,146,789				34			$	243,825,354				35
Non-controlling interests			26,444				—				23,791				—				32,232				—				15,434				—
		$	89,098,072				34			$	89,949,228				36			$	251,179,021				34			$	243,840,788				35
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO:
Shareholders of the parent		$	85,190,350				33			$	89,029,620				35			$	259,332,283				35			$	222,984,427				32
Non-controlling interests			26,716				—				15,694				—				35,202				—				10,362				—
		$	85,217,066				33			$	89,045,314				35			$	259,367,485				35			$	222,994,789				32

 

(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)

 

 

		For the Three Months Ended September 30								For the Nine Months Ended September 30
		2018				2017				2018				2017
		Income Attributable to Shareholders of the Parent				Income Attributable to Shareholders of the Parent				Income Attributable to Shareholders of the Parent				Income Attributable to Shareholders of the Parent
EARNINGS PER SHARE (NT$, Note 30)
Basic earnings per share		$	3.44			$	3.47			$	9.69			$	9.40
Diluted earnings per share		$	3.44			$	3.47			$	9.69			$	9.40

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

 

(Concluded)

 

- 5 -

---

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

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

(Reviewed, Not Audited)

 

 

		Equity Attributable to Shareholders of the Parent
																														Others
		Capital Stock - Common Stock												Retained Earnings																Foreign				Unrealized				Unrealized Gain (Loss) on Financial Assets at Fair Value Through				Cash								Unearned
		Shares (In Thousands)				Amount				Capital Surplus				Legal Capital Reserve				Special Capital Reserve				Unappropriated Earnings				Total				Currency Translation Reserve				Gain (Loss) from Available-for-sale Financial Assets				Other Comprehensive Income				Flow Hedges Reserve				Gain (Loss) on Hedging Instruments				Stock-Based Employee Compensation				Total				Total				Non-controlling Interests				Total 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
Appropriations of prior year’s earnings
Legal capital reserve			—				—				—				34,311,148				—				(34,311,148	)			—				—				—				—				—				—				—				—				—				—				—
Special capital reserve			—				—				—				—				26,907,527				(26,907,527	)			—				—				—				—				—				—				—				—				—				—				—
Cash dividends to shareholders - NT$8 per share			—				—				—				—				—				(207,443,044	)			(207,443,044	)			—				—				—				—				—				—				—				(207,443,044	)			—				(207,443,044	)
Total			—				—				—				34,311,148				26,907,527				(268,661,719	)			(207,443,044	)			—				—				—				—				—				—				—				(207,443,044	)			—				(207,443,044	)
Net income for the nine months ended September 30, 2018			—				—				—				—				—				251,146,789				251,146,789				—				—				—				—				—				—				—				251,146,789				32,232				251,179,021
Other comprehensive income (loss) for the nine months ended September 30, 2018, net of income tax			—				—				—				—				—				—				—				10,448,911				—				(2,287,670	)			—				24,253				—				8,185,494				8,185,494				2,970				8,188,464
Total comprehensive income (loss) for the nine months ended September 30, 2018			—				—				—				—				—				251,146,789				251,146,789				10,448,911				—				(2,287,670	)			—				24,253				—				8,185,494				259,332,283				35,202				259,367,485
Disposal of investments in equity instruments at fair value through other comprehensive income			—				—				—				—				—				(884,415	)			(884,415	)			—				—				884,415				—				—				—				884,415				—				—				—
Basis adjustment for loss on hedging instruments			—				—				—				—				—				—				—				—				—				—				—				(26,936	)			—				(26,936	)			(26,936	)			—				(26,936	)
Adjustments to share of changes in equities of associates			—				—				(288	)			—				—				—				—				—				—				—				—				—				4,477				4,477				4,189				—				4,189
From share of changes in equities of subsidiaries			—				—				2,371				—				—				—				—				—				—				—				—				—				—				—				2,371				(2,371	)			—
Donation from shareholders			—				—				40				—				—				—				—				—				—				—				—				—				—				—				40				6				46
Decrease in non-controlling interests			—				—				—				—				—				—				—				—				—				—				—				—				—				—				—				(77,202	)			(77,202	)
BALANCE, SEPTEMBER 30, 2018			25,930,380			$	259,303,805			$	56,311,659			$	276,033,811			$	26,907,527			$	974,796,321			$	1,277,737,659			$	(16,248,769	)		$	—			$	(1,928,170	)		$	—			$	1,543			$	(5,813	)		$	(18,181,209	)		$	1,575,171,914			$	658,087			$	1,575,830,001
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
Appropriations of prior year’s earnings
Legal capital reserve			—				—				—				33,424,718				—				(33,424,718	)			—				—				—				—				—				—				—				—				—				—				—
Cash dividends to shareholders - NT$7 per share			—				—				—				—				—				(181,512,663	)			(181,512,663	)			—				—				—				—				—				—				—				(181,512,663	)			—				(181,512,663	)
Total			—				—				—				33,424,718				—				(214,937,381	)			(181,512,663	)			—				—				—				—				—				—				—				(181,512,663	)			—				(181,512,663	)
Net income for the nine months ended September 30, 2017			—				—				—				—				—				243,825,354				243,825,354				—				—				—				—				—				—				—				243,825,354				15,434				243,840,788
Other comprehensive income (loss) for the nine months ended September 30, 2017, net of income tax			—				—				—				—				—				—				—				(20,831,019	)			(43,804	)			—				33,896				—				—				(20,840,927	)			(20,840,927	)			(5,072	)			(20,845,999	)
Total comprehensive income (loss) for the nine months ended September 30, 2017			—				—				—				—				—				243,825,354				243,825,354				(20,831,019	)			(43,804	)			—				33,896				—				—				(20,840,927	)			222,984,427				10,362				222,994,789
Adjustments to share of changes in equities of associates			—				—				6,206				—				—				—				—				—				—				—				—				—				(12,145	)			(12,145	)			(5,939	)			—				(5,939	)
From share of changes in equities of subsidiaries			—				—				2,761				—				—				—				—				—				—				—				—				—				—				—				2,761				(2,761	)			—
Decrease in non-controlling interests			—				—				—				—				—				—				—				—				—				—				—				—				—				—				—				(114,624	)			(114,624	)
BALANCE, SEPTEMBER 30, 2017			25,930,380			$	259,303,805			$	56,281,271			$	241,722,663			$	—			$	892,598,197			$	1,134,320,860			$	(19,169,782	)		$	(41,163	)		$	—			$	34,001			$	—			$	(12,145	)		$	(19,189,089	)		$	1,430,716,847			$	695,842			$	1,431,412,689

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

 

- 6 -

---

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands of New Taiwan Dollars)

(Reviewed, Not Audited)

 

 

		Nine Months Ended September 30
		2018				2017
CASH FLOWS FROM OPERATING ACTIVITIES
Income before income tax		$	286,428,171			$	284,458,130
Adjustments for:
Depreciation expense			213,318,950				186,131,944
Amortization expense			3,197,428				3,197,293
Reversal of expected credit losses on investments in debt instruments			(2,279	)			—
Finance costs			2,175,318				2,499,791
Share of profits of associates			(1,946,111	)			(2,036,879	)
Interest income			(10,543,592	)			(6,714,157	)
Loss on disposal or retirement of property, plant and equipment, net			789,005				251,319
Gain on disposal of intangible assets, net			(436	)			—
Impairment loss on property, plant and equipment			488,336				—
Impairment loss on intangible assets			—				13,520
Impairment loss on financial assets			—				15,941
Loss on financial instruments at fair value through profit or loss, net			244,799				—
Loss on disposal of investments in debt instruments at fair value through other comprehensive income, net			774,784				—
Gain on disposal of available-for-sale financial assets, net			—				(266,986	)
Gain on disposal of financial assets carried at cost, net			—				(12,809	)
Unrealized gross profit on sales to associates			188,528				37,152
Loss (gain) on foreign exchange, net			1,863,969				(6,624,087	)
Dividend income			(158,358	)			(145,588	)
Loss arising from fair value hedges, net			2,494				32,058
Changes in operating assets and liabilities:
Financial instruments at fair value through profit or loss			639,804				5,260,911
Notes and accounts receivable, net			(10,902,779	)			5,990,086
Receivables from related parties			(572,949	)			(106,879	)
Other receivables from related parties			106,673				(19,141	)
Inventories			(31,475,575	)			(25,211,646	)
Other financial assets			(5,641,723	)			604,831
Other current assets			(247,466	)			(1,639,813	)
Other noncurrent assets			139,107				(890,881	)
Accounts payable			341,340				1,452,987
Payables to related parties			(85,053	)			179,855
Salary and bonus payable			(2,317,288	)			(1,377,765	)
Accrued profit sharing bonus to employees and compensation to directors and supervisors			(5,629,367	)			(5,826,873	)
Accrued expenses and other current liabilities			(24,443,396	)			9,167,145
Provisions			—				(3,899,652	)
Net defined benefit liability			(62,562	)			23,218
Cash generated from operations			416,669,772				444,543,025
Income taxes paid			(32,088,012	)			(63,351,167	)
Net cash generated by operating activities			384,581,760				381,191,858

(Continued)

 

- 7 -

---

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands of New Taiwan Dollars)

(Reviewed, Not Audited)

 

 

		Nine Months Ended September 30
		2018				2017
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions of:
Financial instruments at fair value through profit or loss - debt instruments		$	(306,309	)		$	—
Financial assets at fair value through other comprehensive income			(72,383,276	)			—
Available-for-sale financial assets			—				(66,661,656	)
Held-to-maturity financial assets			—				(1,695,771	)
Financial assets carried at cost			—				(1,190,157	)
Property, plant and equipment			(201,476,971	)			(269,408,108	)
Intangible assets			(2,940,549	)			(3,677,303	)
Proceeds from disposal or redemption of:
Financial instruments at fair value through profit or loss - debt instruments			286,248				—
Financial assets at fair value through other comprehensive income			63,929,332				—
Available-for-sale financial assets			—				45,952,054
Held-to-maturity financial assets			—				12,510,000
Financial assets at amortized cost			2,032,442				—
Financial assets carried at cost			—				58,237
Property, plant and equipment			135,507				253,267
Intangible assets			492				—
Proceeds from return of capital of investments in equity instruments at fair value through other comprehensive income			127,878				—
Proceeds from return of capital of financial assets carried at cost			—				14,828
Derecognition of hedging derivative financial instruments			—				(35,790	)
Derecognition of hedging financial instruments			199,730				—
Interest received			10,612,192				6,776,756
Proceeds from government grants - property, plant and equipment			—				436,587
Other dividends received			158,358				145,588
Dividends received from investments accounted for using equity method			3,262,910				4,245,772
Refundable deposits paid			(2,227,335	)			(1,084,028	)
Refundable deposits refunded			1,581,399				247,027
Net cash used in investing activities			(197,007,952	)			(273,112,697	)

 

(Continued)

 

- 8 -

---

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands of New Taiwan Dollars)

(Reviewed, Not Audited)

 

 

		Nine Months Ended September 30
		2018				2017
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in short-term loans		$	9,626,705			$	(290,110	)
Repayment of bonds			(58,024,900	)			(38,100,000	)
Repayment of long-term bank loans			—				(7,260	)
Interest paid			(2,796,082	)			(2,907,017	)
Guarantee deposits received			1,253,537				4,400,240
Guarantee deposits refunded			(1,947,272	)			(6,810,329	)
Cash dividends			(207,443,044	)			(181,512,663	)
Donation from shareholders			46				—
Decrease in non-controlling interests			(77,202	)			(114,624	)
Net cash used in financing activities			(259,408,212	)			(225,341,763	)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS			7,174,829				(15,913,536	)
NET DECREASE IN CASH AND CASH EQUIVALENTS			(64,659,575	)			(133,176,138	)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD			553,391,696				541,253,833
CASH AND CASH EQUIVALENTS, END OF PERIOD		$	488,732,121			$	408,077,695

 

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

 

- 9 -

---

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 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 November 13, 2018.

 

3.	APPLICATION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS

 

a.

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

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

 

1)

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.

 

- 10 -

---

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:

 

 

 

 

- 11 -

---

(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 or loss on available-for-sale financial assets of NT$228,304 thousand is reclassified to increase other equity-unrealized gain or 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 or 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 or 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 or 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 or loss on available-for-sale financial assets of NT$434,403 thousand is reclassified to decrease other equity-unrealized gain or 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 or 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.

 

- 12 -

---

(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 or loss on financial assets at FVTOCI of NT$23,616 thousand, a decrease in other equity- unrealized gain or loss on available-for-sale financial assets of NT$2,110 thousand and an increase in retained earnings of NT$33,984 thousand on January 1, 2018.

Hedge accounting

The Company prospectively applies 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:

 

 

- 13 -

---

(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 current assets) and adjust related assets and equity accordingly.

 

(2)

Prior to the application of IFRS 15, the Company recognized the estimation of sales returns and allowance as provisions. Under IFRS 15, the Company recognizes such estimation as refund liability (classified under accrued expenses and other current liabilities).

The following table shows the amount affected in the current period by the application of IFRS 15 as compared to IAS 18:

Impact on Assets, Liabilities and Equity

 

Impact on Total Comprehensive Income

 

 

- 14 -

---

3)

Please refer to Note 32 for the disclosure of amendment to IAS 7 “Disclosure Initiative”

 

b.

Amendments to the Regulations Governing the Preparation of Financial Reports by Securities Issuers for application starting from 2019 and the IFRSs issued by IASB and endorsed by FSC with effective date starting 2019

 

 

Note 1:

Unless stated otherwise, the above New IFRSs are effective for annual periods beginning on or after their respective effective dates.

 

Note 2:

The FSC permits the election for early adoption of the amendments starting from 2018.

 

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.

Upon initial application of IFRS 16, if the Company is a lessee, it will 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. In the consolidated statements of comprehensive income, the Company will present the depreciation expense charged on the right-of-use asset and interest expense accrued on the lease liability under cost of revenue/operating expenses and finance costs, respectively; 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 will be classified within financing activities. Currently, payments under operating lease contracts are recognized as expenses on a straight-line basis. Cash flows for operating leases are classified within operating activities on the consolidated statements of cash flows.

Under initial application of IFRS 16, the Company anticipates applying retrospectively with the cumulative effect of this standard at the date of initial application, comparative information will not be restated. As of the date the accompanying consolidated financial statements were issued, the related effect will be disclosed when the Company completes the evaluation.

 

- 15 -

---

c.

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

 

 

Note 1:

The Company shall apply these amendments to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after January 1, 2020 and to asset acquisitions that occur on or after the beginning of that period.

 

Note 2:

The Company shall apply these amendments prospectively for annual reporting periods beginning on or after January 1, 2020.

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 aforementioned standards or interpretations. The related impact will be disclosed when the Company completes the evaluation.

 

4.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

 

- 16 -

---

The subsidiaries in the consolidated financial statements

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

 

 

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.

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.

 

- 17 -

---

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.

 

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.

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.

 

- 18 -

---

2017

Financial assets are classified into the following specified categories: Financial assets at FVTPL, available-for-sale financial assets, held-to-maturity 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.

 

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.

 

- 19 -

---

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.

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.

 

- 20 -

---

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.

 

c.

Derecognition of financial assets

2018

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

On derecognition of a financial asset at amortized cost in its entirety, the difference between the asset’s carrying amount and the sum of the consideration received and receivable is recognized in profit or loss. On derecognition of an investment in a debt instrument at FVTOCI, the difference between the asset’s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognized in other comprehensive income is recognized in profit or loss. However, on derecognition of an investment in an equity instrument at FVTOCI, the cumulative gain or loss that had been recognized in other comprehensive income is transferred directly to retained earnings, without recycling through profit or loss.

2017

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

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

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 and foreign currency deposits, 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.

 

- 23 -

---

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.

Please refer to Note 33 for information about the valuation techniques and inputs used in determining the fair value of various investments.

 

6.	CASH AND CASH EQUIVALENTS

 

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

 

 

- 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:

 

Investments in debt instruments at FVTOCI were classified as available-for-sale financial assets under IAS 39. Refer to Notes 3 and 9 for information relating to their reclassification and comparative information for 2017.

 

- 25 -

---

Outstanding cross currency swap contracts consisted of the following:

 

 

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

 

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

For the nine months ended September 30, 2018, the Company sold shares of stocks for NT$730,399 thousand mainly because the strategic purpose no longer exists and the non-publicly traded investee has been merged. The related other equity-unrealized gain or loss on financial assets at FVTOCI of NT$884,415 thousand were transferred to decrease retained earnings.

For dividends from equity investments designated as at FVTOCI recognized during the three months and nine months ended September 30, 2018, please refer to Note 26. All the amounts are related to investments held at the end of the reporting period.

As of September 30, 2018, the cumulative loss allowance for expected credit loss of NT$29,598 thousand is recognized under investments in debt instruments at FVTOCI. Refer to Note 33 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.

 

- 26 -

---

9.	AVAILABLE-FOR-SALE FINANCIAL ASSETS-2017

 

 

10.	HELD-TO-MATURITY FINANCIAL ASSETS-2017

 

 

11.	FINANCIAL ASSETS AT AMORTIZED COST-2018

 

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 33 for information relating to credit risk management and expected credit loss for financial assets at amortized cost.

 

- 27 -

---

12.	FINANCIAL ASSETS CARRIED AT COST-2017

The Company’s investment classified as financial assets carried at cost primarily consists of non-publicly traded equity investments. Since there is a wide range of estimated fair values of the Company’s investments in non-publicly traded equity investments, 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.

 

13.	HEDGING FINANCIAL INSTRUMENTS

2018

 

Fair value hedge

The Company entered into interest rate futures contracts, which are used to partially 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.

 

- 28 -

---

The following tables summarize the information relating to the hedges for interest rate risk as of September 30, 2018.

 

The effect for the nine months ended September 30, 2018 is detailed below:

 

Amount of hedge ineffectiveness recognized in profit or loss is classified under other gains and losses.

Cash flow hedge

The Company entered into forward exchange contracts and foreign currency deposits 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 foreign currency deposits and the value of 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 and foreign currency deposits. No other sources of ineffectiveness emerged from these hedging relationships.

 

- 29 -

---

The following tables summarize the information relating to the hedges for foreign currency risk as of September 30, 2018.

 

The effect for the nine months ended September 30, 2018 is detailed below:

 

For the nine months ended September 30, 2018, 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.

2017

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

 

 

- 30 -

---

The Company entered into interest rate futures contracts, which are used to partially 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:

 

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:

 

 

14.	NOTES AND ACCOUNTS RECEIVABLE, NET

 

The Company signed a contract with the bank to sell certain accounts receivable without recourse and transaction cost required. These accounts receivable are classified as at FVTOCI because they are held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets.

 

- 31 -

---

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

 

Movements of the loss allowance for accounts receivable

 

For the nine months ended September 30, 2018, the decrease in loss allowance was mainly due to the variations from accounts receivable balance of different risk levels.

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.

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 and the Company has obtained guarantee against certain receivables.

 

- 32 -

---

Aging analysis of notes and accounts receivable, net

 

Movements of the allowance for doubtful receivables

 

 

15.	INVENTORIES

 

Write-down of inventories to net realizable value (excluding computer virus outbreak losses) and reversal of write-down of inventories resulting from the increase in net realizable value were included in the cost of revenue, which were as follows. Please refer to computer virus outbreak losses in Note 38.

 

 

- 33 -

---

16.	INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD

Associates consisted of the following:

 

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.

 

 

- 34 -

---

17.	PROPERTY, PLANT AND EQUIPMENT

 

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.

In the second quarter of 2018, the Company recognized an impairment loss of NT$488,336 thousand for certain machinery and equipment that was assessed to have no future use, and the recoverable amount of certain machinery and equipment was nil. Such impairment loss was recognized in other operating income and expenses.

 

- 35 -

---

18. INTANGIBLE ASSETS

 

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.

 

- 36 -

---

19.	OTHER ASSETS

 

 

20.	SHORT-TERM LOANS

 

 

21.	PROVISIONS

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

 

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.

 

- 37 -

---

22.	BONDS PAYABLE

 

The major terms of overseas unsecured bonds are as follows:

 

 

23.	GUARANTEE DEPOSITS

 

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

 

24.

EQUITY

 

a.

Capital stock

 

 

- 38 -

---

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 September 30, 2018, 1,068,157 thousand ADSs of TSMC were traded on the NYSE. The number of common shares represented by the ADSs was 5,340,787 thousand shares (one ADS represents five common shares).

 

b.

Capital surplus

 

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 31.

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.

 

- 39 -

---

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 or loss from available-for-sale financial assets, gain or loss from changes in fair value of hedging instruments in cash flow hedges, etc. For the subsequent decrease in the deduction amount to stockholders’ equity, any special reserve appropriated may be reversed to the extent that the net debit balance reverses.

The appropriations of 2017 and 2016 earnings have been approved by TSMC’s shareholders in its meeting held on June 5, 2018 and June 8, 2017, respectively. The appropriations and dividends per share were as follows:

 

 

d.

Others

Changes in others were as follows:

 

 

- 40 -

---

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

 

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

 

- 41 -

---

 

b.

Contract balances

 

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

For the three months and nine months ended September 30, 2018, the Company recognized NT$128,863 thousand and NT$31,641,659 thousand in revenue from the beginning balance of contract liability.

 

- 42 -

---

26.	OTHER INCOME

 

 

27.	FINANCE COSTS

 

 

28.	OTHER GAINS AND LOSSES

 

(Continued)

 

- 43 -

---

(Concluded)

 

29.	INCOME TAX

 

a.

Income tax expense recognized in profit or loss

 

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$412,328 thousand has not been recognized as of September 30, 2018, with corresponding effect recognized throughout the interim periods. In addition, the tax rate applicable to unappropriated earnings was reduced from 10% to 5%.

 

- 44 -

---

b.

Income tax expense recognized in other comprehensive income

 

 

c.

Income tax examination

The tax authorities have examined income tax returns of TSMC through 2015. All investment tax credit adjustments assessed by the tax authorities have been recognized accordingly.

 

30.	EARNINGS PER SHARE

 

EPS is computed as follows:

 

(Continued)

 

- 45 -

---

(Concluded)

 

31.	ADDITIONAL INFORMATION OF EXPENSES BY NATURE

 

 

- 46 -

---

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$5,978,557 thousand and NT$6,034,054 thousand for the three months ended September 30, 2018 and 2017, respectively; and NT$16,850,949 thousand and NT$16,356,611 thousand for the nine months ended September 30, 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.

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.

 

- 47 -

---

32.	CASH FLOW INFORMATION

Reconciliation of liabilities arising from financing activities

 

 

Note:

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

 

33.	FINANCIAL INSTRUMENTS

 

a.

Categories of financial instruments

 

 

Note 1:

Financial assets mandatorily measured at FVTPL.

 

Note 2:

Including notes and accounts receivable, net, 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.

 

- 48 -

---

 

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.

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.

 

- 49 -

---

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 nine months ended September 30, 2018 and 2017 would have decreased by NT$585,920 thousand and NT$185,262 thousand, respectively, and the other comprehensive income for the nine months ended September 30, 2018 and 2017 would have decreased by NT$91,341 thousand and NT$465,790 thousand, respectively.

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, an unfavorable movement of hypothetical 1.00% increase in interest rates across all maturities would have resulted in a decrease in net income by NT$149,843 thousand for the nine months ended September 30, 2018, and in a decrease in other comprehensive income by NT$2,680,417 thousand and NT$1,919,137 thousand for the nine months ended September 30, 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 nine months ended September 30, 2018 and 2017, the other comprehensive income would have decreased by NT$314,182 thousand and NT$335,977 thousand, respectively.

 

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.

 

- 50 -

---

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 September 30, 2018, December 31, 2017 and September 30, 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 mitigates its financial credit risk by selecting counterparties with investment-grade credit ratings and by limiting the exposure to any individual counterparty. The Company regularly monitors and reviews the limit applied to counterparties and adjusts the limit according to market conditions and the credit standing of the counterparties.

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 conditions 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:

 

For the nine months ended September 30, 2018, the expected credit loss decreases NT$1,228 thousand, mainly attributed to asset allocation adjustment to debt investments of higher credit rating.

 

- 51 -

---

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.

 

 

(Continued)

 

- 52 -

---

(Concluded)

 

f.

Fair value of financial instruments

 

1)

Fair value measurements recognized in the consolidated balance sheets

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

 

•

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

 

•

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

 

•

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

 

2)

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

Fair value hierarchy

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

 

 

(Continued)

 

- 53 -

---

 

(Continued)

 

- 54 -

---

(Continued)

 

- 55 -

---

(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 period classification from level 1 to level 2.

There were no transfers between Level 1 and Level 2 for the nine months ended September 30, 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 nine months ended September 30, 2018 were as follows:

 

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.

 

•

The fair value of accounts receivables classified as at FVTOCI are determined by the present value of future cash flows based on the discount rate that reflects the credit risk of counterparties.

 

- 56 -

---

Valuation techniques and assumptions used in Level 3 fair value Measurement

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

To determine the fair value, the Company utilizes the asset approach and takes into account the net asset value measured at the fair value by independent parties. On September 30, 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$31,736 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 September 30, 2018, the Company uses significant unobservable inputs, which include long term revenue growth rate of approximately 3%, discount rate of 10%, 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$40,080 thousand; if discount rate increases by 1%, the fair value will decrease by NT$72,717 thousand; if discount for lack of marketability increases by 1%, the fair value will decrease by NT$19,000 thousand; if discount for lack of control increases by 1%, the fair value will decrease by NT$19,000 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.

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:

 

 

- 57 -

---

 

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 period 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 product is determined by quoted market prices provided by the counterparty.

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

 

- 58 -

---

34.	RELATED PARTY TRANSACTIONS

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

 

a.

Related party name and categories

 

 

b.

Net revenue

 

 

c.

Purchases

 

 

d.

Receivables from related parties

 

(Continued)

 

- 59 -

---

(Concluded)

 

e.

Payables to related parties

 

 

f.

Accrued expenses and other current liabilities

 

 

g.

Others

 

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.

 

- 60 -

---

The Company deferred the disposal gain or loss derived from sales of property, plant and equipment to related parties (transactions with associates), and then recognized such gain or 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 and nine months ended September 30, 2018 and 2017 were as follows:

 

The compensation to directors and other key management personnel were determined by the Compensation Committee of TSMC in accordance with the individual performance and the market trends.

 

35.	PLEDGED ASSETS

The Company provided certificate of deposits recorded in other financial assets as collateral mainly for building lease agreements. As of September 30, 2018, December 31, 2017 and September 30, 2017, the aforementioned other financial assets amounted to NT$123,520 thousand, NT$165,618 thousand and NT$168,293 thousand, respectively.

 

36.	SIGNIFICANT OPERATING LEASE ARRANGEMENTS

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

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

 

 

- 61 -

---

37.	SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNIZED COMMITMENTS

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

 

a.

Under a technical cooperation agreement with Industrial Technology Research Institute, the R.O.C. Government or its designee approved by TSMC can use up to 35% of TSMC’s capacity provided TSMC’s outstanding commitments to its customers are not prejudiced. The term of this agreement is for five years beginning from January 1, 1987 and is automatically renewed for successive periods of five years unless otherwise terminated by either party with one year prior notice. As of September 30, 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 September 30, 2018.

 

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 was 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. In July 2018, all pending litigations between the parties in the U.S. District Court for the Northern District of California were dismissed.

 

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.

TSMC entered into a long-term purchase agreement of equipment. The relative purchase quantity and price are specified in the agreement.

 

g.

TSMC entered into long-term power purchase agreements with multiple suppliers. The relative purchase period, quantity and price are specified in the agreements.

 

h.

Amounts available under unused letters of credit as of September 30, 2018, December 31, 2017 and September 30, 2017 were NT$70,162 thousand, NT$94,909 thousand and NT$96,765 thousand, respectively.

 

- 62 -

---

38.	SIGNIFICANT LOSSES FROM DISASTERS

The Company experienced a computer virus outbreak on August 3, 2018, which affected a number of computer systems and fab tools, and consequently impacted wafer production in Taiwan. All the impacted tools have been recovered by August 6, 2018. The Company recognized a loss of NT$2,596,046 thousand related to this incident for the three months ended September 30, 2018, which was included in cost of revenue.

 

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

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

 

(Continued)

 

- 63 -

---

(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 and nine months ended September 30, 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.

 

40.	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.

 

- 64 -

---

41.	ADDITIONAL DISCLOSURES

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

 

a.

Financings provided: Please see Table 1 attached;

 

b.

Endorsement/guarantee provided: Please see Table 2 attached;

 

c.

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

 

d.

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

 

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.

 

- 65 -

---

TABLE 1

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

FINANCINGS PROVIDED

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 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$	52,384,500     7,000,000) & 700,000)			$ (RMB (US$	46,680,065     7,000,000) & 513,000)			$ (RMB (US$	30,240,415     5,700,000) & 163,000)			1.30%-1.96%		The need for short-term and long-term financing		$	—			Operating capital		$	—				—			$	—			$	53,848,784			$	53,848,784
2		TSMC Global		TSMC		Other receivables from related parties		Yes		(US$	45,757,500 1,500,000	)		(US$	45,757,500 1,500,000	)			—			—		The need for short-term financing			—			Operating capital			—				—				—				384,742,480				384,742,480

 

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.

 

- 66 -

---

TABLE 2

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

ENDORSEMENTS/GUARANTEES PROVIDED

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 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		$	393,792,979			$ (US$	35,080,750 1,150,000	)		$	—			$	—			$	—			—		$	393,792,979			Yes		No		No
				TSMC North America		Subsidiary			393,792,979			(US$	2,538,422 83,213	)		(US$	2,538,422 83,213	)		(US$	2,538,422 83,213	)			—			0.16%			393,792,979			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.

 

- 67 -

---

TABLE 3

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

MARKETABLE SECURITIES HELD

SEPTEMBER 30, 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		SEPTEMBER 30, 2018																Note
										Shares/Units (In Thousands)				Carrying Value (Foreign Currencies in Thousands)				Percentage of Ownership (%)				Fair Value (Foreign Currencies in Thousands)
TSMC		Non-publicly traded equity investments
		United Industrial Gases Co., Ltd.			—			Financial assets at fair value through other comprehensive income			21,230			$	580,864				10			$	580,864
		Shin-Etsu Handotai Taiwan Co., Ltd.			—			”			10,500				344,736				7				344,736
		Global Investment Holding Inc.			—			”			11,124				85,909				6				85,909
		W.K. Technology Fund IV			—			”			806				5,753				2				5,753
		Crimson Asia Capital			—			”			—				4,791				1				4,791
		Horizon Ventures Fund			—			”			—				2,458				12				2,458
		Publicly traded stocks
		Semiconductor Manufacturing International Corporation			—			Financial assets at fair value through other comprehensive income			21,105				694,683				—				694,683
		Motech			—			”			13,097				132,932				2				132,932
TSMC Partners		Non-publicly traded equity investments
		Tela Innovations			—			Financial assets at fair value through other comprehensive income			10,440			US$	56,058				25			US$	56,058
		Shanghai Walden Venture Capital Enterprise			—			”			—			US$	8,511				6			US$	8,511
		China Walden Venture Investments II, L.P.			—			”			—			US$	8,169				9			US$	8,169
		China Walden Venture Investments III, L.P.			—			”			—			US$	1,520				4			US$	1,520
		Mcube Inc.			—			”			6,333				—				12				—
TSMC Global		Corporate bond
		Bank of America Corp			—			Financial assets at fair value through other comprehensive income			—			US$	44,855				N/A			US$	44,855
		JPMorgan Chase & Co			—			”			—			US$	43,170				N/A			US$	43,170
		Morgan Stanley			—			”			—			US$	40,848				N/A			US$	40,848
		Goldman Sachs Group Inc/The			—			”			—			US$	32,474				N/A			US$	32,474
		Citigroup Inc			—			”			—			US$	28,833				N/A			US$	28,833
		CVS Health Corp			—			”			—			US$	26,700				N/A			US$	26,700
		Inter American Development Bank			—			”			—			US$	24,254				N/A			US$	24,254
		AT&T Inc			—			”			—			US$	24,031				N/A			US$	24,031
		Verizon Communications Inc			—			”			—			US$	15,939				N/A			US$	15,939
		HSBC Holdings PLC			—			”			—			US$	13,617				N/A			US$	13,617
		Apple Inc			—			”			—			US$	12,525				N/A			US$	12,525
		Ford Motor Credit Co LLC			—			”			—			US$	12,270				N/A			US$	12,270
		PNC Bank NA			—			”			—			US$	12,177				N/A			US$	12,177
		BAT Capital Corp			—			”			—			US$	12,171				N/A			US$	12,171
		Anheuser-Busch InBev Finance Inc			—			”			—			US$	12,135				N/A			US$	12,135
		Daimler Finance North America LLC			—			”			—			US$	11,854				N/A			US$	11,854
		Nordea Bank AB			—			”			—			US$	11,729				N/A			US$	11,729
		AbbVie Inc			—			”			—			US$	11,727				N/A			US$	11,727
		United Technologies Corp			—			”			—			US$	10,585				N/A			US$	10,585
		BP Capital Markets PLC			—			”			—			US$	10,142				N/A			US$	10,142

(Continued)

 

- 68 -

---

Held Company Name		Marketable Securities Type and Name		Relationship with the Company		Financial Statement Account		SEPTEMBER 30, 2018														Note
								Shares/Units (In Thousands)				Carrying Value (Foreign Currencies in Thousands)				Percentage of Ownership (%)		Fair Value (Foreign Currencies in Thousands)
TSMC Global		Credit Suisse AG/New York NY		—		Financial assets at fair value through other comprehensive income			—			US$	9,663			N/A		US$	9,663
		Sumitomo Mitsui Financial Group Inc		—		”			—			US$	9,195			N/A		US$	9,195
		Mitsubishi UFJ Financial Group Inc		—		”			—			US$	9,088			N/A		US$	9,088
		Macquarie Group Ltd		—		”			—			US$	8,998			N/A		US$	8,998
		Bank of New York Mellon Corp/The		—		”			—			US$	8,859			N/A		US$	8,859
		Analog Devices Inc		—		”			—			US$	8,772			N/A		US$	8,772
		Wells Fargo & Co		—		”			—			US$	8,681			N/A		US$	8,681
		ABN AMRO Bank NV		—		”			—			US$	8,645			N/A		US$	8,645
		ERAC USA Finance LLC		—		”			—			US$	8,573			N/A		US$	8,573
		Southern Co/The		—		”			—			US$	8,516			N/A		US$	8,516
		Celgene Corp		—		”			—			US$	8,370			N/A		US$	8,370
		Duke Energy Corp		—		”			—			US$	8,178			N/A		US$	8,178
		Tencent Holdings Ltd		—		”			—			US$	8,079			N/A		US$	8,079
		Intercontinental Exchange Inc		—		”			—			US$	7,812			N/A		US$	7,812
		Hewlett Packard Enterprise Co		—		”			—			US$	7,741			N/A		US$	7,741
		Huntington National Bank/The		—		”			—			US$	7,676			N/A		US$	7,676
		Siemens Financieringsmaatschappij NV		—		”			—			US$	7,508			N/A		US$	7,508
		Cardinal Health Inc		—		”			—			US$	7,500			N/A		US$	7,500
		UBS Group Funding Switzerland AG		—		”			—			US$	7,367			N/A		US$	7,367
		ANZ New Zealand Int’l Ltd/London		—		”			—			US$	7,249			N/A		US$	7,249
		QUALCOMM Inc		—		”			—			US$	7,107			N/A		US$	7,107
		Deutsche Telekom International Finance BV		—		”			—			US$	7,095			N/A		US$	7,095
		Microsoft Corp		—		”			—			US$	7,088			N/A		US$	7,088
		Svenska Handelsbanken AB		—		”			—			US$	7,079			N/A		US$	7,079
		Citizens Bank NA/Providence RI		—		”			—			US$	7,048			N/A		US$	7,048
		Banco Santander SA		—		”			—			US$	7,035			N/A		US$	7,035
		African Development Bank		—		”			—			US$	7,018			N/A		US$	7,018
		Welltower Inc		—		”			—			US$	7,005			N/A		US$	7,005
		General Dynamics Corp		—		”			—			US$	6,998			N/A		US$	6,998
		Toyota Motor Credit Corp		—		”			—			US$	6,890			N/A		US$	6,890
		Westpac Banking Corp		—		”			—			US$	6,833			N/A		US$	6,833
		Dominion Energy Inc		—		”			—			US$	6,804			N/A		US$	6,804
		BB&T Corp		—		”			—			US$	6,695			N/A		US$	6,695
		Hyundai Capital America		—		”			—			US$	6,647			N/A		US$	6,647
		Wells Fargo Bank NA		—		”			—			US$	6,629			N/A		US$	6,629
		US Bank NA/Cincinnati OH		—		”			—			US$	6,620			N/A		US$	6,620
		Mizuho Financial Group Inc		—		”			—			US$	6,376			N/A		US$	6,376
		American International Group Inc		—		”			—			US$	6,319			N/A		US$	6,319
		Cooperatieve Rabobank UA/NY		—		”			—			US$	6,252			N/A		US$	6,252
		Tyson Foods Inc		—		”			—			US$	6,207			N/A		US$	6,207
		Air Lease Corp		—		”			—			US$	6,204			N/A		US$	6,204
		21st Century Fox America Inc		—		”			—			US$	6,167			N/A		US$	6,167
		Dow Chemical Co/The		—		”			—			US$	6,093			N/A		US$	6,093
		Barclays PLC		—		”			—			US$	6,066			N/A		US$	6,066
		Northrop Grumman Corp		—		”			—			US$	6,026			N/A		US$	6,026
		Lloyds Bank PLC		—		”			—			US$	6,024			N/A		US$	6,024
		Fifth Third Bancorp		—		”			—			US$	6,004			N/A		US$	6,004
		KeyCorp		—		”			—			US$	5,809			N/A		US$	5,809
		UBS AG/London		—		”			—			US$	5,761			N/A		US$	5,761
		SMBC Aviation Capital Finance DAC		—		”			—			US$	5,760			N/A		US$	5,760

(Continued)

 

- 69 -

---

Held Company Name		Marketable Securities Type and Name		Relationship with the Company		Financial Statement Account		SEPTEMBER 30, 2018														Note
								Shares/Units (In Thousands)				Carrying Value (Foreign Currencies in Thousands)				Percentage of Ownership (%)		Fair Value (Foreign Currencies in Thousands)
TSMC Global		BPCE SA		—		Financial assets at fair value through other comprehensive income			—			US$	5,718			N/A		US$	5,718
		AXA Equitable Holdings Inc		—		”			—			US$	5,705			N/A		US$	5,705
		Oracle Corp		—		”			—			US$	5,698			N/A		US$	5,698
		Aviation Capital Group Corp		—		”			—			US$	5,689			N/A		US$	5,689
		Reckitt Benckiser Treasury Services PLC		—		”			—			US$	5,615			N/A		US$	5,615
		Santander UK PLC		—		”			—			US$	5,568			N/A		US$	5,568
		Santander UK Group Holdings PLC		—		”			—			US$	5,547			N/A		US$	5,547
		KeyBank NA/Cleveland OH		—		”			—			US$	5,538			N/A		US$	5,538
		Penske Truck Leasing Co Lp/PTL Finance Corp		—		”			—			US$	5,392			N/A		US$	5,392
		ITC Holdings Corp		—		”			—			US$	5,321			N/A		US$	5,321
		Capital One NA/Mclean VA		—		”			—			US$	5,301			N/A		US$	5,301
		Ryder System Inc		—		”			—			US$	5,290			N/A		US$	5,290
		Amgen Inc		—		”			—			US$	5,229			N/A		US$	5,229
		International Bank for Reconstruction & Development		—		”			—			US$	5,151			N/A		US$	5,151
		Sompo International Holdings Ltd		—		”			—			US$	5,055			N/A		US$	5,055
		BNP Paribas SA		—		”			—			US$	5,054			N/A		US$	5,054
		Jackson National Life Global Funding		—		”			—			US$	5,054			N/A		US$	5,054
		SunTrust Banks Inc		—		”			—			US$	5,038			N/A		US$	5,038
		Manufacturers & Traders Trust Co		—		”			—			US$	5,028			N/A		US$	5,028
		Toronto-Dominion Bank/The		—		”			—			US$	4,997			N/A		US$	4,997
		UBS AG/Stamford CT		—		”			—			US$	4,972			N/A		US$	4,972
		Cigna Corp		—		”			—			US$	4,915			N/A		US$	4,915
		Marriott International Inc/MD		—		”			—			US$	4,797			N/A		US$	4,797
		Cox Communications Inc		—		”			—			US$	4,728			N/A		US$	4,728
		NextEra Energy Capital Holdings Inc		—		”			—			US$	4,715			N/A		US$	4,715
		Schlumberger Holdings Corp		—		”			—			US$	4,680			N/A		US$	4,680
		Air Liquide Finance SA		—		”			—			US$	4,680			N/A		US$	4,680
		Five Corners Funding Trust		—		”			—			US$	4,618			N/A		US$	4,618
		Credit Suisse Group Funding Guernsey Ltd		—		”			—			US$	4,569			N/A		US$	4,569
		Goldman Sachs Bank USA/New York NY		—		”			—			US$	4,564			N/A		US$	4,564
		AEP Texas Inc		—		”			—			US$	4,449			N/A		US$	4,449
		New York Life Global Funding		—		”			—			US$	4,435			N/A		US$	4,435
		Reliance Standard Life Global Funding II		—		”			—			US$	4,407			N/A		US$	4,407
		Enterprise Products Operating LLC		—		”			—			US$	4,261			N/A		US$	4,261
		Credit Agricole SA/London		—		”			—			US$	4,117			N/A		US$	4,117
		Vodafone Group PLC		—		”			—			US$	4,066			N/A		US$	4,066
		Fifth Third Bank/Cincinnati OH		—		”			—			US$	4,027			N/A		US$	4,027
		Banque Federative du Credit Mutuel SA		—		”			—			US$	4,023			N/A		US$	4,023
		SunTrust Bank/Atlanta GA		—		”			—			US$	4,009			N/A		US$	4,009
		Exelon Generation Co LLC		—		”			—			US$	3,999			N/A		US$	3,999
		Toyota Motor Corp		—		”			—			US$	3,994			N/A		US$	3,994
		Nuveen Finance LLC		—		”			—			US$	3,927			N/A		US$	3,927
		European Investment Bank		—		”			—			US$	3,867			N/A		US$	3,867
		Bank of Nova Scotia		—		”			—			US$	3,847			N/A		US$	3,847
		American Express Credit Corp		—		”			—			US$	3,814			N/A		US$	3,814
		Edison International		—		”			—			US$	3,782			N/A		US$	3,782
		Bayer US Finance II LLC		—		”			—			US$	3,699			N/A		US$	3,699
		Alimentation Couche-Tard Inc		—		”			—			US$	3,651			N/A		US$	3,651
		Husky Energy Inc		—		”			—			US$	3,637			N/A		US$	3,637
		Barclays Bank PLC		—		”			—			US$	3,632			N/A		US$	3,632

(Continued)

 

- 70 -

---

Held Company Name		Marketable Securities Type and Name		Relationship with the Company		Financial Statement Account		SEPTEMBER 30, 2018														Note
								Shares/Units (In Thousands)				Carrying Value (Foreign Currencies in Thousands)				Percentage of Ownership (%)		Fair Value (Foreign Currencies in Thousands)
TSMC Global		Canadian Imperial Bank of Commerce		—		Financial assets at fair value through other comprehensive income			—			US$	3,592			N/A		US$	3,592
		SES GLOBAL Americas Holdings GP		—		”			—			US$	3,526			N/A		US$	3,526
		Branch Banking & Trust Co		—		”			—			US$	3,482			N/A		US$	3,482
		Capital One Financial Corp		—		”			—			US$	3,433			N/A		US$	3,433
		Enel Finance International NV		—		”			—			US$	3,429			N/A		US$	3,429
		BMW US Capital LLC		—		”			—			US$	3,426			N/A		US$	3,426
		Shell International Finance BV		—		”			—			US$	3,390			N/A		US$	3,390
		Mondelez International Holdings Netherlands BV		—		”			—			US$	3,381			N/A		US$	3,381
		LyondellBasell Industries NV		—		”			—			US$	3,379			N/A		US$	3,379
		Lloyds Banking Group PLC		—		”			—			US$	3,253			N/A		US$	3,253
		Keurig Dr Pepper Inc		—		”			—			US$	3,187			N/A		US$	3,187
		Bank of Montreal		—		”			—			US$	3,123			N/A		US$	3,123
		Digital Realty Trust LP		—		”			—			US$	3,113			N/A		US$	3,113
		Skandinaviska Enskilda Banken AB		—		”			—			US$	3,051			N/A		US$	3,051
		Royal Bank of Canada		—		”			—			US$	2,999			N/A		US$	2,999
		Macquarie Bank Ltd		—		”			—			US$	2,950			N/A		US$	2,950
		Anthem Inc		—		”			—			US$	2,845			N/A		US$	2,845
		Simon Property Group LP		—		”			—			US$	2,775			N/A		US$	2,775
		Sprint Spectrum Co LLC/Sprint Spectrum Co II LLC/Sprint Spectrum Co III LLC		—		”			—			US$	2,764			N/A		US$	2,764
		Express Scripts Holding Co		—		”			—			US$	2,733			N/A		US$	2,733
		ING Groep NV		—		”			—			US$	2,695			N/A		US$	2,695
		Societe Generale SA		—		”			—			US$	2,623			N/A		US$	2,623
		McCormick & Co Inc/MD		—		”			—			US$	2,596			N/A		US$	2,596
		PartnerRe Finance B LLC		—		”			—			US$	2,577			N/A		US$	2,577
		DXC Technology Co		—		”			—			US$	2,575			N/A		US$	2,575
		Delta Air Lines 2007-1 Class A Pass Through Trust		—		”			—			US$	2,530			N/A		US$	2,530
		Aetna Inc		—		”			—			US$	2,523			N/A		US$	2,523
		WR Berkley Corp		—		”			—			US$	2,490			N/A		US$	2,490
		Lam Research Corp		—		”			—			US$	2,485			N/A		US$	2,485
		Ventas Realty LP/Ventas Capital Corp		—		”			—			US$	2,409			N/A		US$	2,409
		Eastman Chemical Co		—		”			—			US$	2,392			N/A		US$	2,392
		NiSource Inc		—		”			—			US$	2,371			N/A		US$	2,371
		Xylem Inc/NY		—		”			—			US$	2,326			N/A		US$	2,326
		EI du Pont de Nemours & Co		—		”			—			US$	2,316			N/A		US$	2,316
		MUFG Bank Ltd		—		”			—			US$	2,296			N/A		US$	2,296
		NBCUniversal Media LLC		—		”			—			US$	2,253			N/A		US$	2,253
		PSEG Power LLC		—		”			—			US$	2,231			N/A		US$	2,231
		Nestle Holdings Inc		—		”			—			US$	2,198			N/A		US$	2,198
		Sumitomo Mitsui Banking Corp		—		”			—			US$	2,161			N/A		US$	2,161
		Cintas Corp No 2		—		”			—			US$	2,145			N/A		US$	2,145
		National Australia Bank Ltd/New York		—		”			—			US$	2,132			N/A		US$	2,132
		Wm Wrigley Jr Co		—		”			—			US$	2,123			N/A		US$	2,123
		AIG Global Funding		—		”			—			US$	2,118			N/A		US$	2,118
		Gilead Sciences Inc		—		”			—			US$	2,103			N/A		US$	2,103
		Commonwealth Bank of Australia/New York NY		—		”			—			US$	2,091			N/A		US$	2,091
		Walgreens Boots Alliance Inc		—		”			—			US$	2,090			N/A		US$	2,090
		ProAssurance Corp		—		”			—			US$	2,085			N/A		US$	2,085
		HCP Inc		—		”			—			US$	2,046			N/A		US$	2,046
		EOG Resources Inc		—		”			—			US$	2,006			N/A		US$	2,006

(Continued)

 

- 71 -

---

Held Company Name		Marketable Securities Type and Name		Relationship with the Company		Financial Statement Account		SEPTEMBER 30, 2018														Note
								Shares/Units (In Thousands)				Carrying Value (Foreign Currencies in Thousands)				Percentage of Ownership (%)		Fair Value (Foreign Currencies in Thousands)
TSMC Global		Philip Morris International Inc		—		Financial assets at fair value through other comprehensive income			—			US$	2,002			N/A		US$	2,002
		British Telecommunications PLC		—		”			—			US$	1,997			N/A		US$	1,997
		Roche Holdings Inc		—		”			—			US$	1,980			N/A		US$	1,980
		Realty Income Corp		—		”			—			US$	1,961			N/A		US$	1,961
		American Airlines 2013-2 Class A Pass Through Trust		—		”			—			US$	1,943			N/A		US$	1,943
		Caterpillar Financial Services Corp		—		”			—			US$	1,937			N/A		US$	1,937
		American Express Co		—		”			—			US$	1,902			N/A		US$	1,902
		Duke Realty LP		—		”			—			US$	1,898			N/A		US$	1,898
		General Mills Inc		—		”			—			US$	1,840			N/A		US$	1,840
		Orange SA		—		”			—			US$	1,827			N/A		US$	1,827
		WestRock RKT Co		—		”			—			US$	1,754			N/A		US$	1,754
		Brambles USA Inc		—		”			—			US$	1,748			N/A		US$	1,748
		Visa Inc		—		”			—			US$	1,744			N/A		US$	1,744
		DTE Energy Co		—		”			—			US$	1,725			N/A		US$	1,725
		Dominion Energy Gas Holdings LLC		—		”			—			US$	1,724			N/A		US$	1,724
		Danske Bank A/S		—		”			—			US$	1,694			N/A		US$	1,694
		Regions Financial Corp		—		”			—			US$	1,659			N/A		US$	1,659
		Magellan Midstream Partners LP		—		”			—			US$	1,614			N/A		US$	1,614
		General Electric Co		—		”			—			US$	1,601			N/A		US$	1,601
		Amazon.com Inc		—		”			—			US$	1,574			N/A		US$	1,574
		Principal Life Global Funding II		—		”			—			US$	1,553			N/A		US$	1,553
		Weyerhaeuser Co		—		”			—			US$	1,545			N/A		US$	1,545
		Lincoln National Corp		—		”			—			US$	1,537			N/A		US$	1,537
		Metropolitan Life Global Funding I		—		”			—			US$	1,534			N/A		US$	1,534
		McKesson Corp		—		”			—			US$	1,497			N/A		US$	1,497
		Harley-Davidson Financial Services Inc		—		”			—			US$	1,488			N/A		US$	1,488
		Abbott Laboratories		—		”			—			US$	1,481			N/A		US$	1,481
		Nissan Motor Acceptance Corp		—		”			—			US$	1,469			N/A		US$	1,469
		O’Reilly Automotive Inc		—		”			—			US$	1,469			N/A		US$	1,469
		Guardian Life Global Funding		—		”			—			US$	1,451			N/A		US$	1,451
		Public Service Electric & Gas Co		—		”			—			US$	1,443			N/A		US$	1,443
		Oesterreichische Kontrollbank AG		—		”			—			US$	1,434			N/A		US$	1,434
		CBS Corp		—		”			—			US$	1,423			N/A		US$	1,423
		HSBC Bank PLC		—		”			—			US$	1,422			N/A		US$	1,422
		Monongahela Power Co		—		”			—			US$	1,372			N/A		US$	1,372
		Cboe Global Markets Inc		—		”			—			US$	1,367			N/A		US$	1,367
		Texas Eastern Transmission LP		—		”			—			US$	1,364			N/A		US$	1,364
		Georgia-Pacific LLC		—		”			—			US$	1,352			N/A		US$	1,352
		Kreditanstalt fuer Wiederaufbau		—		”			—			US$	1,326			N/A		US$	1,326
		GATX Corp		—		”			—			US$	1,262			N/A		US$	1,262
		CNA Financial Corp		—		”			—			US$	1,254			N/A		US$	1,254
		Entergy Arkansas Inc		—		”			—			US$	1,247			N/A		US$	1,247
		Compass Bank		—		”			—			US$	1,243			N/A		US$	1,243
		Western Union Co/The		—		”			—			US$	1,235			N/A		US$	1,235
		Entergy Corp		—		”			—			US$	1,232			N/A		US$	1,232
		Sempra Energy		—		”			—			US$	1,206			N/A		US$	1,206
		Consolidated Edison Inc		—		”			—			US$	1,199			N/A		US$	1,199
		Glencore Funding LLC		—		”			—			US$	1,193			N/A		US$	1,193
		GlaxoSmithKline Capital PLC		—		”			—			US$	1,180			N/A		US$	1,180
		Regions Bank/Birmingham AL		—		”			—			US$	1,174			N/A		US$	1,174

(Continued)

 

- 72 -

---

Held Company Name		Marketable Securities Type and Name		Relationship with the Company		Financial Statement Account		SEPTEMBER 30, 2018														Note
								Shares/Units (In Thousands)				Carrying Value (Foreign Currencies in Thousands)				Percentage of Ownership (%)		Fair Value (Foreign Currencies in Thousands)
TSMC Global		Public Service Enterprise Group Inc		—		Financial assets at fair value through other comprehensive income			—			US$	1,135			N/A		US$	1,135
		Interpublic Group of Cos Inc/The		—		”			—			US$	1,084			N/A		US$	1,084
		Swedbank AB		—		”			—			US$	1,057			N/A		US$	1,057
		Merck & Co Inc		—		”			—			US$	1,040			N/A		US$	1,040
		CA Inc		—		”			—			US$	1,040			N/A		US$	1,040
		Reinsurance Group of America Inc		—		”			—			US$	1,037			N/A		US$	1,037
		International Paper Co		—		”			—			US$	1,036			N/A		US$	1,036
		Glencore Finance Canada Ltd		—		”			—			US$	1,029			N/A		US$	1,029
		Quest Diagnostics Inc		—		”			—			US$	1,028			N/A		US$	1,028
		Prudential Financial Inc		—		”			—			US$	1,028			N/A		US$	1,028
		Athene Global Funding		—		”			—			US$	1,016			N/A		US$	1,016
		Commonwealth Edison Co		—		”			—			US$	1,012			N/A		US$	1,012
		Scentre Group Trust 1/Scentre Group Trust 2		—		”			—			US$	1,011			N/A		US$	1,011
		Mitsubishi UFJ Trust & Banking Corp		—		”			—			US$	1,008			N/A		US$	1,008
		Marsh & McLennan Cos Inc		—		”			—			US$	1,006			N/A		US$	1,006
		DNB Bank ASA		—		”			—			US$	1,006			N/A		US$	1,006
		Union Pacific Corp		—		”			—			US$	1,004			N/A		US$	1,004
		Halliburton Co		—		”			—			US$	996			N/A		US$	996
		Biogen Inc		—		”			—			US$	995			N/A		US$	995
		Laboratory Corp of America Holdings		—		”			—			US$	994			N/A		US$	994
		Equinor ASA		—		”			—			US$	994			N/A		US$	994
		Southern California Edison Co		—		”			—			US$	993			N/A		US$	993
		Sysco Corp		—		”			—			US$	987			N/A		US$	987
		BNG Bank NV		—		”			—			US$	987			N/A		US$	987
		Pricoa Global Funding I		—		”			—			US$	984			N/A		US$	984
		Unum Group		—		”			—			US$	983			N/A		US$	983
		Holcim US Finance Sarl & Cie SCS		—		”			—			US$	980			N/A		US$	980
		Moody’s Corp		—		”			—			US$	977			N/A		US$	977
		UnitedHealth Group Inc		—		”			—			US$	977			N/A		US$	977
		Protective Life Global Funding		—		”			—			US$	973			N/A		US$	973
		Entergy Texas Inc		—		”			—			US$	973			N/A		US$	973
		Healthcare Trust of America Holdings LP		—		”			—			US$	967			N/A		US$	967
		State Grid Overseas Investment Ltd		—		”			—			US$	961			N/A		US$	961
		TransCanada PipeLines Ltd		—		”			—			US$	959			N/A		US$	959
		Bunge Ltd Finance Corp		—		”			—			US$	956			N/A		US$	956
		Citibank NA		—		”			—			US$	953			N/A		US$	953
		XLIT Ltd		—		”			—			US$	952			N/A		US$	952
		National Retail Properties Inc		—		”			—			US$	938			N/A		US$	938
		Anheuser-Busch InBev Worldwide Inc		—		”			—			US$	935			N/A		US$	935
		Duke Energy Progress LLC		—		”			—			US$	906			N/A		US$	906
		Southern Electric Generating Co		—		”			—			US$	899			N/A		US$	899
		Standard Chartered PLC		—		”			—			US$	892			N/A		US$	892
		Coca-Cola Femsa SAB de CV		—		”			—			US$	891			N/A		US$	891
		Lockheed Martin Corp		—		”			—			US$	887			N/A		US$	887
		Chevron Corp		—		”			—			US$	872			N/A		US$	872
		CNOOC Finance Ltd		—		”			—			US$	860			N/A		US$	860
		Viterra Inc		—		”			—			US$	854			N/A		US$	854
		Fiserv Inc		—		”			—			US$	834			N/A		US$	834
		Baker Hughes a GE Co LLC/Baker Hughes Co-Obligor Inc		—		”			—			US$	833			N/A		US$	833
		Huntington Bancshares Inc/OH		—		”			—			US$	814			N/A		US$	814

(Continued)

 

- 73 -

---

Held Company Name		Marketable Securities Type and Name		Relationship with the Company		Financial Statement Account		SEPTEMBER 30, 2018														Note
								Shares/Units (In Thousands)				Carrying Value (Foreign Currencies in Thousands)				Percentage of Ownership (%)		Fair Value (Foreign Currencies in Thousands)
TSMC Global		Intesa Sanpaolo SpA		—		Financial assets at fair value through other comprehensive income			—			US$	811			N/A		US$	811
		Consolidated Edison Co of New York Inc		—		”			—			US$	806			N/A		US$	806
		Danone SA		—		”			—			US$	803			N/A		US$	803
		Charles Schwab Corp/The		—		”			—			US$	801			N/A		US$	801
		Aon PLC		—		”			—			US$	795			N/A		US$	795
		Alterra Finance LLC		—		”			—			US$	792			N/A		US$	792
		ONEOK Partners LP		—		”			—			US$	787			N/A		US$	787
		AXIS Specialty Finance LLC		—		”			—			US$	777			N/A		US$	777
		Manulife Financial Corp		—		”			—			US$	774			N/A		US$	774
		Activision Blizzard Inc		—		”			—			US$	774			N/A		US$	774
		Nomura Holdings Inc		—		”			—			US$	772			N/A		US$	772
		Suncorp-Metway Ltd		—		”			—			US$	772			N/A		US$	772
		Sinopec Capital Ltd		—		”			—			US$	769			N/A		US$	769
		Incitec Pivot Finance LLC		—		”			—			US$	769			N/A		US$	769
		Warner Media LLC		—		”			—			US$	758			N/A		US$	758
		AutoZone Inc		—		”			—			US$	750			N/A		US$	750
		Baidu Inc		—		”			—			US$	743			N/A		US$	743
		Walmart Inc		—		”			—			US$	741			N/A		US$	741
		John Deere Capital Corp		—		”			—			US$	738			N/A		US$	738
		WEC Energy Group Inc		—		”			—			US$	735			N/A		US$	735
		Pinnacle West Capital Corp		—		”			—			US$	731			N/A		US$	731
		Phillips 66		—		”			—			US$	706			N/A		US$	706
		Comcast Corp		—		”			—			US$	706			N/A		US$	706
		Thermo Fisher Scientific Inc		—		”			—			US$	702			N/A		US$	702
		Baker Hughes a GE Co LLC		—		”			—			US$	696			N/A		US$	696
		APT Pipelines Ltd		—		”			—			US$	695			N/A		US$	695
		American Honda Finance Corp		—		”			—			US$	695			N/A		US$	695
		Australia & New Zealand Banking Group Ltd/New York NY		—		”			—			US$	694			N/A		US$	694
		eBay Inc		—		”			—			US$	694			N/A		US$	694
		Textron Inc		—		”			—			US$	685			N/A		US$	685
		Three Gorges Finance I Cayman Islands Ltd		—		”			—			US$	673			N/A		US$	673
		Vornado Realty LP		—		”			—			US$	672			N/A		US$	672
		National Oilwell Varco Inc		—		”			—			US$	667			N/A		US$	667
		Rochester Gas & Electric Corp		—		”			—			US$	663			N/A		US$	663
		Norfolk Southern Railway Co		—		”			—			US$	663			N/A		US$	663
		Ohio Power Co		—		”			—			US$	635			N/A		US$	635
		Georgia Power Co		—		”			—			US$	634			N/A		US$	634
		Toledo Edison Co/The		—		”			—			US$	633			N/A		US$	633
		ERP Operating LP		—		”			—			US$	622			N/A		US$	622
		RBC USA Holdco Corp		—		”			—			US$	621			N/A		US$	621
		Continental Airlines 2007-1 Class A Pass Through Trust		—		”			—			US$	620			N/A		US$	620
		Alexandria Real Estate Equities Inc		—		”			—			US$	616			N/A		US$	616
		Liberty Property LP		—		”			—			US$	613			N/A		US$	613
		Grupo Bimbo SAB de CV		—		”			—			US$	612			N/A		US$	612
		Nutrien Ltd		—		”			—			US$	612			N/A		US$	612
		Continental Airlines 2000-1 Class A-1 Pass Through Trust		—		”			—			US$	611			N/A		US$	611
		Woolworths Group Ltd		—		”			—			US$	608			N/A		US$	608
		MUFG Union Bank NA		—		”			—			US$	599			N/A		US$	599
		Altria Group Inc		—		”			—			US$	597			N/A		US$	597
		Kimberly-Clark Corp		—		”			—			US$	597			N/A		US$	597

(Continued)

 

- 74 -

---

Held Company Name		Marketable Securities Type and Name		Relationship with the Company		Financial Statement Account		SEPTEMBER 30, 2018														Note
								Shares/Units (In Thousands)				Carrying Value (Foreign Currencies in Thousands)				Percentage of Ownership (%)		Fair Value (Foreign Currencies in Thousands)
TSMC Global		OneBeacon US Holdings Inc		—		Financial assets at fair value through other comprehensive income			—			US$	595			N/A		US$	595
		Daiwa Securities Group Inc		—		”			—			US$	595			N/A		US$	595
		BOC Aviation Ltd		—		”			—			US$	594			N/A		US$	594
		BAT International Finance PLC		—		”			—			US$	594			N/A		US$	594
		Life Technologies Corp		—		”			—			US$	590			N/A		US$	590
		Kimco Realty Corp		—		”			—			US$	590			N/A		US$	590
		Ontario Teachers’ Cadillac Fairview Properties Trust		—		”			—			US$	588			N/A		US$	588
		ABC Inc		—		”			—			US$	576			N/A		US$	576
		AXIS Specialty Finance PLC		—		”			—			US$	574			N/A		US$	574
		Mizuho Bank Ltd		—		”			—			US$	573			N/A		US$	573
		Nationwide Financial Services Inc		—		”			—			US$	569			N/A		US$	569
		Host Hotels & Resorts LP		—		”			—			US$	564			N/A		US$	564
		AvalonBay Communities Inc		—		”			—			US$	562			N/A		US$	562
		Berkshire Hathaway Energy Co		—		”			—			US$	551			N/A		US$	551
		Duke Energy Progress LLC		—		”			—			US$	548			N/A		US$	548
		Church & Dwight Co Inc		—		”			—			US$	520			N/A		US$	520
		Bunge Ltd Finance Corp				”						US$	518			N/A		US$	518
		MUFG Americas Holdings Corp		—		”			—			US$	518			N/A		US$	518
		American Electric Power Co Inc		—		”			—			US$	514			N/A		US$	514
		Pacific Gas & Electric Co		—		”			—			US$	507			N/A		US$	507
		Southwestern Electric Power Co				”						US$	505			N/A		US$	505
		Fulton Financial Corp		—		”			—			US$	504			N/A		US$	504
		TD Ameritrade Holding Corp		—		”			—			US$	501			N/A		US$	501
		Rockwell Collins Inc		—		”			—			US$	497			N/A		US$	497
		Regency Centers Corp		—		”			—			US$	496			N/A		US$	496
		Sumitomo Mitsui Trust Bank Ltd		—		”			—			US$	495			N/A		US$	495
		ASB Bank Ltd		—		”			—			US$	495			N/A		US$	495
		Highwoods Realty LP		—		”			—			US$	492			N/A		US$	492
		ORIX Corp		—		”			—			US$	486			N/A		US$	486
		Eni SpA		—		”			—			US$	476			N/A		US$	476
		MassMutual Global Funding II		—		”			—			US$	475			N/A		US$	475
		Diageo Capital PLC		—		”			—			US$	474			N/A		US$	474
		Comerica Inc		—		”			—			US$	473			N/A		US$	473
		Spire Inc		—		”			—			US$	458			N/A		US$	458
		Narragansett Electric Co/The		—		”			—			US$	457			N/A		US$	457
		Eaton Corp		—		”			—			US$	456			N/A		US$	456
		United Overseas Bank Ltd		—		”			—			US$	452			N/A		US$	452
		CenterPoint Energy Inc		—		”			—			US$	449			N/A		US$	449
		Total Capital International SA		—		”			—			US$	445			N/A		US$	445
		Burlington Northern Santa Fe LLC		—		”			—			US$	427			N/A		US$	427
		Columbia Pipeline Group Inc		—		”			—			US$	424			N/A		US$	424
		Canadian Pacific Railway Co		—		”			—			US$	415			N/A		US$	415
		Valero Energy Corp		—		”			—			US$	415			N/A		US$	415
		Texas-New Mexico Power Co		—		”			—			US$	413			N/A		US$	413
		Marathon Petroleum Corp		—		”			—			US$	412			N/A		US$	412
		Continental Airlines 2012-1 Class A Pass Through Trust		—		”			—			US$	402			N/A		US$	402
		Tanger Properties LP		—		”			—			US$	389			N/A		US$	389
		IBM Credit LLC		—		”			—			US$	388			N/A		US$	388
		Southern Power Co		—		”			—			US$	387			N/A		US$	387
		StanCorp Financial Group Inc		—		”			—			US$	378			N/A		US$	378

(Continued)

 

- 75 -

---

Held Company Name		Marketable Securities Type and Name		Relationship with the Company		Financial Statement Account		SEPTEMBER 30, 2018														Note
								Shares/Units (In Thousands)				Carrying Value (Foreign Currencies in Thousands)				Percentage of Ownership (%)		Fair Value (Foreign Currencies in Thousands)
TSMC Global		Aon Corp		—		Financial assets at fair value through other comprehensive income			—			US$	377			N/A		US$	377
		Kroger Co/The		—		”			—			US$	370			N/A		US$	370
		First Niagara Financial Group Inc		—		”			—			US$	367			N/A		US$	367
		NetApp Inc		—		”			—			US$	362			N/A		US$	362
		CenterPoint Energy Resources Corp		—		”			—			US$	354			N/A		US$	354
		Deutsche Bank AG		—		”			—			US$	349			N/A		US$	349
		Cooperatieve Rabobank UA		—		”			—			US$	339			N/A		US$	339
		Cisco Systems Inc		—		”			—			US$	318			N/A		US$	318
		Schlumberger Finance Canada Ltd		—		”			—			US$	292			N/A		US$	292
		Eli Lilly & Co		—		”			—			US$	286			N/A		US$	286
		Amphenol Corp		—		”			—			US$	285			N/A		US$	285
		BAE Systems Holdings Inc		—		”			—			US$	283			N/A		US$	283
		EMD Finance LLC		—		”			—			US$	276			N/A		US$	276
		Hartford Financial Services Group Inc/The		—		”			—			US$	229			N/A		US$	229
		Rolls-Royce PLC		—		”			—			US$	220			N/A		US$	220
		Protective Life Corp		—		”			—			US$	219			N/A		US$	219
		WestRock MWV LLC				”						US$	213			N/A		US$	213
		ING Bank NV		—		”			—			US$	207			N/A		US$	207
		Fidelity National Information Services Inc		—		”			—			US$	203			N/A		US$	203
		Equifax Inc		—		”			—			US$	174			N/A		US$	174
		Schneider Electric SE				”						US$	157			N/A		US$	157
		Packaging Corp of America		—		”			—			US$	157			N/A		US$	157
		Reynolds American Inc		—		”			—			US$	126			N/A		US$	126
		Duke Energy Florida LLC		—		”			—			US$	75			N/A		US$	75
		Wells Fargo & Co		—		Financial assets at amortized cost			—			US$	149,941			N/A		US$	152,147
		JPMorgan Chase & Co.		—		”			—			US$	124,948			N/A		US$	126,575
		Westpac Banking Corp.		—		”			—			US$	99,987			N/A		US$	100,276
		Goldman Sachs Group, Inc.		—		”			—			US$	99,900			N/A		US$	100,437
		Commonwealth Bank of Australia		—		”			—			US$	49,994			N/A		US$	50,100
		National Australia Bank		—		”			—			US$	49,994			N/A		US$	50,079
		Bank of Nova Scotia		—		”			—			US$	49,975			N/A		US$	50,140
		Industrial and Commercial Bank of China		—		”			—			US$	9,996			N/A		US$	10,012
		Government bond
		United States Treasury Note/Bond		—		Financial assets at fair value through other comprehensive income			—			US$	349,827			N/A		US$	349,827
		Abu Dhabi Government International Bond		—		”			—			US$	3,397			N/A		US$	3,397
		Qatar Government International Bond		—		”			—			US$	1,309			N/A		US$	1,309
		Agency bonds/Agency mortgage-backed securities
		Freddie Mac		—		Financial assets at fair value through Profit or Loss			—			US$	54,729			N/A		US$	54,729
		Fannie Mae		—		”			—			US$	44,804			N/A		US$	44,804
		Government National Mortgage Association		—		”			—			US$	27,182			N/A		US$	27,182
		Freddie Mac Multifamily Structured Pass Through Certificates		—		”			—			US$	2,042			N/A		US$	2,042
		Fannie Mae		—		Financial assets at fair value through other comprehensive income			—			US$	586,994			N/A		US$	586,994
		Freddie Mac		—		”			—			US$	227,982			N/A		US$	227,982
		Government National Mortgage Association		—		”			—			US$	143,925			N/A		US$	143,925
		Ginnie Mae		—		”			—			US$	70,023			N/A		US$	70,023
		Province of Quebec Canada		—		”			—			US$	2,496			N/A		US$	2,496

(Continued)

 

- 76 -

---

Held Company Name		Marketable Securities Type and Name		Relationship with the Company		Financial Statement Account		SEPTEMBER 30, 2018														Note
								Shares/Units (In Thousands)				Carrying Value (Foreign Currencies in Thousands)				Percentage of Ownership (%)		Fair Value (Foreign Currencies in Thousands)
TSMC Global		FHLMC-GNMA		—		Financial assets at fair value through other comprehensive income			—			US$	1,604			N/A		US$	1,604
		Freddie Mac Multifamily Structured Pass Through Certificates		—		”			—			US$	1,289			N/A		US$	1,289
		NCUA Guaranteed Notes Trust 2010-R2		—		”			—			US$	1,251			N/A		US$	1,251
		Export Development Canada		—		”			—			US$	979			N/A		US$	979
		Federal Farm Credit Banks		—		”			—			US$	884			N/A		US$	884
		Kowloon-Canton Railway Corp		—		”			—			US$	556			N/A		US$	556
		Asset-backed securities
		Citibank Credit Card Issuance Trust		—		Financial assets at fair value through other comprehensive income			—			US$	55,773			N/A		US$	55,773
		Discover Card Execution Note Trust		—		”			—			US$	44,159			N/A		US$	44,159
		American Express Credit Account Master Trust		—		”			—			US$	42,356			N/A		US$	42,356
		Chase Issuance Trust		—		”			—			US$	39,969			N/A		US$	39,969
		Ford Credit Floorplan Master Owner Trust A		—		”			—			US$	26,763			N/A		US$	26,763
		COMM Mortgage Trust		—		”			—			US$	14,066			N/A		US$	14,066
		Ford Credit Auto Owner Trust/Ford Credit 2014-REV1		—		”			—			US$	13,722			N/A		US$	13,722
		GS Mortgage Securities Trust		—		”			—			US$	12,521			N/A		US$	12,521
		Morgan Stanley Bank of America Merrill Lynch Trust		—		”			—			US$	12,287			N/A		US$	12,287
		BA Credit Card Trust				”						US$	12,131			N/A		US$	12,131
		Toyota Auto Receivables 2014-C Owner Trust		—		”			—			US$	11,877			N/A		US$	11,877
		UBS-Barclays Commercial Mortgage Trust 2012-C2		—		”			—			US$	9,999			N/A		US$	9,999
		JPMCC Commercial Mortgage Securities Trust 2017-JP7		—		”			—			US$	9,980			N/A		US$	9,980
		BANK				”						US$	9,569			N/A		US$	9,569
		Hyundai Auto Lease Securitization Trust 2017-A		—		”			—			US$	8,536			N/A		US$	8,536
		Nissan Master Owner Trust Receivables		—		”			—			US$	8,014			N/A		US$	8,014
		CGDBB Commercial Mortgage Trust 2017-BIOC		—		”			—			US$	7,511			N/A		US$	7,511
		Mercedes-Benz Master Owner Trust		—		”			—			US$	7,423			N/A		US$	7,423
		Ford Credit Auto Lease Trust		—		”			—			US$	7,419			N/A		US$	7,419
		Capital One Multi-Asset Execution Trust		—		”			—			US$	7,302			N/A		US$	7,302
		Nissan Auto Lease Trust		—		”			—			US$	7,258			N/A		US$	7,258
		GM Financial Automobile Leasing Trust 2015-3		—		”			—			US$	7,116			N/A		US$	7,116
		Morgan Stanley Capital I Trust		—		”			—			US$	6,084			N/A		US$	6,084
		Chesapeake Funding II LLC		—		”			—			US$	6,071			N/A		US$	6,071
		UBS Commercial Mortgage Trust 2018-C10		—		”			—			US$	6,055			N/A		US$	6,055
		SLM Student Loan Trust 2013-6		—		”			—			US$	5,750			N/A		US$	5,750
		Wells Fargo Commercial Mortgage Trust 2015-LC20		—		”			—			US$	5,711			N/A		US$	5,711
		JPMBB Commercial Mortgage Securities Trust 2013-C12		—		”			—			US$	5,651			N/A		US$	5,651
		Citigroup Commercial Mortgage Trust 2013-GC11		—		”			—			US$	5,631			N/A		US$	5,631
		Honda Auto Receivables 2017-2 Owner Trust		—		”			—			US$	5,585			N/A		US$	5,585
		BBCMS 2018-TALL Mortgage Trust		—		”			—			US$	5,497			N/A		US$	5,497
		Ford Credit Auto Owner Trust		—		”			—			US$	4,951			N/A		US$	4,951
		JPMDB Commercial Mortgage Securities Trust 2017-C7		—		”			—			US$	4,748			N/A		US$	4,748
		BMW Vehicle Lease Trust		—		”			—			US$	4,703			N/A		US$	4,703
		Volvo Financial Equipment Master Owner Trust 2017-A		—		”			—			US$	4,512			N/A		US$	4,512
		GM Financial Consumer Automobile 2017-1		—		”			—			US$	3,903			N/A		US$	3,903
		Cold Storage Trust 2017-ICE3		—		”			—			US$	3,811			N/A		US$	3,811
		Navient Student Loan Trust 2017-1		—		”			—			US$	3,761			N/A		US$	3,761
		Nissan Auto Receivables 2017-B Owner Trust		—		”			—			US$	3,345			N/A		US$	3,345
		Wheels SPV 2 LLC		—		”			—			US$	3,342			N/A		US$	3,342
		Hertz Fleet Lease Funding LP		—		”			—			US$	2,988			N/A		US$	2,988

(Continued)

 

- 77 -

---

Held Company Name		Marketable Securities Type and Name		Relationship with the Company		Financial Statement Account		SEPTEMBER 30, 2018														Note
								Shares/Units (In Thousands)				Carrying Value (Foreign Currencies in Thousands)				Percentage of Ownership (%)		Fair Value (Foreign Currencies in Thousands)
TSMC Global		BMW Floorplan Master Owner Trust		—		Financial assets at fair value through other comprehensive income			—			US$	2,804			N/A		US$	2,804
		CarMax Auto Owner Trust		—		”			—			US$	2,619			N/A		US$	2,619
		BENCHMARK 2018-B4		—		”			—			US$	2,000			N/A		US$	2,000
		Nelnet Student Loan Trust 2010-4		—		”			—			US$	1,878			N/A		US$	1,878
		Nelnet Student Loan Trust 2006-2		—		”			—			US$	1,786			N/A		US$	1,786
		BENCHMARK 2018-B6 Mortgage Trust		—		”			—			US$	1,778			N/A		US$	1,778
		WFRBS Commercial Mortgage Trust 2013-C14		—		”			—			US$	1,568			N/A		US$	1,568
		Nelnet Student Loan Trust 2018-3		—		”			—			US$	1,550			N/A		US$	1,550
		Mercedes-Benz Auto Lease Trust 2016-A		—		”			—			US$	1,416			N/A		US$	1,416
		Enterprise Fleet Financing LLC		—		”			—			US$	1,356			N/A		US$	1,356
		Hyundai Auto Receivables Trust		—		”			—			US$	998			N/A		US$	998
		Mercedes-Benz Auto Receivables Trust 2015-1		—		”			—			US$	912			N/A		US$	912
		ARI Fleet Lease Trust 2018-A		—		”			—			US$	838			N/A		US$	838
		280 Park Avenue Mortgage Trust		—		”			—			US$	831			N/A		US$	831
		CFCRE Commercial Mortgage Trust 2011-C1		—		”			—			US$	783			N/A		US$	783
		Ally Auto Receivables Trust 2018-3		—		”			—			US$	700			N/A		US$	700
		DBUBS 2011-LC2 Mortgage Trust		—		”			—			US$	513			N/A		US$	513
		CD 2016-CD2 Mortgage Trust		—		”			—			US$	495			N/A		US$	495
		Commercial paper
		Oversea-Chinese Banking Corp L		—		Financial assets at fair value through other comprehensive income			—			US$	2,969			N/A		US$	2,969
		Sumitomo Mitsui Trust Bank Limited/New York		—		”			—			US$	2,000			N/A		US$	2,000
		Royal Bank of Canada/New York NY		—		”			—			US$	2,000			N/A		US$	2,000
		Toronto-Dominion Bank/NY		—		”			—			US$	1,500			N/A		US$	1,500
		Non-publicly traded equity investments
		Primavera Capital Fund II L.P.		—		Financial assets at fair value through other comprehensive income			—			US$	72,189			4		US$	72,189
VTAF II		Non-publicly traded equity investments
		Sentelic		—		Financial assets at fair value through other comprehensive income			1,019			US$	2,054			4		US$	2,054
		Aether Systems, Inc.		—		”			1,085			US$	356			20		US$	356
		5V Technologies, Inc.		—		”			963			US$	316			2		US$	316
		Publicly traded stocks
		Aquantia		—		Financial assets at fair value through other comprehensive income			85			US$	1,084			—		US$	1,084
VTAF III		Non-publicly traded equity investments
		LiquidLeds Lighting Corp.		—		Financial assets at fair value through other comprehensive income			1,600			US$	800			11		US$	800
		Neoconix, Inc.		—		”			4,147			US$	174			—		US$	174
ISDF		Non-publicly traded equity investments
		Sonics, Inc.		—		Financial assets at fair value through other comprehensive income			230				—			3			—
ISDF II		Non-publicly traded equity investments
		Sonics, Inc.		—		Financial assets at fair value through other comprehensive income			542				—			8			—

(Continued)

 

- 78 -

---

Held Company Name

Marketable Securities Type and Name

Relationship with the Company

Financial Statement Account

SEPTEMBER 30, 2018

Note

Shares/Units (In Thousands)

Carrying Value (Foreign Currencies in Thousands)

Percentage of Ownership (%)

Fair Value (Foreign Currencies in Thousands)

Growth Fund

Non-publicly traded equity investments

Innovium, Inc.

—

Financial assets at fair value through other comprehensive income

451

US$

2,393

—

US$

2,393

CNEX Labs, Inc.

—

”

237

US$

775

—

US$

775

(Concluded)

 

- 79 -

---

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 NINE MONTHS ENDED SEPTEMBER 30, 2018

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

 

 

Company Name		Marketable Securities Type and Name		Financial Statement Account		Counter-party				Nature of Relationship				Beginning Balance								Acquisition								Disposal																Ending Balance (Note)
														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		Non-publicly traded equity investments
		TSMC Global		Investments accounted for using equity method			—				Subsidiary				9			$	309,211,877				2			$	59,182,280				—			$	—			$	—			$	—				11			$	384,742,480
		TSMC Nanjing		“			—				Subsidiary				—				26,493,740				—				2,361,320				—				—				—				—				—				23,679,547
		Publicly traded stocks
		Motech		Financial assets at fair value through other comprehensive income			—				—				58,320				1,309,279				—				—				45,223				542,229				1,420,002				(877,773	)			13,097				132,932
TSMC Global		Corporate bond
		Bank of America Corp		Financial assets at fair value through other comprehensive income			—				—				—			US$	40,876				—			US$	10,270				—			US$	5,393			US$	5,426			US$	(33	)			—			US$	44,855
		CVS Health Corp		“			—				—				—			US$	10,018				—			US$	16,959				—			US$	199			US$	198			US$	1				—			US$	26,700
		Inter American Development Bank		“			—				—				—			US$	—				—			US$	21,168				—			US$	—			US$	—			US$	—				—			US$	21,164
		Celgene Corp		“			—				—				—			US$	6,181				—			US$	10,575				—			US$	8,076			US$	8,258			US$	(182	)			—			US$	8,370
		Cooperatieve Rabobank UA/NY		“			—				—				—			US$	1,450				—			US$	11,593				—			US$	6,683			US$	6,798			US$	(115	)			—			US$	6,252
		Asian Development Bank		“			—				—				—			US$	11,073				—			US$	—				—			US$	11,075			US$	11,075			US$	—				—			US$	—
		Government bond
		United States Treasury Note/Bond		Financial assets at fair value through other comprehensive income			—				—				—			US$	202,689				—			US$	373,192				—			US$	302,629			US$	304,216			US$	(1,587	)			—			US$	267,884
		United States Treasury Floating Rate Note		“			—				—				—			US$	49,901				—			US$	99,327				—			US$	79,979			US$	79,935			US$	44				—			US$	69,244
		United States Treasury Bill		“			—				—				—			US$	2,997				—			US$	153,233				—			US$	147,939			US$	147,908			US$	31				—			US$	8,381
		Agency bonds/Agency mortgage-backed securities
		FNMA TBA 30 Yr 5		Financial assets at fair value through other comprehensive income			—				—				—			US$	—				—			US$	139,880				—			US$	109,786			US$	109,735			US$	51				—			US$	30,000
		FNMA Pool BM4495		“			—				—				—			US$	—				—			US$	29,117				—			US$	184			US$	185			US$	(1	)			—			US$	28,880
		FNMA Pool BM1948		“			—				—				—			US$	41,275				—			US$	5,537				—			US$	17,499			US$	18,617			US$	(1,118	)			—			US$	27,609
		FED HM LN PC Pool G61603		“			—				—				—			US$	—				—			US$	27,059				—			US$	—			US$	—			US$	—				—			US$	27,147
		FNMA Pool CA2352		“			—				—				—			US$	—				—			US$	25,863				—			US$	—			US$	—			US$	—				—			US$	26,040
		FNMA Pool BM4493		“			—				—				—			US$	—				—			US$	18,366				—			US$	639			US$	640			US$	(1	)			—			US$	17,665
		GNMA II Pool MA5468		“			—				—				—			US$	—				—			US$	17,751				—			US$	—			US$	—			US$	—				—			US$	17,662
		Government National Mortgage Association		“			—				—				—			US$	—				—			US$	16,433				—			US$	—			US$	—			US$	—				—			US$	16,094

(Continued)

 

- 80 -

---

Company Name		Marketable Securities Type and Name		Financial Statement Account		Counter-party		Nature of Relationship		Beginning Balance								Acquisition								Disposal																Ending Balance (Note)
										Shares/Units (In Thousands)				Amount				Shares/Units (In Thousands)				Amount				Shares/Units (In Thousands)				Amount				Carrying Value				Gain/Loss on Disposal				Shares/Units (In Thousands)				Amount
TSMC Global		FED HM LN PC Pool G61553		Financial assets at fair value through other comprehensive income		—		—			—			US$	—				—			US$	15,372				—			US$	—			US$	—			US$	—				—			US$	15,275
		FNMA Pool CA2169		”		—		—			—			US$	—				—			US$	15,368				—			US$	—			US$	—			US$	—				—			US$	15,248
		GNMA II Pool MA5332		”		—		—			—			US$	—				—			US$	26,202				—			US$	13,130			US$	13,116			US$	14				—			US$	13,006
		GNMA II TBA 30 Yr 5		”		—		—			—			US$	—				—			US$	12,328				—			US$	—			US$	—			US$	—				—			US$	12,275
		Government National Mortgage Association		”		—		—			—			US$	—				—			US$	10,494				—			US$	—			US$	—			US$	—				—			US$	10,231
		FNMA TBA 15 Yr 3		”		—		—			—			US$	2,015				—			US$	55,925				—			US$	51,392			US$	51,432			US$	(40	)			—			US$	6,514
		FNMA TBA 30 Yr 4.5		”		—		—			—			US$	15,758				—			US$	112,478				—			US$	125,642			US$	125,894			US$	(252	)			—			US$	2,389
		GNMA II TBA 30 Yr 4		”		—		—			—			US$	2,378				—			US$	38,275				—			US$	38,302			US$	38,349			US$	(47	)			—			US$	2,319
		FNMA TBA 15 Yr 3.5		”		—		—			—			US$	—				—			US$	30,355				—			US$	28,336			US$	28,341			US$	(5	)			—			US$	2,010
		GNMA II TBA 30 Yr 3.5		”		—		—			—			US$	145				—			US$	38,929				—			US$	37,352			US$	37,428			US$	(76	)			—			US$	1,643
		FNMA TBA 30 Yr 3.5		”		—		—			—			US$	2,866				—			US$	57,051				—			US$	59,733			US$	59,627			US$	106				—			US$	295
		FNMA TBA 30 Yr 3		”		—		—			—			US$	—				—			US$	123,851				—			US$	123,395			US$	123,851			US$	(456	)			—			US$	—
		FED HM LN PC Pool G60594		”		—		—			—			US$	11,599				—			US$	—				—			US$	11,191			US$	11,711			US$	(520	)			—			US$	—
		Federal Home Loan Bank Discount Notes		”		—		—			—			US$	—				—			US$	29,498				—			US$	29,500			US$	29,499			US$	1				—			US$	—
		Asset-backed securities
		Citibank Credit Card Issuance Trust		Financial assets at fair value through other comprehensive income		—		—			—			US$	48,328				—			US$	27,950				—			US$	20,343			US$	20,346			US$	(3	)			—			US$	55,773
		Discover Card Execution Note Trust		”		—		—			—			US$	45,722				—			US$	16,266				—			US$	17,729			US$	17,754			US$	(25	)			—			US$	44,159
		Chase Issuance Trust		”		—		—			—			US$	39,211				—			US$	17,750				—			US$	16,973			US$	16,982			US$	(9	)			—			US$	39,969
		American Express Credit Account Master Trust		”		—		—			—			US$	12,805				—			US$	25,878				—			US$	11,239			US$	11,233			US$	6				—			US$	27,427
		Capital One Multi-Asset Execution Trust		”		—		—			—			US$	22,544				—			US$	—				—			US$	15,223			US$	15,227			US$	(4	)			—			US$	7,302

 

Note:

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

(Concluded)

 

- 81 -

---

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 NINE MONTHS ENDED SEPTEMBER 30, 2018

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

 

 

Types of

Transaction Amount (Foreign Currencies in

Nature of

Prior Transaction of Related Counter-party

Price

Purpose of

Other

Company 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 August 6, 2018

607,800

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 18, 2017 to June 4, 2018

1,334,403

Monthly settlement by the construction progress and acceptance

CHEN FULL INTERNATIONAL CO., LTD.

—

N/A

N/A

N/A

N/A

Price comparison and price negotiation

Manufacturing purpose

None

Fab

April 20, 2017 to April 19, 2018

300,874

Monthly settlement by the construction progress and acceptance

Unique Station International Corp.

—

N/A

N/A

N/A

N/A

Price comparison and price negotiation

Manufacturing purpose

None

Fab

April 21, 2017 to June 12, 2018

1,841,951

Monthly settlement by the construction progress and acceptance

Organo Technology Co., Ltd.

—

N/A

N/A

N/A

N/A

Price comparison and price negotiation

Manufacturing purpose

None

Fab

April 25, 2017 to July 31, 2018

2,559,574

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 12, 2017 to May 10, 2018

413,901

Monthly settlement by the construction progress and acceptance

HUAN YU TECHNOLOGIES CO., LTD.

—

N/A

N/A

N/A

N/A

Price comparison and price negotiation

Manufacturing purpose

None

Fab

May 25, 2017 to June 21, 2018

2,187,982

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

July 11, 2017 to July 31, 2018

1,422,454

Monthly settlement by the construction progress and acceptance

TASA Construction Corporation

—

N/A

N/A

N/A

N/A

Price comparison and price negotiation

Manufacturing purpose

None

Fab

July 24, 2017 to June 21, 2018

347,431

Monthly settlement by the construction progress and acceptance

MandarTech Interiors Inc.

—

N/A

N/A

N/A

N/A

Price comparison and price negotiation

Manufacturing purpose

None

(Continued)

 

- 82 -

---

Types of

Transaction Amount (Foreign Currencies in

Nature of

Prior Transaction of Related Counter-party

Price

Purpose of

Other

Company Name

Property

Transaction Date

Thousands)

Payment Term

Counter-party

Relationships

Owner

Relationships

Transfer Date

Amount

Reference

Acquisition

Terms

TSMC

Fab

July 28, 2017 to April 19, 2018

$

348,757

Monthly settlement by the construction progress and acceptance

J.J. PAN AND PARTNERS , ARCHITECTS AND PLANNERS

—

N/A

N/A

N/A

N/A

Price comparison and price negotiation

Manufacturing purpose

None

Fab

July 28, 2017 to May 8, 2018

574,621

Monthly settlement by the construction progress and acceptance

Trane Taiwan Distribution Limited

—

N/A

N/A

N/A

N/A

Price comparison and price negotiation

Manufacturing purpose

None

Fab

August 8, 2017 to June 28, 2018

337,069

Monthly settlement by the construction progress and acceptance

Lumax International Corp., Ltd

—

N/A

N/A

N/A

N/A

Price comparison and price negotiation

Manufacturing purpose

None

Fab

August 16, 2017 to July 31, 2018

1,012,550

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 June 1, 2018

1,224,738

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

Fab

November 9, 2017 to June 20, 2018

1,773,165

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

November 10, 2017 to May 24, 2018

305,783

Monthly settlement by the construction progress and acceptance

DESICCANT TECHNOLOGY CO., LTD.

—

N/A

N/A

N/A

N/A

Price comparison and price negotiation

Manufacturing purpose

None

Fab

November 13, 2017 to August 13, 2018

948,048

Monthly settlement by the construction progress and acceptance

Chen Yuan International Co., Ltd

—

N/A

N/A

N/A

N/A

Price comparison and price negotiation

Manufacturing purpose

None

Fab

November 14, 2017 to April 16, 2018

1,724,550

Monthly settlement by the construction progress and acceptance

PAN ASIA Corp.

—

N/A

N/A

N/A

N/A

Price comparison and price negotiation

Manufacturing purpose

None

Fab

December 5, 2017 to July 31, 2018

7,219,028

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

(Continued)

 

- 83 -

---

Types of

Transaction Amount (Foreign Currencies in

Nature of

Prior Transaction of Related Counter-party

Price

Purpose of

Other

Company Name

Property

Transaction Date

Thousands)

Payment Term

Counter-party

Relationships

Owner

Relationships

Transfer Date

Amount

Reference

Acquisition

Terms

TSMC

Fab

December 13, 2017 to July 23, 2018

$

2,457,695

Monthly settlement by the construction progress and acceptance

Taiwan Puritic Corp.

—

N/A

N/A

N/A

N/A

Price comparison and price negotiation

Manufacturing purpose

None

Fab

December 14, 2017 to May 23, 2018

305,566

Monthly settlement by the construction progress and acceptance

WHOLETECH SYSTEM HITECH LIMITED

—

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 to April 16, 2018

1,744,533

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

January 5, 2018 to April 16, 2018

315,886

Monthly settlement by the construction progress and acceptance

Shihlin Electric & Engineering Corp. Tainan Branch

—

N/A

N/A

N/A

N/A

Price comparison and price negotiation

Manufacturing purpose

None

Fab

February 5, 2018 to July 31, 2018

2,564,709

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

Fab

February 6, 2018 to August 13, 2018

5,387,421

Monthly settlement by the construction progress and acceptance

Fu Tsu Construction Co., Ltd.

—

N/A

N/A

N/A

N/A

Price comparison and price negotiation

Manufacturing purpose

None

Fab

February 12, 2018 to April 16, 2018

378,445

Monthly settlement by the construction progress and acceptance

AMPOWER INTERNATIONAL ENTERPRISE

—

N/A

N/A

N/A

N/A

Price comparison and price negotiation

Manufacturing purpose

None

Fab

February 13, 2018 to June 25, 2018

1,415,232

Monthly settlement by the construction progress and acceptance

Cica-Huntek Chemical Technology Taiwan Co., Ltd

—

N/A

N/A

N/A

N/A

Price comparison and price negotiation

Manufacturing purpose

None

Fab

April 13, 2018 to April 16, 2018

410,000

Monthly settlement by the construction progress and acceptance

Lead Fu Industrials Corp.

—

N/A

N/A

N/A

N/A

Price comparison and price negotiation

Manufacturing purpose

None

Fab

April 16, 2018

2,691,210

Monthly settlement by the construction progress and acceptance

DA CIN Construction Co., Ltd.

—

N/A

N/A

N/A

N/A

Price comparison and price negotiation

Manufacturing purpose

None

(Continued)

 

- 84 -

---

Types of

Transaction Amount (Foreign Currencies in

Nature of

Prior Transaction of Related Counter-party

Price

Purpose of

Other

Company Name

Property

Transaction Date

Thousands)

Payment Term

Counter-party

Relationships

Owner

Relationships

Transfer Date

Amount

Reference

Acquisition

Terms

TSMC

Fab

August 16, 2017 to July 31, 2018

$

617,447

Monthly settlement by the construction progress and acceptance

Kao Hsin Engineering Co., Ltd.

—

N/A

N/A

N/A

N/A

Price comparison and price negotiation

Manufacturing purpose

None

(Concluded)

 

- 85 -

---

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 NINE MONTHS ENDED SEPTEMBER 30, 2018

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

 

 

																						Notes/Accounts Payable or Receivable
						Transaction Details																Ending Balance
								Amount (Foreign Currencies				% to						Abnormal Transaction				(Foreign Currencies in				% to
Company Name		Related Party		Nature of Relationships		Purchases/Sales		in Thousands)				Total				Payment Terms		Unit Price		Payment Terms		Thousands)				Total				Note
TSMC		TSMC North America		Subsidiary		Sales		$	449,319,589				58			Net 30 days from invoice date (Note)		—		Note		$	86,509,418				69
		GUC		Associate		Sales			5,356,073				1			Net 30 days from the end of the month of when invoice is issued		—		—			1,338,059				1
		TSMC China		Subsidiary		Purchases			13,944,138				19			Net 30 days from the end of the month of when invoice is issued		—		—			(1,089,594	)			3
		TSMC Nanjing		Subsidiary		Purchases			7,185,512				10			Net 30 days from the end of the month of when invoice is issued		—		—			(1,434,737	)			4
		WaferTech		Indirect subsidiary		Purchases			6,406,552				9			Net 30 days from the end of the month of when invoice is issued		—		—			(1,329,743	)			4
		VIS		Associate		Purchases			3,985,293				6			Net 30 days from the end of the month of when invoice is issued		—		—			(467,874	)			1
		SSMC		Associate		Purchases			2,708,201				4			Net 30 days from the end of the month of when invoice is issued		—		—			(367,328	)			1
TSMC North America		GUC		Associate of TSMC		Sales		(US$	1,421,992 47,625)				—			Net 30 days from invoice date		—		—		(US$	208,918 6,849)				—
VisEra Tech		Xintec		Associate of TSMC		Sales			343,851				18			Net 30 days from the end of the month of when invoice is issued		—		—			210,096				37

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.

 

- 86 -

---

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

SEPTEMBER 30, 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		$	87,305,818			54		$	5,745,109			—		$	45,056,581			$	—
		GUC		Associate			1,338,196			54			—			—			—				—
		TSMC Nanjing		Subsidiary			121,987			Note 2			—			—			—				—
TSMC China		TSMC Nanjing		The same parent company		(RMB	30,403,767     6,858,508	)		Note 2			—			—			—				—
		TSMC		Parent company		(RMB	1,089,594 245,793	)		25			—			—			—				—
TSMC Nanjing		TSMC		Parent company		(RMB	1,434,737  323,652	)		28			—			—			—				—
WaferTech		TSMC		The ultimate parent of the Company		(USD	1,329,743 43,591	)		56		(USD	710,084 23,278	)		—		(USD	710,084 23,278	)			—
TSMC Technology		TSMC		The ultimate parent of the Company		(USD	215,971 7,080	)		Note 2			—			—			—				—
TSMC North America		TSMC		Parent company		(USD	108,717 3,564)			Note 2		(USD	10,658 349	)		—		(USD	10,658 349	)			—
TSMC Japan		TSMC		Parent company		(JPY	100,061 370,735)			Note 2		(JPY	64,235 237,994	)		—		(JPY	64,235 237,994	)			—

 

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.

 

- 87 -

---

TABLE 8

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

INTERCOMPANY RELATIONSHIPS AND SIGNIFICANT INTERCOMPANY TRANSACTIONS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 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 sale of goods		$	449,319,589			—		61%
								Receivables from related parties			86,509,418			—		4%
								Other receivables from related parties			796,400			—		—
								Payables to related parties			108,717			—		—
				TSMC Japan		1		Marketing expenses - commission			167,385			—		—
								Payables to related parties			100,061			—		—
				TSMC Europe		1		Marketing expenses - commission			355,276			—		—
				TSMC China		1		Purchases			13,944,138			—		2%
								Marketing expenses - commission			115,561			—		—
								Payables to related parties			1,089,594			—		—
				TSMC Nanjing		1		Purchases			7,185,512			—		1%
								Proceeds from disposal of property, plant and equipment			2,539,445			—		—
								Other receivables from related parties			121,987			—		—
								Payables to related parties			1,434,737			—		—
				TSMC Canada		1		Research and development expenses			221,935			—		—
				TSMC Technology		1		Research and development expenses			1,546,508			—		—
								Payables to related parties			215,971			—		—
				WaferTech		1		Purchases			6,406,552			—		1%
								Payables to related parties			1,329,743			—		—
1		TSMC China		TSMC Nanjing		3		Other receivables from related parties			30,403,767			—		2%

 

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.

 

- 88 -

---

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 NINE MONTHS ENDED SEPTEMBER 30, 2018

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

 

 

								Original Investment Amount								Balance as of September 30, 2018										Net Income				Share of Profits/Losses
Investor Company		Investee Company		Location		Main Businesses and Products		September 30, 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		$	384,742,480			$	6,581,643			$	6,581,643			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			53,066,126				1,909,351				1,909,351			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			8,450,652				4,238,101				1,196,560			Associate
		SSMC		Singapore		Manufacturing and selling of integrated circuits and other semiconductor devices			5,120,028				5,120,028				314			39			5,317,308				2,845,054				1,103,596			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			4,390,530				249,643				217,022			Subsidiary
		TSMC North America		San Jose, California, U.S.A		Selling and marketing of integrated circuits and other semiconductor devices			333,718				333,718				11,000			100			4,324,412				206,551				206,551			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			1,715,711				(1,479,071	)			(599,872	)		Associate
		GUC		Hsin-Chu, Taiwan		Researching, developing, manufacturing, testing and marketing of integrated circuits			386,568				386,568				46,688			35			1,125,928				711,727				247,966			Associate
		TSMC Europe		Amsterdam, the Netherlands		Customer service and supporting activities			15,749				15,749				—			100			441,433				31,573				31,573			Subsidiary
		VTAF III		Cayman Islands		Investing in new start-up technology companies			1,318,885				1,318,885				—			98			199,014				(6,010	)			(5,890	)		Subsidiary
		VTAF II		Cayman Islands		Investing in new start-up technology companies			294,300				412,831				—			98			154,129				(3,549	)			(3,478	)		Subsidiary
		TSMC Japan		Yokohama, Japan		Customer service and supporting activities			83,760				83,760				6			100			137,377				4,543				4,543			Subsidiary
		TSMC Korea		Seoul, Korea		Customer service and supporting activities			13,656				13,656				80			100			40,784				1,988				1,988			Subsidiary
		TSMC Solar Europe GmbH		Hamburg, Germany		Selling of solar related products and providing customer service			25,266				25,266				1			100			(20,369	)			(21	)			(21	)		Subsidiary
TSMC Partners		TSMC Development		Delaware, U.S.A		Investing in companies involved in the manufacturing related business in the semiconductor industry		(US$	17,904,568 586,939	)		(US$	17,904,568 586,939	)			—			100		(US$	28,616,530 938,093	)		(US$	1,458,177 48,668	)			Note 2			Subsidiary
		TSMC Technology		Delaware, U.S.A		Engineering support activities			435,673				435,673				—			100			577,021				42,308				Note 2			Subsidiary
								(US$	14,282	)		(US$	14,282	)								(US$	18,916	)		(US$	1,430	)
		TSMC Canada		Ontario, Canada		Engineering support activities			70,162				70,162				2,300			100			202,790				21,784				Note 2			Subsidiary
								(US$	2,300	)		(US$	2,300	)								(US$	6,648	)		(US$	731	)
		ISDF		Cayman Islands		Investing in new start-up technology companies			14,496				14,496				583			97			506				—				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			65,701				65,701				—			100			97,419				(209	)			Note 2			Subsidiary
								(US$	2,154	)		(US$	2,154	)								(US$	3,194	)		(US$	(8	))
		Mutual-Pak		New Taipei, Taiwan		Manufacturing of electronic parts, wholesaling and retailing of electronic materials, and researching, developing and testing of RFID		(US$	48,605 1,593	)		(US$	48,605 1,593	)			4,693			39		(US$	21,071 691	)		(US$	(5,492 (190	)  ))			Note 2			Associate

(Continued)

 

- 89 -

---

Original Investment Amount

Balance as of September 30, 2018

Net Income

Share of Profits/Losses

Investor Company

Investee Company

Location

Main Businesses and Products

September 30, 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$

5,195,324 170,311

)

$ (US$

1,190,576 39,741

)

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)

 

- 90 -

---

TABLE 10

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

INFORMATION ON INVESTMENT IN MAINLAND CHINA

FOR NINE MONTHS ENDED SEPTEMBER 30, 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 September 30, 2018 (US$ in Thousands)				Net Income (Losses) of the Investee Company				Percentage of Ownership		Share of Profits/Losses				Carrying Amount as of September 30, 2018				Accumulated Inward Remittance of Earnings as of September 30, 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	)		$	4,202,563			100%		$	4,206,026 (Note 2	)		$	53,768,320			$	—
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	)			(4,751,679	)		100%			(4,752,362 (Note 2	)  )			23,679,547				—

 

Accumulated Investment in Mainland China as of September 30, 2018 (US$ in Thousands)				Investment Amounts Authorized by Investment Commission, MOEA (US$ in Thousands)				Upper Limit on Investment
$ (US$	49,461,079 1,596,000	)		$ (US$	119,412,667 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.

 

- 91 -