1934 Act Registration No. 1-14700

 

 

 

 

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

 

FORM 6-K

 

 

REPORT OF FOREIGN PRIVATE ISSUER

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

THE SECURITIES EXCHANGE ACT OF 1934

For the month of May 2018

 

 

Taiwan Semiconductor Manufacturing Company Ltd.

(Translation of Registrant’s Name Into English)

 

 

No. 8, Li-Hsin Rd. 6,

Hsinchu Science Park,

Taiwan

(Address of Principal Executive Offices)

 

 

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

Form 20-F    ☒            Form 40-F  ☐

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

Yes  ☐            No  ☒

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

 

 

 

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SIGNATURES

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

 

				Taiwan Semiconductor Manufacturing Company Ltd.
Date: May 7, 2018				By		/s/ Lora Ho
						Lora Ho
						Senior Vice President & Chief Financial Officer

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		Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries   Consolidated Financial Statements for the Three Months Ended March 31, 2018 and 2017 and Independent Auditors’ Review Report

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INDEPENDENT AUDITORS’ REVIEW REPORT

The Board of Directors and Shareholders

Taiwan Semiconductor Manufacturing Company Limited

Introduction

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

Scope of Review

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

Conclusion

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

 

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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

April 20, 2018

Notice to Readers

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

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

 

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Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED BALANCE SHEETS

(In Thousands of New Taiwan Dollars)

 

 

		March 31, 2018 (Reviewed)								December 31, 2017 (Audited)								March 31, 2017 (Reviewed)
		Amount				%				Amount				%				Amount				%
ASSETS
CURRENT ASSETS
Cash and cash equivalents (Note 6)		$	577,782,963				28			$	553,391,696				28			$	564,725,266				29
Financial assets at fair value through profit or loss (Note 7)			963,915				—				569,751				—				5,374,003				—
Financial assets at fair value through other comprehensive income (Note 8)			95,713,446				4				—				—				—				—
Available-for-sale financial assets (Note 9)			—				—				93,374,153				5				71,083,797				4
Held-to-maturity financial assets (Note 10)			—				—				1,988,385				—				18,140,374				1
Financial assets at amortized cost (Note 11)			9,888,741				1				—				—				—				—
Hedging derivative financial assets (Note 13)			—				—				34,394				—				—				—
Hedging financial assets (Note 13)			26,357				—				—				—				—				—
Notes and accounts receivable, net (Note 14)			106,601,372				5				121,133,248				6				108,532,829				6
Receivables from related parties (Note 32)			1,179,312				—				1,184,124				—				494,839				—
Other receivables from related parties (Note 32)			130,070				—				171,058				—				135,051				—
Inventories (Note 15)			85,215,899				4				73,880,747				4				50,389,022				3
Other financial assets (Note 33)			11,667,264				1				7,253,114				—				3,761,484				—
Other current assets (Note 19)			39,947,321				2				4,222,440				—				3,025,168				—
Total current assets			929,116,660				45				857,203,110				43				825,661,833				43
NONCURRENT ASSETS
Financial assets at fair value through other comprehensive income (Note 8)			6,035,904				—				—				—				—				—
Held-to-maturity financial assets (Note 10)			—				—				18,833,329				1				20,499,458				1
Financial assets at amortized cost (Note 11)			10,033,241				1				—				—				—				—
Financial assets carried at cost (Note 12)			—				—				4,874,257				—				4,079,292				—
Investments accounted for using equity method (Note 16)			18,307,517				1				17,861,488				1				19,940,062				1
Property, plant and equipment (Note 17)			1,055,366,207				51				1,062,542,322				53				1,037,364,143				54
Intangible assets (Note 18)			13,674,295				1				14,175,140				1				14,278,436				1
Deferred income tax assets (Note 4)			12,987,042				1				12,105,463				1				10,644,401				—
Refundable deposits			2,121,209				—				1,283,414				—				572,005				—
Other noncurrent assets (Note 19)			1,513,731				—				2,983,120				—				1,624,131				—
Total noncurrent assets			1,120,039,146				55				1,134,658,533				57				1,109,001,928				57
TOTAL		$	2,049,155,806				100			$	1,991,861,643				100			$	1,934,663,761				100
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Short-term loans (Notes 20 and 30)		$	56,731,350				3			$	63,766,850				3			$	54,666,000				3
Financial liabilities at fair value through profit or loss (Note 7)			170,673				—				26,709				—				124,935				—
Hedging derivative financial liabilities (Note 13)			—				—				15,562				—				3,908				—
Hedging financial liabilities (Note 13)			79,182				—				—				—				—				—
Accounts payable			27,817,670				1				28,412,807				1				23,081,567				1
Payables to related parties (Note 32)			1,224,307				—				1,656,356				—				1,171,195				—
Salary and bonus payable			10,201,325				1				14,254,871				1				10,703,656				1
Accrued profit sharing bonus to employees and compensation to directors and supervisors (Notes 24 and 29)			29,529,009				1				23,419,135				1				28,857,625				1
Payables to contractors and equipment suppliers			47,828,289				2				55,723,774				3				57,671,953				3
Income tax payable (Note 4)			44,096,800				2				33,479,311				2				52,874,433				3
Provisions (Note 21)			—				—				13,961,787				1				11,298,320				1
Long-term liabilities - current portion (Note 22)			49,356,740				2				58,401,122				3				44,909,680				2
Accrued expenses and other current liabilities (Notes 23, 30 and 32)			75,199,897				4				65,588,396				3				36,217,252				2
Total current liabilities			342,235,242				16				358,706,680				18				321,580,524				17
NONCURRENT LIABILITIES
Bonds payable (Notes 22 and 30)			83,400,000				4				91,800,000				5				134,198,769				7
Long-term bank loans			—				—				—				—				19,360				—
Deferred income tax liabilities (Note 4)			285,644				—				302,205				—				90,944				—
Net defined benefit liability (Note 4)			8,818,705				1				8,850,704				1				8,537,369				—
Guarantee deposits (Notes 23 and 30)			5,991,361				—				7,586,790				—				12,321,468				1
Others			1,819,825				—				1,855,621				—				1,605,302				—
Total noncurrent liabilities			100,315,535				5				110,395,320				6				156,773,212				8
Total liabilities			442,550,777				21				469,102,000				24				478,353,736				25
EQUITY ATTRIBUTABLE TO SHAREHOLDERS OF THE PARENT
Capital stock (Note 24)			259,303,805				13				259,303,805				13				259,303,805				13
Capital surplus (Note 24)			56,305,751				3				56,309,536				3				56,282,118				3
Retained earnings (Note 24)
Appropriated as legal capital reserve			241,722,663				12				241,722,663				12				208,297,945				11
Unappropriated earnings			1,082,967,237				53				991,639,347				49				951,339,122				49
			1,324,689,900				65				1,233,362,010				61				1,159,637,067				60
Others (Note 24)			(34,401,067	)			(2	)			(26,917,818	)			(1	)			(19,709,627	)			(1	)
Equity attributable to shareholders of the parent			1,605,898,389				79				1,522,057,533				76				1,455,513,363				75
NON-CONTROLLING INTERESTS			706,640				—				702,110				—				796,662				—
Total equity			1,606,605,029				79				1,522,759,643				76				1,456,310,025				75
TOTAL		$	2,049,155,806				100			$	1,991,861,643				100			$	1,934,663,761				100

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

 

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Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

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

(Reviewed, Not Audited)

 

 

		Three Months Ended March 31
		2018								2017
		Amount				%				Amount				%
NET REVENUE (Notes 25, 32 and 37)		$	248,078,671				100			$	233,914,400				100
COST OF REVENUE (Notes 15, 29 and 32)			123,103,977				50				112,428,734				48
GROSS PROFIT BEFORE REALIZED (UNREALIZED) GROSS PROFIT ON SALES TO ASSOCIATES			124,974,694				50				121,485,666				52
REALIZED (UNREALIZED) GROSS PROFIT ON SALES TO ASSOCIATES			(117,155	)			—				3,970				—
GROSS PROFIT			124,857,539				50				121,489,636				52
OPERATING EXPENSES (Notes 29 and 32)
Research and development			20,428,594				8				19,412,393				8
General and administrative			4,851,708				2				5,247,603				2
Marketing			1,448,092				1				1,496,487				1
Total operating expenses			26,728,394				11				26,156,483				11
OTHER OPERATING INCOME AND EXPENSES, NET (Note 29)			(1,302,199	)			—				19,237				—
INCOME FROM OPERATIONS (Note 37)			96,826,946				39				95,352,390				41
NON-OPERATING INCOME AND EXPENSES
Share of profits of associates			681,791				—				666,810				—
Other income			3,154,642				1				2,104,979				1
Foreign exchange gain (loss), net (Note 36)			(676,980	)			—				99,795				—
Finance costs			(807,966	)			—				(816,664	)			—
Other gains and losses, net (Note 26)			765,188				—				415,189				—
Total non-operating income and expenses			3,116,675				1				2,470,109				1
INCOME BEFORE INCOME TAX			99,943,621				40				97,822,499				42
INCOME TAX EXPENSE (Notes 4 and 27)			10,156,047				4				10,201,591				5
NET INCOME			89,787,574				36				87,620,908				37

(Continued)

 

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Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

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

(Reviewed, Not Audited)

 

 

		Three Months Ended March 31
		2018								2017
		Amount				%				Amount				%
OTHER COMPREHENSIVE INCOME (LOSS) (Notes 24 and 27)
Items that will not be reclassified subsequently to profit or loss:
Unrealized loss on investments in equity instruments at fair value through other comprehensive income		$	(19,507	)			—			$	—				—
Gain on hedging instruments			37,282				—				—				—
Share of other comprehensive income of associates			62				—				—				—
Income tax benefit related to items that will not be reclassified subsequently			39,206				—				—				—
			57,043				—				—				—
Items that may be reclassified subsequently to profit or loss:
Exchange differences arising on translation of foreign operations			(6,476,486	)			(3	)			(21,243,594	)			(9	)
Changes in fair value of available-for-sale financial assets			—				—				(93,470	)			—
Unrealized loss on investments in debt instruments at fair value through other comprehensive income			(727,410	)			—				—				—
Share of other comprehensive loss of associates			(39,352	)			—				(61,657	)			—
Income tax benefit related to items that may be reclassified subsequently			—				—				46,400				—
			(7,243,248	)			(3	)			(21,352,321	)			(9	)
Other comprehensive loss for the period, net of income tax			(7,186,205	)			(3	)			(21,352,321	)			(9	)
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD		$	82,601,369				33			$	66,268,587				28
NET INCOME (LOSS) ATTRIBUTABLE TO:
Shareholders of the parent		$	89,784,622				36			$	87,628,898				37
Non-controlling interests			2,952				—				(7,990	)			—
		$	89,787,574				36			$	87,620,908				37

(Continued)

 

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Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

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

(Reviewed, Not Audited)

 

 

		Three Months Ended March 31
		2018								2017
		Amount				%				Amount				%
TOTAL COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO:
Shareholders of the parent		$	82,596,052				33			$	66,274,790				28
Non-controlling interests			5,317				—				(6,203	)			—
		$	82,601,369				33			$	66,268,587				28
		2018								2017
		Income Attributable to Shareholders of the Parent								Income Attributable to Shareholders of the Parent
EARNINGS PER SHARE (NT$, Note 28)
Basic earnings per share		$					3.46			$					3.38
Diluted earnings per share		$					3.46			$					3.38

 

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

 

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Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(In Thousands of New Taiwan Dollars)

(Reviewed, Not Audited)

 

 

		Equity Attributable to Shareholders of the Parent
																										Others
																																		Unrealized Gain(Loss) on Financial Assets at Fair Value Through Other Comprehensive Income
																														Unrealized Gain(Loss) from Available- for-sale Financial Assets
																										Foreign Currency Translation Reserve																				Unearned Stock-Based Employee Compensation
		Capital Stock - Common Stock												Retained Earnings																												Gain(Loss) on Hedging Instruments
		Shares												Legal Capital				Unappropriated																				Cash Flow Hedges Reserve																				Non-controlling				Total
		(In Thousands)				Amount				Capital Surplus				Reserve				Earnings				Total																												Total				Total				Interests				Equity
BALANCE, JANUARY 1, 2018			25,930,380			$	259,303,805			$	56,309,536			$	241,722,663			$	991,639,347			$	1,233,362,010			$	(26,697,680	)		$	(214,074	)		$	—			$	4,226			$	—			$	(10,290	)		$	(26,917,818	)		$	1,522,057,533			$	702,110			$	1,522,759,643
Effect of retrospective application			—				—				—				—				1,556,319				1,556,319				—				214,074				(524,915	)			(4,226	)			4,226				—				(310,841	)			1,245,478				342				1,245,820
ADJUSTED BALANCE, JANUARY 1, 2018			25,930,380				259,303,805				56,309,536				241,722,663				993,195,666				1,234,918,329				(26,697,680	)			—				(524,915	)			—				4,226				(10,290	)			(27,228,659	)			1,523,303,011				702,452				1,524,005,463
Net income for the three months ended March 31, 2018			—				—				—				—				89,784,622				89,784,622				—				—				—				—				—				—				—				89,784,622				2,952				89,787,574
Other comprehensive income (loss) for the three months ended March 31, 2018, net of income tax			—				—				—				—				—				—				(6,515,676	)			—				(705,702	)			—				32,808				—				(7,188,570	)			(7,188,570	)			2,365				(7,186,205	)
Total comprehensive income (loss) for the three months ended March 31, 2018			—				—				—				—				89,784,622				89,784,622				(6,515,676	)			—				(705,702	)			—				32,808				—				(7,188,570	)			82,596,052				5,317				82,601,369
Disposal of investments in equity instruments at fair value through other comprehensive income			—				—				—				—				(13,051	)			(13,051	)			—				—				13,051				—				—				—				13,051				—				—				—
Adjustments to share of changes in equities of associates			—				—				(3,825	)			—				—				—				—				—				—				—				—				3,111				3,111				(714	)			—				(714	)
Donation from shareholders			—				—				40				—				—				—				—				—				—				—				—				—				—				40				6				46
Decrease in non-controlling interests			—				—				—				—				—				—				—				—				—				—				—				—				—				—				(1,135	)			(1,135	)
BALANCE, March 31, 2018			25,930,380			$	259,303,805			$	56,305,751			$	241,722,663			$	1,082,967,237			$	1,324,689,900			$	(33,213,356	)		$	—			$	(1,217,566	)		$	—			$	37,034			$	(7,179	)		$	(34,401,067	)		$	1,605,898,389			$	706,640			$	1,606,605,029
BALANCE, JANUARY 1, 2017			25,930,380			$	259,303,805			$	56,272,304			$	208,297,945			$	863,710,224			$	1,072,008,169			$	1,661,237			$	2,641			$	—			$	105			$	—			$	—			$	1,663,983			$	1,389,248,261			$	802,865			$	1,390,051,126
Net income (loss) for the three months ended March 31, 2017			—				—				—				—				87,628,898				87,628,898				—				—				—				—				—				—				—				87,628,898				(7,990	)			87,620,908
Other comprehensive income (loss) for the three months ended March 31, 2017, net of income tax			—				—				—				—				—				—				(21,304,092	)			(50,016	)			—				—				—				—				(21,354,108	)			(21,354,108	)			1,787				(21,352,321	)
Total comprehensive income (loss) for the three months ended March 31, 2017			—				—				—				—				87,628,898				87,628,898				(21,304,092	)			(50,016	)			—				—				—				—				(21,354,108	)			66,274,790				(6,203	)			66,268,587
Adjustments to share of changes in equities of associates			—				—				9,814				—				—				—				—				—				—				—				—				(19,502	)			(19,502	)			(9,688	)			—				(9,688	)
BALANCE, March 31, 2017			25,930,380			$	259,303,805			$	56,282,118			$	208,297,945			$	951,339,122			$	1,159,637,067			$	(19,642,855	)		$	(47,375	)		$	—			$	105			$	—			$	(19,502	)		$	(19,709,627	)		$	1,455,513,363			$	796,662			$	1,456,310,025

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

 

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Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands of New Taiwan Dollars)

(Reviewed, Not Audited)

 

 

		Three Months Ended March 31
		2018				2017
CASH FLOWS FROM OPERATING ACTIVITIES
Income before income tax		$	99,943,621			$	97,822,499
Adjustments for:
Depreciation expense			70,462,286				59,133,361
Amortization expense			1,035,591				1,038,824
Reversal of expected credit losses on investments in debt instruments			(1,757	)			—
Finance costs			807,966				816,664
Share of profits of associates			(681,791	)			(666,810	)
Interest income			(3,154,189	)			(2,104,979	)
Loss (gain) on disposal or retirement of property, plant and equipment, net			582,384				(22,195	)
Gain on disposal of intangible assets, net			(436	)			—
Impairment loss on financial assets			—				12,032
Loss on financial instruments at fair value through profit or loss			28,142				—
Loss on disposal of investments in debt instruments at fair value through other comprehensive income			252,328				—
Loss on disposal of available-for-sale financial assets, net			—				8,982
Unrealized (realized) gross profit on sales to associates			117,155				(3,970	)
Gain on foreign exchange, net			(1,205,272	)			(7,106,552	)
Dividend income			(453	)			—
Loss (gain) arising from fair value hedges, net			(352	)			19,487
Changes in operating assets and liabilities:
Financial instruments at fair value through profit or loss			602,734				1,010,909
Notes and accounts receivable, net			13,296,988				18,227,303
Receivables from related parties			4,812				474,720
Other receivables from related parties			40,988				11,737
Inventories			(11,335,152	)			(1,706,789	)
Other financial assets			(3,143,144	)			1,599,844
Other current assets			(1,402,930	)			369,473
Other noncurrent assets			25,301				(152,473	)
Accounts payable			(984,571	)			(3,020,849	)
Payables to related parties			(432,049	)			(90,979	)
Salary and bonus payable			(4,053,546	)			(2,978,161	)
Accrued profit sharing bonus to employees and compensation to directors and supervisors			6,109,874				5,963,619
Accrued expenses and other current liabilities			(5,776,314	)			(824,558	)
Provisions			—				(6,696,992	)
Net defined benefit liability			(31,999	)			(14,039	)
Cash generated from operations			161,106,215				161,120,108
Income taxes paid			(380,297	)			(112,064	)
Net cash generated by operating activities			160,725,918				161,008,044

(Continued)

 

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Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands of New Taiwan Dollars)

(Reviewed, Not Audited)

 

 

		Three Months Ended March 31
		2018				2017
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions of:
Financial instruments at fair value through profit or loss - debt instruments		$	(183,026	)		$	—
Financial assets at fair value through other comprehensive income			(24,382,829	)			—
Available-for-sale financial assets			—				(24,675,339	)
Held-to-maturity financial assets			—				(1,695,771	)
Financial assets carried at cost			—				(202,032	)
Property, plant and equipment			(71,847,185	)			(102,505,595	)
Intangible assets			(222,548	)			(917,636	)
Proceeds from disposal or redemption of:
Financial instruments at fair value through profit or loss - debt instruments			49,438				—
Financial assets at fair value through other comprehensive income			20,123,921				—
Available-for-sale financial assets			—				18,436,274
Held-to-maturity financial assets			—				400,000
Financial assets at amortized cost			498,542				—
Property, plant and equipment			47,376				151,904
Intangible assets			492				—
Derecognition of hedging derivative financial instruments			—				(6,399	)
Derecognition of hedging financial instruments			177,209				—
Interest received			3,139,610				1,950,176
Other dividends received			453				—
Refundable deposits paid			(1,048,245	)			(191,217	)
Refundable deposits refunded			187,602				25,376
Net cash used in investing activities			(73,459,190	)			(109,230,259	)
CASH FLOWS FROM FINANCING ACTIVITIES
Decrease in short-term loans			(5,774,830	)			(250,365	)
Repayment of bonds and interest – prepaid			(33,998,915	)			—
Repayment of bonds			(16,800,000	)			(10,000,000	)
Repayment of long-term bank loans			—				(2,420	)
Interest paid			(998,257	)			(1,257,295	)
Guarantee deposits received			3,095				723,339
Guarantee deposits refunded			(57,230	)			(1,123,178	)
Donation from shareholders			46				—
Decrease in non-controlling interests			(1,135	)			—
Net cash used in financing activities			(57,627,226	)			(11,909,919	)

(Continued)

 

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Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands of New Taiwan Dollars)

(Reviewed, Not Audited)

 

 

		Three Months Ended March 31
		2018				2017
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS		$	(5,248,235	)		$	(16,396,433	)
NET INCREASE IN CASH AND CASH EQUIVALENTS			24,391,267				23,471,433
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD			553,391,696				541,253,833
CASH AND CASH EQUIVALENTS, END OF PERIOD		$	577,782,963			$	564,725,266

 

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

 

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Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2018 and 2017

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

(Reviewed, Not Audited)

 

 

1.

GENERAL

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

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

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

 

2.	THE AUTHORIZATION OF FINANCIAL STATEMENTS

The accompanying consolidated financial statements were reported to the Board of Directors and issued on April 20, 2018.

 

3.	APPLICATION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS

 

a.

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

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

 

1)

IFRS 9 “Financial Instruments” and related amendment

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

Classification, measurement and impairment of financial assets and financial liabilities

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

 

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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:

 

 

 

 

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(1)

Cash and cash equivalents, notes and accounts receivable (including related parties), other receivables and refundable deposits that were classified as loans and receivables under IAS 39 are now classified at amortized cost with assessment of future 12-month or lifetime expected credit loss under IFRS 9. As a result of retrospective application, the adjustments would result in a decrease in loss allowance for accounts receivable of NT$244,773 thousand and an increase in retained earnings of NT$244,773 thousand on January 1, 2018.

 

(2)

As equity investments that were previously classified as available-for-sale financial assets under IAS 39 are not held for trading, the Company elected to designate all of these investments as at FVTOCI under IFRS 9. As a result, the related other equity-unrealized gain/loss on available-for-sale financial assets of NT$228,304 thousand is reclassified to increase other equity - unrealized gain/loss on financial assets at FVTOCI.

 

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

 

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

 

(3)

Debt investments were previously classified as available-for-sale financial assets under IAS 39. Under IFRS 9, except for debt instruments of NT$779,489 thousand whose contractual cash flows are not solely payments of principal and interest on the principal outstanding and therefore are classified as at FVTPL with the related other equity-unrealized gain/loss on available-for-sale financial assets of NT$10,085 thousand being consequently reclassified to decrease retained earnings, the remaining debt investments are classified as at FVTOCI with assessment of future 12-month expected credit loss because these investments are held within a business model whose objective is both to collect the contractual cash flows and sell the financial assets. The related other equity-unrealized gain/loss on available-for-sale financial assets of NT$434,403 thousand is reclassified to decrease other equity-unrealized gain/loss on financial assets at FVTOCI. As a result of retrospective application of future 12-month expected credit loss, the adjustments would result in an increase in other equity - unrealized gain/loss on financial assets at FVTOCI of NT$30,658 thousand and a decrease in retained earnings of NT$30,658 thousand on January 1, 2018.

 

(4)

Debt investments previously classified as held-to-maturity financial assets and measured at amortized cost under IAS 39 are classified as measured at amortized cost with assessment of future 12-month expected credit loss under IFRS 9 because the contractual cash flows are solely payments of principal and interest on the principal outstanding and these investments are held within a business model whose objective is to collect the contractual cash flows. As a result of retrospective application of future 12-month expected credit loss, the adjustments would result in an increase in loss allowance of NT$8,252 thousand and a decrease in retained earnings of NT$8,252 thousand on January 1, 2018.

 

(5)

With the retrospective adoption of IFRS 9 by associates accounted for using equity method, the corresponding adjustments made by the Company would result in an increase in investments accounted for using equity method of NT$8,258 thousand, a decrease in other equity- unrealized gain/loss on financial assets at FVTOCI of NT$23,616 thousand, a decrease in other equity- unrealized gain/loss on available-for-sale financial assets of NT$2,110 thousand and an increase in retained earnings of NT$33,984 thousand on January 1, 2018.

 

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Hedge accounting

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

 

2)

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

IFRS 15 establishes principles for recognizing revenue that apply to all contracts with customers, and will supersede IAS 18, “Revenue,” IAS 11, “Construction Contracts,” and a number of revenue-related interpretations. Please refer to Note 4 for information relating to the relevant accounting policies.

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

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

 

 

(1)

Prior to the application of IFRS 15, the Company recognizes revenue based on the accounting treatment of the sales of goods. Under IFRS 15, certain subsidiaries and associates accounted for using equity method will change to recognize revenue over time because customers are deemed to have control over the products when the products are manufactured. As a result, the Company will recognize contract assets (classified under other financial assets) and adjust related assets and equity accordingly.

 

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(2)

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

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

Impact on Assets, Liabilities and Equity

 

Impact on Total Comprehensive Income

 

 

3)

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

 

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b.

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

 

 

Note 1:

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

Note 2:

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

Note 3:

The Company shall apply these amendments to plan amendments, curtailments or settlements occurring on or after January 1, 2019.

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

 

1)

IFRS 16 “Leases”

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

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

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

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

 

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4.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

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

Statement of Compliance

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

Basis of Consolidation

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

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

The subsidiaries in the consolidated financial statements

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

 

 

(Continued)

 

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(Concluded)

 

Note a:

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

 

Note b:

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

 

Note c:

TSMC Solar Europe GmbH is under liquidation procedures.

 

Note d:

ISDF and ISDF II are under liquidation procedures.

 

Note e:

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

 

Note f:

VTA Holdings completed the liquidation procedures in April 2017.

Financial Assets

The classification of financial assets depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. Regular way purchases or sales of financial assets are recognized and derecognized on a trade date or settlement date basis for which financial assets were classified in the same way, respectively. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace.

 

a.

Category of financial assets and measurement

2018

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

 

1)

Financial asset at FVTPL

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

 

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2)

Investments in debt instruments at FVTOCI

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

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

 

3)

Investments in equity instruments at FVTOCI

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

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

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

 

4)

Measured at amortized cost

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

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

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

2017

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

 

1)

Financial asset at FVTPL

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

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

 

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2)

Available-for-sale financial assets

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

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

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

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

 

3)

Held-to-maturity financial assets

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

 

4)

Loans and receivables

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

 

b.

Impairment of financial assets

2018

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

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

 

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

2017

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

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

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

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

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

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

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

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

Hedge Accounting

 

a.

Fair value hedges

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

 

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b.

Cash flow hedges

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

2018

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

2017

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

Revenue Recognition

2018

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

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

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

In principle, payment term granted to customers is due 30 days from the invoice date or 30 days from the end of the month of when the invoice is issued. Due to the short term nature of the receivables from sale of goods with the immaterial discounted effect, the Company measures them at the original invoice amounts without discounting.

2017

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

 

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Sale of goods

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

 

•

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

 

•

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

 

•

The amount of revenue can be measured reliably;

 

•

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

 

•

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

In principle, payment term granted to customers is due 30 days from the invoice date or 30 days from the end of the month of when the invoice is issued. Due to the short term nature of the receivables from sale of goods with the immaterial discounted effect, the Company measures them at the original invoice amounts without discounting.

Dividend and interest income

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

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

Retirement Benefits

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

Taxation

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

 

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

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

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

 

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

 

6.	CASH AND CASH EQUIVALENTS

 

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

 

 

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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:

 

 

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

 

(Continued)

 

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(Concluded)

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

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

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

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

 

9.	AVAILABLE-FOR-SALE FINANCIAL ASSETS-2017

 

 

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

 

12.	FINANCIAL ASSETS CARRIED AT COST-2017

 

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

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

 

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13.	HEDGING FINANCIAL INSTRUMENTS

 

2018

 

Fair value hedge

The Company entered into interest rate futures contracts, which are used to hedge against the price risk caused by changes in interest rates in the Company’s investments in fixed income securities. The hedge ratio is adjusted in response to the changes in the financial market and capped at 100%.

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

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

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

 

 

 

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

 

Cash flow hedge

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

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

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

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

 

 

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.

 

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2017

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

 

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

The outstanding interest rate futures contracts consisted of the following:

 

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:

 

 

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14.	NOTES AND ACCOUNTS RECEIVABLE, NET

 

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

2017

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

 

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Except for those impaired, for the rest of the notes and accounts receivable, the account aging analysis at the end of the reporting period is summarized in the following table. There was no impairment concern for the accounts receivable that were past due without recognizing a specific allowance for doubtful receivables since there was no significant change in the credit quality of its customers after the assessment. In addition, the Company has obtained guarantee against certain receivables.

Aging analysis of notes and accounts receivable, net

 

Movements of the allowance for doubtful receivables

 

 

15.	INVENTORIES

 

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

 

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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.

 

 

17.	PROPERTY, PLANT AND EQUIPMENT

 

(Continued)

 

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(Concluded)

The significant part of the Company’s buildings includes main plants, mechanical and electrical power equipment and clean rooms, and the related depreciation is calculated using the estimated useful lives of 20 years, 10 years and 10 years, respectively.

 

18.	INTANGIBLE ASSETS

 

(Continued)

 

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(Concluded)

The Company’s goodwill has been tested for impairment at the end of the annual reporting period and the recoverable amount is determined based on the value in use. The value in use was calculated based on the cash flow forecast from the financial budgets covering the future five-year period, and the Company used annual discount rate of 8.5% in its test of impairment as of December 31, 2017 to reflect the relevant specific risk in the cash-generating unit.

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

 

19.	OTHER ASSETS

 

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

 

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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.

 

22.	BONDS PAYABLE

 

 

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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

 

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

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

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

 

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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 29.

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

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

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

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

 

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The appropriations of 2017 and 2016 earnings have been approved by TSMC’s Board of Directors in its meeting held on February 13, 2018 and by TSMC’s shareholders in its meeting held on June 8, 2017, respectively. The appropriations and dividends per share were as follows:

 

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

 

d.

Others

Changes in others were as follows:

 

 

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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.

 

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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.

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

 

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26.	OTHER GAINS AND LOSSES

 

 

27.	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$1,098,743 thousand has not been recognized as of March 31, 2018, with corresponding effect recognized throughout the interim periods. In addition, the tax rate applicable to unappropriated earnings was reduced from 10% to 5%.

 

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b.

Income tax expense recognized in other comprehensive income

 

 

c.

Income tax examination

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

 

28.	EARNINGS PER SHARE

 

EPS is computed as follows:

 

 

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29.	ADDITIONAL INFORMATION OF EXPENSES BY NATURE

 

According to TSMC’s Articles of Incorporation, TSMC shall allocate compensation to directors and profit sharing bonus to employees of TSMC not more than 0.3% and not less than 1% of annual profits during the period, respectively.

TSMC accrued profit sharing bonus to employees based on a percentage of net income before income tax, profit sharing bonus to employees and compensation to directors during the period, which amounted to NT$6,023,994 thousand and NT$5,877,094 thousand for the three months ended March 31, 2018 and 2017, respectively; compensation to directors was expensed based on estimated amount payable. If there is a change in the proposed amounts after the annual consolidated financial statements are authorized for issue, the differences are recorded as a change in accounting estimate.

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

 

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

 

30.	CASH FLOW INFORMATION

Reconciliation of liabilities arising from financing activities

 

 

Note:

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

 

31.	FINANCIAL INSTRUMENTS

 

a.

Categories of financial instruments

 

 

Note 1:

Financial assets mandatorily measured at FVTPL.

Note 2:

Including debt and equity investments.

Note 3:

Including cash and cash equivalents, financial assets at amortized cost, notes and accounts receivable (including related parties), other receivables and refundable deposits.

Note 4:

Held for trading.

Note 5:

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

 

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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.

 

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Foreign currency risk

Most of the Company’s revenues and expenditures are denominated in foreign currencies. Consequently, the Company is exposed to foreign currency risk. To protect against reductions in value and the volatility of future cash flows caused by changes in foreign exchange rates, the Company uses derivative financial instruments, such as forward exchange contracts and cross currency swaps, and non-derivative financial instruments, such as foreign currency-denominated debt, to partially hedge the Company’s existing and certain forecasted currency exposure. These hedges will offset only a portion of, but do not eliminate, the financial impact from movements in foreign currency exchange rates.

The Company’s sensitivity analysis of foreign currency risk mainly focuses on the foreign currency monetary items and the derivatives financial instruments at the end of the reporting period. Assuming an unfavorable 10% movement in the levels of foreign exchanges relative to the New Taiwan dollar, the net income for the three months ended March 31, 2018 and 2017 would have decreased by NT$1,060,765 thousand and NT$878,838 thousand, respectively, and the other comprehensive income for the three months ended March 31, 2018 would have decreased by NT$326,872 thousand.

Interest rate risk

The Company is exposed to interest rate risk primarily related to its outstanding debt and investments in fixed income securities. All of the Company’s bonds payable have fixed interest rates and are measured at amortized cost. As such, changes in interest rates would not affect the future cash flows. On the other hand, because interest rates of the Company’s long-term bank loans are floating, changes in interest rates would affect the future cash flows but not the fair value. As of December 31, 2017, the Company had no outstanding long-term bank loans.

The Company classified its investments in fixed income securities as financial assets at FVTPL, financial assets at FVTOCI and financial assets at amortized costs starting from 2018; as available-for-sale and held-to-maturity financial assets in 2017. Because financial assets at amortized costs and held-to-maturity fixed income securities are measured at amortized cost, changes in interest rates would not affect the fair value. On the other hand, financial assets at FVTPL, financial assets at FVTOCI and available-for-sale fixed income securities are exposed to fair value fluctuations caused by changes in interest rates. The Company utilized interest rate futures to partially hedge the interest rate risk on its financial assets at FVTPL and FVTOCI and available-for-sale fixed income investments. These hedges may offset only a small portion of the financial impact from movements in interest rates.

Based on a sensitivity analysis performed at the end of the reporting period, a hypothetical 100 basis points (1.00%) increase in interest rates across all maturities would have resulted in a decrease in profit or loss by 73,285 thousand for the three months ended March 31, 2018, and in a decrease in other comprehensive income by NT$2,243,927 thousand and NT$1,778,761 thousand for three months ended March 31, 2018 and 2017, respectively.

Other price risk

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

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

 

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d.

Credit risk management

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

Business related credit risk

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

As of March 31, 2018, December 31, 2017 and March 31, 2017, the Company’s ten largest customers accounted for 76%, 70% and 73% of accounts receivable, respectively. The Company believes the concentration of credit risk is not material for the remaining accounts receivable.

Financial credit risk

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

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

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

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

 

(Continued)

 

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(Concluded)

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

 

e.

Liquidity risk management

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

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

 

 

(Continued)

 

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(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

 

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•

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:

 

 

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(Continued)

 

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(Concluded)

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

There were no transfers between Level 1 and Level 2 for the three months ended March 31, 2018.

Reconciliation of Level 3 fair value measurements of financial assets

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

 

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.

 

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Valuation techniques and assumptions used in Level 3 fair value Measurement

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

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

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

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

 

3)

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

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

 

 

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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:

 

 

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

Valuation techniques and assumptions used in Level 2 fair value measurement

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

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

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

 

32.	RELATED PARTY TRANSACTIONS

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

 

a.

Related party name and categories

 

 

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b.

Net revenue

 

 

c.

Purchases

 

 

d.

Receivables from related parties

 

 

e.

Payables to related parties

 

 

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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.

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

 

h.

Compensation of key management personnel

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

 

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.

 

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33.	PLEDGED ASSETS

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

 

34.	SIGNIFICANT OPERATING LEASE ARRANGEMENTS

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

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

 

 

35.	SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNIZED COMMITMENTS

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

 

a.

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

 

b.

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

 

- 59 -

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c.

In May 2017, Uri Cohen filed a complaint in the U.S. District Court for the Eastern District of Texas alleging that TSMC, TSMC North America and other companies infringe four U.S. patents. Cohen’s case has been transferred to and consolidated with the responsive declaratory judgment case for non-infringement of Cohen’s asserted patents filed by TSMC and TSMC North America in the U.S. District Court for the Northern District of California. The outcome cannot be determined and the Company cannot make a reliable estimate of the contingent liability at this time.

 

d.

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

 

e.

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

 

f.

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

 

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

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

 

(Continued)

 

- 60 -

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(Concluded)

 

Note 1:

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

 

Note 2:

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

Please refer to the consolidated statements of comprehensive income for the total of realized and unrealized foreign exchange gain and loss for the three months ended March 31, 2018 and 2017, respectively. Since there were varieties of foreign currency transactions and functional currencies within the subsidiaries of the Company, the Company was unable to disclose foreign exchange gain (loss) towards each foreign currency with significant impact.

 

- 61 -

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37.	OPERATING SEGMENTS INFORMATION

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

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

 

38.	ADDITIONAL DISCLOSURES

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

 

a.

Financings provided: Please see Table 1 attached;

 

b.

Endorsement/guarantee provided: Please see Table 2 attached;

 

c.

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

 

d.

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

 

e.

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

 

f.

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

 

g.

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

 

h.

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

 

i.

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

 

j.

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

 

k.

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

 

l.

Information on investment in mainland China

 

1)

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

 

2)

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

 

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TABLE 1

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

FINANCINGS PROVIDED

FOR THE THREE MONTHS ENDED MARCH 31, 2018

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

 

 

No.		Financing Company		Counter-party		Financial Statement Account		Related Party		Maximum Balance for the Period (Foreign Currencies in Thousands) (Note 3)				Ending Balance (Foreign Currencies in Thousands) (Note 3)				Amount Actually Drawn (Foreign Currencies in Thousands)				Interest Rate				Nature for Financing (Note 4)		Transaction Amounts				Reason for Financing (Note 4)		Allowance for Bad Debt				Collateral						Financing Limits for Each Borrowing Company (Notes 1 and 2)				Financing Company’s Total Financing Amount Limits (Notes 1 and 2)
																																						Item		Value
1		TSMC China		TSMC Nanjing		Other receivables from related parties		Yes		$ (RMB (US$	45,908,750 5,500,000 700,000	) &  )		$ (RMB (US$	45,908,750 5,500,000 700,000)	) &		$ (RMB (US$	22,012,290 3,800,000 150,000	) &  )			1.30%-1.88%			The need for short-term and long-term financing		$	—			Operating capital		$	—			—		$	—				$53,530,304				$53,530,304
2		TSMC Global		TSMC		Other receivables from related parties		Yes		(US$	43,639,500 1,500,000	)			—				—				—			The need for short-term financing			—			Operating capital			—			—			—				362,900,046				362,900,046

 

Note 1:

The total amount available for lending purpose shall not exceed the net worth of TSMC China. The total amount for lending to a company for funding for a short-term period shall not exceed ten percent (10%) of the net worth of TSMC China. In addition, the total amount lendable to any one borrower shall be no more than thirty percent (30%) of the borrower’s net worth. The above restriction does not apply to the subsidiaries whose voting shares are 100% owned, directly or indirectly, by TSMC. However, the total amount lendable to any such subsidiary of TSMC shall not exceed forty percent (40%) of the net worth of TSMC China. When there is a lending for funding needs by TSMC China to TSMC, or to the subsidiaries whose voting shares are 100% owned, directly or indirectly, by TSMC, which are not located in Taiwan, the lending will not be subject to the restriction set forth in the above paragraph of this Article. Notwithstanding the foregoing, the aggregate amount available for lending to such borrowers and the total amount lendable to each of such borrowers still shall not exceed the net worth of TSMC China.

 

Note 2:

The total amount available for lending purpose shall not exceed the net worth of TSMC Global. The total amount for lending to a company for funding for a short-term period shall not exceed ten percent (10%) of the net worth of TSMC Global. In addition, the total amount lendable to any one borrower shall be no more than thirty percent (30%) of the borrower’s net worth. While TSMC, or foreign subsidiaries whose voting shares are 100% owned, directly or indirectly, by TSMC will not be subject to this restriction, their total borrowing amount still shall not exceed the net worth of TSMC Global. Notwithstanding the foregoing, the aggregate amount for lending to Taiwan companies other than TSMC shall not exceed forty percent (40%) of the net worth of TSMC Global.

 

Note 3:

The maximum balance for the period and ending balance represent the amounts approved by the Board of Directors.

 

Note 4:

The restriction of the term of each loan for funding not exceeding one year shall not apply to inter-company loans for funding between offshore subsidiaries in which the Company holds, directly or indirectly, 100% of the voting shares.

 

 

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TABLE 2

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

ENDORSEMENTS/GUARANTEES PROVIDED

FOR THE THREE MONTHS ENDED MARCH 31, 2018

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

 

 

No.		Endorsement/ Guarantee Provider		Guaranteed Party				Limits on Endorsement/ Guarantee Amount Provided to Each Guaranteed Party (Notes 1 and 2)				Maximum Balance for the Period (US$ in Thousands) (Note 3)				Ending Balance (US$ in Thousands) (Note 3)				Amount Actually Drawn (US$ in Thousands)				Amount of Endorsement/ Guarantee Collateralized by Properties				Ratio of Accumulated Endorsement/ Guarantee to Net Equity per Latest Financial Statements				Maximum Endorsement/ Guarantee Amount Allowable (Note 2)				Guarantee Provided by Parent Company				Guarantee Provided by A Subsidiary				Guarantee Provided to Subsidiaries in Mainland China
				Name		Nature of Relationship
0		TSMC		TSMC Global		Subsidiary		$	401,474,597			$ (US$	33,456,950 1,150,000	)		$ (US$	33,456,950 1,150,000	)		$ (US$	33,456,950 1,150,000	)		$	—				2.08%			$	401,474,597				Yes				No				No
				TSMC North America		Subsidiary			401,474,597			(US$	2,420,925 83,213	)		(US$	2,420,925 83,213	)		(US$	2,420,925 83,213	)			—				0.15%				401,474,597				Yes				No				No

 

Note 1:

The total amount of the guarantee provided by TSMC to any individual entity shall not exceed ten percent (10%) of TSMC’s net worth, or the net worth of such entity. However, subsidiaries whose voting shares are 100% owned, directly or indirectly, by TSMC are not subject to the above restrictions after the approval of the Board of Directors.

 

Note 2:

The total amount of guarantee shall not exceed twenty-five percent (25%) of TSMC’s net worth.

 

Note 3:

The maximum balance for the period and ending balance represent the amounts approved by the Board of Directors.

 

- 64 -

---

TABLE 3

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

MARKETABLE SECURITIES HELD

MARCH 31, 2018

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

 

 

Held Company Name		Marketable Securities Type and Name		Relationship with the Company		Financial Statement Account		March 31, 2018																Note
								Shares/Units (In Thousands)				Carrying Value (Foreign Currencies in Thousands)				Percentage of Ownership (%)				Fair Value (Foreign Currencies in Thousands)
TSMC		Common stock
		Motech		—		Financial assets at fair value through other comprehensive income			58,320			$	1,306,363				11			$	1,306,363
		Semiconductor Manufacturing International Corporation		—		”			21,105				803,343				—				803,343
		United Industrial Gases Co., Ltd.		—		”			21,230				558,744				10				558,744
		Shin-Etsu Handotai Taiwan Co., Ltd.		—		”			10,500				353,303				7				353,303
		Global Investment Holding Inc.		—		”			11,124				94,543				6				94,543
		W.K. Technology Fund IV		—		”			1,152				9,587				2				9,587
		Fund
		Horizon Ventures Fund		—		Financial assets at fair value through other comprehensive income			—				6,715				12				6,715
		Crimson Asia Capital		—		”			—				5,863				1				5,863
TSMC Partners		Common stock
		Tela Innovations		—		Financial assets at fair value through other comprehensive income			10,440			US$	65,000				25			US$	65,000
		Mcube Inc.		—		”			6,333				—				12				—
		Fund
		Shanghai Walden Venture Capital Enterprise		—		Financial assets at fair value through other comprehensive income			—			US$	14,447				6			US$	14,447
		China Walden Venture Investments II, L.P.		—		”			—			US$	8,048				9			US$	8,048
		China Walden Venture Investments III, L.P.		—		”			—			US$	1,400				5			US$	1,400
TSMC Global		Corporate bond
		Bank of America Corp		—		Financial assets at fair value through other comprehensive income			—			US$	41,775				N/A			US$	41,775
		Morgan Stanley		—		”			—			US$	41,616				N/A			US$	41,616
		JPMorgan Chase & Co		—		”			—			US$	40,145				N/A			US$	40,145
		Goldman Sachs Group Inc/The		—		”			—			US$	33,315				N/A			US$	33,315
		Citigroup Inc		—		”			—			US$	28,536				N/A			US$	28,536
		AT&T Inc		—		”			—			US$	26,534				N/A			US$	26,534
		CVS Health Corp		—		”			—			US$	24,628				N/A			US$	24,628
		Verizon Communications Inc		—		”			—			US$	18,854				N/A			US$	18,854
		Ford Motor Credit Co LLC		—		”			—			US$	16,938				N/A			US$	16,938
		Apple Inc		—		”			—			US$	15,096				N/A			US$	15,096
		Credit Suisse AG/New York NY		—		”			—			US$	13,451				N/A			US$	13,451
		Anheuser-Busch InBev Finance Inc		—		”			—			US$	13,224				N/A			US$	13,224
		Celgene Corp		—		”			—			US$	12,459				N/A			US$	12,459
		PNC Bank NA		—		”			—			US$	12,269				N/A			US$	12,269
		BAT Capital Corp		—		”			—			US$	12,206				N/A			US$	12,206
		Daimler Finance North America LLC		—		”			—			US$	11,917				N/A			US$	11,917
		AbbVie Inc		—		”			—			US$	11,375				N/A			US$	11,375
		BP Capital Markets PLC		—		”			—			US$	11,080				N/A			US$	11,080
		Southern Co/The		—		”			—			US$	10,510				N/A			US$	10,510
		Cardinal Health Inc		—		”			—			US$	10,333				N/A			US$	10,333
		ABN AMRO Bank NV		—		”			—			US$	9,890				N/A			US$	9,890
		Wells Fargo & Co		—		”			—			US$	9,709				N/A			US$	9,709
		HSBC Holdings PLC		—		”			—			US$	9,695				N/A			US$	9,695

(Continued)

 

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Held Company Name		Marketable Securities Type and Name		Relationship with the Company		Financial Statement Account		March 31, 2018																Note
								Shares/Units (In Thousands)				Carrying Value (Foreign Currencies in Thousands)				Percentage of Ownership (%)				Fair Value (Foreign Currencies in Thousands)
TSMC Global		Capital One NA/Mclean VA		—		Financial assets at fair value through other comprehensive income			—			US$	9,277				N/A			US$	9,277
		Sumitomo Mitsui Financial Group Inc		—		”			—			US$	9,250				N/A			US$	9,250
		Macquarie Group Ltd		—		”			—			US$	9,100				N/A			US$	9,100
		Mitsubishi UFJ Financial Group Inc		—		”			—			US$	8,975				N/A			US$	8,975
		Wells Fargo Bank NA		—		”			—			US$	8,872				N/A			US$	8,872
		Analog Devices Inc		—		”			—			US$	8,856				N/A			US$	8,856
		ERAC USA Finance LLC		—		”			—			US$	8,652				N/A			US$	8,652
		Tyson Foods Inc		—		”			—			US$	8,340				N/A			US$	8,340
		Toronto-Dominion Bank/The		—		”			—			US$	8,241				N/A			US$	8,241
		Duke Energy Corp		—		”			—			US$	8,162				N/A			US$	8,162
		American International Group Inc		—		”			—			US$	7,861				N/A			US$	7,861
		Hewlett Packard Enterprise Co		—		”			—			US$	7,813				N/A			US$	7,813
		Svenska Handelsbanken AB		—		”			—			US$	7,762				N/A			US$	7,762
		Huntington National Bank/The		—		”			—			US$	7,717				N/A			US$	7,717
		Tencent Holdings Ltd		—		”			—			US$	7,685				N/A			US$	7,685
		UBS Group Funding Switzerland AG		—		”			—			US$	7,396				N/A			US$	7,396
		Westpac Banking Corp		—		”			—			US$	7,371				N/A			US$	7,371
		Reckitt Benckiser Treasury Services PLC		—		”			—			US$	7,349				N/A			US$	7,349
		ANZ New Zealand Int’l Ltd/London		—		”			—			US$	7,255				N/A			US$	7,255
		Deutsche Telekom International Finance BV		—		”			—			US$	7,126				N/A			US$	7,126
		Microsoft Corp		—		”			—			US$	7,106				N/A			US$	7,106
		Skandinaviska Enskilda Banken AB		—		”			—			US$	7,070				N/A			US$	7,070
		Banque Federative du Credit Mutuel SA		—		”			—			US$	7,028				N/A			US$	7,028
		Bank of New York Mellon Corp/The		—		”			—			US$	7,014				N/A			US$	7,014
		Siemens Financieringsmaatschappij NV		—		”			—			US$	6,977				N/A			US$	6,977
		Hyundai Capital America		—		”			—			US$	6,948				N/A			US$	6,948
		Barclays PLC		—		”			—			US$	6,898				N/A			US$	6,898
		Dominion Energy Inc		—		”			—			US$	6,796				N/A			US$	6,796
		Marriott International Inc/MD		—		”			—			US$	6,793				N/A			US$	6,793
		Citizens Bank NA/Providence RI		—		”			—			US$	6,630				N/A			US$	6,630
		QUALCOMM Inc		—		”			—			US$	6,529				N/A			US$	6,529
		Mizuho Financial Group Inc		—		”			—			US$	6,402				N/A			US$	6,402
		Reliance Standard Life Global Funding II		—		”			—			US$	6,400				N/A			US$	6,400
		Fifth Third Bancorp		—		”			—			US$	6,390				N/A			US$	6,390
		Banco Santander SA		—		”			—			US$	6,289				N/A			US$	6,289
		21st Century Fox America Inc		—		”			—			US$	6,245				N/A			US$	6,245
		Dow Chemical Co/The		—		”			—			US$	6,214				N/A			US$	6,214
		Welltower Inc		—		”			—			US$	6,172				N/A			US$	6,172
		Santander UK Group Holdings PLC		—		”			—			US$	6,101				N/A			US$	6,101
		Northrop Grumman Corp		—		”			—			US$	6,052				N/A			US$	6,052
		Nordea Bank AB		—		”			—			US$	6,046				N/A			US$	6,046
		SMBC Aviation Capital Finance DAC		—		”			—			US$	5,869				N/A			US$	5,869
		KeyCorp		—		”			—			US$	5,823				N/A			US$	5,823
		Manufacturers & Traders Trust Co		—		”			—			US$	5,801				N/A			US$	5,801
		UBS AG/London		—		”			—			US$	5,770				N/A			US$	5,770
		Schlumberger Holdings Corp		—		”			—			US$	5,704				N/A			US$	5,704
		Oracle Corp		—		”			—			US$	5,702				N/A			US$	5,702
		Air Lease Corp		—		”			—			US$	5,596				N/A			US$	5,596
		Santander UK PLC		—		”			—			US$	5,592				N/A			US$	5,592
		Toyota Motor Credit Corp		—		”			—			US$	5,592				N/A			US$	5,592
		Penske Truck Leasing Co Lp / PTL Finance Corp		—		”			—			US$	5,521				N/A			US$	5,521
		UBS AG/Stamford CT		—		”			—			US$	5,458				N/A			US$	5,458
		ITC Holdings Corp		—		”			—			US$	5,385				N/A			US$	5,385
		Amgen Inc		—		”			—			US$	5,215				N/A			US$	5,215
		International Bank for Reconstruction & Development		—		”			—			US$	5,164				N/A			US$	5,164
		Montpelier Re Holdings Ltd		—		”			—			US$	5,163				N/A			US$	5,163
		McCormick & Co Inc/MD		—		”			—			US$	5,146				N/A			US$	5,146

(Continued)

 

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Held Company Name		Marketable Securities Type and Name		Relationship with the Company		Financial Statement Account		March 31, 2018																Note
								Shares/Units (In Thousands)				Carrying Value (Foreign Currencies in Thousands)				Percentage of Ownership (%)				Fair Value (Foreign Currencies in Thousands)
TSMC Global		Jackson National Life Global Funding		—		Financial assets at fair value through other comprehensive income			—			US$	5,073				N/A			US$	5,073
		Branch Banking & Trust Co		—		”			—			US$	5,025				N/A			US$	5,025
		Aviation Capital Group Corp		—		”			—			US$	5,009				N/A			US$	5,009
		KeyBank NA/Cleveland OH		—		”			—			US$	4,980				N/A			US$	4,980
		Cigna Corp		—		”			—			US$	4,968				N/A			US$	4,968
		Rockwell Collins Inc		—		”			—			US$	4,933				N/A			US$	4,933
		BB&T Corp		—		”			—			US$	4,875				N/A			US$	4,875
		US Bancorp		—		”			—			US$	4,841				N/A			US$	4,841
		Cox Communications Inc		—		”			—			US$	4,795				N/A			US$	4,795
		BPCE SA		—		”			—			US$	4,765				N/A			US$	4,765
		American Express Credit Corp		—		”			—			US$	4,748				N/A			US$	4,748
		Five Corners Funding Trust		—		”			—			US$	4,700				N/A			US$	4,700
		Shell International Finance BV		—		”			—			US$	4,681				N/A			US$	4,681
		Air Liquide Finance SA		—		”			—			US$	4,672				N/A			US$	4,672
		SunTrust Banks Inc		—		”			—			US$	4,567				N/A			US$	4,567
		AEP Texas Inc		—		”			—			US$	4,480				N/A			US$	4,480
		Ryder System Inc		—		”			—			US$	4,427				N/A			US$	4,427
		New York Life Global Funding		—		”			—			US$	4,415				N/A			US$	4,415
		US Bank NA/Cincinnati OH		—		”			—			US$	4,341				N/A			US$	4,341
		Bank of Montreal		—		”			—			US$	4,306				N/A			US$	4,306
		Enterprise Products Operating LLC		—		”			—			US$	4,299				N/A			US$	4,299
		Lloyds Bank PLC		—		”			—			US$	4,185				N/A			US$	4,185
		Exelon Generation Co LLC		—		”			—			US$	4,037				N/A			US$	4,037
		Ventas Realty LP / Ventas Capital Corp		—		”			—			US$	3,982				N/A			US$	3,982
		Mondelez International Holdings Netherlands BV		—		”			—			US$	3,979				N/A			US$	3,979
		Nuveen Finance LLC		—		”			—			US$	3,927				N/A			US$	3,927
		European Investment Bank		—		”			—			US$	3,899				N/A			US$	3,899
		Bank of Nova Scotia		—		”			—			US$	3,877				N/A			US$	3,877
		Intercontinental Exchange Inc		—		”			—			US$	3,862				N/A			US$	3,862
		Royal Bank of Canada		—		”			—			US$	3,823				N/A			US$	3,823
		Edison International		—		”			—			US$	3,814				N/A			US$	3,814
		NextEra Energy Capital Holdings Inc		—		”			—			US$	3,793				N/A			US$	3,793
		Express Scripts Holding Co		—		”			—			US$	3,788				N/A			US$	3,788
		Suncorp-Metway Ltd		—		”			—			US$	3,756				N/A			US$	3,756
		Husky Energy Inc		—		”			—			US$	3,683				N/A			US$	3,683
		Alimentation Couche-Tard Inc		—		”			—			US$	3,670				N/A			US$	3,670
		Canadian Imperial Bank of Commerce		—		”			—			US$	3,596				N/A			US$	3,596
		Credit Agricole SA/London		—		”			—			US$	3,588				N/A			US$	3,588
		Credit Suisse Group Funding Guernsey Ltd		—		”			—			US$	3,557				N/A			US$	3,557
		Protective Life Global Funding		—		”			—			US$	3,527				N/A			US$	3,527
		SES GLOBAL Americas Holdings GP		—		”			—			US$	3,513				N/A			US$	3,513
		LyondellBasell Industries NV		—		”			—			US$	3,431				N/A			US$	3,431
		Kroger Co/The		—		”			—			US$	3,292				N/A			US$	3,292
		Sprint Spectrum Co LLC / Sprint Spectrum Co II LLC / Sprint Spectrum Co III LLC		—		”			—			US$	3,209				N/A			US$	3,209
		Digital Realty Trust LP		—		”			—			US$	3,149				N/A			US$	3,149
		BNP Paribas SA		—		”			—			US$	3,048				N/A			US$	3,048
		African Development Bank		—		”			—			US$	2,998				N/A			US$	2,998
		Macquarie Bank Ltd		—		”			—			US$	2,965				N/A			US$	2,965
		Time Warner Inc		—		”			—			US$	2,945				N/A			US$	2,945
		Enel Finance International NV		—		”			—			US$	2,928				N/A			US$	2,928
		Anthem Inc		—		”			—			US$	2,850				N/A			US$	2,850
		Australia & New Zealand Banking Group Ltd/New York NY		—		”			—			US$	2,690				N/A			US$	2,690
		Lloyds Banking Group PLC		—		”			—			US$	2,685				N/A			US$	2,685
		Delta Air Lines 2007-1 Class A Pass Through Trust		—		”			—			US$	2,678				N/A			US$	2,678
		Fifth Third Bank/Cincinnati OH		—		”			—			US$	2,677				N/A			US$	2,677
		AutoZone Inc		—		”			—			US$	2,657				N/A			US$	2,657

(Continued)

 

- 67 -

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Held Company Name		Marketable Securities Type and Name		Relationship with the Company		Financial Statement Account		March 31, 2018																Note
								Shares/Units (In Thousands)				Carrying Value (Foreign Currencies in Thousands)				Percentage of Ownership (%)				Fair Value (Foreign Currencies in Thousands)
TSMC Global		PartnerRe Finance B LLC		—		Financial assets at fair value through other comprehensive income			—			US$	2,623				N/A			US$	2,623
		DXC Technology Co		—		”			—			US$	2,596				N/A			US$	2,596
		WR Berkley Corp		—		”			—			US$	2,534				N/A			US$	2,534
		NiSource Inc		—		”			—			US$	2,533				N/A			US$	2,533
		Metropolitan Life Global Funding I		—		”			—			US$	2,504				N/A			US$	2,504
		Pacific Gas & Electric Co		—		”			—			US$	2,497				N/A			US$	2,497
		Barclays Bank PLC		—		”			—			US$	2,472				N/A			US$	2,472
		Capital One Financial Corp		—		”			—			US$	2,456				N/A			US$	2,456
		Anheuser-Busch InBev Worldwide Inc		—		”			—			US$	2,455				N/A			US$	2,455
		Eastman Chemical Co		—		”			—			US$	2,398				N/A			US$	2,398
		Danske Bank A/S		—		”			—			US$	2,389				N/A			US$	2,389
		Xylem Inc/NY		—		”			—			US$	2,380				N/A			US$	2,380
		Aetna Inc		—		”			—			US$	2,331				N/A			US$	2,331
		EI du Pont de Nemours & Co		—		”			—			US$	2,316				N/A			US$	2,316
		SunTrust Bank/Atlanta GA		—		”			—			US$	2,312				N/A			US$	2,312
		Bank of Tokyo-Mitsubishi UFJ Ltd/The		—		”			—			US$	2,288				N/A			US$	2,288
		NBCUniversal Media LLC		—		”			—			US$	2,286				N/A			US$	2,286
		Simon Property Group LP		—		”			—			US$	2,265				N/A			US$	2,265
		Kimco Realty Corp		—		”			—			US$	2,241				N/A			US$	2,241
		ING Groep NV		—		”			—			US$	2,229				N/A			US$	2,229
		BAT International Finance PLC		—		”			—			US$	2,188				N/A			US$	2,188
		Pricoa Global Funding I		—		”			—			US$	2,186				N/A			US$	2,186
		BMW US Capital LLC		—		”			—			US$	2,178				N/A			US$	2,178
		Cintas Corp No 2		—		”			—			US$	2,166				N/A			US$	2,166
		ProAssurance Corp		—		”			—			US$	2,155				N/A			US$	2,155
		National Australia Bank Ltd/New York		—		”			—			US$	2,127				N/A			US$	2,127
		Wm Wrigley Jr Co		—		”			—			US$	2,124				N/A			US$	2,124
		Walgreens Boots Alliance Inc		—		”			—			US$	2,091				N/A			US$	2,091
		Commonwealth Bank of Australia/New York NY		—		”			—			US$	2,087				N/A			US$	2,087
		HCP Inc		—		”			—			US$	2,068				N/A			US$	2,068
		EOG Resources Inc		—		”			—			US$	2,013				N/A			US$	2,013
		British Telecommunications PLC		—		”			—			US$	1,993				N/A			US$	1,993
		Bank of New York Mellon Corp/The		—		”			—			US$	1,991				N/A			US$	1,991
		Realty Income Corp		—		”			—			US$	1,976				N/A			US$	1,976
		Duke Realty LP		—		”			—			US$	1,916				N/A			US$	1,916
		Societe Generale SA		—		”			—			US$	1,888				N/A			US$	1,888
		Magellan Midstream Partners LP		—		”			—			US$	1,886				N/A			US$	1,886
		Sempra Energy		—		”			—			US$	1,884				N/A			US$	1,884
		American Airlines 2013-2 Class A Pass Through Trust		—		”			—			US$	1,833				N/A			US$	1,833
		Orange SA		—		”			—			US$	1,817				N/A			US$	1,817
		Lam Research Corp		—		”			—			US$	1,800				N/A			US$	1,800
		Philip Morris International Inc		—		”			—			US$	1,795				N/A			US$	1,795
		WestRock RKT Co		—		”			—			US$	1,789				N/A			US$	1,789
		Brambles USA Inc		—		”			—			US$	1,769				N/A			US$	1,769
		State Grid Overseas Investment Ltd		—		”			—			US$	1,765				N/A			US$	1,765
		Visa Inc		—		”			—			US$	1,747				N/A			US$	1,747
		Regency Centers LP		—		”			—			US$	1,744				N/A			US$	1,744
		Dominion Energy Gas Holdings LLC		—		”			—			US$	1,733				N/A			US$	1,733
		Inter American Development Bank		—		”			—			US$	1,710				N/A			US$	1,710
		Citibank NA		—		”			—			US$	1,708				N/A			US$	1,708
		Regions Financial Corp		—		”			—			US$	1,670				N/A			US$	1,670
		General Electric Co		—		”			—			US$	1,607				N/A			US$	1,607
		Amazon.com Inc		—		”			—			US$	1,600				N/A			US$	1,600
		Ontario Teachers’ Cadillac Fairview Properties Trust		—		”			—			US$	1,591				N/A			US$	1,591
		Gilead Sciences Inc		—		”			—			US$	1,589				N/A			US$	1,589
		Weyerhaeuser Co		—		”			—			US$	1,571				N/A			US$	1,571
		Lincoln National Corp		—		”			—			US$	1,563				N/A			US$	1,563

(Continued)

 

- 68 -

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Held Company Name		Marketable Securities Type and Name		Relationship with the Company		Financial Statement Account		March 31, 2018																Note
								Shares/Units (In Thousands)				Carrying Value (Foreign Currencies in Thousands)				Percentage of Ownership (%)				Fair Value (Foreign Currencies in Thousands)
TSMC Global		Principal Life Global Funding II		—		Financial assets at fair value through other comprehensive income			—			US$	1,561				N/A			US$	1,561
		Phillips 66		—		”			—			US$	1,557				N/A			US$	1,557
		Sinopec Capital Ltd		—		”			—			US$	1,554				N/A			US$	1,554
		Berkshire Hathaway Energy Co		—		”			—			US$	1,551				N/A			US$	1,551
		Chevron Corp		—		”			—			US$	1,527				N/A			US$	1,527
		Caterpillar Financial Services Corp		—		”			—			US$	1,518				N/A			US$	1,518
		PSEG Power LLC		—		”			—			US$	1,495				N/A			US$	1,495
		McKesson Corp		—		”			—			US$	1,492				N/A			US$	1,492
		O’Reilly Automotive Inc		—		”			—			US$	1,492				N/A			US$	1,492
		Ares Capital Corp		—		”			—			US$	1,491				N/A			US$	1,491
		Harley-Davidson Financial Services Inc		—		”			—			US$	1,488				N/A			US$	1,488
		Standard Chartered PLC		—		”			—			US$	1,480				N/A			US$	1,480
		Abbott Laboratories		—		”			—			US$	1,474				N/A			US$	1,474
		HSBC USA Inc		—		”			—			US$	1,462				N/A			US$	1,462
		Guardian Life Global Funding		—		”			—			US$	1,452				N/A			US$	1,452
		CBS Corp		—		”			—			US$	1,441				N/A			US$	1,441
		Cooperatieve Rabobank UA/NY		—		”			—			US$	1,439				N/A			US$	1,439
		Sumitomo Mitsui Banking Corp		—		”			—			US$	1,437				N/A			US$	1,437
		Oesterreichische Kontrollbank AG		—		”			—			US$	1,437				N/A			US$	1,437
		HSBC Bank PLC		—		”			—			US$	1,431				N/A			US$	1,431
		American Express Co		—		”			—			US$	1,416				N/A			US$	1,416
		Monongahela Power Co		—		”			—			US$	1,398				N/A			US$	1,398
		Sysco Corp		—		”			—			US$	1,389				N/A			US$	1,389
		AIG Global Funding		—		”			—			US$	1,378				N/A			US$	1,378
		Georgia-Pacific LLC		—		”			—			US$	1,374				N/A			US$	1,374
		Texas Eastern Transmission LP		—		”			—			US$	1,369				N/A			US$	1,369
		Cboe Global Markets Inc		—		”			—			US$	1,359				N/A			US$	1,359
		CNA Financial Corp		—		”			—			US$	1,273				N/A			US$	1,273
		GATX Corp		—		”			—			US$	1,266				N/A			US$	1,266
		Entergy Arkansas Inc		—		”			—			US$	1,256				N/A			US$	1,256
		Nissan Motor Acceptance Corp		—		”			—			US$	1,251				N/A			US$	1,251
		Western Union Co/The		—		”			—			US$	1,249				N/A			US$	1,249
		Entergy Corp		—		”			—			US$	1,245				N/A			US$	1,245
		Consolidated Edison Inc		—		”			—			US$	1,199				N/A			US$	1,199
		Glencore Funding LLC		—		”			—			US$	1,198				N/A			US$	1,198
		Stryker Corp		—		”			—			US$	1,142				N/A			US$	1,142
		Kreditanstalt fuer Wiederaufbau		—		”			—			US$	1,131				N/A			US$	1,131
		Public Service Enterprise Group Inc		—		”			—			US$	1,128				N/A			US$	1,128
		ERP Operating LP		—		”			—			US$	1,110				N/A			US$	1,110
		Marsh & McLennan Cos Inc		—		”			—			US$	1,077				N/A			US$	1,077
		CA Inc		—		”			—			US$	1,059				N/A			US$	1,059
		Swedbank AB		—		”			—			US$	1,058				N/A			US$	1,058
		Reinsurance Group of America Inc		—		”			—			US$	1,049				N/A			US$	1,049
		International Paper Co		—		”			—			US$	1,048				N/A			US$	1,048
		Merck & Co Inc		—		”			—			US$	1,042				N/A			US$	1,042
		Glencore Finance Canada Ltd		—		”			—			US$	1,042				N/A			US$	1,042
		Commonwealth Edison Co		—		”			—			US$	1,023				N/A			US$	1,023
		Athene Global Funding		—		”			—			US$	1,021				N/A			US$	1,021
		Scentre Group Trust 1 / Scentre Group Trust 2		—		”			—			US$	1,014				N/A			US$	1,014
		Statoil ASA		—		”			—			US$	999				N/A			US$	999
		Holcim US Finance Sarl & Cie SCS		—		”			—			US$	996				N/A			US$	996
		Bank Nederlandse Gemeenten NV		—		”			—			US$	994				N/A			US$	994
		Biogen Inc		—		”			—			US$	994				N/A			US$	994
		Laboratory Corp of America Holdings		—		”			—			US$	992				N/A			US$	992
		Unum Group		—		”			—			US$	992				N/A			US$	992
		Entergy Texas Inc		—		”			—			US$	980				N/A			US$	980
		Healthcare Trust of America Holdings LP		—		”			—			US$	978				N/A			US$	978

(Continued)

 

- 69 -

---

								March 31, 2018																Note
Held Company Name		Marketable Securities Type and Name		Relationship with the Company		Financial Statement Account		Shares/Units (In Thousands)				Carrying Value (Foreign Currencies in Thousands)				Percentage of Ownership (%)				Fair Value (Foreign Currencies in Thousands)
TSMC Global		UnitedHealth Group Inc		—		Financial assets at fair value through other comprehensive income			—			US$	977				N/A			US$	977
		XLIT Ltd		—		”			—			US$	972				N/A			US$	972
		TransCanada PipeLines Ltd		—		”			—			US$	967				N/A			US$	967
		Bunge Ltd Finance Corp		—		”			—			US$	967				N/A			US$	967
		National Retail Properties Inc		—		”			—			US$	949				N/A			US$	949
		PPL Capital Funding Inc		—		”			—			US$	931				N/A			US$	931
		Duke Energy Progress LLC		—		”			—			US$	916				N/A			US$	916
		Coca-Cola Femsa SAB de CV		—		”			—			US$	901				N/A			US$	901
		Southern Electric Generating Co		—		”			—			US$	898				N/A			US$	898
		Lockheed Martin Corp		—		”			—			US$	892				N/A			US$	892
		Walmart Inc		—		”			—			US$	882				N/A			US$	882
		CNOOC Finance Ltd		—		”			—			US$	870				N/A			US$	870
		Intesa Sanpaolo SpA		—		”			—			US$	849				N/A			US$	849
		Valero Energy Corp		—		”			—			US$	846				N/A			US$	846
		Mastercard Inc		—		”			—			US$	844				N/A			US$	844
		Baker Hughes a GE Co LLC / Baker Hughes Co-Obligor Inc		—		”			—			US$	842				N/A			US$	842
		Consolidated Edison Co of New York Inc		—		”			—			US$	822				N/A			US$	822
		Huntington Bancshares Inc/OH		—		”			—			US$	814				N/A			US$	814
		Alterra Finance LLC		—		”			—			US$	805				N/A			US$	805
		Nucor Corp		—		”			—			US$	804				N/A			US$	804
		MetLife Inc		—		”			—			US$	804				N/A			US$	804
		Aon PLC		—		”			—			US$	802				N/A			US$	802
		Danone SA		—		”			—			US$	799				N/A			US$	799
		Continental Airlines 2000-1 Class A-1 Pass Through Trust		—		”			—			US$	792				N/A			US$	792
		AXIS Specialty Finance LLC		—		”			—			US$	789				N/A			US$	789
		ONEOK Partners LP		—		”			—			US$	787				N/A			US$	787
		Incitec Pivot Finance LLC		—		”			—			US$	783				N/A			US$	783
		Manulife Financial Corp		—		”			—			US$	782				N/A			US$	782
		Spectra Energy Partners LP		—		”			—			US$	781				N/A			US$	781
		Activision Blizzard Inc		—		”			—			US$	776				N/A			US$	776
		United Technologies Corp		—		”			—			US$	756				N/A			US$	756
		Baidu Inc		—		”			—			US$	745				N/A			US$	745
		John Deere Capital Corp		—		”			—			US$	738				N/A			US$	738
		Duke Energy Progress LLC		—		”			—			US$	721				N/A			US$	721
		DTE Energy Co		—		”			—			US$	707				N/A			US$	707
		Baker Hughes a GE Co LLC		—		”			—			US$	702				N/A			US$	702
		APT Pipelines Ltd		—		”			—			US$	701				N/A			US$	701
		American Honda Finance Corp		—		”			—			US$	698				N/A			US$	698
		TTX Co		—		”			—			US$	697				N/A			US$	697
		Sumitomo Mitsui Trust Bank Ltd		—		”			—			US$	688				N/A			US$	688
		Norfolk Southern Railway Co		—		”			—			US$	686				N/A			US$	686
		Vornado Realty LP		—		”			—			US$	682				N/A			US$	682
		Three Gorges Finance I Cayman Islands Ltd		—		”			—			US$	680				N/A			US$	680
		Rochester Gas & Electric Corp		—		”			—			US$	673				N/A			US$	673
		ING Bank NV		—		”			—			US$	672				N/A			US$	672
		National Oilwell Varco Inc		—		”			—			US$	669				N/A			US$	669
		Continental Airlines 2007-1 Class A Pass Through Trust		—		”			—			US$	646				N/A			US$	646
		Ohio Power Co		—		”			—			US$	646				N/A			US$	646
		Entergy Gulf States Louisiana LLC		—		”			—			US$	642				N/A			US$	642
		Georgia Power Co		—		”			—			US$	635				N/A			US$	635
		RBC USA Holdco Corp		—		”			—			US$	632				N/A			US$	632
		Hyatt Hotels Corp		—		”			—			US$	629				N/A			US$	629
		Alexandria Real Estate Equities Inc		—		”			—			US$	625				N/A			US$	625
		Grupo Bimbo SAB de CV		—		”			—			US$	621				N/A			US$	621
		Liberty Property LP		—		”			—			US$	621				N/A			US$	621
		Potash Corp of Saskatchewan Inc		—		”			—			US$	618				N/A			US$	618
		Woolworths Group Ltd		—		”			—			US$	617				N/A			US$	617
		OneBeacon US Holdings Inc		—		”			—			US$	603				N/A			US$	603

(Continued)

 

- 70 -

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								March 31, 2018																Note
Held Company Name		Marketable Securities Type and Name		Relationship with the Company		Financial Statement Account		Shares/Units (In Thousands)				Carrying Value (Foreign Currencies in Thousands)				Percentage of Ownership (%)				Fair Value (Foreign Currencies in Thousands)
TSMC Global		Daiwa Securities Group Inc		—		Financial assets at fair value through other comprehensive income			—			US$	602				N/A			US$	602
		Life Technologies Corp		—		”			—			US$	599				N/A			US$	599
		BOC Aviation Ltd		—		”			—			US$	598				N/A			US$	598
		Dr Pepper Snapple Group Inc		—		”			—			US$	598				N/A			US$	598
		Altria Group Inc		—		”			—			US$	596				N/A			US$	596
		MUFG Union Bank NA		—		”			—			US$	596				N/A			US$	596
		Kimberly-Clark Corp		—		”			—			US$	595				N/A			US$	595
		ABC Inc		—		”			—			US$	587				N/A			US$	587
		Host Hotels & Resorts LP		—		”			—			US$	576				N/A			US$	576
		AXIS Specialty Finance PLC		—		”			—			US$	574				N/A			US$	574
		Mizuho Bank Ltd		—		”			—			US$	571				N/A			US$	571
		AvalonBay Communities Inc		—		”			—			US$	567				N/A			US$	567
		Regions Bank/Birmingham AL		—		”			—			US$	549				N/A			US$	549
		Exxon Mobil Corp		—		”			—			US$	542				N/A			US$	542
		Bunge Ltd Finance Corp		—		”			—			US$	531				N/A			US$	531
		Prudential Financial Inc		—		”			—			US$	523				N/A			US$	523
		MUFG Americas Holdings Corp		—		”			—			US$	517				N/A			US$	517
		Southwestern Electric Power Co		—		”			—			US$	514				N/A			US$	514
		American Electric Power Co Inc		—		”			—			US$	514				N/A			US$	514
		Fulton Financial Corp		—		”			—			US$	510				N/A			US$	510
		TD Ameritrade Holding Corp		—		”			—			US$	509				N/A			US$	509
		Regency Centers Corp		—		”			—			US$	503				N/A			US$	503
		BNP Paribas / BNP Paribas US Medium-Term Note Program LLC		—		”			—			US$	500				N/A			US$	500
		Halliburton Co		—		”			—			US$	499				N/A			US$	499
		Highwoods Realty LP		—		”			—			US$	496				N/A			US$	496
		ORIX Corp		—		”			—			US$	492				N/A			US$	492
		MassMutual Global Funding II		—		”			—			US$	478				N/A			US$	478
		Comerica Inc		—		”			—			US$	471				N/A			US$	471
		Eaton Corp		—		”			—			US$	465				N/A			US$	465
		Narragansett Electric Co/The		—		”			—			US$	462				N/A			US$	462
		Spire Inc		—		”			—			US$	459				N/A			US$	459
		CenterPoint Energy Inc		—		”			—			US$	455				N/A			US$	455
		Canadian Pacific Railway Co		—		”			—			US$	428				N/A			US$	428
		Texas-New Mexico Power Co		—		”			—			US$	426				N/A			US$	426
		Volkswagen Group of America Finance LLC		—		”			—			US$	399				N/A			US$	399
		Southern Power Co		—		”			—			US$	389				N/A			US$	389
		IBM Credit LLC		—		”			—			US$	388				N/A			US$	388
		Aon Corp		—		”			—			US$	382				N/A			US$	382
		StanCorp Financial Group Inc		—		”			—			US$	382				N/A			US$	382
		First Niagara Financial Group Inc		—		”			—			US$	373				N/A			US$	373
		Nationwide Financial Services Inc		—		”			—			US$	369				N/A			US$	369
		NetApp Inc		—		”			—			US$	359				N/A			US$	359
		CenterPoint Energy Resources Corp		—		”			—			US$	359				N/A			US$	359
		Deutsche Bank AG		—		”			—			US$	349				N/A			US$	349
		Cisco Systems Inc		—		”			—			US$	319				N/A			US$	319
		PacifiCorp		—		”			—			US$	311				N/A			US$	311
		eBay Inc		—		”			—			US$	299				N/A			US$	299
		Schlumberger Finance Canada Ltd		—		”			—			US$	296				N/A			US$	296
		Eli Lilly & Co		—		”			—			US$	288				N/A			US$	288
		Amphenol Corp		—		”			—			US$	286				N/A			US$	286
		BAE Systems Holdings Inc		—		”			—			US$	286				N/A			US$	286
		EMD Finance LLC		—		”			—			US$	277				N/A			US$	277
		Nomura Holdings Inc		—		”			—			US$	250				N/A			US$	250
		NBCUniversal Enterprise Inc		—		”			—			US$	248				N/A			US$	248
		CMS Energy Corp		—		”			—			US$	237				N/A			US$	237
		Comcast Corp		—		”			—			US$	236				N/A			US$	236
		Hartford Financial Services Group Inc/The		—		”			—			US$	232				N/A			US$	232
		Protective Life Corp		—		”			—			US$	223				N/A			US$	223

(Continued)

 

- 71 -

---

								March 31, 2018
Held Company Name		Marketable Securities Type and Name		Relationship with the Company		Financial Statement Account		Shares/Units (In Thousands)				Carrying Value (Foreign Currencies in Thousands)				Percentage of Ownership (%)				Fair Value (Foreign Currencies in Thousands)				Note
TSMC Global		WestRock MWV LLC		—		Financial assets at fair value through other comprehensive income			—			US$	222				N/A			US$	222
		Rolls-Royce PLC		—		”			—			US$	221				N/A			US$	221
		Fidelity National Information Services Inc		—		”			—			US$	203				N/A			US$	203
		Commonwealth Bank of Australia		—		”			—			US$	201				N/A			US$	201
		Pinnacle West Capital Corp		—		”			—			US$	195				N/A			US$	195
		Equifax Inc		—		”			—			US$	175				N/A			US$	175
		Packaging Corp of America		—		”			—			US$	157				N/A			US$	157
		Schneider Electric SE		—		”			—			US$	157				N/A			US$	157
		Berkshire Hathaway Finance Corp		—		”			—			US$	134				N/A			US$	134
		Duke Energy Florida LLC		—		”			—			US$	104				N/A			US$	104
		Wells Fargo & Co		—		Financial assets at amortized cost			—			US$	149,943				N/A			US$	151,431
		JPMorgan Chase & Co.		—		”			—			US$	124,948				N/A			US$	126,789
		Westpac Banking Corp.		—		”			—			US$	99,987				N/A			US$	100,455
		Goldman Sachs Group, Inc.		—		”			—			US$	99,959				N/A			US$	100,728
		Commonwealth Bank of Australia		—		”			—			US$	49,993				N/A			US$	50,214
		National Australia Bank		—		”			—			US$	49,993				N/A			US$	50,178
		Bank of Nova Scotia		—		”			—			US$	49,971				N/A			US$	50,150
		Industrial and Commercial Bank of China		—		”			—			US$	9,996				N/A			US$	10,006
		Government bond
		United States Treasury Note/Bond		—		Financial assets at fair value through other comprehensive income			—			US$	322,938				N/A			US$	322,938
		Abu Dhabi Government International Bond		—		”			—			US$	3,402				N/A			US$	3,402
		Agency bonds/Agency mortgage-backed securities
		Government National Mortgage Association		—		Financial assets at fair value through profit or loss			—			US$	11,633				N/A			US$	11,633
		Fannie Mae		—		”			—			US$	9,260				N/A			US$	9,260
		Freddie Mac		—		”			—			US$	5,042				N/A			US$	5,042
		Fannie Mae		—		Financial assets at fair value through other comprehensive income			—			US$	665,741				N/A			US$	665,741
		Freddie Mac		—		”			—			US$	264,453				N/A			US$	264,453
		Government National Mortgage Association		—		”			—			US$	126,064				N/A			US$	126,064
		Ginnie Mae		—		”			—			US$	27,221				N/A			US$	27,221
		Federal Home Loan Banks		—		”			—			US$	6,138				N/A			US$	6,138
		Freddie Mac Multifamily Structured Pass Through Certificates		—		”			—			US$	3,744				N/A			US$	3,744
		Export-Import Bank of Korea		—		”			—			US$	3,004				N/A			US$	3,004
		Export Development Canada		—		”			—			US$	2,977				N/A			US$	2,977
		Province of Quebec Canada		—		”			—			US$	2,521				N/A			US$	2,521
		NCUA Guaranteed Notes Trust 2010-R2		—		”			—			US$	1,416				N/A			US$	1,416
		CPPIB Capital Inc		—		”			—			US$	1,177				N/A			US$	1,177
		Federal Farm Credit Banks		—		”			—			US$	888				N/A			US$	888
		Kowloon-Canton Railway Corp		—		”			—			US$	564				N/A			US$	564
		FHLMC-GNMA		—		”			—			US$	535				N/A			US$	535
		Asset-backed securities
		Hyundai Auto Receivables Trust		—		Financial assets at fair value through profit or loss			—			US$	1,992				N/A			US$	1,992
		Ford Credit Auto Owner Trust		—		”			—			US$	1,306				N/A			US$	1,306
		Citibank Credit Card Issuance Trust		—		Financial assets at fair value through other comprehensive income			—			US$	53,963				N/A			US$	53,963
		Discover Card Execution Note Trust		—		”			—			US$	45,298				N/A			US$	45,298
		Chase Issuance Trust		—		”			—			US$	43,924				N/A			US$	43,924
		American Express Credit Account Master Trust		—		”			—			US$	35,584				N/A			US$	35,584
		Ford Credit Floorplan Master Owner Trust A		—		”			—			US$	26,781				N/A			US$	26,781
		Ford Credit Auto Owner Trust/Ford Credit 2014-REV1		—		”			—			US$	13,762				N/A			US$	13,762
		Toyota Auto Receivables 2014-C Owner Trust		—		”			—			US$	13,002				N/A			US$	13,002
		UBS-Barclays Commercial Mortgage Trust 2012-C2		—		”			—			US$	12,523				N/A			US$	12,523

(Continued)

 

- 72 -

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								March 31, 2018
Held Company Name		Marketable Securities Type and Name		Relationship with the Company		Financial Statement Account		Shares/Units (In Thousands)				Carrying Value (Foreign Currencies in Thousands)				Percentage of Ownership (%)				Fair Value (Foreign Currencies in Thousands)				Note
TSMC Global		Capital One Multi-Asset Execution Trust		—		Financial assets at fair value through other comprehensive income			—			US$	12,494				N/A			US$	12,494
		Morgan Stanley Bank of America Merrill Lynch Trust		—		”			—			US$	11,598				N/A			US$	11,598
		BA Credit Card Trust		—		”			—			US$	10,816				N/A			US$	10,816
		COMM Mortgage Trust		—		”			—			US$	10,410				N/A			US$	10,410
		Chesapeake Funding II LLC		—		”			—			US$	10,285				N/A			US$	10,285
		Nissan Master Owner Trust Receivables		—		”			—			US$	10,004				N/A			US$	10,004
		GM Financial Automobile Leasing Trust 2015-3		—		”			—			US$	9,408				N/A			US$	9,408
		Hyundai Auto Lease Securitization Trust 2017-A		—		”			—			US$	9,108				N/A			US$	9,108
		Honda Auto Receivables 2017-2 Owner Trust		—		”			—			US$	8,662				N/A			US$	8,662
		JPMCC Commercial Mortgage Securities Trust 2017-JP7		—		”			—			US$	8,552				N/A			US$	8,552
		Mercedes-Benz Master Owner Trust		—		”			—			US$	8,536				N/A			US$	8,536
		BANK		—		”			—			US$	7,871				N/A			US$	7,871
		CGDBB Commercial Mortgage Trust 2017-BIOC		—		”			—			US$	7,507				N/A			US$	7,507
		GS Mortgage Securities Trust		—		”			—			US$	7,355				N/A			US$	7,355
		Citigroup Commercial Mortgage Trust 2013-GC11		—		”			—			US$	6,590				N/A			US$	6,590
		JPMBB Commercial Mortgage Securities Trust 2013-C12		—		”			—			US$	6,363				N/A			US$	6,363
		Nissan Auto Lease Trust		—		”			—			US$	6,090				N/A			US$	6,090
		Ford Credit Auto Owner Trust		—		”			—			US$	5,750				N/A			US$	5,750
		BBCMS 2018-TALL Mortgage Trust		—		”			—			US$	5,469				N/A			US$	5,469
		JPMDB Commercial Mortgage Securities Trust 2017-C7		—		”			—			US$	5,327				N/A			US$	5,327
		Ford Credit Auto Lease Trust		—		”			—			US$	4,905				N/A			US$	4,905
		BMW Vehicle Lease Trust		—		”			—			US$	4,794				N/A			US$	4,794
		Volvo Financial Equipment Master Owner Trust 2017-A		—		”			—			US$	4,523				N/A			US$	4,523
		Nissan Auto Receivables 2017-B Owner Trust		—		”			—			US$	4,405				N/A			US$	4,405
		Wells Fargo Commercial Mortgage Trust 2015-LC20		—		”			—			US$	4,209				N/A			US$	4,209
		GM Financial Consumer Automobile 2017-1		—		”			—			US$	3,922				N/A			US$	3,922
		Morgan Stanley Capital I Trust		—		”			—			US$	3,885				N/A			US$	3,885
		Cold Storage Trust 2017-ICE3		—		”			—			US$	3,813				N/A			US$	3,813
		Wheels SPV 2 LLC		—		”			—			US$	3,579				N/A			US$	3,579
		Hertz Fleet Lease Funding LP		—		”			—			US$	3,476				N/A			US$	3,476
		Hyundai Auto Receivables Trust		—		”			—			US$	3,158				N/A			US$	3,158
		BMW Floorplan Master Owner Trust		—		”			—			US$	2,440				N/A			US$	2,440
		Mercedes-Benz Auto Lease Trust 2016-A		—		”			—			US$	1,892				N/A			US$	1,892
		WFRBS Commercial Mortgage Trust 2013-C14		—		”			—			US$	1,828				N/A			US$	1,828
		Enterprise Fleet Financing LLC		—		”			—			US$	1,603				N/A			US$	1,603
		CFCRE Commercial Mortgage Trust 2011-C1		—		”			—			US$	892				N/A			US$	892
		CarMax Auto Owner Trust		—		”			—			US$	873				N/A			US$	873
		280 Park Avenue Mortgage Trust		—		”			—			US$	833				N/A			US$	833
		DBUBS 2011-LC2 Mortgage Trust		—		”			—			US$	520				N/A			US$	520
		ARI Fleet Lease Trust 2018-A		—		”			—			US$	508				N/A			US$	508
		CD 2016-CD2 Mortgage Trust		—		”			—			US$	500				N/A			US$	500
		Mercedes-Benz Auto Receivables Trust 2015-1		—		”			—			US$	339				N/A			US$	339
		Structure product
		Bank of Tokyo-Mitsubishi UFJ		—		Financial assets at amortized cost			—			US$	49,979				N/A			US$	49,764
		Commercial paper
		Old Line Funding LLC		—		Financial assets at fair value through other comprehensive income			—			US$	1,989				N/A			US$	1,989
		Fund
		Primavera Capital Fund II L.P.		—		Financial assets at fair value through other comprehensive income			—			US$	78,923				4			US$	78,923
VTAF II		Common stock
		Aquantia		—		Financial assets at fair value through other comprehensive income			460			US$	7,218				1			US$	7,218
		Sentelic		—		”			903			US$	1,864				4			US$	1,864
		Aether Systems, Inc.		—		”			1,085			US$	373				20			US$	373
		5V Technologies, Inc.		—		”			963			US$	331				2			US$	331

(Continued)

 

- 73 -

---

								March 31, 2018																Note
Held Company Name		Marketable Securities Type and Name		Relationship with the Company		Financial Statement Account		Shares/Units (In Thousands)				Carrying Value (Foreign Currencies in Thousands)				Percentage of Ownership (%)				Fair Value (Foreign Currencies in Thousands)
VTAF II		Common stock
		Aquantia		—		Financial assets at fair value through other comprehensive income			460			US$	7,218				1			US$	7,218
		Sentelic		—		”			903			US$	1,864				4			US$	1,864
		Aether Systems, Inc.		—		”			1,085			US$	373				20			US$	373
		5V Technologies, Inc.		—		”			963			US$	331				2			US$	331
VTAF II		Common stock
		LiquidLeds Lighting Corp.		—		Financial assets at fair value through other comprehensive income			1,600			US$	800				11			US$	800
		Preferred stock
		Neoconix, Inc.		—		Financial assets at fair value through other comprehensive income			4,147			US$	170				—			US$	170
ISDF		Preferred stock
		Sonics, Inc.		—		Financial assets at fair value through other comprehensive income			230				—				3				—
ISDF II		Common stock
		Sonics, Inc.		—		Financial assets at fair value through other comprehensive income			278				—				4				—
		Preferred stock
		Sonics, Inc.		—		Financial assets at fair value through other comprehensive income			264				—				4				—
Growth Fund		Common stock
		Innovium, Inc.		—		Financial assets at fair value through other comprehensive income			221			US$	370				—			US$	370
		Preferred stock
		Innovium, Inc.		—		Financial assets at fair value through other comprehensive income			230			US$	384				—			US$	384

(Concluded)

 

- 74 -

---

TABLE 4

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

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

FOR THE THREE MONTHS ENDED MARCH 31, 2018

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

 

 

		Marketable												Beginning Balance								Acquisition								Disposal																Ending Balance (Note 1)
Company Name		Securities Type and Name		Financial Statement Account		Counter-party				Nature of Relationship				Shares/Units (In Thousands)				Amount				Shares/Units (In Thousands)				Amount				Shares/Units (In Thousands)				Amount				Carrying Value				Gain/Loss on Disposal				Shares/Units (In Thousands)				Amount
TSMC		Stock
		TSMC Global		Investments accounted for using equity method			—				Subsidiary				9			$	309,211,877				2			$	59,182,280				—			$	—			$	—			$	—				11			$	362,900,046
		TSMC Nanjing		”			—				Subsidiary				—				26,493,740				—				2,361,320				—				—				—				—				—				27,651,586
TSMC Global		Corporate bond
		CVS Health Corp		Financial assets at fair value through other comprehensive income			—				—				—			US$	10,018				—			US$	14,507				—				—				—				—				—			US$	24,628
		Asian Development Bank		”			—				—				—			US$	11,073				—				—				—			US$	11,075			US$	11,075				—				—				—
		Government bond
		United States Treasury Note/Bond		Financial assets at fair value through other comprehensive income			—				—				—			US$	202,689				—			US$	160,346				—			US$	86,184			US$	86,814			US$	(630	)			—			US$	274,372
		United States Treasury Floating Rate Note		”			—				—				—			US$	49,901				—			US$	38,809				—			US$	48,975			US$	48,930			US$	45				—			US$	39,702
		United States Treasury Bill		”			—				—				—			US$	2,997				—			US$	48,775				—			US$	51,413			US$	51,407			US$	6				—			US$	396
		Agency bonds/Agency mortgage-backed securities
		FNMA TBA 30 Yr 4.5		Financial assets at fair value through other comprehensive income			—				—				—			US$	15,758				—			US$	45,336				—			US$	31,918			US$	32,128			US$	(210	)			—			US$	29,067
		Government National Mortgage Association		”			—				—				—				—				—			US$	12,707				—				—				—				—				—			US$	12,674
		FNMA TBA 30 Yr 5		”			—				—				—				—				—			US$	10,569				—				—				—				—				—			US$	10,597
		GNMA II TBA 30 Yr 3.5		”			—				—				—			US$	145				—			US$	19,769				—			US$	16,282			US$	16,346			US$	(64	)			—			US$	3,582
		GNMA II TBA 30 Yr 4		”			—				—				—			US$	2,378				—			US$	16,057				—			US$	16,069			US$	16,108			US$	(39	)			—			US$	2,341
		FNMA TBA 30 Yr 3.5		”			—				—				—			US$	2,866				—			US$	11,140				—			US$	11,662			US$	11,719			US$	(57	)			—			US$	2,301
		FNMA TBA 30 Yr 3		”			—				—				—				—				—			US$	48,338				—			US$	48,047			US$	48,338			US$	(291	)			—				—
		Federal Home Loan Bank Discount Notes		”			—				—				—				—				—			US$	29,498				—			US$	29,500			US$	29,499			US$	1				—				—
		Asset-backed securities
		Citibank Credit Card Issuance Trust		Financial assets at fair value through other comprehensive income			—				—				—			US$	48,328				—			US$	12,594				—			US$	6,802			US$	6,800			US$	2				—			US$	53,963

 

Note:

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

 

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TABLE 5

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

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

FOR THE THREE MONTHS ENDED MARCH 31, 2018

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

 

 

Company

Types of

Transaction Amount (Foreign Currencies in

Nature of

Prior Transaction of Related Counter-party

Price

Purpose of

Other

Name

Property

Transaction Date

Thousands)

Payment Term

Counter-party

Relationships

Owner

Relationships

Transfer Date

Amount

Reference

Acquisition

Terms

TSMC

Fab

March 10, 2017 to January 25, 2018

$

303,592

Monthly settlement by the construction progress and acceptance

HSIEH KUN CO., LTD

—

N/A

N/A

N/A

N/A

Price comparison and price negotiation

Manufacturing purpose

None

Fab

March 17, 2017 to March 12, 2018

301,341

Monthly settlement by the construction progress and acceptance

Jer Yih Electrical Eng. Co.

—

N/A

N/A

N/A

N/A

Price comparison and price negotiation

Manufacturing purpose

None

Fab

March 21, 2017 to January 8, 2018

302,101

Monthly settlement by the construction progress and acceptance

TRUSVAL TECHNOLOGY CO., LTD.

—

N/A

N/A

N/A

N/A

Price comparison and price negotiation

Manufacturing purpose

None

Fab

April 10, 2017 to March 30, 2018

382,672

Monthly settlement by the construction progress and acceptance

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

—

N/A

N/A

N/A

N/A

Price comparison and price negotiation

Manufacturing purpose

None

Fab

April 25, 2017 to March 30, 2018

559,250

Monthly settlement by the construction progress and acceptance

YANKEY ENGINEERING CO., LTD.

—

N/A

N/A

N/A

N/A

Price comparison and price negotiation

Manufacturing purpose

None

Fab

May 25, 2017 to March 29, 2018

303,552

Monthly settlement by the construction progress and acceptance

MEGA UNION TECHNOLOGY INCORPORATED

—

N/A

N/A

N/A

N/A

Price comparison and price negotiation

Manufacturing purpose

None

Fab

August 16, 2017 to March 26, 2018

322,134

Monthly settlement by the construction progress and acceptance

Air Liquide Far Eastern

—

N/A

N/A

N/A

N/A

Price comparison and price negotiation

Manufacturing purpose

None

Fab

September 5, 2017 to March 8, 2018

809,171

Monthly settlement by the construction progress and acceptance

Uangyih-Tech Industrial Co., Ltd.

—

N/A

N/A

N/A

N/A

Price comparison and price negotiation

Manufacturing purpose

None

Fab

September 14, 2017 to March 22, 2018

784,003

Monthly settlement by the construction progress and acceptance

Siemens Ltd.

—

N/A

N/A

N/A

N/A

Price comparison and price negotiation

Manufacturing purpose

None

(Continued)

 

---

Company

Types of

Transaction Amount (Foreign Currencies in

Nature of

Prior Transaction of Related Counter-party

Price

Purpose of

Other

Name

Property

Transaction Date

Thousands)

Payment Term

Counter-party

Relationships

Owner

Relationships

Transfer Date

Amount

Reference

Acquisition

Terms

TSMC

Fab

November 9, 2017 to March 16, 2018

300,598

Monthly settlement by the construction progress and acceptance

MARKETECH INTERNATIONAL CORP.

—

N/A

N/A

N/A

N/A

Price comparison and price negotiation

Manufacturing purpose

None

Fab

December 5, 2017 to March 5, 2018

300,150

Monthly settlement by the construction progress and acceptance

UNITED INTEGRATED SERVICES CO., LTD.

—

N/A

N/A

N/A

N/A

Price comparison and price negotiation

Manufacturing purpose

None

Fab

December 26, 2017 to February 13, 2018

525,172

Monthly settlement by the construction progress and acceptance

ABB Ltd.

—

N/A

N/A

N/A

N/A

Price comparison and price negotiation

Manufacturing purpose

None

Fab

January 4, 2018

747,551

Monthly settlement by the construction progress and acceptance

KEDGE Construction Co., Ltd.

—

N/A

N/A

N/A

N/A

Price comparison and price negotiation

Manufacturing purpose

None

Fab

February 5, 2018 to March 22, 2018

2,067,841

Monthly settlement by the construction progress and acceptance

L&K ENGINEERING CO.,LTD.

—

N/A

N/A

N/A

N/A

Price comparison and price negotiation

Manufacturing purpose

None

(Concluded)

 

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TABLE 6

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

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

FOR THE THREE MONTHS ENDED MARCH 31, 2018

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

 

 

Company Name		Related Party		Nature of Relationships		Transaction Details												Abnormal Transaction								Notes/Accounts Payable or Receivable								Note
						Purchases/ Sales		Amount (Foreign Currencies in Thousands)				% to Total				Payment Terms		Unit Price				Payment Terms				Ending Balance (Foreign Currencies in Thousands)				% to Total
TSMC		TSMC North America		Subsidiary		Sales		$	152,751,762				59			Net 30 days from invoice date (Note)			—				Note			$	73,470,052				70
		GUC		Associate		Sales			1,592,532				1			Net 30 days from the end of the month of when invoice is issued			—				—				843,572				1
		TSMC China		Subsidiary		Purchases			4,524,097				22			Net 30 days from the end of the month of when invoice is issued			—				—				(1,360,751	)			5
		WaferTech		Indirect subsidiary		Purchases			1,984,763				10			Net 30 days from the end of the month of when invoice is issued			—				—				(1,259,891	)			4
		VIS		Associate		Purchases			1,311,213				7			Net 30 days from the end of the month of when invoice is issued			—				—				(452,091	)			2
		SSMC		Associate		Purchases			912,035				5			Net 30 days from the end of the month of when invoice is issued			—				—				(358,899	)			1
TSMC North America		GUC		Associate of TSMC		Sales		(US$	505,383 17,233	)			—			Net 30 days from invoice date			—				—				275,688				—
																										(US$	9,476	)

 

Note:

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

 

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TABLE 7

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

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

MARCH 31, 2018

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

 

 

Company Name		Related Party		Nature of Relationships		Ending Balance (Foreign Currencies in Thousands)				Turnover Days (Note 1)				Overdue								Amounts Received in Subsequent Period				Allowance for Bad Debts
														Amount				Action Taken
TSMC		TSMC North America		Subsidiary		$	74,240,350				49			$	1,450,406				—			$	11,273,836			$	—
		TSMC Nanjing		Subsidiary			1,201,519				Note 2				—				—				—				—
		GUC		Associate			843,572				46				301,502				—				317,927				—
TSMC China		TSMC Nanjing		The same parent company		(RMB	22,122,110 4,763,282	)			Note 2				—				—				—				—
		TSMC		Parent company			1,360,751				28				—				—				—				—
						(RMB	293,418	)
WaferTech		TSMC		The ultimate parent of the Company		(US$	1,259,891 43,305	)			59			(US$	634,996 21,826	)			—			(US$	634,996 21,826	)			—
TSMC Technology		TSMC		The ultimate parent of the Company		(US$	280,077 9,627	)			Note 2				—				—				—				—
TSMC North America		GUC		Associate of TSMC		(US$	275,912 9,484	)			47			(US$	38,839 1,335	)			—			(US$	53,124 1,826	)			—
TSMC Japan		TSMC		Parent company			103,541				Note 2				—				—				—				—
						(JPY	377,062	)

 

Note 1:

The calculation of turnover days excludes other receivables from related parties.

 

Note 2:

The ending balance is primarily consisted of other receivables, which is not applicable for the calculation of turnover days.

 

- 78 -

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TABLE 8

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

INTERCOMPANY RELATIONSHIPS AND SIGNIFICANT INTERCOMPANY TRANSACTIONS

FOR THE THREE MONTHS ENDED MARCH 31, 2018

(Amounts in Thousands of New Taiwan Dollars)

 

 

No.		Company Name		Counter Party		Nature of Relationship (Note 1)				Intercompany Transactions
										Financial Statements Item		Amount				Terms (Note 2)				Percentage of Consolidated Net Revenue or Total Assets
0		TSMC		TSMC North America			1			Net revenue from sales of goods		$	152,751,762				—				62%
										Receivables from related parties			73,470,052				—				4%
										Other receivables from related parties			770,298				—				—
				TSMC China			1			Purchases			4,524,097				—				2%
										Payables to related parties			1,360,751				—				—
				TSMC Nanjing			1			Proceeds from disposal of property, plant and equipment			1,892,937				—				1%
										Other receivables from related parties			1,201,519				—				—
				WaferTech			1			Purchases			1,984,763				—				1%
										Payables to related parties			1,259,891				—				—
				TSMC Technology			1			Research and development expenses			489,653				—				—
										Payables to related parties			280,077				—				—
				TSMC Europe			1			Marketing expenses - commission			116,994				—				—
				TSMC Japan			1			Payables to related parties			103,541				—				—
1		TSMC China		TSMC Nanjing			3			Other receivables from related parties			22,122,110				—				1%

 

Note 1:

No. 1 represents the transactions from parent company to subsidiary.

No. 3 represents the transactions between subsidiaries.

Note 2:

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

 

- 79 -

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TABLE 9

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

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

FOR THE THREE MONTHS ENDED MARCH 31, 2018

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

 

 

								Original Investment Amount								Balance as of March 31, 2018												Net Income				Share of Profits/Losses
Investor Company		Investee Company		Location		Main Businesses and Products		March 31, 2018 (Foreign Currencies in Thousands)				December 31, 2017 (Foreign Currencies in Thousands)				Shares (In Thousands)				Percentage of Ownership				Carrying Value (Foreign Currencies in Thousands)				(Losses) of the Investee (Foreign Currencies in Thousands)				of Investee (Note 1) (Foreign Currencies in Thousands)				Note
TSMC		TSMC Global		Tortola, British Virgin Islands		Investment activities		$	352,072,509			$	292,890,229				11				100			$	362,900,046			$	1,848,060			$	1,848,060			Subsidiary
		TSMC Partners		Tortola, British Virgin Islands		Investing in companies involved in the design, manufacture, and other related business in the semiconductor industry and other investment activities			31,456,130				31,456,130				988,268				100				49,539,919				482,623				482,623			Subsidiary
		VIS		Hsin-Chu, Taiwan		Manufacturing, selling, packaging, testing and computer-aided design of integrated circuits and other semiconductor devices and the manufacturing and design service of masks			10,180,677				10,180,677				464,223				28				8,860,765				1,147,920				323,868			Associate
		SSMC		Singapore		Manufacturing and selling of integrated circuits and other semiconductor devices			5,120,028				5,120,028				314				39				5,923,979				908,118				352,259			Associate
		VisEra Tech		Hsin-Chu, Taiwan		Engaged in manufacturing electronic spare parts and in researching, developing, designing, manufacturing, selling, packaging and testing of color filter			5,005,171				5,005,171				253,120				87				4,701,334				24,829				21,586			Subsidiary
		TSMC North America		San Jose, California, U.S.A		Selling and marketing of integrated circuits and other semiconductor devices			333,718				333,718				11,000				100				3,961,984				37,634				37,634			Subsidiary
		Xintec		Taoyuan, Taiwan		Wafer level chip size packaging and wafer level post passivation interconnection service			1,988,317				1,988,317				111,282				41				2,246,049				(171,371	)			(64,815	)		Associate
		GUC		Hsin-Chu, Taiwan		Researching, developing, manufacturing, testing and marketing of integrated circuits			386,568				386,568				46,688				35				1,255,013				206,599				71,979			Associate
		TSMC Europe		Amsterdam, the Netherlands		Customer service and supporting activities			15,749				15,749				—				100				423,206				10,528				10,528			Subsidiary
		VTAF II		Cayman Islands		Investing in new start-up technology companies			412,831				412,831				—				98				297,778				(1,497	)			(1,467	)		Subsidiary
		VTAF III		Cayman Islands		Investing in new start-up technology companies			1,318,885				1,318,885				—				98				147,653				(3,221	)			(3,156	)		Subsidiary
		TSMC Japan		Yokohama, Japan		Customer service and supporting activities			83,760				83,760				6				100				136,715				1,488				1,488			Subsidiary
		TSMC Korea		Seoul, Korea		Customer service and supporting activities			13,656				13,656				80				100				38,960				311				311			Subsidiary
		TSMC Solar Europe GmbH		Hamburg, Germany		Selling of solar related products and providing customer service			25,266				25,266				1				100				(20,500	)			(15	)			(15	)		Subsidiary
TSMC Partners		TSMC Development		Delaware, U.S.A		Investing in companies involved in the manufacturing related business in the semiconductor industry			17,075,811				17,075,811				—				100				26,231,490				358,287				Note 2			Subsidiary
								(US$	586,939	)		(US$	586,939	)										(US$	901,643	)		(US$	12,217	)
		TSMC Technology		Delaware, U.S.A		Engineering support activities			415,507				415,507				—				100				526,830				18,256				Note 2			Subsidiary
								(US$	14,282	)		(US$	14,282	)										(US$	18,108	)		(US$	623	)
		TSMC Canada		Ontario, Canada		Engineering support activities			66,914				66,914				2,300				100				181,599				7,157				Note 2			Subsidiary
								(US$	2,300	)		(US$	2,300	)										(US$	6,242	)		(US$	244	)
		ISDF		Cayman Islands		Investing in new start-up technology companies			13,825				13,825				583				97				483				—				Note 2			Subsidiary
								(US$	475	)		(US$	475	)										(US$	17	)
		ISDF II		Cayman Islands		Investing in new start-up technology companies			—				—				9,299				97				—				(6,781	)			Note 2			Subsidiary
																												(US$	(231	))
VTAF III		Growth Fund		Cayman Islands		Investing in new start-up technology companies			62,660				62,660				—				100				45,159				(293	)			Note 2			Subsidiary
								(US$	2,154	)		(US$	2,154	)										(US$	1,552	)		(US$	(10	))
		Mutual-Pak		New Taipei, Taiwan		Manufacturing of electronic parts, wholesaling and retailing of electronic materials, and researching, developing and testing of RFID		(US$	46,355 1,593	)		(US$	46,355 1,593	)			4,693				39			(US$	21,711 746	)		(US$	(3,849 (131	)  ))			Note 2			Associate

 

(Continued)

 

- 80 -

---

Original Investment Amount

Balance as of March 31, 2018

Net Income

Share of Profits/Losses

Investor Company

Investee Company

Location

Main Businesses and Products

March 31, 2018 (Foreign Currencies in Thousands)

December 31, 2017 (Foreign Currencies in Thousands)

Shares (In Thousands)

Percentage of Ownership

Carrying Value (Foreign Currencies in Thousands)

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

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

Note

TSMC Development

WaferTech

Washington, U.S.A

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

$

—

$

—

293,637

100

$ (US$

4,953,422 170,262

)

$ (US$

284,221 9,692

)

Note 2

Subsidiary

 

Note 1:

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

Note  2:

The share of profits/losses of the investee company is not reflected herein as such amount is already included in the share of profits/losses of the investor company.

 

(Concluded)

 

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TABLE 10

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

INFORMATION ON INVESTMENT IN MAINLAND CHINA

FOR THREE MONTHS ENDED MARCH 31, 2018

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

 

 

Investee Company		Main Businesses and Products		Total Amount of Paid-in Capital (RMB in Thousands)				Method of Investment				Accumulated Outflow of Investment from Taiwan as of January 1, 2018 (US$ in Thousands)				Investment Flows								Accumulated Outflow of Investment from Taiwan as of March 31, 2018 (US$ in Thousands)				Net Income (Losses) of the Investee Company				Percentage of Ownership				Share of Profits/Losses				Carrying Amount as of March 31, 2018				Accumulated Inward Remittance of Earnings as of March 31, 2018
																Outflow (US$ in Thousands)				Inflow
TSMC China		Manufacturing, selling, testing and computer-aided design of integrated circuits and other semiconductor devices		$ (RMB	18,939,667 4,502,080	)			Note 1			$ (US$	18,939,667 596,000	)		$	—			$	—			$ (US$	18,939,667 596,000	)		$	1,349,349				100%			$	1,348,879 (Note 2	)		$	53,431,777			$	—
TSMC Nanjing		Manufacturing, selling, testing and computer-aided design of integrated circuits and other semiconductor devices		(RMB	30,521,412 6,650,119	)			Note 1			(US$	28,160,092 920,000	)		(US$	2,361,320 80,000	)			—			(US$	30,521,412 1,000,000	)			(1,746,699	)			100%				(1,746,699 (Note 2	)  )			27,651,586				—

 

Accumulated Investment in Mainland China as of March 31, 2018 (US$ in Thousands)		Investment Amounts Authorized by Investment Commission, MOEA (US$ in Thousands)				Upper Limit on Investment
$        49,461,079 (US$      1,596,000)			$       119,412,667 (US$      3,596,000)				Note 3

 

Note 1:

TSMC directly invested US$596,000 thousand in TSMC China and US$1,000,000 thousands in TSMC Nanjing.

Note 2:

Amount was recognized based on the reviewed financial statements.

Note 3:

As the Company has obtained the certificate of being qualified for operating headquarters issued by Industrial Development Bureau, MOEA on August 2016, the upper limit on investment in mainland China pursuant to “Principle of investment or Technical Cooperation in Mainland China” is not applicable.

 

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