Form 6-K

1934 Act Registration No. 1-14700

 

 

 

 

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

 

FORM 6-K

 

 

REPORT OF FOREIGN PRIVATE ISSUER

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

THE SECURITIES EXCHANGE ACT OF 1934

For the month of November 2018

 

 

Taiwan Semiconductor Manufacturing Company Ltd.

(Translation of Registrant’s Name Into English)

 

 

No. 8, Li-Hsin Rd. 6,

Hsinchu Science Park,

Taiwan

(Address of Principal Executive Offices)

 

 

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

Form 20-F  ☒            Form 40-F  ☐

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

Yes  ☐            No  ☒

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

 

 

 


SIGNATURES

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

 

    Taiwan Semiconductor Manufacturing Company Ltd.
Date: November 16, 2018     By  

/s/ Lora Ho

      Lora Ho
      Senior Vice President & Chief Financial Officer


  

Taiwan Semiconductor Manufacturing

Company Limited and Subsidiaries

  
                               

Consolidated Financial Statements for the

Nine Months Ended September 30, 2018 and 2017 and

Independent Auditors’ Review Report

  


LOGO

INDEPENDENT AUDITORS’ REVIEW REPORT

The Board of Directors and Shareholders

Taiwan Semiconductor Manufacturing Company Limited

Introduction

We have reviewed the accompanying consolidated balance sheets of Taiwan Semiconductor Manufacturing Company Limited and its subsidiaries (collectively, the “Company”) as of September 30, 2018 and 2017, the related consolidated statements of comprehensive income for the three months ended September 30, 2018 and 2017 and for the nine months ended September 30, 2018 and 2017, the consolidated statements of changes in equity and cash flows for the nine months then ended, and the related notes to the consolidated financial statements, including a summary of significant accounting policies (collectively referred to as the “consolidated financial statements”). Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and International Accounting Standard 34 “Interim Financial Reporting” endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China. Our responsibility is to express a conclusion on the consolidated financial statements based on our reviews.

Scope of Review

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

Conclusion

Based on our reviews, nothing has come to our attention that caused us to believe that the accompanying consolidated financial statements do not present fairly, in all material respects the consolidated financial position of the Company as of September 30, 2018 and 2017, its consolidated financial performance for the three months ended September 30, 2018 and 2017, and its consolidated financial performance and its consolidated cash flows for the nine months ended September 30, 2018 and 2017 in accordance with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and International Accounting Standard 34 “Interim Financial Reporting” endorsed and issued into effect by the Financial Supervisory Commission of the Republic of China.

 

- 1 -


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

 

LOGO    LOGO

Deloitte & Touche

Taipei, Taiwan

Republic of China

November 13, 2018

Notice to Readers

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

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

 

- 2 -


Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED BALANCE SHEETS

(In Thousands of New Taiwan Dollars)

 

 

    September 30, 2018
(Reviewed)
    December 31, 2017
(Audited)
    September 30, 2017
(Reviewed)
 
    Amount     %     Amount     %     Amount     %  

ASSETS

           

CURRENT ASSETS

           

Cash and cash equivalents (Note 6)

  $ 488,732,121       25     $ 553,391,696       28     $ 408,077,695       22  

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

    4,057,240             569,751             1,125,668        

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

    99,214,066       5                          

Available-for-sale financial assets (Note 9)

                93,374,153       5       84,953,011       5  

Held-to-maturity financial assets (Note 10)

                1,988,385             7,521,216        

Financial assets at amortized cost (Note 11)

    11,891,845       1                          

Hedging derivative financial assets (Note 13)

                34,394             98,879        

Hedging financial assets (Note 13)

    124,242                                

Notes and accounts receivable, net (Note 14)

    127,782,905       7       121,133,248       6       117,649,258       7  

Receivables from related parties (Note 34)

    1,757,073             1,184,124             1,076,438        

Other receivables from related parties (Note 34)

    64,385             171,058             165,929        

Inventories (Note 15 and 38)

    105,336,576       5       73,880,747       4       73,893,879       4  

Other financial assets (Note 35)

    15,178,774       1       7,253,114             5,209,635        

Other current assets (Note 19)

    5,084,478             4,222,440             5,090,170        
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total current assets

    859,223,705       44       857,203,110       43       704,861,778       38  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

NONCURRENT ASSETS

           

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

    5,701,354                                

Held-to-maturity financial assets (Note 10)

                18,833,329       1       18,899,177       1  

Financial assets at amortized cost (Note 11)

    7,470,742                                

Financial assets carried at cost (Note 12)

                4,874,257             4,986,046        

Investments accounted for using equity method (Note 16)

    16,630,670       1       17,861,488       1       17,018,500       1  

Property, plant and equipment (Note 17)

    1,048,516,835       53       1,062,542,322       53       1,065,756,867       58  

Intangible assets (Note 18)

    13,989,184       1       14,175,140       1       14,841,399       1  

Deferred income tax assets (Note 4)

    14,697,325       1       12,105,463       1       11,237,149       1  

Refundable deposits

    1,968,751             1,283,414             1,241,028        

Other noncurrent assets (Note 19)

    1,690,222             2,983,120             2,582,438        
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total noncurrent assets

    1,110,665,083       56       1,134,658,533       57       1,136,562,604       62  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

TOTAL

  $ 1,969,888,788       100     $ 1,991,861,643       100     $ 1,841,424,382       100  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

LIABILITIES AND EQUITY

           

CURRENT LIABILITIES

           

Short-term loans (Notes 20 and 32)

  $ 73,974,625       4     $ 63,766,850       3     $ 54,430,200       3  

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

    240,620             26,709             251,212        

Hedging derivative financial liabilities (Note 13)

                15,562             7,545        

Hedging financial liabilities (Note 13)

    3,750                                

Accounts payable

    28,733,773       1       28,412,807       1       27,545,477       1  

Payables to related parties (Note 34)

    1,571,303             1,656,356             1,442,029        

Salary and bonus payable

    11,937,583       1       14,254,871       1       12,304,052       1  

Accrued profit sharing bonus to employees and compensation to directors and supervisors (Notes 24 and 31)

    17,789,768       1       23,419,135       1       17,067,133       1  

Payables to contractors and equipment suppliers

    58,590,057       3       55,723,774       3       47,975,461       3  

Income tax payable (Note 4)

    39,157,673       2       33,479,311       2       20,663,395       1  

Provisions (Note 21)

                13,961,787       1       14,123,509       1  

Long-term liabilities - current portion (Note 22)

    34,900,000       2       58,401,122       3       59,071,057       3  

Accrued expenses and other current liabilities (Notes 23, 25, 32 and 34)

    54,731,050       3       65,588,396       3       43,641,234       2  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total current liabilities

    321,630,202       17       358,706,680       18       298,522,304       16  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

NONCURRENT LIABILITIES

           

Bonds payable (Notes 22 and 32)

    56,900,000       3       91,800,000       5       91,800,000       5  

Long-term bank loans

                            14,520        

Deferred income tax liabilities (Note 4)

    254,887             302,205             120,360        

Net defined benefit liability (Note 4)

    8,788,142             8,850,704       1       8,574,626        

Guarantee deposits (Notes 23 and 32)

    4,445,580             7,586,790             9,243,250       1  

Others

    2,039,976             1,855,621             1,736,633        
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total noncurrent liabilities

    72,428,585       3       110,395,320       6       111,489,389       6  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities

    394,058,787       20       469,102,000       24       410,011,693       22  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

EQUITY ATTRIBUTABLE TO SHAREHOLDERS OF THE PARENT

           

Capital stock (Note 24)

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

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Capital surplus (Note 24)

    56,311,659       3       56,309,536       3       56,281,271       3  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Retained earnings (Note 24)

           

Appropriated as legal capital reserve

    276,033,811       14       241,722,663       12       241,722,663       13  

Appropriated as special capital reserve

    26,907,527       1                          

Unappropriated earnings

    974,796,321       50       991,639,347       49       892,598,197       49  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    1,277,737,659       65       1,233,362,010       61       1,134,320,860       62  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Others (Note 24)

    (18,181,209     (1     (26,917,818     (1     (19,189,089     (1
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Equity attributable to shareholders of the parent

    1,575,171,914       80       1,522,057,533       76       1,430,716,847       78  

NON - CONTROLLING INTERESTS

    658,087             702,110             695,842        
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total equity

    1,575,830,001       80       1,522,759,643       76       1,431,412,689       78  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

TOTAL

  $ 1,969,888,788       100     $ 1,991,861,643       100     $ 1,841,424,382       100  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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

 

- 3 -


Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

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

(Reviewed, Not Audited)

 

 

    For the Three Months Ended September 30     For the Nine Months Ended September 30  
    2018     2017     2018     2017  
    Amount     %     Amount     %     Amount     %     Amount     %  

NET REVENUE (Notes 25, 34 and 40)

  $ 260,347,882       100     $ 252,107,345       100     $ 741,703,364       100     $ 699,876,957       100  

COST OF REVENUE (Notes 15, 31, 34 and 38)

    136,967,039       53       126,230,664       50       381,759,723       51       343,761,367       49  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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

    123,380,843       47       125,876,681       50       359,943,641       49       356,115,590       51  

REALIZED (UNREALIZED) GROSS PROFIT ON SALES TO ASSOCIATES

    (14,203           3,467             (188,528           (37,152      
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

GROSS PROFIT

    123,366,640       47       125,880,148       50       359,755,113       49       356,078,438       51  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

OPERATING EXPENSES (Notes 31 and 34)

               

Research and development

    21,886,199       8       21,045,439       8       62,206,346       8       59,515,288       8  

General and administrative

    4,656,730       2       5,003,679       2       14,579,032       2       15,178,441       2  

Marketing

    1,585,523             1,487,598       1       4,511,592       1       4,366,284       1  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

    28,128,452       10       27,536,716       11       81,296,970       11       79,060,013       11  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

OTHER OPERATING INCOME AND EXPENSES, NET (Note 31)

    6,993             (286,999           (1,957,870     (1     (354,201      
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

INCOME FROM OPERATIONS (Note 40)

    95,245,181       37       98,056,433       39       276,500,273       37       276,664,224       40  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

NON-OPERATING INCOME AND EXPENSES

               

Share of profits of associates

    997,827             751,618             1,946,111             2,036,879        

Other income (Note 26)

    3,817,473       1       2,128,556       1       10,701,950       2       6,859,745       1  

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

    444,202             (462,310           2,097,838             (914,048      

Finance costs (Note 27)

    (739,068           (843,214           (2,175,318           (2,499,791      

Other gains and losses, net (Note 28)

    (868,673           887,081             (2,642,683           2,311,121        
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total non-operating income and expenses

    3,651,761       1       2,461,731       1       9,927,898       2       7,793,906       1  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

INCOME BEFORE INCOME TAX

    98,896,942       38       100,518,164       40       286,428,171       39       284,458,130       41  

INCOME TAX EXPENSE (Notes 4 and 29)

    9,798,870       4       10,568,936       4       35,249,150       5       40,617,342       6  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

NET INCOME

    89,098,072       34       89,949,228       36       251,179,021       34       243,840,788       35  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

OTHER COMPREHENSIVE INCOME (LOSS) (Notes 24 and 29)

               

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

               

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

    (418,111                       (1,306,987                  

Gain on hedging instruments

    8,544                         23,887                    

Share of other comprehensive loss of associates

    (9,719                       (4,106                  

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

    30,458                         66,843                    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    (388,828                       (1,220,363                  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Items that may be reclassified subsequently to profit or loss:

               

Exchange differences arising on translation of foreign operations

    (3,457,786     (1     (882,654     (1     10,375,886       1       (20,772,474     (3

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

                (43,684                       (108,757      

Cash flow hedges

                19,522                         38,519        

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

    (30,572                       (1,040,342                  

Share of other comprehensive income (loss) of associates

    (3,820           1,710             73,283             (56,920      

Income tax benefit related to items that may be reclassified subsequently

                1,192                         53,633        
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    (3,492,178     (1     (903,914     (1     9,408,827       1       (20,845,999     (3
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income (loss) for the period, net of income tax

    (3,881,006     (1     (903,914     (1     8,188,464       1       (20,845,999     (3
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

TOTAL COMPREHENSIVE INCOME FOR THE PERIOD

  $ 85,217,066       33     $ 89,045,314       35     $ 259,367,485       35     $ 222,994,789       32  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

NET INCOME ATTRIBUTABLE TO:

               

Shareholders of the parent

  $ 89,071,628       34     $ 89,925,437       36     $ 251,146,789       34     $ 243,825,354       35  

Non-controlling interests

    26,444             23,791             32,232             15,434        
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  $ 89,098,072       34     $ 89,949,228       36     $ 251,179,021       34     $ 243,840,788       35  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO:

               

Shareholders of the parent

  $ 85,190,350       33     $ 89,029,620       35     $ 259,332,283       35     $ 222,984,427       32  

Non-controlling interests

    26,716             15,694             35,202             10,362        
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  $ 85,217,066       33     $ 89,045,314       35     $ 259,367,485       35     $ 222,994,789       32  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(Continued)

 

- 4 -


Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

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

(Reviewed, Not Audited)

 

 

     For the Three Months Ended September 30      For the Nine Months Ended September 30  
     2018      2017      2018      2017  
    

Income Attributable to
Shareholders of

the Parent

    

Income Attributable to
Shareholders of

the Parent

    

Income Attributable to
Shareholders of

the Parent

    

Income Attributable to

Shareholders of

the Parent

 

EARNINGS PER SHARE (NT$, Note 30)

           

Basic earnings per share

   $ 3.44      $ 3.47      $ 9.69      $ 9.40  
  

 

 

    

 

 

    

 

 

    

 

 

 

Diluted earnings per share

   $ 3.44      $ 3.47      $ 9.69      $ 9.40  
  

 

 

    

 

 

    

 

 

    

 

 

 

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

 

(Concluded)

 

- 5 -


Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

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

(Reviewed, Not Audited)

 

 

    Equity Attributable to Shareholders of the Parent              
                                              Others              
    Capital Stock -
Common Stock
          Retained Earnings     Foreign     Unrealized     Unrealized
Gain (Loss) on
Financial
Assets at Fair
Value Through
    Cash           Unearned                          
    Shares (In
Thousands)
    Amount     Capital
Surplus
    Legal
Capital
Reserve
    Special
Capital
Reserve
    Unappropriated
Earnings
    Total     Currency
Translation
Reserve
    Gain (Loss) from
Available-for-sale
Financial Assets
    Other
Comprehensive
Income
    Flow
Hedges
Reserve
    Gain (Loss)
on Hedging
Instruments
    Stock-Based
Employee
Compensation
    Total     Total     Non-controlling
Interests
    Total Equity  

BALANCE, JANUARY 1, 2018

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

Effect of retrospective application

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

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

ADJUSTED BALANCE, JANUARY 1, 2018

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

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Appropriations of prior year’s earnings

                                 

Legal capital reserve

                      34,311,148             (34,311,148                                                                  

Special capital reserve

                            26,907,527       (26,907,527                                                                  

Cash dividends to shareholders - NT$8 per share

                                  (207,443,044     (207,443,044                                               (207,443,044           (207,443,044
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

                      34,311,148       26,907,527       (268,661,719     (207,443,044                                               (207,443,044           (207,443,044
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income for the nine months ended
September 30, 2018

                                  251,146,789       251,146,789                                                 251,146,789       32,232       251,179,021  

Other comprehensive income (loss) for the nine months ended September 30, 2018, net of income tax

                                              10,448,911             (2,287,670           24,253             8,185,494       8,185,494       2,970       8,188,464  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income (loss) for the nine months ended September 30, 2018

                                  251,146,789       251,146,789       10,448,911             (2,287,670           24,253             8,185,494       259,332,283       35,202       259,367,485  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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

                                  (884,415     (884,415                 884,415                         884,415                    

Basis adjustment for loss on hedging instruments

                                                                      (26,936           (26,936     (26,936           (26,936

Adjustments to share of changes in equities of associates

                (288                                                           4,477       4,477       4,189             4,189  

From share of changes in equities of subsidiaries

                2,371                                                                         2,371       (2,371      

Donation from shareholders

                40                                                                         40       6       46  

Decrease in non-controlling interests

                                                                                              (77,202     (77,202
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

BALANCE, SEPTEMBER 30, 2018

    25,930,380     $ 259,303,805     $ 56,311,659     $ 276,033,811     $ 26,907,527     $ 974,796,321     $ 1,277,737,659     $ (16,248,769   $     $ (1,928,170   $     $ 1,543     $ (5,813   $ (18,181,209   $ 1,575,171,914     $ 658,087     $ 1,575,830,001  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

BALANCE, JANUARY 1, 2017

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

Appropriations of prior year’s earnings

                                 

Legal capital reserve

                      33,424,718             (33,424,718                                                                  

Cash dividends to shareholders - NT$7 per share

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

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

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

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income for the nine months ended
September 30, 2017

                                  243,825,354       243,825,354                                                 243,825,354       15,434       243,840,788  

Other comprehensive income (loss) for the nine months ended September 30, 2017, net of income tax

                                              (20,831,019     (43,804           33,896                   (20,840,927     (20,840,927     (5,072     (20,845,999
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income (loss) for the nine months ended September 30, 2017

                                  243,825,354       243,825,354       (20,831,019     (43,804           33,896                   (20,840,927     222,984,427       10,362       222,994,789  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjustments to share of changes in equities of associates

                6,206                                                             (12,145     (12,145     (5,939           (5,939

From share of changes in equities of subsidiaries

                2,761                                                                         2,761       (2,761      

Decrease in non-controlling interests

                                                                                              (114,624     (114,624
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

BALANCE, SEPTEMBER 30, 2017

    25,930,380     $ 259,303,805     $ 56,281,271     $ 241,722,663     $     $ 892,598,197     $ 1,134,320,860     $ (19,169,782   $ (41,163   $     $ 34,001     $     $ (12,145   $ (19,189,089   $ 1,430,716,847     $ 695,842     $ 1,431,412,689  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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

 

- 6 -


Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands of New Taiwan Dollars)

(Reviewed, Not Audited)

 

 

     Nine Months Ended September 30  
     2018      2017  

CASH FLOWS FROM OPERATING ACTIVITIES

     

Income before income tax

   $ 286,428,171      $ 284,458,130  

Adjustments for:

     

Depreciation expense

     213,318,950        186,131,944  

Amortization expense

     3,197,428        3,197,293  

Reversal of expected credit losses on investments in debt instruments

     (2,279       

Finance costs

     2,175,318        2,499,791  

Share of profits of associates

     (1,946,111      (2,036,879

Interest income

     (10,543,592      (6,714,157

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

     789,005        251,319  

Gain on disposal of intangible assets, net

     (436       

Impairment loss on property, plant and equipment

     488,336         

Impairment loss on intangible assets

            13,520  

Impairment loss on financial assets

            15,941  

Loss on financial instruments at fair value through profit or loss, net

     244,799         

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

     774,784         

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

            (266,986

Gain on disposal of financial assets carried at cost, net

            (12,809

Unrealized gross profit on sales to associates

     188,528        37,152  

Loss (gain) on foreign exchange, net

     1,863,969        (6,624,087

Dividend income

     (158,358      (145,588

Loss arising from fair value hedges, net

     2,494        32,058  

Changes in operating assets and liabilities:

     

Financial instruments at fair value through profit or loss

     639,804        5,260,911  

Notes and accounts receivable, net

     (10,902,779      5,990,086  

Receivables from related parties

     (572,949      (106,879

Other receivables from related parties

     106,673        (19,141

Inventories

     (31,475,575      (25,211,646

Other financial assets

     (5,641,723      604,831  

Other current assets

     (247,466      (1,639,813

Other noncurrent assets

     139,107        (890,881

Accounts payable

     341,340        1,452,987  

Payables to related parties

     (85,053      179,855  

Salary and bonus payable

     (2,317,288      (1,377,765

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

     (5,629,367      (5,826,873

Accrued expenses and other current liabilities

     (24,443,396      9,167,145  

Provisions

            (3,899,652

Net defined benefit liability

     (62,562      23,218  
  

 

 

    

 

 

 

Cash generated from operations

     416,669,772        444,543,025  

Income taxes paid

     (32,088,012      (63,351,167
  

 

 

    

 

 

 

Net cash generated by operating activities

     384,581,760        381,191,858  
  

 

 

    

 

 

 

(Continued)

 

- 7 -


Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands of New Taiwan Dollars)

(Reviewed, Not Audited)

 

 

     Nine Months Ended September 30  
     2018      2017  

CASH FLOWS FROM INVESTING ACTIVITIES

     

Acquisitions of:

     

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

   $ (306,309    $  

Financial assets at fair value through other comprehensive income

     (72,383,276       

Available-for-sale financial assets

            (66,661,656

Held-to-maturity financial assets

            (1,695,771

Financial assets carried at cost

            (1,190,157

Property, plant and equipment

     (201,476,971      (269,408,108

Intangible assets

     (2,940,549      (3,677,303

Proceeds from disposal or redemption of:

     

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

     286,248         

Financial assets at fair value through other comprehensive income

     63,929,332         

Available-for-sale financial assets

            45,952,054  

Held-to-maturity financial assets

            12,510,000  

Financial assets at amortized cost

     2,032,442         

Financial assets carried at cost

            58,237  

Property, plant and equipment

     135,507        253,267  

Intangible assets

     492         

Proceeds from return of capital of investments in equity instruments at fair value through other comprehensive income

     127,878         

Proceeds from return of capital of financial assets carried at cost

            14,828  

Derecognition of hedging derivative financial instruments

            (35,790

Derecognition of hedging financial instruments

     199,730         

Interest received

     10,612,192        6,776,756  

Proceeds from government grants - property, plant and equipment

            436,587  

Other dividends received

     158,358        145,588  

Dividends received from investments accounted for using equity method

     3,262,910        4,245,772  

Refundable deposits paid

     (2,227,335      (1,084,028

Refundable deposits refunded

     1,581,399        247,027  
  

 

 

    

 

 

 

Net cash used in investing activities

     (197,007,952      (273,112,697
  

 

 

    

 

 

 

 

(Continued)

 

- 8 -


Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands of New Taiwan Dollars)

(Reviewed, Not Audited)

 

 

     Nine Months Ended September 30  
     2018      2017  

CASH FLOWS FROM FINANCING ACTIVITIES

     

Increase (decrease) in short-term loans

   $ 9,626,705      $ (290,110

Repayment of bonds

     (58,024,900      (38,100,000

Repayment of long-term bank loans

            (7,260

Interest paid

     (2,796,082      (2,907,017

Guarantee deposits received

     1,253,537        4,400,240  

Guarantee deposits refunded

     (1,947,272      (6,810,329

Cash dividends

     (207,443,044      (181,512,663

Donation from shareholders

     46         

Decrease in non-controlling interests

     (77,202      (114,624
  

 

 

    

 

 

 

Net cash used in financing activities

     (259,408,212      (225,341,763
  

 

 

    

 

 

 

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS

     7,174,829        (15,913,536
  

 

 

    

 

 

 

NET DECREASE IN CASH AND CASH EQUIVALENTS

     (64,659,575      (133,176,138

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

     553,391,696        541,253,833  
  

 

 

    

 

 

 

CASH AND CASH EQUIVALENTS, END OF PERIOD

   $ 488,732,121      $ 408,077,695  
  

 

 

    

 

 

 

 

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

 

- 9 -


Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018 and 2017

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

(Reviewed, Not Audited)

 

 

1.

GENERAL

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

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

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

 

2.

THE AUTHORIZATION OF FINANCIAL STATEMENTS

The accompanying consolidated financial statements were reported to the Board of Directors and issued on November 13, 2018.

 

3.

APPLICATION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS

 

  a.

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

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

 

  1)

IFRS 9 “Financial Instruments” and related amendment

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

Classification, measurement and impairment of financial assets and financial liabilities

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

 

- 10 -


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

 

    

Measurement Category

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

Cash and cash equivalents

  

Loans and receivables

  

Amortized cost

   $ 553,391,696      $ 553,391,696        (1

Derivatives

  

Held for trading

  

Mandatorily at fair value through profit or loss (FVTPL)

     569,751        569,751     
  

Hedging instruments

  

Hedging instruments

     34,394        34,394     

Equity securities

  

Available-for-sale

  

Fair value through other comprehensive income (FVTOCI)

     7,422,311        8,389,438        (2

Debt securities

  

Available-for-sale

  

Mandatorily at FVTPL

     —          779,489        (3
     

FVTOCI

     90,826,099        90,046,610        (3
  

Held-to-maturity

  

Amortized cost

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

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

  

Loans and receivables

  

Amortized cost

     131,024,958        131,269,731        (1
Financial Liabilities               

Derivatives

  

Held for trading

  

Held for trading

     26,709        26,709     
  

Hedging instruments

  

Hedging instruments

     15,562        15,562     

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

  

Amortized cost

  

Amortized cost

     340,501,266        340,501,266     

 

    

Carrying

Amount as of

December 31,
2017 (IAS 39)

    

Reclassifi-

cations

    

Remea-

surements

    

Carrying

Amount as
of

January 1,
2018 (IFRS
9)

    

Retained

Earnings

Effect on

January 1,

2018

    

Other Equity

Effect on

January 1,

2018

     Note  
Financial Assets                     

FVTPL

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

- Debt instruments

                    

Add: From available for sale

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

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

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

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

FVTOCI

                                            

- Equity instruments

                    

Add: From available for sale

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

- Debt instruments

                    

Add: From available for sale

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

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

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

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Amortized cost

                                            

Add: From held to maturity

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

Add: From loans and receivables

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

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

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

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Hedging instruments

     34,394                      34,394                   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Total

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

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

    

Carrying

Amount as of

December 31,
2017

(IAS 39)

     Adjustments
Arising
from Initial
Application
    

Carrying

Amount as
of

January 1,
2018

(IFRS 9)

    

Retained

Earnings

Effect on

January 1,

2018

    

Other
Equity

Effect on

January 1,

2018

     Note  

Investments accounted for using equity method

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

 

- 11 -


  (1)

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

 

  (2)

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

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

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

 

  (3)

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

 

  (4)

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

 

- 12 -


  (5)

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

Hedge accounting

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

 

  2)

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

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

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

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

 

    

Carrying
Amount as of
December 31,
2017

(IAS 18 and
Revenue-related
Interpretations)

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

Inventories

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

Contract assets

     —          34,177        34,177        (1

Investments accounted for using equity method

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

 

 

       

Total effect on assets

      $ 33,914        
     

 

 

       

Provisions - current

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

Accrued expenses and other current liabilities

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

 

 

       

Total effect on liabilities

      $ —          
     

 

 

       

Retained earnings

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

Non-controlling interests

     702,110        1,885        703,995        (1
     

 

 

       

Total effect on equity

      $ 33,914        
     

 

 

       

 

- 13 -


  (1)

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

 

  (2)

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

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

Impact on Assets, Liabilities and Equity

 

    

September 30,

2018

 

Decrease in inventories

   $ (22,885

Increase in contract assets

     45,142  

Increase in investments accounted for using equity method

     50,474  
  

 

 

 

Total effect on assets

   $ 72,731  
  

 

 

 

Decrease in provisions - current

   $ (18,783,350

Increase in accrued expenses and other current liabilities

     18,783,047  

Increase in income tax payable

     4,512  
  

 

 

 

Total effect on liabilities

   $ 4,209  
  

 

 

 

Increase in retained earnings

   $ 66,165  

Increase in non-controlling interests

     2,357  
  

 

 

 

Total effect on equity

   $ 68,522  
  

 

 

 

Impact on Total Comprehensive Income

 

     Three Months
Ended
September 30,
2018
     Nine Months
Ended
September 30,
2018
 

Increase in net revenue

   $ 13,081      $ 45,445  

Increase in cost of revenue

     (5,520      (22,885

Increase in share of the profit or loss of associates

     14,497        50,474  

Increase in income tax expense

     (1,512      (4,512
  

 

 

    

 

 

 

Increase in net income for the period

   $ 20,546      $ 68,522  
  

 

 

    

 

 

 

Increase in net income/total comprehensive income attributable to:

     

Shareholders of the parent

   $ 19,756      $ 66,165  

Non-controlling interests

     790        2,357  
  

 

 

    

 

 

 
   $ 20,546      $ 68,522  
  

 

 

    

 

 

 

 

- 14 -


  3)

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

 

  b.

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

 

New, Amended or Revised Standards and Interpretations

(the “New IFRSs”)

   Effective Date
Announced by IASB (Note 1)

Annual Improvements to IFRSs 2015-2017 Cycle

   January 1, 2019

Amendments to IFRS 9 “Prepayment Features with Negative Compensation”

   January 1, 2019 (Note 2)

IFRS 16 “Leases”

   January 1, 2019

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

   January 1, 2019 (Note 3)

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

   January 1, 2019

IFRIC 23 “Uncertainty over Income Tax Treatments”

   January 1, 2019

 

  Note 1:

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

 

  Note 2:

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

 

  Note 3:

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

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

 

  1)

IFRS 16 “Leases”

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

Upon initial application of IFRS 16, if the Company is a lessee, it will recognize right-of-use assets and lease liabilities for all leases on the consolidated balance sheets except for low-value and short-term leases. The Company may elect to apply the accounting method similar to the accounting for operating lease under IAS 17 to the low-value and short-term leases. In the consolidated statements of comprehensive income, the Company will present the depreciation expense charged on the right-of-use asset and interest expense accrued on the lease liability under cost of revenue/operating expenses and finance costs, respectively; interest is computed by using effective interest method. On the consolidated statements of cash flows, cash payments for both the principal and interest portion of the lease liability will be classified within financing activities. Currently, payments under operating lease contracts are recognized as expenses on a straight-line basis. Cash flows for operating leases are classified within operating activities on the consolidated statements of cash flows.

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

 

- 15 -


  c.

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

 

New, Revised or Amended Standards and Interpretations

   Effective Date Issued
by IASB

Amendments to IFRS 3 “Definition of a Business”

   January 1, 2020 (Note 1)

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

   To be determined by IASB

Amendments to IAS 1 and IAS 8 “Definition of Material”

   January 1, 2020 (Note 2)

 

  Note 1:

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

 

  Note 2:

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

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

 

4.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

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

Statement of Compliance

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

Basis of Consolidation

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

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

 

- 16 -


The subsidiaries in the consolidated financial statements

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

 

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

and Operating

Location

 

September 30,

2018

  December 31,
2017
 

September 30,

2017

  Note

TSMC

 

TSMC North America

 

Selling and marketing of integrated circuits and other semiconductor devices

 

San Jose, California, U.S.A.

  100%   100%   100%  
 

TSMC Europe B.V. (TSMC Europe)

 

Customer service and supporting activities

 

Amsterdam, the Netherlands

  100%   100%   100%   a)
 

TSMC Japan Limited (TSMC Japan)

 

Customer service and supporting activities

 

Yokohama, Japan

  100%   100%   100%   a)
 

TSMC Korea Limited (TSMC Korea)

 

Customer service and supporting activities

 

Seoul, Korea

  100%   100%   100%   a)
 

TSMC Partners, Ltd. (TSMC Partners)

 

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

 

Tortola, British Virgin Islands

  100%   100%   100%   a)
 

TSMC Global, Ltd. (TSMC Global)

 

Investment activities

 

Tortola, British Virgin Islands

  100%   100%   100%  
 

TSMC China Company Limited (TSMC China)

 

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

 

Shanghai, China

  100%   100%   100%  
 

TSMC Nanjing Company Limited (TSMC Nanjing)

 

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

 

Nanjing, China

  100%   100%   100%   b)
 

VisEra Technologies Company Ltd. (VisEra Tech)

 

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

 

Hsin-Chu, Taiwan

  87%   87%   87%  
 

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

 

Investing in new start-up technology companies

 

Cayman Islands

  98%   98%   98%   a)
 

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

 

Investing in new start-up technology companies

 

Cayman Islands

  98%   98%   98%   a)
 

TSMC Solar Europe GmbH

 

Selling of solar related products and providing customer service

 

Hamburg, Germany

  100%   100%   100%   a) , c)

TSMC Partners

 

TSMC Development, Inc. (TSMC Development)

 

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

 

Delaware, U.S.A.

  100%   100%   100%  
 

TSMC Technology, Inc. (TSMC Technology)

 

Engineering support activities

 

Delaware, U.S.A.

  100%   100%   100%   a)
 

TSMC Design Technology Canada Inc. (TSMC Canada)

 

Engineering support activities

 

Ontario, Canada

  100%   100%   100%   a)
 

InveStar Semiconductor Development Fund, Inc. (ISDF)

 

Investing in new start-up technology companies

 

Cayman Islands

  97%   97%   97%   a) , d)
 

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

 

Investing in new start-up technology companies

 

Cayman Islands

  97%   97%   97%   a) , d)

TSMC Development

 

WaferTech, LLC (WaferTech)

 

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

 

Washington, U.S.A.

  100%   100%   100%  

VTAF III

 

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

 

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

 

New Taipei, Taiwan

  39%   39%   58%   a), e)
 

Growth Fund Limited (Growth Fund)

 

Investing in new start-up technology companies

 

Cayman Islands

  100%   100%   100%   a)

 

  Note a:

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

  Note b:

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

  Note c:

TSMC Solar Europe GmbH is under liquidation procedures.

  Note d:

ISDF and ISDF II are under liquidation procedures.

  Note e:

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

Financial Assets

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

 

- 17 -


  a.

Category of financial assets and measurement

2018

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

 

  1)

Financial asset at FVTPL

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

 

  2)

Investments in debt instruments at FVTOCI

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

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

 

  3)

Investments in equity instruments at FVTOCI

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

Investments in equity instruments at FVTOCI are subsequently measured at fair value with gains and losses arising from changes in fair value recognized in other comprehensive income and accumulated in other equity.

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

 

  4)

Measured at amortized cost

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

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

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

 

- 18 -


2017

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

 

  1)

Financial asset at FVTPL

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

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

 

  2)

Available-for-sale financial assets

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

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

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

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

 

  3)

Held-to-maturity financial assets

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

 

  4)

Loans and receivables

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

 

- 19 -


  b.

Impairment of financial assets

2018

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

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

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

2017

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

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

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

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

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

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

 

- 20 -


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

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

 

  c.

Derecognition of financial assets

2018

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

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

2017

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

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

Hedge Accounting

 

  a.

Fair value hedges

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

 

- 21 -


  b.

Cash flow hedges

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

2018

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

2017

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

Revenue Recognition

2018

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

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

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

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

2017

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

 

- 22 -


Sale of goods

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

 

 

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

 

 

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

 

 

The amount of revenue can be measured reliably;

 

 

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

 

 

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

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

Dividend and interest income

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

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

Retirement Benefits

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

Taxation

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

 

5.

CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION AND UNCERTAINTY

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

 

- 23 -


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

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

 

6.

CASH AND CASH EQUIVALENTS

 

    

September 30,

2018

     December 31,
2017
    

September 30,

2017

 

Cash and deposits in banks

   $ 486,951,934      $ 551,919,770      $ 406,922,229  

Repurchase agreements collateralized by corporate bonds

     1,536,900                

Commercial paper

     243,287        695,901        120,831  

Agency bonds

            776,025        1,034,635  
  

 

 

    

 

 

    

 

 

 
   $ 488,732,121      $ 553,391,696      $ 408,077,695  
  

 

 

    

 

 

    

 

 

 

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

 

    

September 30,

2018

     December 31,
2017
     September 30,
2017
 

Financial assets

        

Mandatorily measured at FVTPL

        

Agency mortgage-backed securities

   $ 3,927,700      $      $  

Forward exchange contracts

     129,540                
  

 

 

    

 

 

    

 

 

 
     4,057,240                
  

 

 

    

 

 

    

 

 

 

Held for trading

        

Forward exchange contracts

            569,751        57,395  
  

 

 

    

 

 

    

 

 

 

Designated as at FVTPL

        

Time deposit

                   1,068,273  
  

 

 

    

 

 

    

 

 

 
   $ 4,057,240      $ 569,751      $ 1,125,668  
  

 

 

    

 

 

    

 

 

 

Financial liabilities

        

Held for trading

        

Forward exchange contracts

   $ 240,620      $ 26,709      $ 212,135  

Cross currency swap contracts

                   39,077  
  

 

 

    

 

 

    

 

 

 
   $ 240,620      $ 26,709      $ 251,212  
  

 

 

    

 

 

    

 

 

 

 

- 24 -


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

Outstanding forward exchange contracts consisted of the following:

 

          Contract Amount  
     Maturity Date    (In Thousands)  

September 30, 2018

     

Sell NT$/Buy EUR

   October 2018 to November 2018      NT$11,839,127/EUR331,000  
Sell NT$/Buy JPY    October 2018 to November 2018      NT$7,030,043/JPY25,504,229  
Sell US$/Buy NT$    October 2018 to November 2018      US$555,500/NT$17,039,496  
Sell US$/Buy EUR    October 2018      US$233,273/EUR198,632  
Sell US$/Buy JPY    October 2018      US$114,008/JPY12,869,738  
Sell US$/Buy RMB    October 2018      US$345,000/RMB2,369,777  
Sell RMB/Buy US$    October 2018      RMB714,250/ US$104,000  

December 31, 2017

     

Sell NT$/Buy EUR

   January 2018 to February 2018      NT$6,002,786/EUR169,000  
Sell NT$/Buy JPY    February 2018      NT$996,294/JPY3,800,000  
Sell US$/Buy JPY    January 2018      US$2,191/JPY246,724  
Sell US$/Buy RMB    January 2018      US$558,000/RMB3,679,575  
Sell US$/Buy NT$    January 2018 to February 2018      US$1,661,500/NT$49,673,320  
Sell RMB /Buy EUR    January 2018      RMB38,967/EUR4,994  
Sell RMB/Buy JPY    January 2018      RMB409,744/JPY7,062,536  
Sell RMB/Buy GBP    January 2018      RMB3,637/GBP413  

September 30, 2017

     

Sell NT$/Buy EUR

   October 2017 to November 2017      NT$13,233,331/EUR369,500  
Sell NT$/Buy JPY    October 2017 to November 2017      NT$9,762,488/JPY36,000,000  
Sell US$/Buy EUR    October 2017      US$10,519/EUR8,750  
Sell US$/Buy JPY    October 2017      US$10,197/JPY1,142,080  
Sell US$/Buy RMB    October 2017      US$473,000/RMB3,127,514  
Sell US$/Buy NT$    October 2017 to November 2017      US$295,500/NT$8,886,061  
Sell RMB/Buy EUR    October 2017      RMB9,947/EUR1,270  
Sell RMB/Buy JPY    October 2017      RMB73,088/JPY1,218,200  
Sell RMB/Buy GBP    October 2017      RMB3,542/GBP413  
Sell RMB/Buy US$    October 2017      RMB30,207/US$4,540  

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

 

- 25 -


Outstanding cross currency swap contracts consisted of the following:

 

Maturity Date   

Contract Amount

(In Thousands)

    

Range of

    Interest Rates    
Paid

    

Range of

  Interest Rates  
Received

September 30, 2017

        

October 2017

     US$530,000/NT$16,003,500        1.56%-1.63%     

 

8.

FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME-2018

 

    

September 30,

2018

 

Investments in debt instruments at FVTOCI

  

Corporate bonds

   $ 40,587,299  

Agency bonds/Agency mortgage-backed securities

     31,663,708  

Asset-backed securities

     15,028,991  

Government bonds

     10,815,035  

Commercial paper

     258,345  
  

 

 

 
     98,353,378  
  

 

 

 

Investments in equity instruments at FVTOCI

  

Non-publicly traded equity investments

     5,701,354  

Publicly traded stocks

     860,688  
  

 

 

 
     6,562,042  
  

 

 

 
   $ 104,915,420  
  

 

 

 

Current

   $ 99,214,066  

Non-current

     5,701,354  
  

 

 

 
   $ 104,915,420  
  

 

 

 

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

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

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

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

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

 

- 26 -


9.

AVAILABLE-FOR-SALE FINANCIAL ASSETS-2017

 

     December 31,
2017
    

September 30,

2017

 

Corporate bonds

   $ 40,165,148      $ 38,023,860  

Agency bonds/Agency mortgage-backed securities

     29,235,388        25,383,136  

Asset-backed securities

     13,459,545        12,195,102  

Government bonds

     7,817,723        7,044,080  

Publicly traded stocks

     2,548,054        2,068,370  

Commercial paper

     148,295        238,463  
  

 

 

    

 

 

 
   $ 93,374,153      $ 84,953,011  
  

 

 

    

 

 

 

 

10.

HELD-TO-MATURITY FINANCIAL ASSETS-2017

 

     December 31,
2017
    

September 30,

2017

 

Corporate bonds

   $ 19,338,764      $ 20,372,593  

Structured product

     1,482,950        1,511,950  

Negotiable certificate of deposit

            4,535,850  
  

 

 

    

 

 

 
   $ 20,821,714      $ 26,420,393  
  

 

 

    

 

 

 

Current portion

   $ 1,988,385      $ 7,521,216  

Noncurrent portion

     18,833,329        18,899,177  
  

 

 

    

 

 

 
   $ 20,821,714      $ 26,420,393  
  

 

 

    

 

 

 

 

11.

FINANCIAL ASSETS AT AMORTIZED COST-2018

 

    

September 30,

2018

 

Corporate bonds

   $ 19,370,671  

Less: Allowance for impairment loss

     (8,084
  

 

 

 
   $ 19,362,587  
  

 

 

 

Current portion

   $ 11,891,845  

Noncurrent portion

     7,470,742  
  

 

 

 
   $ 19,362,587  
  

 

 

 

Financial assets at amortized cost were classified as held-to-maturity financial assets under IAS 39. Refer to Notes 3 and 10 for information relating to their reclassification and comparative information for 2017. Refer to Note 33 for information relating to credit risk management and expected credit loss for financial assets at amortized cost.

 

- 27 -


12.

FINANCIAL ASSETS CARRIED AT COST-2017

The Company’s investment classified as financial assets carried at cost primarily consists of non-publicly traded equity investments. Since there is a wide range of estimated fair values of the Company’s investments in non-publicly traded equity investments, the Company concludes that the fair value cannot be reliably measured and therefore should be measured at the cost less any impairment.

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

 

13.

HEDGING FINANCIAL INSTRUMENTS

2018

 

    

September 30,

2018

 

Financial assets - current

  

Fair value hedges

  

Interest rate futures contracts

   $ 120,417  

Cash flow hedges

  

Forward exchange contracts

     3,825  
  

 

 

 
   $ 124,242  
  

 

 

 

Financial liabilities - current

  

Cash flow hedges

  

Forward exchange contracts

   $ 3,750  
  

 

 

 

Fair value hedge

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

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

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

 

- 28 -


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

 

Hedging Instruments   

Contract
Amount

(US$ in
Thousands)

     Maturity  

US treasury bonds interest rate futures contracts

     US$301,400        December 2018  
Hedged Items    Asset Carrying
Amount as of
September 30,
2018
    

Asset
Accumulated

Amount of Fair
Value Hedge
Adjustments

 

Financial assets at FVTOCI

   $ 15,557,309      $ (626,274

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

 

Hedging Instruments/Hedged Items   

Increase

(Decrease) in
Value Used for
Calculating
Hedge
Ineffectiveness

 

Hedging Instruments

  

US treasury bonds interest rate futures contracts

   $ 242,632  

Hedged Items

  

Financial assets at FVTOCI

     (245,126
  

 

 

 
   $ (2,494
  

 

 

 

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

Cash flow hedge

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

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

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

 

- 29 -


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

 

Hedging Instruments   

Contract Amount

(in Thousands)

   Maturity   

Balance in

Other Equity
(Continuing
Hedges)

Forward exchange contracts

   NT$1,140,456/EUR 32,000    November 2018 to December 2018    $1,543

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

 

Hedged Items   

Increase
(Decrease) in
Value Used for
Calculating
Hedge

Ineffectiveness

 

Hedging Instruments

  

Forward exchange contracts

   $ 17,475  

Foreign currency deposits

     6,412  
  

 

 

 
   $ 23,887  
  

 

 

 

Hedged Items

  

Forecast transaction (capital expenditures)

   $ (23,887
  

 

 

 

For the nine months ended September 30, 2018, refer to Note 24(d) for gain or loss arising from changes in the fair value of hedging instruments and the amount transferred to initial carrying amount of hedged items.

2017

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

 

     December 31,
2017
    

September 30,

2017

 

Financial assets - current

     

Fair value hedges

     

Interest rate futures contracts

   $ 27,016      $ 51,057  

Cash flow hedges

     

Forward exchange contracts

     7,378        47,822  
  

 

 

    

 

 

 
   $ 34,394      $ 98,879  
  

 

 

    

 

 

 

Financial liabilities - current

     

Cash flow hedges

     

Forward exchange contracts

   $ 15,562      $ 7,545  
  

 

 

    

 

 

 

 

- 30 -


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

The outstanding interest rate futures contracts consisted of the following:

 

Maturity Period

   Contract Amount

(US$ in Thousands)

December 31, 2017   
March 2018    US$169,400
September 30, 2017   
December 2017    US$158,900

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:

 

          Contract Amount
     Maturity Date    (In Thousands)

December 31, 2017

     

Sell NT$/Buy EUR

   February 2018 to May 2018    NT$2,649,104/EUR75,000

September 30, 2017

     

Sell NT$/Buy EUR

   October 2017 to January 2018    NT$4,619,213/EUR130,000

 

14.

NOTES AND ACCOUNTS RECEIVABLE, NET

 

    

September 30,

2018

     December 31,
2017
    

September 30,

2017

 

At amortized cost

        

Notes and accounts receivable

   $ 124,750,986      $ 121,604,989      $ 118,121,051  

Less: Loss allowance

     (88,320      (471,741      (471,793
  

 

 

    

 

 

    

 

 

 
     124,662,666        121,133,248        117,649,258  

At FVTOCI

     3,120,239                
  

 

 

    

 

 

    

 

 

 

Notes and accounts receivable, net

   $ 127,782,905      $ 121,133,248      $ 117,649,258  
  

 

 

    

 

 

    

 

 

 

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

 

- 31 -


2018

In principle, the payment term granted to customers is due 30 days from the invoice date or 30 days from the end of the month when the invoice is issued. Aside from recognizing impairment loss for credit-impaired accounts receivable, the Company recognizes loss allowance based on the expected credit loss ratio of customers by different risk levels. Such risk levels are determined with factors of historical loss ratios and customers’ financial conditions, competitiveness and business outlook. For accounts receivable past due over 90 days without collaterals or guarantees, the Company recognizes loss allowance at full amount.

Aging analysis of notes and accounts receivable, net

 

     September 30,
2018
 

Not past due

   $ 118,124,577  

Past due

  

Past due within 30 days

     9,281,088  

Past due 31-60 days

     190,769  

Past due 61-120 days

     165,805  

Past due over 121 days

     20,666  
  

 

 

 
   $ 127,782,905  
  

 

 

 

Movements of the loss allowance for accounts receivable

 

Balance at January 1, 2018 (IAS 39)

   $ 471,741  

Effect of retrospective application of IFRS 9

     (244,773
  

 

 

 

Balance at January 1, 2018 (IFRS 9)

     226,968  

Provision (Reversal)

     (138,644

Effect of exchange rate changes

     (4
  

 

 

 

Balance at September 30, 2018

   $ 88,320  
  

 

 

 

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

2017

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

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

 

- 32 -


Aging analysis of notes and accounts receivable, net

 

     December 31,
2017
    

September 30,

2017

 

Neither past due nor impaired

   $ 105,295,219      $ 108,623,574  

Past due but not impaired

     

Past due within 30 days

     13,984,125        6,791,143  

Past due 31-60 days

     929,672        615,147  

Past due 61 - 120 days

     582,821        1,619,394  

Past due over 121 days

     341,411         
  

 

 

    

 

 

 
   $ 121,133,248      $ 117,649,258  
  

 

 

    

 

 

 

Movements of the allowance for doubtful receivables

 

     Individually
Assessed for
Impairment
     Collectively
Assessed for
Impairment
     Total  

Balance at January 1, 2017

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

Reversal/Write-off

     (1,848      (6,305      (8,153

Effect of exchange rate changes

            (172      (172
  

 

 

    

 

 

    

 

 

 

Balance at September 30, 2017

   $      $ 471,793      $ 471,793  
  

 

 

    

 

 

    

 

 

 

 

15.

INVENTORIES

 

    

September 30,

2018

     December 31,
2017
    

September 30,

2017

 

Finished goods

   $ 11,043,539      $ 9,923,338      $ 13,196,752  

Work in process

     77,500,661        53,362,160        51,122,144  

Raw materials

     12,346,579        7,143,806        6,256,306  

Supplies and spare parts

     4,445,797        3,451,443        3,318,677  
  

 

 

    

 

 

    

 

 

 
   $ 105,336,576      $ 73,880,747      $ 73,893,879  
  

 

 

    

 

 

    

 

 

 

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

 

    

Three Months Ended
September 30

     Nine Months Ended
September 30
 
     2018      2017      2018      2017  

Inventory losses (reversal of write-down of inventories)

   $ 405,743      $ 613,132      $ 1,471,757      $ (850,209
  

 

 

    

 

 

    

 

 

    

 

 

 

 

- 33 -


16.

INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD

Associates consisted of the following:

 

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

September 30,

2018

     December 31,
2017
    

September 30,

2017

    

September 30,

2018

    December 31,
2017
   

September 30,

2017

 

Vanguard International Semiconductor Corporation (VIS)

    














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

 
 
 
 
 
 
 
 
 
 
 
     Hsinchu, Taiwan      $ 8,450,652      $ 8,568,344      $ 8,285,386        28     28     28

Systems on Silicon Manufacturing Company Pte Ltd. (SSMC)

    





Manufacturing
and selling
of integrated
circuits and
other
semiconductor
devices
 
 
 
 
 
 
 
     Singapore        5,317,308        5,677,640        5,329,236        39     39     39

Xintec Inc. (Xintec)

    






Wafer level
chip size
packaging
and wafer
level post
passivation
interconnection
service
 
 
 
 
 
 
 
 
     Taoyuan, Taiwan        1,715,711        2,292,100        2,264,539        41     41     41

Global Unichip Corporation (GUC)

    





Researching,
developing,
manufacturing,
testing and
marketing of
integrated
circuits
 
 
 
 
 
 
 
     Hsinchu, Taiwan        1,125,928        1,300,194        1,139,339        35     35     35

Mutual-Pak

    










Manufacturing
of electronic
parts,
wholesaling
and retailing
of electronic
materials,
and
researching,
developing
and testing
of RFID
 
 
 
 
 
 
 
 
 
 
 
 
     New Taipei, Taiwan        21,071        23,210               39     39      
        

 

 

    

 

 

    

 

 

        
        

 

$

 

16,630,670

 

 

  

 

$

 

17,861,488

 

 

  

 

$

 

17,018,500

 

 

      
        

 

 

    

 

 

    

 

 

        

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

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

 

Name of Associate   

September 30,

2018

     December 31,
2017
    

September 30,

2017

 

VIS

   $ 31,567,198      $ 30,638,751      $ 24,325,311  
  

 

 

    

 

 

    

 

 

 

GUC

   $ 12,652,410      $ 11,905,404      $ 9,711,075  
  

 

 

    

 

 

    

 

 

 

Xintec

   $ 4,952,046      $ 9,180,759      $ 5,630,865  
  

 

 

    

 

 

    

 

 

 

 

- 34 -


17.

PROPERTY, PLANT AND EQUIPMENT

 

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

Cost

           

Balance at January 1, 2018

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

Additions (Deductions)

          26,506,546       214,486,883       5,585,725       (44,641,617     201,937,537  

Disposals or retirements

          (18,624     (3,353,136     (352,951           (3,724,711

Effect of exchange rate changes

    21,999       (743,953     (1,342,261     (21,818     (291,513     (2,377,546
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at September 30, 2018

  $ 4,005,242     $ 404,878,582     $ 2,697,543,751     $ 47,602,472     $ 122,420,360     $ 3,276,450,407  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Accumulated depreciation and impairment

           

Balance at January 1, 2018

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

Additions

    20,458       18,149,233       190,993,719       4,155,540             213,318,950  

Disposals or retirements

          (6,764     (2,421,656     (352,324           (2,780,744

Impairment

                488,336                   488,336  

Effect of exchange rate changes

    14,973       (139,812     (1,060,793     19,857             (1,165,775
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at September 30, 2018

  $ 545,929     $ 212,449,178     $ 1,983,448,448     $ 31,490,017     $     $ 2,227,933,572  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Carrying amounts at January 1, 2018

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

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Carrying amounts at September 30, 2018

  $ 3,459,313     $ 192,429,404     $ 714,095,303     $ 16,112,455     $ 122,420,360     $ 1,048,516,835  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cost

           

Balance at January 1, 2017

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

Additions (Deductions)

          71,252,771       432,538,004       6,486,826       (255,462,474     254,815,127  

Disposals or retirements

          (36,957     (7,472,448     (339,470           (7,848,875

Reclassification

                8,791       1,507             10,298  

Effect of exchange rate changes

    (50,967     (640,806     (3,035,872     (103,271     109,897       (3,721,019
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at September 30, 2017

  $ 3,998,325     $ 374,979,482     $ 2,464,906,219     $ 40,775,232     $ 131,847,098     $ 3,016,506,356  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Accumulated depreciation and impairment

           

Balance at January 1, 2017

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

Additions

    20,919       15,070,323       167,433,217       3,607,485             186,131,944  

Disposals or retirements

          (28,816     (6,968,621     (339,377           (7,336,814

Reclassification

                8,195       1,466             9,661  

Effect of exchange rate changes

    (32,179     (549,075     (2,873,746     (73,440           (3,528,440
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at September 30, 2017

  $ 513,585     $ 188,841,509     $ 1,734,976,554     $ 26,417,841     $     $ 1,950,749,489  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Carrying amounts at September 30, 2017

  $ 3,484,740     $ 186,137,973     $ 729,929,665     $ 14,357,391     $ 131,847,098     $ 1,065,756,867  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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

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

 

- 35 -


18. INTANGIBLE ASSETS

 

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

Cost

              

Balance at January 1, 2018

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

Additions

            483,117        2,037,709        382,211        2,903,037  

Disposals or retirements

                   (125,430      (31,183      (156,613

Effect of exchange rate changes

     114,876        (466      (11,117      1,653        104,946  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Balance at September 30, 2018

   $ 5,763,578      $ 10,925,908      $ 27,087,380      $ 6,068,827      $ 49,845,693  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Accumulated amortization and impairment

              

Balance at January 1, 2018

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

Additions

            796,974        2,011,154        389,300        3,197,428  

Disposals or retirements

                   (125,374      (31,183      (156,557

Effect of exchange rate changes

            (466      (3,208      129        (3,545
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Balance at September 30, 2018

   $      $ 8,491,365      $ 22,259,265      $ 5,105,879      $ 35,856,509  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Carrying amounts at January 1, 2018

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

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Carrying amounts at September 30, 2018

   $ 5,763,578      $ 2,434,543      $ 4,828,115      $ 962,948      $ 13,989,184  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Cost

              

Balance at January 1, 2017

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

Additions

            805,917        2,591,791        307,928        3,705,636  

Retirements

                   (75,237             (75,237

Reclassification

                   7,662        (17,960      (10,298

Effect of exchange rate changes

     (267,018      1,302        (2,728      (1,026      (269,470
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Balance at September 30, 2017

   $ 5,740,957      $ 10,353,226      $ 24,765,083      $ 5,675,377      $ 46,534,643  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Accumulated amortization and impairment

              

Balance at January 1, 2017

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

Additions

            1,168,030        1,664,395        364,868        3,197,293  

Retirements

                   (75,237             (75,237

Reclassification

                   7,409        (17,070      (9,661

Impairment

     13,520                             13,520  

Effect of exchange rate changes

     (22      1,304        (2,710      (409      (1,837
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Balance at September 30, 2017

   $ 13,498      $ 7,316,534      $ 19,738,285      $ 4,624,927      $ 31,693,244  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Carrying amounts at September 30, 2017

   $ 5,727,459      $ 3,036,692      $ 5,026,798      $ 1,050,450      $ 14,841,399  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

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

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

 

- 36 -


19.

OTHER ASSETS

 

    

September 30,

2018

     December 31,
2017
    

September 30,

2017

 

Tax receivable

   $ 4,144,951      $ 4,021,602      $ 4,203,892  

Prepaid expenses

     732,033        1,559,963        1,313,927  

Others

     1,897,716        1,623,995        2,154,789  
  

 

 

    

 

 

    

 

 

 
   $ 6,774,700      $ 7,205,560      $ 7,672,608  
  

 

 

    

 

 

    

 

 

 

Current portion

   $ 5,084,478      $ 4,222,440      $ 5,090,170  

Noncurrent portion

     1,690,222        2,983,120        2,582,438  
  

 

 

    

 

 

    

 

 

 
   $ 6,774,700      $ 7,205,560      $ 7,672,608  
  

 

 

    

 

 

    

 

 

 

 

20.

SHORT-TERM LOANS

 

    

September 30,

2018

     December 31,
2017
    

September 30,

2017

 

Unsecured loans

        

Amount

   $ 73,974,625      $ 63,766,850      $ 54,430,200  
  

 

 

    

 

 

    

 

 

 

Original loan content

        

US$ (in thousands)

   $ 2,425,000      $ 2,150,000      $ 1,800,000  

Annual interest rate

     2.42%-2.67%        1.54%-1.82%        1.45%-1.54%  

Maturity date

    
Due by
October 2018
 
 
    
Due by
February 2018
 
 
    
Due by
October 2017
 
 

 

21.

PROVISIONS

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

 

     Sales Returns
and Allowances
 

Nine Months Ended September 30, 2017

  

Balance, beginning of period

   $ 18,037,789  

Provision

     31,130,506  

Payment

     (35,025,604

Effect of exchange rate changes

     (19,182
  

 

 

 

Balance, end of period

   $ 14,123,509  
  

 

 

 

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

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

 

- 37 -


22.

BONDS PAYABLE

 

    

September 30,

2018

     December 31,
2017
    

September 30,

2017

 

Domestic unsecured bonds

   $ 91,800,000      $ 116,100,000      $ 116,100,000  

Overseas unsecured bonds

            34,107,850        34,774,850  
  

 

 

    

 

 

    

 

 

 
     91,800,000        150,207,850        150,874,850  

Less: Discounts on bonds payable

            (6,728      (13,473

Less: Current portion

     (34,900,000      (58,401,122      (59,061,377
  

 

 

    

 

 

    

 

 

 
   $ 56,900,000      $ 91,800,000      $ 91,800,000  
  

 

 

    

 

 

    

 

 

 

The major terms of overseas unsecured bonds are as follows:

 

Issuance Period   

Total Amount
(US$

in Thousands)

     Coupon Rate  

Repayment and Interest

Payment

April 2013 to April 2018

   US$ 1,150,000      1.625%  

Bullet repayment; interest payable semi-annually

 

23.

GUARANTEE DEPOSITS

 

    

September 30,

2018

     December 31,
2017
    

September 30,

2017

 

Capacity guarantee

   $ 10,371,700      $ 13,346,550      $ 15,119,500  

Receivables guarantee

     647,218        2,427,548        2,742,840  

Others

     208,525        306,521        371,627  
  

 

 

    

 

 

    

 

 

 
   $ 11,227,443      $ 16,080,619      $ 18,233,967  
  

 

 

    

 

 

    

 

 

 

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

   $ 6,781,863      $ 8,493,829      $ 8,990,717  

Noncurrent portion

     4,445,580        7,586,790        9,243,250  
  

 

 

    

 

 

    

 

 

 
   $ 11,227,443      $ 16,080,619      $ 18,233,967  
  

 

 

    

 

 

    

 

 

 

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

 

24.

EQUITY

 

  a.

Capital stock

 

    

September 30,

2018

     December 31,
2017
    

September 30,

2017

 

Authorized shares (in thousands)

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

 

 

    

 

 

    

 

 

 

Authorized capital

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

 

 

    

 

 

    

 

 

 

Issued and paid shares (in thousands)

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

 

 

    

 

 

    

 

 

 

Issued capital

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

 

 

    

 

 

    

 

 

 

 

- 38 -


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

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

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

 

  b.

Capital surplus

 

    

September 30,

2018

     December 31,
2017
    

September 30,

2017

 

Additional paid-in capital

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

From merger

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

From convertible bonds

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

From share of changes in equities of subsidiaries

     121,163        118,792        110,559  

From share of changes in equities of associates

     288,952        289,240        288,361  

Donations

     19,248        19,208        55  
  

 

 

    

 

 

    

 

 

 
   $ 56,311,659      $ 56,309,536      $ 56,281,271  
  

 

 

    

 

 

    

 

 

 

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

 

  c.

Retained earnings and dividend policy

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

 

  1)

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

 

  2)

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

 

  3)

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

TSMC’s Articles of Incorporation provide the policy about the profit sharing bonus to employees, please refer to Note 31.

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

 

- 39 -


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

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

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

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

 

     Appropriation of Earnings      Dividends Per Share
(NT$)
 
     For Fiscal      For Fiscal      For Fiscal      For Fiscal  
     Year 2017      Year 2016      Year 2017      Year 2016  

Legal capital reserve

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

Special capital reserve

     26,907,527               

Cash dividends to shareholders

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

 

 

    

 

 

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

 

 

    

 

 

       

 

  d.

Others

Changes in others were as follows:

 

    Nine Months Ended September 30, 2018  
    Foreign
Currency
Translation
Reserve
    Unrealized
Gain (Loss) on
Financial
Assets at
FVTOCI
    Gain (Loss) on
Hedging
Instruments
    Unearned
Stock-Based
Compensation
    Total  

Balance, beginning of period (IFRS 9)

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

Exchange differences arising on translation of foreign operations

    10,375,628                         10,375,628  

Unrealized gain (loss) on financial assets at FVTOCI

         

Equity instruments

          (1,309,697                 (1,309,697

Debt instruments

          (1,813,242                 (1,813,242

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

          884,415                   884,415  

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

          774,784                   774,784  

Loss allowance adjustments from debt instruments

          (1,886                 (1,886

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

                23,887             23,887  

Transferred to initial carrying amount of hedged items

                (26,936           (26,936

Share of other comprehensive income (loss) of associates

    73,283       (4,106                 69,177  

Share of unearned stock-based employee compensation of associates

                      4,477       4,477  

Income tax effect

          66,477       366             66,843  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance, end of period

  $ (16,248,769   $ (1,928,170   $ 1,543     $ (5,813   $ (18,181,209
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

- 40 -


     Nine Months Ended September 30, 2017  
     Foreign
Currency
Translation
Reserve
     Unrealized
Gain/Loss from
Available-for-
sale Financial
Assets
     Cash Flow
Hedges Reserve
    

Unearned
Stock-Based

Employee
Compensation

     Total  

Balance, beginning of period

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

Exchange differences arising on translation of foreign operations

     (20,770,834                           (20,770,834

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

            145,862                      145,862  

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

            (251,187                    (251,187

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

                   102,026               102,026  

Transferred to initial carrying amount of hedged items

                   (63,507             (63,507

Share of other comprehensive income (loss) of associates

     (60,185      3,265                      (56,920

Share of unearned stock-based employee compensation of associates

                          (12,145      (12,145

Income tax effect

            58,256        (4,623             53,633  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Balance, end of period

   $ (19,169,782    $ (41,163    $ 34,001      $ (12,145    $ (19,189,089
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

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

 

25.

NET REVENUE

 

  a.

Disaggregation of revenue from contracts with customers

 

Production    Three Months
Ended
September 30,
2018
     Nine Months
Ended
September 30,
2018
 

Wafer

   $ 228,826,813      $ 661,533,102  

Others

     31,521,069        80,170,262  
  

 

 

    

 

 

 
   $ 260,347,882      $ 741,703,364  
  

 

 

    

 

 

 
Region    Three Months
Ended
September 30,
2018
     Nine Months
Ended
September 30,
2018
 

Taiwan

   $ 21,576,476      $ 59,637,777  

United States

     157,394,160        424,736,531  

China

     41,386,552        141,737,386  

Europe, the Middle East and Africa

     17,285,430        52,154,282  

Japan

     17,165,225        49,156,817  

Others

     5,540,039        14,280,571  
  

 

 

    

 

 

 
   $ 260,347,882      $ 741,703,364  
  

 

 

    

 

 

 

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

 

- 41 -


Application Type    Three Months
Ended
September 30,
2018
     Nine Months
Ended
September 30,
2018
 

Communication

   $ 146,199,392      $ 395,065,368  

Industrial/Standard

     61,684,590        174,288,910  

Computer

     33,127,986        118,643,019  

Consumer

     19,335,914        53,706,067  
  

 

 

    

 

 

 
   $ 260,347,882      $ 741,703,364  
  

 

 

    

 

 

 
Customer Type    Three Months
Ended
September 30,
2018
     Nine Months
Ended
September 30,
2018
 

Fabless semiconductor companies/systems companies

   $ 212,846,662      $ 607,172,662  

Integrated device manufacturers

     47,184,213        133,866,265  

Others

     317,007        664,437  
  

 

 

    

 

 

 
   $ 260,347,882      $ 741,703,364  
  

 

 

    

 

 

 
Resolution    Three Months
Ended
September 30,
2018
     Nine Months
Ended
September 30,
2018
 

7-nanometer

   $ 25,336,977      $ 26,250,260  

10-nanometer

     13,476,325        81,203,203  

16/20-nanometer

     58,294,618        158,947,856  

28-nanometer

     43,739,621        135,806,688  

40/45-nanometer

     27,035,128        76,604,782  

65-nanometer

     17,833,438        56,562,781  

90-nanometer

     8,633,488        29,363,801  

0.11/0.13 micron

     5,854,756        15,093,688  

0.15/0.18 micron

     21,720,438        60,593,793  

0.25 micron and above

     6,902,024        21,106,250  
  

 

 

    

 

 

 

Wafer revenue

   $ 228,826,813      $ 661,533,102  
  

 

 

    

 

 

 

 

  b.

Contract balances

 

     September 30,
2018
    

January 1,

2018

 

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

   $ 5,975,108      $ 32,434,829  
  

 

 

    

 

 

 

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

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

 

- 42 -


26.

OTHER INCOME

 

     Three Months Ended
September 30
     Nine Months Ended
September 30
 
     2018      2017      2018      2017  

Interest income

           

Bank deposits

   $ 2,676,602      $ 1,486,181      $ 7,341,903      $ 4,595,104  

Financial assets at FVTPL

     137,328               190,261         

Financial assets at FVTOCI

     773,191               2,327,001         

Financial assets at amortized cost

     230,352               684,427         

Available-for-sale financial assets

            366,600               1,371,764  

Held-to-maturity financial assets

            142,176               427,634  

Structured product

            130,514               319,655  
  

 

 

    

 

 

    

 

 

    

 

 

 
     3,817,473      2,125,471      10,543,592      6,714,157  

Dividend income

            3,085        158,358        145,588  
  

 

 

    

 

 

    

 

 

    

 

 

 
     $3,817,473      $2,128,556      $10,701,950      $6,859,745  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

27.

FINANCE COSTS

 

     Three Months Ended
September 30
     Nine Months Ended
September 30
 
     2018      2017      2018      2017  

Interest expense

           

Corporate bonds

   $ 377,854      $ 639,120      $ 1,285,754      $ 1,985,998  

Bank loans

     361,150        204,059        889,414        513,684  

Others

     64        35        150        109  
  

 

 

    

 

 

    

 

 

    

 

 

 
     $739,068      $843,214      $2,175,318      $2,499,791  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

28.

OTHER GAINS AND LOSSES

 

     Three Months Ended
September 30
     Nine Months Ended
September 30
 
     2018      2017      2018      2017  

Gain (loss) on disposal of financial assets, net

           

Investments in debt instruments at FVTOCI

   $ (262,517    $      $ (774,784    $  

Available-for-sale financial assets

            326,297               266,986  

Financial assets carried at cost

            8,056               12,809  

Net gain (loss) on financial instruments at FVTPL

           

Held for trading

            463,651               1,759,927  

Mandatorily measured at FVTPL

     (642,780             (1,927,698       

Designated as at FVTPL

            33,045               130,709  

Loss arising from fair value hedges, net

     (10,219      (8,564      (2,494      (32,058

(Continued)

 

- 43 -


     Three Months Ended
September 30
     Nine Months Ended
September 30
 
     2018      2017      2018      2017  

Impairment loss on financial assets

           

Financial assets carried at cost

   $      $ (3,909    $      $ (15,941

The reversal of expected credit loss of financial assets

           

Investments in debt instruments at FVTOCI

     185               1,886         

Financial assets at amortized cost

     641               393         

Other gains, net

     46,017        68,505        60,014        188,689  
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ (868,673    $ 887,081      $ (2,642,683    $ 2,311,121  
  

 

 

    

 

 

    

 

 

    

 

 

 

(Concluded)

 

29.

INCOME TAX

 

  a.

Income tax expense recognized in profit or loss

 

     Three Months Ended
September 30
     Nine Months Ended
September 30
 
     2018      2017      2018      2017  

Current income tax expense

           

Current tax expense recognized in the current period

   $ 10,826,220      $ 11,785,404      $ 38,684,790      $ 44,460,678  

Income tax adjustments on prior years

     (26,628      (9,614      (989,984      (947,906

Other income tax adjustments

     36,336        60,267        110,882        130,801  
  

 

 

    

 

 

    

 

 

    

 

 

 
     10,835,928        11,836,057        37,805,688        43,643,573  
  

 

 

    

 

 

    

 

 

    

 

 

 

Deferred income tax expense (benefit)

           

Effect of tax rate changes

     (346,383             (1,062,480       

The origination and reversal of temporary differences

     (690,675      (1,267,121      (1,494,058      (3,026,231
  

 

 

    

 

 

    

 

 

    

 

 

 
     (1,037,058      (1,267,121      (2,556,538      (3,026,231
  

 

 

    

 

 

    

 

 

    

 

 

 
     $9,798,870      $10,568,936      $35,249,150      $40,617,342  
  

 

 

    

 

 

    

 

 

    

 

 

 

In 2018, the Income Tax Law in the R.O.C. was amended and, starting from 2018, the corporate income tax rate was adjusted from 17% to 20%. The effect of the change in tax rate on deferred tax income to be recognized in profit or loss is NT$1,474,808 thousand, of which NT$412,328 thousand has not been recognized as of September 30, 2018, with corresponding effect recognized throughout the interim periods. In addition, the tax rate applicable to unappropriated earnings was reduced from 10% to 5%.

 

- 44 -


  b.

Income tax expense recognized in other comprehensive income

 

     Three Months Ended
September 30
     Nine Months Ended
September 30
 
     2018      2017      2018      2017  

Deferred income tax benefit (expense)

           

Related to unrealized gain/loss on investments in equity instruments at FVTOCI

   $ 28,564      $      $ 66,477      $  

Related to gain/loss on cash flow hedges

     1,894        (2,343      366        (4,623

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

            3,535               58,256  
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 30,458      $ 1,192      $ 66,843      $ 53,633  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

  c.

Income tax examination

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

 

30.

EARNINGS PER SHARE

 

     Three Months Ended
September 30
     Nine Months Ended
September 30
 
     2018      2017      2018      2017  

Basic EPS

   $ 3.44      $ 3.47      $ 9.69      $ 9.40  
  

 

 

    

 

 

    

 

 

    

 

 

 

Diluted EPS

   $ 3.44      $ 3.47      $ 9.69      $ 9.40  
  

 

 

    

 

 

    

 

 

    

 

 

 

EPS is computed as follows:

 

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

Three months ended September 30, 2018

        

Basic/Diluted EPS

        

Net income available to common shareholders of the parent

   $ 89,071,628        25,930,380      $ 3.44  
  

 

 

    

 

 

    

 

 

 

Three months ended September 30, 2017

        

Basic/Diluted EPS

        

Net income available to common shareholders of the parent

   $ 89,925,437        25,930,380      $ 3.47  
  

 

 

    

 

 

    

 

 

 

(Continued)

 

- 45 -


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

Nine Months Ended September 30, 2018

        

Basic/Diluted EPS

        

Net income available to common shareholders of the parent

   $ 251,146,789        25,930,380      $ 9.69  
  

 

 

    

 

 

    

 

 

 

Nine Months Ended September 30, 2017

        

Basic/Diluted EPS

        

Net income available to common shareholders of the parent

   $ 243,825,354        25,930,380      $ 9.40  
  

 

 

    

 

 

    

 

 

 

(Concluded)

 

31.

ADDITIONAL INFORMATION OF EXPENSES BY NATURE

 

     Three Months Ended
September 30
     Nine Months Ended
September 30
 
     2018      2017      2018      2017  

a. Depreciation of property, plant and equipment

           

Recognized in cost of revenue

   $ 66,715,027      $ 65,040,285      $ 196,072,392      $ 171,702,451  

Recognized in operating expenses

     5,784,173        4,974,403        17,223,489        14,398,910  

Recognized in other operating income and expenses

     5,994        18,140        23,069        30,583  
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 72,505,194      $ 70,032,828      $ 213,318,950      $ 186,131,944  
  

 

 

    

 

 

    

 

 

    

 

 

 

b. Amortization of intangible assets

           

Recognized in cost of revenue

   $ 492,247      $ 542,083      $ 1,470,473      $ 1,584,845  

Recognized in operating expenses

     612,376        589,751        1,726,955        1,612,448  
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 1,104,623      $ 1,131,834      $ 3,197,428      $ 3,197,293  
  

 

 

    

 

 

    

 

 

    

 

 

 

c. Research and development costs expensed as incurred

   $ 21,886,199      $ 21,045,439      $ 62,206,346      $ 59,515,288  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

- 46 -


     Three Months Ended
September 30
     Nine Months Ended
September 30
 
     2018      2017      2018      2017  

d. Employee benefits expenses

           

Post-employment benefits

           

Defined contribution plans

   $ 626,912      $ 611,107      $ 1,937,915      $ 1,767,533  

Defined benefit plans

     70,437        67,875        211,339        203,637  
  

 

 

    

 

 

    

 

 

    

 

 

 
     697,349        678,982        2,149,254        1,971,170  

Other employee benefits

     26,731,464        26,164,537        77,438,960        74,262,832  
  

 

 

    

 

 

    

 

 

    

 

 

 
     $27,428,813      $26,843,519      $79,588,214      $76,234,002  
  

 

 

    

 

 

    

 

 

    

 

 

 

Employee benefits expense summarized by function

           

Recognized in cost of revenue

   $ 16,052,801      $ 15,696,897      $ 46,749,063      $ 44,831,683  

Recognized in operating expenses

     11,376,012        11,146,622        32,839,151        31,402,319  
  

 

 

    

 

 

    

 

 

    

 

 

 
     $27,428,813      $26,843,519      $79,588,214      $76,234,002  
  

 

 

    

 

 

    

 

 

    

 

 

 

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

TSMC accrued profit sharing bonus to employees based on a percentage of net income before income tax, profit sharing bonus to employees and compensation to directors during the period, which amounted to NT$5,978,557 thousand and NT$6,034,054 thousand for the three months ended September 30, 2018 and 2017, respectively; and NT$16,850,949 thousand and NT$16,356,611 thousand for the nine months ended September 30, 2018 and 2017, respectively. Compensation to directors was expensed based on estimated amount payable. If there is a change in the proposed amounts after the annual consolidated financial statements are authorized for issue, the differences are recorded as a change in accounting estimate.

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

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

 

- 47 -


32.

CASH FLOW INFORMATION

Reconciliation of liabilities arising from financing activities

 

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

Other Changes

(Note)

     Balance as of
September 30,
2018
 

Short-term loans

   $ 63,766,850      $ 9,626,705      $ 581,070      $      $ 73,974,625  

Guarantee deposits

     16,080,619        (693,735      338,458        (4,497,899      11,227,443  

Bonds payable

     150,201,122        (58,024,900      (382,878      6,656        91,800,000  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 230,048,591      $ (49,091,930    $ 536,650      $ (4,491,243    $ 177,002,068  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

  Note:

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

 

33.

FINANCIAL INSTRUMENTS

 

  a.

Categories of financial instruments

 

     September 30,
2018
 

Financial assets

  

Financial assets at FVTPL (Note 1)

   $ 4,057,240  

Financial assets at FVTOCI (Note 2)

     108,035,659  

Hedging financial assets

     124,242  

Amortized cost (Note 3)

     651,726,357  
  

 

 

 
   $ 763,943,498  
  

 

 

 

Financial liabilities

  

FVTPL (Note 4)

   $ 240,620  

Hedging financial liabilities

     3,750  

Amortized cost (Note 5)

     307,871,280  
  

 

 

 
   $ 308,115,650  
  

 

 

 

 

  Note 1:

Financial assets mandatorily measured at FVTPL.

 

  Note 2:

Including notes and accounts receivable, net, debt and equity investments.

 

  Note 3:

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

 

  Note 4:

Held for trading.

 

  Note 5:

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

 

- 48 -


     December 31,
2017
    

September 30,

2017

 

Financial assets

     

FVTPL (Note 6)

   $ 569,751      $ 1,125,668  

Available-for-sale financial assets (Note 7)

     98,248,410        89,939,057  

Held-to-maturity financial assets

     20,821,714        26,420,393  

Hedging derivative financial assets

     34,394        98,879  

Loans and receivables (Note 8)

     684,416,654        533,419,983  
  

 

 

    

 

 

 
   $ 804,090,923      $ 651,003,980  
  

 

 

    

 

 

 

Financial liabilities

     

FVTPL (Note 6)

   $ 26,709      $ 251,212  

Hedging derivative financial liabilities

     15,562        7,545  

Amortized cost (Note 9)

     340,501,266        323,056,014  
  

 

 

    

 

 

 
   $ 340,543,537      $ 323,314,771  
  

 

 

    

 

 

 

 

  Note 6:

Including held for trading and designated as at FVTPL.

 

  Note 7:

Including financial assets carried at cost.

 

  Note 8:

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

 

  Note 9:

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

 

  b.

Financial risk management objectives

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

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

 

  c.

Market risk

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

Foreign currency risk

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

 

- 49 -


The Company’s sensitivity analysis of foreign currency risk mainly focuses on the foreign currency monetary items and the derivatives financial instruments at the end of the reporting period. Assuming an unfavorable 10% movement in the levels of foreign exchanges relative to the New Taiwan dollar, the net income for the nine months ended September 30, 2018 and 2017 would have decreased by NT$585,920 thousand and NT$185,262 thousand, respectively, and the other comprehensive income for the nine months ended September 30, 2018 and 2017 would have decreased by NT$91,341 thousand and NT$465,790 thousand, respectively.

Interest rate risk

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

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

Based on a sensitivity analysis performed at the end of the reporting period, an unfavorable movement of hypothetical 1.00% increase in interest rates across all maturities would have resulted in a decrease in net income by NT$149,843 thousand for the nine months ended September 30, 2018, and in a decrease in other comprehensive income by NT$2,680,417 thousand and NT$1,919,137 thousand for the nine months ended September 30, 2018 and 2017, respectively.

Other price risk

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

Assuming a hypothetical decrease of 5% in prices of the equity investments at the end of the reporting period for the nine months ended September 30, 2018 and 2017, the other comprehensive income would have decreased by NT$314,182 thousand and NT$335,977 thousand, respectively.

 

  d.

Credit risk management

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

 

- 50 -


Business related credit risk

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

As of September 30, 2018, December 31, 2017 and September 30, 2017, the Company’s ten largest customers accounted for 76%, 70% and 73% of accounts receivable, respectively. The Company believes the concentration of credit risk is not material for the remaining accounts receivable.

Financial credit risk

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

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

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

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

 

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

Performing

  

Credit rating on trade date and valuation date:

(1) Within investment grade

(2) Between BB+ and BB-

  

12 months expected credit loss

     0-0.1

Doubtful

  

Credit rating on trade date and valuation date:

(1) From investment grade to non-investment grade

(2) From BB+~BB- to B+~CCC-

  

Lifetime expected credit loss-not credit impaired

      

In default

   Credit rating CC or below   

Lifetime expected credit loss-credit impaired

      

Write-off

  

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

  

Amount is written off

      

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

 

- 51 -


  e.

Liquidity risk management

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

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

 

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

September 30, 2018

         

Non-derivative financial liabilities

         

Short-term loans

  $ 74,021,637     $     $     $     $ 74,021,637  

Accounts payable (including related parties)

    30,305,076                         30,305,076  

Payables to contractors and equipment suppliers

    58,590,057                         58,590,057  

Accrued expenses and other current liabilities

    41,974,079                         41,974,079  

Bonds payable

    36,166,206       35,464,787       23,077,131             94,708,124  

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

    6,781,863       4,359,556       86,024             11,227,443  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    247,838,918       39,824,343       23,163,155             310,826,416  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Derivative financial instruments

         

Forward exchange contracts

         

Outflows

    60,704,314                         60,704,314  

Inflows

    (60,581,572                       (60,581,572
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    122,742                         122,742  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  $ 247,961,660     $ 39,824,343     $ 23,163,155     $     $ 310,949,158  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

December 31, 2017

         

Non-derivative financial liabilities

         

Short-term loans

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

Accounts payable (including related parties)

    30,069,163                         30,069,163  

Payables to contractors and equipment suppliers

    55,723,774                         55,723,774  

Accrued expenses and other current liabilities

    24,659,738                         24,659,738  

Bonds payable

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

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

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

 

 

   

 

 

   

 

 

   

 

 

   

 

 

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

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Derivative financial instruments

         

Forward exchange contracts

         

Outflows

    67,393,539                         67,393,539  

Inflows

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

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    (564,380                       (564,380
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

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

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(Continued)

 

- 52 -


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

September 30, 2017

         

Non-derivative financial liabilities

         

Short-term loans

  $ 54,454,435     $     $     $     $ 54,454,435  

Accounts payable (including related parties)

    28,987,506                         28,987,506  

Payables to contractors and equipment suppliers

    47,975,461                         47,975,461  

Accrued expenses and other current liabilities

    22,543,303                         22,543,303  

Bonds payable

    61,213,960       68,616,980       3,404,812       22,686,332       155,922,084  

Long-term bank loans

    10,301       14,844                   25,145  

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

    8,990,717       9,157,976       85,274             18,233,967  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    224,175,683       77,789,800       3,490,086       22,686,332       328,141,901  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Derivative financial instruments

         

Forward exchange contracts

         

Outflows

    51,905,530                         51,905,530  

Inflows

    (51,837,951                       (51,837,951
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    67,579                         67,579  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cross currency swap contracts

         

Outflows

    16,050,825                         16,050,825  

Inflows

    (16,003,500                       (16,003,500
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    47,325                         47,325  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    $224,290,587     $77,789,800     $3,490,086     $22,686,332     $328,256,805  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

(Concluded)

 

  f.

Fair value of financial instruments

 

  1)

Fair value measurements recognized in the consolidated balance sheets

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

 

   

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

 

   

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

 

   

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

 

  2)

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

Fair value hierarchy

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

 

     September 30, 2018  
     Level 1      Level 2      Level 3      Total  

Financial assets at FVTPL

           

Mandatorily measured at FVTPL

           

Agency mortgage-backed securities

   $      $ 3,927,700      $      $ 3,927,700  

Forward exchange contracts

            129,540               129,540  
  

 

 

    

 

 

    

 

 

    

 

 

 
   $             —      $ 4,057,240      $             —      $ 4,057,240  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(Continued)

 

- 53 -


     September 30, 2018  
     Level 1      Level 2      Level 3      Total  

Financial assets at FVTOCI

           

Investments in debt instruments

           

Corporate bonds

   $      $ 40,587,299      $      $ 40,587,299  

Agency bonds/Agency mortgage-backed securities

            31,663,708               31,663,708  

Asset-backed securities

            15,028,991               15,028,991  

Government bonds

     10,671,468        143,567               10,815,035  

Commercial paper

            258,345               258,345  

Investments in equity instruments

           

Non-publicly traded equity investments

                   5,701,354        5,701,354  

Publicly traded stocks

     860,688                      860,688  

Notes and accounts receivable, net

            3,120,239               3,120,239  
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 11,532,156      $ 90,802,149      $ 5,701,354      $ 108,035,659  
  

 

 

    

 

 

    

 

 

    

 

 

 

Hedging financial assets

           

Fair value hedges

           

Interest rate futures contracts

   $ 120,417      $      $      $ 120,417  

Cash flow hedges

           

Forward exchange contracts

            3,825               3,825  
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 120,417      $ 3,825      $      $ 124,242  
  

 

 

    

 

 

    

 

 

    

 

 

 

Financial liabilities at FVTPL

           

Held for trading

           

Forward exchange contracts

   $      $ 240,620      $      $ 240,620  
  

 

 

    

 

 

    

 

 

    

 

 

 

Hedging financial liabilities

           

Cash flow hedges

           

Forward exchange contracts

   $      $ 3,750      $      $ 3,750  
  

 

 

    

 

 

    

 

 

    

 

 

 
           (Concluded)  
     December 31, 2017  
     Level 1      Level 2      Level 3      Total  

Financial assets at FVTPL

           

Held for trading

           

Forward exchange contracts

   $      $ 569,751      $      $ 569,751  
  

 

 

    

 

 

    

 

 

    

 

 

 

Available-for-sale financial assets

           

Corporate bonds

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

Agency bonds/Agency mortgage-backed securities

            29,235,388               29,235,388  

Asset-backed securities

            13,459,545               13,459,545  

Government bonds

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

Publicly traded stocks

     2,548,054                      2,548,054  

Commercial paper

            148,295               148,295  
  

 

 

    

 

 

    

 

 

    

 

 

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

 

 

    

 

 

    

 

 

    

 

 

 

 

(Continued)

 

- 54 -


     December 31, 2017  
     Level 1      Level 2      Level 3      Total  

Hedging derivative financial assets

           

Fair value hedges

           

Interest rate futures contracts

   $ 27,016      $      $      $ 27,016  

Cash flow hedges

           

Forward exchange contracts

            7,378               7,378  
  

 

 

    

 

 

    

 

 

    

 

 

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

 

 

    

 

 

    

 

 

    

 

 

 

Financial liabilities at FVTPL

           

Held for trading

           

Forward exchange contracts

   $      $ 26,709      $      $ 26,709  
  

 

 

    

 

 

    

 

 

    

 

 

 

Hedging derivative financial liabilities

           

Cash flow hedges

           

Forward exchange contracts

   $      $ 15,562      $      $ 15,562  
  

 

 

    

 

 

    

 

 

    

 

 

 
           (Concluded)  
     September 30, 2017  
     Level 1      Level 2      Level 3      Total  

Financial assets at FVTPL

           

Held for trading

           

Forward exchange contracts

   $      $ 57,395      $      $ 57,395  

Designated as at FVTPL

           

Time deposit

            1,068,273               1,068,273  
  

 

 

    

 

 

    

 

 

    

 

 

 
   $      $ 1,125,668      $      $ 1,125,668  
  

 

 

    

 

 

    

 

 

    

 

 

 

Available-for-sale financial assets

           

Corporate bonds

   $      $ 38,023,860      $      $ 38,023,860  

Agency bonds/Agency mortgage-backed securities

            25,383,136               25,383,136  

Asset-backed securities

            12,195,102               12,195,102  

Government bonds

     6,938,362        105,718               7,044,080  

Publicly traded stocks

     2,068,370                      2,068,370  

Commercial paper

            238,463               238,463  
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 9,006,732      $ 75,946,279      $      $ 84,953,011  
  

 

 

    

 

 

    

 

 

    

 

 

 

Hedging derivative financial assets

           

Fair value hedges

           

Interest rate futures contracts

   $ 51,057      $      $      $ 51,057  

Cash flow hedges

           

Forward exchange contracts

            47,822               47,822  
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 51,057      $ 47,822      $      $ 98,879  
  

 

 

    

 

 

    

 

 

    

 

 

 

(Continued)

 

- 55 -


     September 30, 2017  
     Level 1      Level 2      Level 3      Total  

Financial liabilities at FVTPL

           

Held for trading

           

Forward exchange contracts

   $      $ 212,135      $      $ 212,135  

Cross currency swap contracts

            39,077               39,077  
  

 

 

    

 

 

    

 

 

    

 

 

 
   $      $ 251,212      $      $ 251,212  
  

 

 

    

 

 

    

 

 

    

 

 

 

Hedging derivative financial liabilities

           

Cash flow hedges

           

Forward exchange contracts

   $             —      $ 7,545      $             —      $ 7,545  
  

 

 

    

 

 

    

 

 

    

 

 

 

(Concluded)

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

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

Reconciliation of Level 3 fair value measurements of financial assets

The financial assets measured at Level 3 fair value were equity investments classified as financial assets at FVTOCI. Reconciliations for the nine months ended September 30, 2018 were as follows:

 

Balance at January 1, 2018

   $ 5,841,384  

Additions

     200,463  

Total gains or losses recognized in other comprehensive income

     (299,938

Disposals and proceeds from return of capital of investments

     (173,088

Effect of exchange rate changes

     132,533  
  

 

 

 

Balance at September 30, 2018

   $ 5,701,354  
  

 

 

 

Valuation techniques and assumptions used in Level 2 fair value measurement

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

 

 

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

 

 

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

 

 

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

 

- 56 -


Valuation techniques and assumptions used in Level 3 fair value Measurement

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

To determine the fair value, the Company utilizes the asset approach and takes into account the net asset value measured at the fair value by independent parties. On September 30, 2018, the Company uses unobservable inputs derived from discount for lack of marketability by 10%. When other inputs remain equal, the fair value will decrease by NT$31,736 thousand if discounts for lack of marketability increase by 1%.

The income approach utilizes discounted cash flows to determine the present value of the expected future economic benefits that will be derived from the investment. On September 30, 2018, the Company uses significant unobservable inputs, which include long term revenue growth rate of approximately 3%, discount rate of 10%, discount for lack of marketability of 10%, and discounts for lack of control of 10%. When other inputs remain equal, if long term revenue growth rate decreases by 1%, the fair value will decrease by NT$40,080 thousand; if discount rate increases by 1%, the fair value will decrease by NT$72,717 thousand; if discount for lack of marketability increases by 1%, the fair value will decrease by NT$19,000 thousand; if discount for lack of control increases by 1%, the fair value will decrease by NT$19,000 thousand.

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

 

  3)

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

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

Fair value hierarchy

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

 

     September 30, 2018  
     Carrying      Fair Value  
     Amount          Level 1              Level 2              Level 3              Total      

Financial assets

              

Financial assets at amortized costs

              

Corporate bonds

   $ 19,362,587      $      $ 19,516,024      $      $ 19,516,024  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Financial liabilities

              

Financial liabilities at amortized costs

              

Bonds payable

   $ 91,800,000      $      $ 93,343,309      $      $ 93,343,309  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

- 57 -


     December 31, 2017  
     Carrying      Fair Value  
     Amount          Level 1              Level 2              Level 3              Total      

Financial assets

              

Held-to-maturity securities

              

Corporate bonds

   $ 19,338,764      $      $ 19,541,419      $      $ 19,541,419  

Structured product

     1,482,950               1,475,350               1,475,350  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   $ 20,821,714      $      $ 21,016,769      $      $ 21,016,769  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Financial liabilities

              

Measured at amortized cost

              

Bonds payable

   $ 150,201,122      $      $ 152,077,728      $      $ 152,077,728  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

     September 30, 2017  
     Carrying      Fair Value  
     Amount          Level 1              Level 2              Level 3              Total      

Financial assets

              

Held-to-maturity securities

              

Corporate bonds

   $ 20,372,593      $      $ 20,593,872      $      $ 20,593,872  

Negotiable certificate of deposit

     4,535,850               4,538,254               4,538,254  

Structured product

     1,511,950               1,503,684               1,503,684  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   $ 26,420,393      $      $ 26,635,810      $      $ 26,635,810  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Financial liabilities

              

Measured at amortized cost

              

Bonds payable

   $ 150,861,377      $      $ 152,840,029      $      $ 152,840,029  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

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

Valuation techniques and assumptions used in Level 2 fair value measurement

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

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

 

- 58 -


34.

RELATED PARTY TRANSACTIONS

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

 

  a.

Related party name and categories

 

Related Party Name

  

Related Party Categories

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

 

  b.

Net revenue

 

              Three Months Ended    
September 30
         Nine Months Ended    
September 30
 
          2018      2017      2018      2017  

Item

   Related Party Categories            

Net revenue from sale of goods

   Associates    $ 2,878,283      $ 2,648,918      $ 7,174,347      $ 6,152,067  
   Other related parties                    330         
     

 

 

    

 

 

    

 

 

    

 

 

 
      $ 2,878,283      $ 2,648,918      $ 7,174,677      $ 6,152,067  
     

 

 

    

 

 

    

 

 

    

 

 

 

Net revenue from royalties

   Associates    $ 51,691      $ 123,236      $ 312,005      $ 364,512  
     

 

 

    

 

 

    

 

 

    

 

 

 

 

  c.

Purchases

 

         Three Months Ended    
September 30
         Nine Months Ended    
September 30
 
     2018      2017      2018      2017  

Related Party Categories

           

Associates

   $ 2,295,579      $ 2,671,511      $ 6,693,633      $ 7,557,431  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

  d.

Receivables from related parties

 

          

  September 30,  

2018

    

  December 31,  

2017

    

  September 30,  

2017

 

Item

    Related Party Name/Categories           

Receivables from related parties

    GUC      $ 1,546,977      $ 1,022,892      $ 933,031  
    Xintec        210,096        161,232        143,407  
    

 

 

    

 

 

    

 

 

 
     $ 1,757,073      $ 1,184,124      $ 1,076,438  
    

 

 

    

 

 

    

 

 

 

(Continued)

 

- 59 -


        

September 30,

2018

    

December 31,

2017

    

September 30,

2017

 

Other receivables from related parties

  SSMC                              $ 56,181      $ 83,099      $ 85,274  
  VIS      7,241        78,141        79,504  
  Other associates      963        9,818        1,151  
    

 

 

    

 

 

    

 

 

 
     $ 64,385      $ 171,058      $ 165,929  
    

 

 

    

 

 

    

 

 

 

(Concluded)

 

  e.

Payables to related parties

 

        

September 30,

2018

    

December 31,

2017

    

September 30,

2017

 

Item

  Related Party Name               

Payables to related parties

  Xintec    $ 728,756      $ 817,930      $ 382,279  
  VIS      467,874        409,950        600,612  
  SSMC      367,328        406,959        429,739  
  Other associates      7,345        21,517        29,399  
    

 

 

    

 

 

    

 

 

 
     $ 1,571,303      $ 1,656,356      $ 1,442,029  
    

 

 

    

 

 

    

 

 

 

 

  f.

Accrued expenses and other current liabilities

 

        

September 30,

2018

    

December 31,

2017

    

September 30,

2017

 

Item

  Related Party Categories         

Contract liabilities

 

Associates

   $ 1,456      $      $  
    

 

 

    

 

 

    

 

 

 

Advance receipts

 

Associates

   $      $ 96,502      $ 239,914  
    

 

 

    

 

 

    

 

 

 

 

  g.

Others

 

         Three Months Ended
September 30
     Nine Months Ended
September 30
 
         2018      2017      2018      2017  

Item

  Related Party Categories            

Manufacturing expenses

  Associates    $ 890,630      $ 492,892      $ 1,889,816      $ 1,055,887  
    

 

 

    

 

 

    

 

 

    

 

 

 

General and administrative expenses

  Other related parties    $ 25,227      $ 16,678      $ 95,528      $ 47,801  
    

 

 

    

 

 

    

 

 

    

 

 

 

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

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

 

- 60 -


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

 

  h.

Compensation of key management personnel

The compensation to directors and other key management personnel for the three months and nine months ended September 30, 2018 and 2017 were as follows:

 

     Three Months Ended
September 30
     Nine Months Ended
September 30
 
     2018      2017      2018      2017  

Short-term employee benefits

   $ 471,505      $ 532,461      $ 1,492,033      $ 1,523,629  

Post-employment benefits

     699        836        2,636        2,929  
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 472,204      $ 533,297      $ 1,494,669      $ 1,526,558  
  

 

 

    

 

 

    

 

 

    

 

 

 

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

 

35.

PLEDGED ASSETS

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

 

36.

SIGNIFICANT OPERATING LEASE ARRANGEMENTS

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

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

 

    

September 30,

2018

    

December 31,

2017

    

September 30,

2017

 

Not later than 1 year

   $ 5,962,586      $ 3,116,209      $ 1,512,193  

Later than 1 year and not later than 5 years

     5,926,589        5,174,729        4,425,524  

Later than 5 years

     9,307,594        8,905,848        9,179,467  
  

 

 

    

 

 

    

 

 

 
   $ 21,196,769      $ 17,196,786      $ 15,117,184  
  

 

 

    

 

 

    

 

 

 

 

- 61 -


37.

SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNIZED COMMITMENTS

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

 

  a.

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

 

  b.

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

 

  c.

In May 2017, Uri Cohen filed a complaint in the U.S. District Court for the Eastern District of Texas alleging that TSMC, TSMC North America and other companies infringe four U.S. patents. Cohen’s case was transferred to and consolidated with the responsive declaratory judgment case for non-infringement of Cohen’s asserted patents filed by TSMC and TSMC North America in the U.S. District Court for the Northern District of California. In July 2018, all pending litigations between the parties in the U.S. District Court for the Northern District of California were dismissed.

 

  d.

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

 

  e.

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

 

  f.

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

 

  g.

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

 

  h.

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

 

- 62 -


38.

SIGNIFICANT LOSSES FROM DISASTERS

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

 

39.

EXCHANGE RATE INFORMATION OF FOREIGN-CURRENCY FINANCIAL ASSETS AND LIABILITIES

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

 

    

Foreign
Currencies

(In Thousands)

    

Exchange Rate

(Note 1)

    

Carrying
Amount

(In Thousands)

 

September 30, 2018

        

Financial assets

        

Monetary items

        

USD

   $ 4,815,815        30.505      $ 146,906,437  

USD

     365,757        6.881 (Note 2      11,157,426  

EUR

     5,861        35.68        209,127  

JPY

     2,160,510        0.2699        583,122  

Non-monetary items

        

HKD

     178,124        3.90        694,683  

Financial liabilities

        

Monetary items

        

USD

     4,251,255        30.505        129,684,537  

EUR

     516,393        35.68        18,424,920  

JPY

     38,344,359        0.2699        10,349,142  

December 31, 2017

        

Financial assets

        

Monetary items

        

USD

     5,668,611        29.659        168,125,342  

USD

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

EUR

     236,474        35.45        8,383,015  

JPY

     34,335,661        0.2629        9,026,845  

Non-monetary items

        

HKD

     285,336        3.80        1,084,276  

(Continued)

 

- 63 -


    

Foreign
Currencies

(In Thousands)

    

Exchange Rate

(Note 1)

    

Carrying
Amount

(In Thousands)

 

Financial liabilities

        

Monetary items

        

USD

   $ 4,048,384        29.659      $ 120,071,030  

EUR

     415,819        35.45        14,740,766  

JPY

     43,205,838        0.2629        11,358,815  

September 30, 2017

        

Financial assets

        

Monetary items

        

USD

     4,782,324        30.239        144,612,701  

USD

     496,388        6.615 (Note 2      15,010,269  

EUR

     2,960        35.83        106,061  

JPY

     254,682        0.2699        68,739  

Non-monetary items

        

HKD

     186,144        3.89        724,099  

Financial liabilities

        

Monetary items

        

USD

     3,982,684        30.239        120,432,378  

EUR

     344,900        35.83        12,357,775  

JPY

     37,415,541        0.2699        10,098,454  

(Concluded)

 

  Note 1:

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

 

  Note 2:

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

Please refer to the consolidated statements of comprehensive income for the total of realized and unrealized foreign exchange gain and loss for the three months and nine months ended September 30, 2018 and 2017, respectively. Since there were varieties of foreign currency transactions and functional currencies within the subsidiaries of the Company, the Company was unable to disclose foreign exchange gain (loss) towards each foreign currency with significant impact.

 

40.

OPERATING SEGMENTS INFORMATION

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

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

 

- 64 -


41.

ADDITIONAL DISCLOSURES

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

 

  a.

Financings provided: Please see Table 1 attached;

 

  b.

Endorsement/guarantee provided: Please see Table 2 attached;

 

  c.

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

 

  d.

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

 

  e.

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

 

  f.

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

 

  g.

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

 

  h.

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

 

  i.

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

 

  j.

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

 

  k.

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

 

  l.

Information on investment in mainland China

 

  1)

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

 

  2)

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

 

- 65 -


TABLE 1

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

FINANCINGS PROVIDED

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018

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

 

 

No.

 

Financing

Company

  Counter-
party
 

Financial
Statement
Account

  Related
Party
  Maximum
Balance for
the Period
(Foreign
Currencies in
Thousands)

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

(Note 3)
    Amount
Actually
Drawn
(Foreign
Currencies in
Thousands)
    Interest
Rate
 

Nature

for
Financing

(Note 4)

  Transaction
Amounts
    Reason
for
Financing

(Note 4)
  Allowance
for Bad
Debt
   

 

Collateral

    Financing
Limits
for Each
Borrowing
Company

(Notes 1 and
2)
    Financing
Company’s

Total
Financing
Amount
Limits

(Notes 1
and 2)
 
  Item     Value  

1

 

TSMC China

  TSMC Nanjing  

Other receivables from related parties

  Yes   $

(RMB

(US$

52,384,500

    7,000,000) &

700,000)

 

 

 

  $

(RMB

(US$

46,680,065

    7,000,000) &

513,000)

 

 

 

  $

(RMB

(US$

30,240,415

    5,700,000) &

163,000)

 

 

 

  1.30%-1.96%  

The need for short-term and long-term financing

  $     Operating
capital
  $  —           $  —     $ 53,848,784     $ 53,848,784  

2

 

TSMC Global

  TSMC  

Other receivables from related parties

  Yes    

(US$

45,757,500

1,500,000

 

   

(US$

45,757,500

1,500,000

 

         

The need for short-term financing

        Operating
capital
                      384,742,480       384,742,480  

 

Note 1:

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

 

Note 2:

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

 

Note 3:

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

 

Note 4:

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

 

- 66 -


TABLE 2

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

ENDORSEMENTS/GUARANTEES PROVIDED

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018

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

 

 

No.

 

Endorsement/

Guarantee Provider

 

 

Guaranteed Party

  Limits on
Endorsement/
Guarantee
Amount
Provided to Each
Guaranteed
Party

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

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

(Note 3)
    Amount
Actually
Drawn

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

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

Name

 

Nature of
Relationship

0

  TSMC  

TSMC Global

  Subsidiary   $ 393,792,979     $

(US$

35,080,750

1,150,000

 

  $ —       $ —       $ —       —     $ 393,792,979     Yes   No   No
   

TSMC North America

  Subsidiary     393,792,979      

(US$

2,538,422

83,213

 

   

(US$

2,538,422

83,213

 

   

(US$

2,538,422

83,213

 

    —       0.16%     393,792,979     Yes   No   No

 

Note 1:

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

 

Note 2:

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

 

Note 3:

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

 

- 67 -


TABLE 3

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

MARKETABLE SECURITIES HELD

SEPTEMBER 30, 2018

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

 

 

Held Company
Name

 

Marketable Securities Type and Name

  Relationship
with the
Company
   

Financial Statement Account

  SEPTEMBER 30, 2018     Note  
  Shares/Units
(In Thousands)
    Carrying Value
(Foreign
Currencies

in Thousands)
    Percentage of
Ownership (%)
    Fair Value
(Foreign
Currencies
in Thousands)
 

TSMC

 

Non-publicly traded equity investments

             
 

United Industrial Gases Co., Ltd.

        Financial assets at fair value through other comprehensive income     21,230     $ 580,864       10     $ 580,864    
 

Shin-Etsu Handotai Taiwan Co., Ltd.

            10,500       344,736       7       344,736    
 

Global Investment Holding Inc.

            11,124       85,909       6       85,909    
 

W.K. Technology Fund IV

            806       5,753       2       5,753    
 

Crimson Asia Capital

                  4,791       1       4,791    
 

Horizon Ventures Fund

                  2,458       12       2,458    
 

Publicly traded stocks

             
 

Semiconductor Manufacturing International Corporation

        Financial assets at fair value through other comprehensive income     21,105       694,683             694,683    
 

Motech

            13,097       132,932       2       132,932    

TSMC Partners

 

Non-publicly traded equity investments

             
 

Tela Innovations

        Financial assets at fair value through other comprehensive income     10,440     US$ 56,058       25     US$ 56,058    
 

Shanghai Walden Venture Capital Enterprise

                US$ 8,511       6     US$ 8,511    
 

China Walden Venture Investments II, L.P.

                US$ 8,169       9     US$ 8,169    
 

China Walden Venture Investments III, L.P.

                US$ 1,520       4     US$ 1,520    
 

Mcube Inc.

            6,333             12          

TSMC Global

 

Corporate bond

             
 

Bank of America Corp

        Financial assets at fair value through other comprehensive income         US$ 44,855       N/A     US$ 44,855    
 

JPMorgan Chase & Co

                US$ 43,170       N/A     US$ 43,170    
 

Morgan Stanley

                US$ 40,848       N/A     US$ 40,848    
 

Goldman Sachs Group Inc/The

                US$ 32,474       N/A     US$ 32,474    
 

Citigroup Inc

                US$ 28,833       N/A     US$ 28,833    
 

CVS Health Corp

                US$ 26,700       N/A     US$ 26,700    
 

Inter American Development Bank

                US$ 24,254       N/A     US$ 24,254    
 

AT&T Inc

                US$ 24,031       N/A     US$ 24,031    
 

Verizon Communications Inc

                US$ 15,939       N/A     US$ 15,939    
 

HSBC Holdings PLC

                US$ 13,617       N/A     US$ 13,617    
 

Apple Inc

                US$ 12,525       N/A     US$ 12,525    
 

Ford Motor Credit Co LLC

                US$ 12,270       N/A     US$ 12,270    
 

PNC Bank NA

                US$ 12,177       N/A     US$ 12,177    
 

BAT Capital Corp

                US$ 12,171       N/A     US$ 12,171    
 

Anheuser-Busch InBev Finance Inc

                US$ 12,135       N/A     US$ 12,135    
 

Daimler Finance North America LLC

                US$ 11,854       N/A     US$ 11,854    
 

Nordea Bank AB

                US$ 11,729       N/A     US$ 11,729    
 

AbbVie Inc

                US$ 11,727       N/A     US$ 11,727    
 

United Technologies Corp

                US$ 10,585       N/A     US$ 10,585    
 

BP Capital Markets PLC

                US$ 10,142       N/A     US$ 10,142    

(Continued)

 

- 68 -


Held Company
Name

 

Marketable Securities Type and Name

  Relationship
with the
Company
 

Financial Statement Account

  SEPTEMBER 30, 2018     Note  
  Shares/Units
(In Thousands)
    Carrying Value
(Foreign
Currencies

in Thousands)
    Percentage of
Ownership (%)
  Fair Value
(Foreign
Currencies
in Thousands)
 

TSMC Global

 

Credit Suisse AG/New York NY

    Financial assets at fair value through other comprehensive income         US$ 9,663     N/A   US$ 9,663    
 

Sumitomo Mitsui Financial Group Inc

            US$ 9,195     N/A   US$ 9,195    
 

Mitsubishi UFJ Financial Group Inc

            US$ 9,088     N/A   US$ 9,088    
 

Macquarie Group Ltd

            US$ 8,998     N/A   US$ 8,998    
 

Bank of New York Mellon Corp/The

            US$ 8,859     N/A   US$ 8,859    
 

Analog Devices Inc

            US$ 8,772     N/A   US$ 8,772    
 

Wells Fargo & Co

            US$ 8,681     N/A   US$ 8,681    
 

ABN AMRO Bank NV

            US$ 8,645     N/A   US$ 8,645    
 

ERAC USA Finance LLC

            US$ 8,573     N/A   US$ 8,573    
 

Southern Co/The

            US$ 8,516     N/A   US$ 8,516    
 

Celgene Corp

            US$ 8,370     N/A   US$ 8,370    
 

Duke Energy Corp

            US$ 8,178     N/A   US$ 8,178    
 

Tencent Holdings Ltd

            US$ 8,079     N/A   US$ 8,079    
 

Intercontinental Exchange Inc

            US$ 7,812     N/A   US$ 7,812    
 

Hewlett Packard Enterprise Co

            US$ 7,741     N/A   US$ 7,741    
 

Huntington National Bank/The

            US$ 7,676     N/A   US$ 7,676    
 

Siemens Financieringsmaatschappij NV

            US$ 7,508     N/A   US$ 7,508    
 

Cardinal Health Inc

            US$ 7,500     N/A   US$ 7,500    
 

UBS Group Funding Switzerland AG

            US$ 7,367     N/A   US$ 7,367    
 

ANZ New Zealand Int’l Ltd/London

            US$ 7,249     N/A   US$ 7,249    
 

QUALCOMM Inc

            US$ 7,107     N/A   US$ 7,107    
 

Deutsche Telekom International Finance BV

            US$ 7,095     N/A   US$ 7,095    
 

Microsoft Corp

            US$ 7,088     N/A   US$ 7,088    
 

Svenska Handelsbanken AB

            US$ 7,079     N/A   US$ 7,079    
 

Citizens Bank NA/Providence RI

            US$ 7,048     N/A   US$ 7,048    
 

Banco Santander SA

            US$ 7,035     N/A   US$ 7,035    
 

African Development Bank

            US$ 7,018     N/A   US$ 7,018    
 

Welltower Inc

            US$ 7,005     N/A   US$ 7,005    
 

General Dynamics Corp

            US$ 6,998     N/A   US$ 6,998    
 

Toyota Motor Credit Corp

            US$ 6,890     N/A   US$ 6,890    
 

Westpac Banking Corp

            US$ 6,833     N/A   US$ 6,833    
 

Dominion Energy Inc

            US$ 6,804     N/A   US$ 6,804    
 

BB&T Corp

            US$ 6,695     N/A   US$ 6,695    
 

Hyundai Capital America

            US$ 6,647     N/A   US$ 6,647    
 

Wells Fargo Bank NA

            US$ 6,629     N/A   US$ 6,629    
 

US Bank NA/Cincinnati OH

            US$ 6,620     N/A   US$ 6,620    
 

Mizuho Financial Group Inc

            US$ 6,376     N/A   US$ 6,376    
 

American International Group Inc

            US$ 6,319     N/A   US$ 6,319    
 

Cooperatieve Rabobank UA/NY

            US$ 6,252     N/A   US$ 6,252    
 

Tyson Foods Inc

            US$ 6,207     N/A   US$ 6,207    
 

Air Lease Corp

            US$ 6,204     N/A   US$ 6,204    
 

21st Century Fox America Inc

            US$ 6,167     N/A   US$ 6,167    
 

Dow Chemical Co/The

            US$ 6,093     N/A   US$ 6,093    
 

Barclays PLC

            US$ 6,066     N/A   US$ 6,066    
 

Northrop Grumman Corp

            US$ 6,026     N/A   US$ 6,026    
 

Lloyds Bank PLC

            US$ 6,024     N/A   US$ 6,024    
 

Fifth Third Bancorp

            US$ 6,004     N/A   US$ 6,004    
 

KeyCorp

            US$ 5,809     N/A   US$ 5,809    
 

UBS AG/London

            US$ 5,761     N/A   US$ 5,761    
 

SMBC Aviation Capital Finance DAC

            US$ 5,760     N/A   US$ 5,760    

(Continued)

 

- 69 -


Held Company
Name

 

Marketable Securities Type and Name

  Relationship
with the
Company
 

Financial Statement Account

  SEPTEMBER 30, 2018     Note  
  Shares/Units
(In Thousands)
    Carrying Value
(Foreign
Currencies

in Thousands)
    Percentage of
Ownership (%)
  Fair Value
(Foreign
Currencies
in Thousands)
 

TSMC Global

 

BPCE SA

    Financial assets at fair value through other comprehensive income         US$ 5,718     N/A   US$ 5,718    
 

AXA Equitable Holdings Inc

            US$ 5,705     N/A   US$ 5,705    
 

Oracle Corp

            US$ 5,698     N/A   US$ 5,698    
 

Aviation Capital Group Corp

            US$ 5,689     N/A   US$ 5,689    
 

Reckitt Benckiser Treasury Services PLC

            US$ 5,615     N/A   US$ 5,615    
 

Santander UK PLC

            US$ 5,568     N/A   US$ 5,568    
 

Santander UK Group Holdings PLC

            US$ 5,547     N/A   US$ 5,547    
 

KeyBank NA/Cleveland OH

            US$ 5,538     N/A   US$ 5,538    
 

Penske Truck Leasing Co Lp/PTL Finance Corp

            US$ 5,392     N/A   US$ 5,392    
 

ITC Holdings Corp

            US$ 5,321     N/A   US$ 5,321    
 

Capital One NA/Mclean VA

            US$ 5,301     N/A   US$ 5,301    
 

Ryder System Inc

            US$ 5,290     N/A   US$ 5,290    
 

Amgen Inc

            US$ 5,229     N/A   US$ 5,229    
 

International Bank for Reconstruction & Development

            US$ 5,151     N/A   US$ 5,151    
 

Sompo International Holdings Ltd

            US$ 5,055     N/A   US$ 5,055    
 

BNP Paribas SA

            US$ 5,054     N/A   US$ 5,054    
 

Jackson National Life Global Funding

            US$ 5,054     N/A   US$ 5,054    
 

SunTrust Banks Inc

            US$ 5,038     N/A   US$ 5,038    
 

Manufacturers & Traders Trust Co

            US$ 5,028     N/A   US$ 5,028    
 

Toronto-Dominion Bank/The

            US$ 4,997     N/A   US$ 4,997    
 

UBS AG/Stamford CT

            US$ 4,972     N/A   US$ 4,972    
 

Cigna Corp

            US$ 4,915     N/A   US$ 4,915    
 

Marriott International Inc/MD

            US$ 4,797     N/A   US$ 4,797    
 

Cox Communications Inc

            US$ 4,728     N/A   US$ 4,728    
 

NextEra Energy Capital Holdings Inc

            US$ 4,715     N/A   US$ 4,715    
 

Schlumberger Holdings Corp

            US$ 4,680     N/A   US$ 4,680    
 

Air Liquide Finance SA

            US$ 4,680     N/A   US$ 4,680    
 

Five Corners Funding Trust

            US$ 4,618     N/A   US$ 4,618    
 

Credit Suisse Group Funding Guernsey Ltd

            US$ 4,569     N/A   US$ 4,569    
 

Goldman Sachs Bank USA/New York NY

            US$ 4,564     N/A   US$ 4,564    
 

AEP Texas Inc

            US$ 4,449     N/A   US$ 4,449    
 

New York Life Global Funding

            US$ 4,435     N/A   US$ 4,435    
 

Reliance Standard Life Global Funding II

            US$ 4,407     N/A   US$ 4,407    
 

Enterprise Products Operating LLC

            US$ 4,261     N/A   US$ 4,261    
 

Credit Agricole SA/London

            US$ 4,117     N/A   US$ 4,117    
 

Vodafone Group PLC

            US$ 4,066     N/A   US$ 4,066    
 

Fifth Third Bank/Cincinnati OH

            US$ 4,027     N/A   US$ 4,027    
 

Banque Federative du Credit Mutuel SA

            US$ 4,023     N/A   US$ 4,023    
 

SunTrust Bank/Atlanta GA

            US$ 4,009     N/A   US$ 4,009    
 

Exelon Generation Co LLC

            US$ 3,999     N/A   US$ 3,999    
 

Toyota Motor Corp

            US$ 3,994     N/A   US$ 3,994    
 

Nuveen Finance LLC

            US$ 3,927     N/A   US$ 3,927    
 

European Investment Bank

            US$ 3,867     N/A   US$ 3,867    
 

Bank of Nova Scotia

            US$ 3,847     N/A   US$ 3,847    
 

American Express Credit Corp

            US$ 3,814     N/A   US$ 3,814    
 

Edison International

            US$ 3,782     N/A   US$ 3,782    
 

Bayer US Finance II LLC

            US$ 3,699     N/A   US$ 3,699    
 

Alimentation Couche-Tard Inc

            US$ 3,651     N/A   US$ 3,651    
 

Husky Energy Inc

            US$ 3,637     N/A   US$ 3,637    
 

Barclays Bank PLC

            US$ 3,632     N/A   US$ 3,632    

(Continued)

 

- 70 -


Held Company
Name

 

Marketable Securities Type and Name

  Relationship
with the
Company
 

Financial Statement Account

  SEPTEMBER 30, 2018     Note  
  Shares/Units
(In Thousands)
    Carrying Value
(Foreign
Currencies

in Thousands)
    Percentage of
Ownership (%)
  Fair Value
(Foreign
Currencies
in Thousands)
 

TSMC Global

 

Canadian Imperial Bank of Commerce

    Financial assets at fair value through other comprehensive income         US$ 3,592     N/A   US$ 3,592    
 

SES GLOBAL Americas Holdings GP

            US$ 3,526     N/A   US$ 3,526    
 

Branch Banking & Trust Co

            US$ 3,482     N/A   US$ 3,482    
 

Capital One Financial Corp

            US$ 3,433     N/A   US$ 3,433    
 

Enel Finance International NV

            US$ 3,429     N/A   US$ 3,429    
 

BMW US Capital LLC

            US$ 3,426     N/A   US$ 3,426    
 

Shell International Finance BV

            US$ 3,390     N/A   US$ 3,390    
 

Mondelez International Holdings Netherlands BV

            US$ 3,381     N/A   US$ 3,381    
 

LyondellBasell Industries NV

            US$ 3,379     N/A   US$ 3,379    
 

Lloyds Banking Group PLC

            US$ 3,253     N/A   US$ 3,253    
 

Keurig Dr Pepper Inc

            US$ 3,187     N/A   US$ 3,187    
 

Bank of Montreal

            US$ 3,123     N/A   US$ 3,123    
 

Digital Realty Trust LP

            US$ 3,113     N/A   US$ 3,113    
 

Skandinaviska Enskilda Banken AB

            US$ 3,051     N/A   US$ 3,051    
 

Royal Bank of Canada

            US$ 2,999     N/A   US$ 2,999    
 

Macquarie Bank Ltd

            US$ 2,950     N/A   US$ 2,950    
 

Anthem Inc

            US$ 2,845     N/A   US$ 2,845    
 

Simon Property Group LP

            US$ 2,775     N/A   US$ 2,775    
 

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

            US$ 2,764     N/A   US$ 2,764    
 

Express Scripts Holding Co

            US$ 2,733     N/A   US$ 2,733    
 

ING Groep NV

            US$ 2,695     N/A   US$ 2,695    
 

Societe Generale SA

            US$ 2,623     N/A   US$ 2,623    
 

McCormick & Co Inc/MD

            US$ 2,596     N/A   US$ 2,596    
 

PartnerRe Finance B LLC

            US$ 2,577     N/A   US$ 2,577    
 

DXC Technology Co

            US$ 2,575     N/A   US$ 2,575    
 

Delta Air Lines 2007-1 Class A Pass Through Trust

            US$ 2,530     N/A   US$ 2,530    
 

Aetna Inc

            US$ 2,523     N/A   US$ 2,523    
 

WR Berkley Corp

            US$ 2,490     N/A   US$ 2,490    
 

Lam Research Corp

            US$ 2,485     N/A   US$ 2,485    
 

Ventas Realty LP/Ventas Capital Corp

            US$ 2,409     N/A   US$ 2,409    
 

Eastman Chemical Co

            US$ 2,392     N/A   US$ 2,392    
 

NiSource Inc

            US$ 2,371     N/A   US$ 2,371    
 

Xylem Inc/NY

            US$ 2,326     N/A   US$ 2,326    
 

EI du Pont de Nemours & Co

            US$ 2,316     N/A   US$ 2,316    
 

MUFG Bank Ltd

            US$ 2,296     N/A   US$ 2,296    
 

NBCUniversal Media LLC

            US$ 2,253     N/A   US$ 2,253    
 

PSEG Power LLC

            US$ 2,231     N/A   US$ 2,231    
 

Nestle Holdings Inc

            US$ 2,198     N/A   US$ 2,198    
 

Sumitomo Mitsui Banking Corp

            US$ 2,161     N/A   US$ 2,161    
 

Cintas Corp No 2

            US$ 2,145     N/A   US$ 2,145    
 

National Australia Bank Ltd/New York

            US$ 2,132     N/A   US$ 2,132    
 

Wm Wrigley Jr Co

            US$ 2,123     N/A   US$ 2,123    
 

AIG Global Funding

            US$ 2,118     N/A   US$ 2,118    
 

Gilead Sciences Inc

            US$ 2,103     N/A   US$ 2,103    
 

Commonwealth Bank of Australia/New York NY

            US$ 2,091     N/A   US$ 2,091    
 

Walgreens Boots Alliance Inc

            US$ 2,090     N/A   US$ 2,090    
 

ProAssurance Corp

            US$ 2,085     N/A   US$ 2,085    
 

HCP Inc

            US$ 2,046     N/A   US$ 2,046    
 

EOG Resources Inc

            US$ 2,006     N/A   US$ 2,006    

(Continued)

 

- 71 -


Held Company
Name

 

Marketable Securities Type and Name

  Relationship
with the
Company
 

Financial Statement Account

  SEPTEMBER 30, 2018     Note  
  Shares/Units
(In Thousands)
    Carrying Value
(Foreign
Currencies

in Thousands)
    Percentage of
Ownership (%)
  Fair Value
(Foreign
Currencies
in Thousands)
 

TSMC Global

 

Philip Morris International Inc

    Financial assets at fair value through other comprehensive income         US$ 2,002     N/A   US$ 2,002    
 

British Telecommunications PLC

            US$ 1,997     N/A   US$ 1,997    
 

Roche Holdings Inc

            US$ 1,980     N/A   US$ 1,980    
 

Realty Income Corp

            US$ 1,961     N/A   US$ 1,961    
 

American Airlines 2013-2 Class A Pass Through Trust

            US$ 1,943     N/A   US$ 1,943    
 

Caterpillar Financial Services Corp

            US$ 1,937     N/A   US$ 1,937    
 

American Express Co

            US$ 1,902     N/A   US$ 1,902    
 

Duke Realty LP

            US$ 1,898     N/A   US$ 1,898    
 

General Mills Inc

            US$ 1,840     N/A   US$ 1,840    
 

Orange SA

            US$ 1,827     N/A   US$ 1,827    
 

WestRock RKT Co

            US$ 1,754     N/A   US$ 1,754    
 

Brambles USA Inc

            US$ 1,748     N/A   US$ 1,748    
 

Visa Inc

            US$ 1,744     N/A   US$ 1,744    
 

DTE Energy Co

            US$ 1,725     N/A   US$ 1,725    
 

Dominion Energy Gas Holdings LLC

            US$ 1,724     N/A   US$ 1,724    
 

Danske Bank A/S

            US$ 1,694     N/A   US$ 1,694    
 

Regions Financial Corp

            US$ 1,659     N/A   US$ 1,659    
 

Magellan Midstream Partners LP

            US$ 1,614     N/A   US$ 1,614    
 

General Electric Co

            US$ 1,601     N/A   US$ 1,601    
 

Amazon.com Inc

            US$ 1,574     N/A   US$ 1,574    
 

Principal Life Global Funding II

            US$ 1,553     N/A   US$ 1,553    
 

Weyerhaeuser Co

            US$ 1,545     N/A   US$ 1,545    
 

Lincoln National Corp

            US$ 1,537     N/A   US$ 1,537    
 

Metropolitan Life Global Funding I

            US$ 1,534     N/A   US$ 1,534    
 

McKesson Corp

            US$ 1,497     N/A   US$ 1,497    
 

Harley-Davidson Financial Services Inc

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

Abbott Laboratories

            US$ 1,481     N/A   US$ 1,481    
 

Nissan Motor Acceptance Corp

            US$ 1,469     N/A   US$ 1,469    
 

O’Reilly Automotive Inc

            US$ 1,469     N/A   US$ 1,469    
 

Guardian Life Global Funding

            US$ 1,451     N/A   US$ 1,451    
 

Public Service Electric & Gas Co

            US$ 1,443     N/A   US$ 1,443    
 

Oesterreichische Kontrollbank AG

            US$ 1,434     N/A   US$ 1,434    
 

CBS Corp

            US$ 1,423     N/A   US$ 1,423    
 

HSBC Bank PLC

            US$ 1,422     N/A   US$ 1,422    
 

Monongahela Power Co

            US$ 1,372     N/A   US$ 1,372    
 

Cboe Global Markets Inc

            US$ 1,367     N/A   US$ 1,367    
 

Texas Eastern Transmission LP

            US$ 1,364     N/A   US$ 1,364    
 

Georgia-Pacific LLC

            US$ 1,352     N/A   US$ 1,352    
 

Kreditanstalt fuer Wiederaufbau

            US$ 1,326     N/A   US$ 1,326    
 

GATX Corp

            US$ 1,262     N/A   US$ 1,262    
 

CNA Financial Corp

            US$ 1,254     N/A   US$ 1,254    
 

Entergy Arkansas Inc

            US$ 1,247     N/A   US$ 1,247    
 

Compass Bank

            US$ 1,243     N/A   US$ 1,243    
 

Western Union Co/The

            US$ 1,235     N/A   US$ 1,235    
 

Entergy Corp

            US$ 1,232     N/A   US$ 1,232    
 

Sempra Energy

            US$ 1,206     N/A   US$ 1,206    
 

Consolidated Edison Inc

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

Glencore Funding LLC

            US$ 1,193     N/A   US$ 1,193    
 

GlaxoSmithKline Capital PLC

            US$ 1,180     N/A   US$ 1,180    
 

Regions Bank/Birmingham AL

            US$ 1,174     N/A   US$ 1,174    

(Continued)

 

- 72 -


Held Company
Name

 

Marketable Securities Type and Name

  Relationship
with the
Company
 

Financial Statement Account

  SEPTEMBER 30, 2018     Note  
  Shares/Units
(In Thousands)
    Carrying Value
(Foreign
Currencies

in Thousands)
    Percentage of
Ownership (%)
  Fair Value
(Foreign
Currencies
in Thousands)
 

TSMC Global

 

Public Service Enterprise Group Inc

    Financial assets at fair value through other comprehensive income         US$ 1,135     N/A   US$ 1,135    
 

Interpublic Group of Cos Inc/The

            US$ 1,084     N/A   US$ 1,084    
 

Swedbank AB

            US$ 1,057     N/A   US$ 1,057    
 

Merck & Co Inc

            US$ 1,040     N/A   US$ 1,040    
 

CA Inc

            US$ 1,040     N/A   US$ 1,040    
 

Reinsurance Group of America Inc

            US$ 1,037     N/A   US$ 1,037    
 

International Paper Co

            US$ 1,036     N/A   US$ 1,036    
 

Glencore Finance Canada Ltd

            US$ 1,029     N/A   US$ 1,029    
 

Quest Diagnostics Inc

            US$ 1,028     N/A   US$ 1,028    
 

Prudential Financial Inc

            US$ 1,028     N/A   US$ 1,028    
 

Athene Global Funding

            US$ 1,016     N/A   US$ 1,016    
 

Commonwealth Edison Co

            US$ 1,012     N/A   US$ 1,012    
 

Scentre Group Trust 1/Scentre Group Trust 2

            US$ 1,011     N/A   US$ 1,011    
 

Mitsubishi UFJ Trust & Banking Corp

            US$ 1,008     N/A   US$ 1,008    
 

Marsh & McLennan Cos Inc

            US$ 1,006     N/A   US$ 1,006    
 

DNB Bank ASA

            US$ 1,006     N/A   US$ 1,006    
 

Union Pacific Corp

            US$ 1,004     N/A   US$ 1,004    
 

Halliburton Co

            US$ 996     N/A   US$ 996    
 

Biogen Inc

            US$ 995     N/A   US$ 995    
 

Laboratory Corp of America Holdings

            US$ 994     N/A   US$ 994    
 

Equinor ASA

            US$ 994     N/A   US$ 994    
 

Southern California Edison Co

            US$ 993     N/A   US$ 993    
 

Sysco Corp

            US$ 987     N/A   US$ 987    
 

BNG Bank NV

            US$ 987     N/A   US$ 987    
 

Pricoa Global Funding I

            US$ 984     N/A   US$ 984    
 

Unum Group

            US$ 983     N/A   US$ 983    
 

Holcim US Finance Sarl & Cie SCS

            US$ 980     N/A   US$ 980    
 

Moody’s Corp

            US$ 977     N/A   US$ 977    
 

UnitedHealth Group Inc

            US$ 977     N/A   US$ 977    
 

Protective Life Global Funding

            US$ 973     N/A   US$ 973    
 

Entergy Texas Inc

            US$ 973     N/A   US$ 973    
 

Healthcare Trust of America Holdings LP

            US$ 967     N/A   US$ 967    
 

State Grid Overseas Investment Ltd

            US$ 961     N/A   US$ 961    
 

TransCanada PipeLines Ltd

            US$ 959     N/A   US$ 959    
 

Bunge Ltd Finance Corp

            US$ 956     N/A   US$ 956    
 

Citibank NA

            US$ 953     N/A   US$ 953    
 

XLIT Ltd

            US$ 952     N/A   US$ 952    
 

National Retail Properties Inc

            US$ 938     N/A   US$ 938    
 

Anheuser-Busch InBev Worldwide Inc

            US$ 935     N/A   US$ 935    
 

Duke Energy Progress LLC

            US$ 906     N/A   US$ 906    
 

Southern Electric Generating Co

            US$ 899     N/A   US$ 899    
 

Standard Chartered PLC

            US$ 892     N/A   US$ 892    
 

Coca-Cola Femsa SAB de CV

            US$ 891     N/A   US$ 891    
 

Lockheed Martin Corp

            US$ 887     N/A   US$ 887    
 

Chevron Corp

            US$ 872     N/A   US$ 872    
 

CNOOC Finance Ltd

            US$ 860     N/A   US$ 860    
 

Viterra Inc

            US$ 854     N/A   US$ 854    
 

Fiserv Inc

            US$ 834     N/A   US$ 834    
 

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

            US$ 833     N/A   US$ 833    
 

Huntington Bancshares Inc/OH

            US$ 814     N/A   US$ 814    

(Continued)

 

- 73 -


Held Company
Name

 

Marketable Securities Type and Name

  Relationship
with the
Company
 

Financial Statement Account

  SEPTEMBER 30, 2018     Note  
  Shares/Units
(In Thousands)
    Carrying Value
(Foreign
Currencies
in Thousands)
    Percentage of
Ownership (%)
  Fair Value
(Foreign
Currencies
in Thousands)
 

TSMC Global

 

Intesa Sanpaolo SpA

    Financial assets at fair value through other comprehensive income         US$ 811     N/A   US$ 811    
 

Consolidated Edison Co of New York Inc

            US$ 806     N/A   US$ 806    
 

Danone SA

            US$ 803     N/A   US$ 803    
 

Charles Schwab Corp/The

            US$ 801     N/A   US$ 801    
 

Aon PLC

            US$ 795     N/A   US$ 795    
 

Alterra Finance LLC

            US$ 792     N/A   US$ 792    
 

ONEOK Partners LP

            US$ 787     N/A   US$ 787    
 

AXIS Specialty Finance LLC

            US$ 777     N/A   US$ 777    
 

Manulife Financial Corp

            US$ 774     N/A   US$ 774    
 

Activision Blizzard Inc

            US$ 774     N/A   US$ 774    
 

Nomura Holdings Inc

            US$ 772     N/A   US$ 772    
 

Suncorp-Metway Ltd

            US$ 772     N/A   US$ 772    
 

Sinopec Capital Ltd

            US$ 769     N/A   US$ 769    
 

Incitec Pivot Finance LLC

            US$ 769     N/A   US$ 769    
 

Warner Media LLC

            US$ 758     N/A   US$ 758    
 

AutoZone Inc

            US$ 750     N/A   US$ 750    
 

Baidu Inc

            US$ 743     N/A   US$ 743    
 

Walmart Inc

            US$ 741     N/A   US$ 741    
 

John Deere Capital Corp

            US$ 738     N/A   US$ 738    
 

WEC Energy Group Inc

            US$ 735     N/A   US$ 735    
 

Pinnacle West Capital Corp

            US$ 731     N/A   US$ 731    
 

Phillips 66

            US$ 706     N/A   US$ 706    
 

Comcast Corp

            US$ 706     N/A   US$ 706    
 

Thermo Fisher Scientific Inc

            US$ 702     N/A   US$ 702    
 

Baker Hughes a GE Co LLC

            US$ 696     N/A   US$ 696    
 

APT Pipelines Ltd

            US$ 695     N/A   US$ 695    
 

American Honda Finance Corp

            US$ 695     N/A   US$ 695    
 

Australia & New Zealand Banking Group Ltd/New York NY

            US$ 694     N/A   US$ 694    
 

eBay Inc

            US$ 694     N/A   US$ 694    
 

Textron Inc

            US$ 685     N/A   US$ 685    
 

Three Gorges Finance I Cayman Islands Ltd

            US$ 673     N/A   US$ 673    
 

Vornado Realty LP

            US$ 672     N/A   US$ 672    
 

National Oilwell Varco Inc

            US$ 667     N/A   US$ 667    
 

Rochester Gas & Electric Corp

            US$ 663     N/A   US$ 663    
 

Norfolk Southern Railway Co

            US$ 663     N/A   US$ 663    
 

Ohio Power Co

            US$ 635     N/A   US$ 635    
 

Georgia Power Co

            US$ 634     N/A   US$ 634    
 

Toledo Edison Co/The

            US$ 633     N/A   US$ 633    
 

ERP Operating LP

            US$ 622     N/A   US$ 622    
 

RBC USA Holdco Corp

            US$ 621     N/A   US$ 621    
 

Continental Airlines 2007-1 Class A Pass Through Trust

            US$ 620     N/A   US$ 620    
 

Alexandria Real Estate Equities Inc

            US$ 616     N/A   US$ 616    
 

Liberty Property LP

            US$ 613     N/A   US$ 613    
 

Grupo Bimbo SAB de CV

            US$ 612     N/A   US$ 612    
 

Nutrien Ltd

            US$ 612     N/A   US$ 612    
 

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

            US$ 611     N/A   US$ 611    
 

Woolworths Group Ltd

            US$ 608     N/A   US$ 608    
 

MUFG Union Bank NA

            US$ 599     N/A   US$ 599    
 

Altria Group Inc

            US$ 597     N/A   US$ 597    
 

Kimberly-Clark Corp

            US$ 597     N/A   US$ 597    

(Continued)

 

- 74 -


Held Company
Name

 

Marketable Securities Type and Name

  Relationship
with the
Company
 

Financial Statement Account

  SEPTEMBER 30, 2018     Note  
  Shares/Units
(In Thousands)
    Carrying Value
(Foreign
Currencies

in Thousands)
    Percentage of
Ownership (%)
  Fair Value
(Foreign
Currencies
in Thousands)
 

TSMC Global

 

OneBeacon US Holdings Inc

    Financial assets at fair value through other comprehensive income         US$ 595     N/A   US$ 595    
 

Daiwa Securities Group Inc

            US$ 595     N/A   US$ 595    
 

BOC Aviation Ltd

            US$ 594     N/A   US$ 594    
 

BAT International Finance PLC

            US$ 594     N/A   US$ 594    
 

Life Technologies Corp

            US$ 590     N/A   US$ 590    
 

Kimco Realty Corp

            US$ 590     N/A   US$ 590    
 

Ontario Teachers’ Cadillac Fairview Properties Trust

            US$ 588     N/A   US$ 588    
 

ABC Inc

            US$ 576     N/A   US$ 576    
 

AXIS Specialty Finance PLC

            US$ 574     N/A   US$ 574    
 

Mizuho Bank Ltd

            US$ 573     N/A   US$ 573    
 

Nationwide Financial Services Inc

            US$ 569     N/A   US$ 569    
 

Host Hotels & Resorts LP

            US$ 564     N/A   US$ 564    
 

AvalonBay Communities Inc

            US$ 562     N/A   US$ 562    
 

Berkshire Hathaway Energy Co

            US$ 551     N/A   US$ 551    
 

Duke Energy Progress LLC

            US$ 548     N/A   US$ 548    
 

Church & Dwight Co Inc

            US$ 520     N/A   US$ 520    
 

Bunge Ltd Finance Corp

        US$ 518     N/A   US$ 518    
 

MUFG Americas Holdings Corp

            US$ 518     N/A   US$ 518    
 

American Electric Power Co Inc

            US$ 514     N/A   US$ 514    
 

Pacific Gas & Electric Co

            US$ 507     N/A   US$ 507    
 

Southwestern Electric Power Co

        US$ 505     N/A   US$ 505    
 

Fulton Financial Corp

            US$ 504     N/A   US$ 504    
 

TD Ameritrade Holding Corp

            US$ 501     N/A   US$ 501    
 

Rockwell Collins Inc

            US$ 497     N/A   US$ 497    
 

Regency Centers Corp

            US$ 496     N/A   US$ 496    
 

Sumitomo Mitsui Trust Bank Ltd

            US$ 495     N/A   US$ 495    
 

ASB Bank Ltd

            US$ 495     N/A   US$ 495    
 

Highwoods Realty LP

            US$ 492     N/A   US$ 492    
 

ORIX Corp

            US$ 486     N/A   US$ 486    
 

Eni SpA

            US$ 476     N/A   US$ 476    
 

MassMutual Global Funding II

            US$ 475     N/A   US$ 475    
 

Diageo Capital PLC

            US$ 474     N/A   US$ 474    
 

Comerica Inc

            US$ 473     N/A   US$ 473    
 

Spire Inc

            US$ 458     N/A   US$ 458    
 

Narragansett Electric Co/The

            US$ 457     N/A   US$ 457    
 

Eaton Corp

            US$ 456     N/A   US$ 456    
 

United Overseas Bank Ltd

            US$ 452     N/A   US$ 452    
 

CenterPoint Energy Inc

            US$ 449     N/A   US$ 449    
 

Total Capital International SA

            US$ 445     N/A   US$ 445    
 

Burlington Northern Santa Fe LLC

            US$ 427     N/A   US$ 427    
 

Columbia Pipeline Group Inc

            US$ 424     N/A   US$ 424    
 

Canadian Pacific Railway Co

            US$ 415     N/A   US$ 415    
 

Valero Energy Corp

            US$ 415     N/A   US$ 415    
 

Texas-New Mexico Power Co

            US$ 413     N/A   US$ 413    
 

Marathon Petroleum Corp

            US$ 412     N/A   US$ 412    
 

Continental Airlines 2012-1 Class A Pass Through Trust

            US$ 402     N/A   US$ 402    
 

Tanger Properties LP

            US$ 389     N/A   US$ 389    
 

IBM Credit LLC

            US$ 388     N/A   US$ 388    
 

Southern Power Co

            US$ 387     N/A   US$ 387    
 

StanCorp Financial Group Inc

            US$ 378     N/A   US$ 378    

(Continued)

 

- 75 -


Held Company
Name

 

Marketable Securities Type and Name

  Relationship
with the
Company
 

Financial Statement Account

  SEPTEMBER 30, 2018     Note  
  Shares/Units
(In Thousands)
    Carrying Value
(Foreign
Currencies

in Thousands)
    Percentage of
Ownership (%)
  Fair Value
(Foreign
Currencies

in Thousands)
 

TSMC Global

 

Aon Corp

    Financial assets at fair value through other comprehensive income         US$ 377     N/A   US$ 377    
 

Kroger Co/The

            US$ 370     N/A   US$ 370    
 

First Niagara Financial Group Inc

            US$ 367     N/A   US$ 367    
 

NetApp Inc

            US$ 362     N/A   US$ 362    
 

CenterPoint Energy Resources Corp

            US$ 354     N/A   US$ 354    
 

Deutsche Bank AG

            US$ 349     N/A   US$ 349    
 

Cooperatieve Rabobank UA

            US$ 339     N/A   US$ 339    
 

Cisco Systems Inc

            US$ 318     N/A   US$ 318    
 

Schlumberger Finance Canada Ltd

            US$ 292     N/A   US$ 292    
 

Eli Lilly & Co

            US$ 286     N/A   US$ 286    
 

Amphenol Corp

            US$ 285     N/A   US$ 285    
 

BAE Systems Holdings Inc

            US$ 283     N/A   US$ 283    
 

EMD Finance LLC

            US$ 276     N/A   US$ 276    
 

Hartford Financial Services Group Inc/The

            US$ 229     N/A   US$ 229    
 

Rolls-Royce PLC

            US$ 220     N/A   US$ 220    
 

Protective Life Corp

            US$ 219     N/A   US$ 219    
 

WestRock MWV LLC

        US$ 213     N/A   US$ 213    
 

ING Bank NV

            US$ 207     N/A   US$ 207    
 

Fidelity National Information Services Inc

            US$ 203     N/A   US$ 203    
 

Equifax Inc

            US$ 174     N/A   US$ 174    
 

Schneider Electric SE

        US$ 157     N/A   US$ 157    
 

Packaging Corp of America

            US$ 157     N/A   US$ 157    
 

Reynolds American Inc

            US$ 126     N/A   US$ 126    
 

Duke Energy Florida LLC

            US$ 75     N/A   US$ 75    
 

Wells Fargo & Co

    Financial assets at amortized cost         US$ 149,941     N/A   US$ 152,147    
 

JPMorgan Chase & Co.

            US$ 124,948     N/A   US$ 126,575    
 

Westpac Banking Corp.

            US$ 99,987     N/A   US$ 100,276    
 

Goldman Sachs Group, Inc.

            US$ 99,900     N/A   US$ 100,437    
 

Commonwealth Bank of Australia

            US$ 49,994     N/A   US$ 50,100    
 

National Australia Bank

            US$ 49,994     N/A   US$ 50,079    
 

Bank of Nova Scotia

            US$ 49,975     N/A   US$ 50,140    
 

Industrial and Commercial Bank of China

            US$ 9,996     N/A   US$ 10,012    
 

Government bond

             
 

United States Treasury Note/Bond

    Financial assets at fair value through other comprehensive income         US$ 349,827     N/A   US$ 349,827    
 

Abu Dhabi Government International Bond

            US$ 3,397     N/A   US$ 3,397    
 

Qatar Government International Bond

            US$ 1,309     N/A   US$ 1,309    
 

Agency bonds/Agency mortgage-backed securities

             
 

Freddie Mac

    Financial assets at fair value through Profit or Loss         US$ 54,729     N/A   US$ 54,729    
 

Fannie Mae

            US$ 44,804     N/A   US$ 44,804    
 

Government National Mortgage Association

            US$ 27,182     N/A   US$ 27,182    
 

Freddie Mac Multifamily Structured Pass Through Certificates

            US$ 2,042     N/A   US$ 2,042    
 

Fannie Mae

    Financial assets at fair value through other comprehensive income         US$ 586,994     N/A   US$ 586,994    
 

Freddie Mac

            US$ 227,982     N/A   US$ 227,982    
 

Government National Mortgage Association

            US$ 143,925     N/A   US$ 143,925    
 

Ginnie Mae

            US$ 70,023     N/A   US$ 70,023    
 

Province of Quebec Canada

            US$ 2,496     N/A   US$ 2,496    

(Continued)

 

- 76 -


Held Company
Name

 

Marketable Securities Type and Name

  Relationship
with the
Company
 

Financial Statement Account

  SEPTEMBER 30, 2018     Note  
  Shares/Units
(In Thousands)
    Carrying Value
(Foreign
Currencies in
Thousands)
    Percentage of
Ownership (%)
  Fair Value
(Foreign
Currencies

in Thousands)
 

TSMC Global

 

FHLMC-GNMA

    Financial assets at fair value through other comprehensive income         US$ 1,604     N/A   US$ 1,604    
 

Freddie Mac Multifamily Structured Pass Through Certificates

   

        US$ 1,289     N/A   US$ 1,289    
 

NCUA Guaranteed Notes Trust 2010-R2

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

Export Development Canada

            US$ 979     N/A   US$ 979    
 

Federal Farm Credit Banks

            US$ 884     N/A   US$ 884    
 

Kowloon-Canton Railway Corp

            US$ 556     N/A   US$ 556    
 

Asset-backed securities

             
 

Citibank Credit Card Issuance Trust

    Financial assets at fair value through other comprehensive income         US$ 55,773     N/A   US$ 55,773    
 

Discover Card Execution Note Trust

            US$ 44,159     N/A   US$ 44,159    
 

American Express Credit Account Master Trust

            US$ 42,356     N/A   US$ 42,356    
 

Chase Issuance Trust

            US$ 39,969     N/A   US$ 39,969    
 

Ford Credit Floorplan Master Owner Trust A

            US$ 26,763     N/A   US$ 26,763    
 

COMM Mortgage Trust

            US$ 14,066     N/A   US$ 14,066    
 

Ford Credit Auto Owner Trust/Ford Credit 2014-REV1

            US$ 13,722     N/A   US$ 13,722    
 

GS Mortgage Securities Trust

            US$ 12,521     N/A   US$ 12,521    
 

Morgan Stanley Bank of America Merrill Lynch Trust

            US$ 12,287     N/A   US$ 12,287    
 

BA Credit Card Trust

        US$ 12,131     N/A   US$ 12,131    
 

Toyota Auto Receivables 2014-C Owner Trust

            US$ 11,877     N/A   US$ 11,877    
 

UBS-Barclays Commercial Mortgage Trust 2012-C2

            US$ 9,999     N/A   US$ 9,999    
 

JPMCC Commercial Mortgage Securities Trust 2017-JP7

            US$ 9,980     N/A   US$ 9,980    
 

BANK

        US$ 9,569     N/A   US$ 9,569    
 

Hyundai Auto Lease Securitization Trust 2017-A

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

Nissan Master Owner Trust Receivables

            US$ 8,014     N/A   US$ 8,014    
 

CGDBB Commercial Mortgage Trust 2017-BIOC

            US$ 7,511     N/A   US$ 7,511    
 

Mercedes-Benz Master Owner Trust

            US$ 7,423     N/A   US$ 7,423    
 

Ford Credit Auto Lease Trust

            US$ 7,419     N/A   US$ 7,419    
 

Capital One Multi-Asset Execution Trust

            US$ 7,302     N/A   US$ 7,302    
 

Nissan Auto Lease Trust

            US$ 7,258     N/A   US$ 7,258    
 

GM Financial Automobile Leasing Trust 2015-3

            US$ 7,116     N/A   US$ 7,116    
 

Morgan Stanley Capital I Trust

            US$ 6,084     N/A   US$ 6,084    
 

Chesapeake Funding II LLC

            US$ 6,071     N/A   US$ 6,071    
 

UBS Commercial Mortgage Trust 2018-C10

            US$ 6,055     N/A   US$ 6,055    
 

SLM Student Loan Trust 2013-6

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

Wells Fargo Commercial Mortgage Trust 2015-LC20

            US$ 5,711     N/A   US$ 5,711    
 

JPMBB Commercial Mortgage Securities Trust 2013-C12

            US$ 5,651     N/A   US$ 5,651    
 

Citigroup Commercial Mortgage Trust 2013-GC11

            US$ 5,631     N/A   US$ 5,631    
 

Honda Auto Receivables 2017-2 Owner Trust

            US$ 5,585     N/A   US$ 5,585    
 

BBCMS 2018-TALL Mortgage Trust

            US$ 5,497     N/A   US$ 5,497    
 

Ford Credit Auto Owner Trust

            US$ 4,951     N/A   US$ 4,951    
 

JPMDB Commercial Mortgage Securities Trust 2017-C7

            US$ 4,748     N/A   US$ 4,748    
 

BMW Vehicle Lease Trust

            US$ 4,703     N/A   US$ 4,703    
 

Volvo Financial Equipment Master Owner Trust 2017-A

            US$ 4,512     N/A   US$ 4,512    
 

GM Financial Consumer Automobile 2017-1

            US$ 3,903     N/A   US$ 3,903    
 

Cold Storage Trust 2017-ICE3

            US$ 3,811     N/A   US$ 3,811    
 

Navient Student Loan Trust 2017-1

            US$ 3,761     N/A   US$ 3,761    
 

Nissan Auto Receivables 2017-B Owner Trust

            US$ 3,345     N/A   US$ 3,345    
 

Wheels SPV 2 LLC

            US$ 3,342     N/A   US$ 3,342    
 

Hertz Fleet Lease Funding LP

            US$ 2,988     N/A   US$ 2,988    

(Continued)

 

- 77 -


Held Company
Name

 

Marketable Securities Type and Name

  Relationship
with the
Company
 

Financial Statement Account

  SEPTEMBER 30, 2018     Note  
  Shares/Units
(In Thousands)
    Carrying Value
(Foreign
Currencies

in Thousands)
    Percentage of
Ownership (%)
  Fair Value
(Foreign
Currencies

in Thousands)
 

TSMC Global

 

BMW Floorplan Master Owner Trust

    Financial assets at fair value through other comprehensive income         US$ 2,804     N/A   US$ 2,804    
 

CarMax Auto Owner Trust

            US$ 2,619     N/A   US$ 2,619    
 

BENCHMARK 2018-B4

            US$ 2,000     N/A   US$ 2,000    
 

Nelnet Student Loan Trust 2010-4

            US$ 1,878     N/A   US$ 1,878    
 

Nelnet Student Loan Trust 2006-2

            US$ 1,786     N/A   US$ 1,786    
 

BENCHMARK 2018-B6 Mortgage Trust

            US$ 1,778     N/A   US$ 1,778    
 

WFRBS Commercial Mortgage Trust 2013-C14

            US$ 1,568     N/A   US$ 1,568    
 

Nelnet Student Loan Trust 2018-3

            US$ 1,550     N/A   US$ 1,550    
 

Mercedes-Benz Auto Lease Trust 2016-A

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

Enterprise Fleet Financing LLC

            US$ 1,356     N/A   US$ 1,356    
 

Hyundai Auto Receivables Trust

            US$ 998     N/A   US$ 998    
 

Mercedes-Benz Auto Receivables Trust 2015-1

            US$ 912     N/A   US$ 912    
 

ARI Fleet Lease Trust 2018-A

            US$ 838     N/A   US$ 838    
 

280 Park Avenue Mortgage Trust

            US$ 831     N/A   US$ 831    
 

CFCRE Commercial Mortgage Trust 2011-C1

            US$ 783     N/A   US$ 783    
 

Ally Auto Receivables Trust 2018-3

            US$ 700     N/A   US$ 700    
 

DBUBS 2011-LC2 Mortgage Trust

            US$ 513     N/A   US$ 513    
 

CD 2016-CD2 Mortgage Trust

            US$ 495     N/A   US$ 495    
 

Commercial paper

             
 

Oversea-Chinese Banking Corp L

    Financial assets at fair value through other comprehensive income         US$ 2,969     N/A   US$ 2,969    
 

Sumitomo Mitsui Trust Bank Limited/New York

            US$ 2,000     N/A   US$ 2,000    
 

Royal Bank of Canada/New York NY

            US$ 2,000     N/A   US$ 2,000    
 

Toronto-Dominion Bank/NY

            US$ 1,500     N/A   US$ 1,500    
 

Non-publicly traded equity investments

             
 

Primavera Capital Fund II L.P.

    Financial assets at fair value through other comprehensive income         US$ 72,189     4   US$ 72,189    

VTAF II

 

Non-publicly traded equity investments

             
 

Sentelic

    Financial assets at fair value through other comprehensive income     1,019     US$ 2,054     4   US$ 2,054    
 

Aether Systems, Inc.

        1,085     US$ 356     20   US$ 356    
 

5V Technologies, Inc.

        963     US$ 316     2   US$ 316    
 

Publicly traded stocks

             
 

Aquantia

    Financial assets at fair value through other comprehensive income     85     US$ 1,084       US$ 1,084    

VTAF III

 

Non-publicly traded equity investments

             
 

LiquidLeds Lighting Corp.

    Financial assets at fair value through other comprehensive income     1,600     US$ 800     11   US$ 800    
 

Neoconix, Inc.

        4,147     US$ 174       US$ 174    

ISDF

 

Non-publicly traded equity investments

             
 

Sonics, Inc.

    Financial assets at fair value through other comprehensive income     230           3        

ISDF II

 

Non-publicly traded equity investments

             
 

Sonics, Inc.

    Financial assets at fair value through other comprehensive income     542           8        

(Continued)

 

- 78 -


Held Company
Name

 

Marketable Securities Type and Name

  Relationship
with the
Company
 

Financial Statement Account

  SEPTEMBER 30, 2018     Note  
  Shares/Units
(In Thousands)
    Carrying Value
(Foreign
Currencies

in Thousands)
    Percentage of
Ownership (%)
  Fair Value
(Foreign
Currencies
in Thousands)
 

Growth Fund

 

Non-publicly traded equity investments

             
 

Innovium, Inc.

    Financial assets at fair value through other comprehensive income     451     US$ 2,393       US$ 2,393    
 

CNEX Labs, Inc.

        237     US$ 775       US$ 775    

(Concluded)

 

- 79 -


TABLE 4

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

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

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018

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

 

 

Company Name

 

Marketable

Securities
Type and Name

 

Financial Statement
Account

  Counter-party     Nature of
Relationship
    Beginning Balance     Acquisition     Disposal     Ending Balance (Note)  
  Shares/Units
(In Thousands)
    Amount     Shares/Units
(In Thousands)
    Amount     Shares/Units
(In Thousands)
    Amount     Carrying Value     Gain/Loss on
Disposal
    Shares/Units
(In Thousands)
    Amount  

TSMC

 

Non-publicly traded equity investments

                         
 

TSMC Global

 

Investments accounted for using equity method

          Subsidiary       9     $ 309,211,877       2     $ 59,182,280           $     $     $       11     $ 384,742,480  
 

TSMC Nanjing

 

          Subsidiary             26,493,740             2,361,320                                     23,679,547  
 

Publicly traded stocks

                         
 

Motech

 

Financial assets at fair value through other comprehensive income

                58,320       1,309,279                   45,223       542,229       1,420,002       (877,773     13,097       132,932  

TSMC Global

 

Corporate bond

                         
 

Bank of America Corp

 

Financial assets at fair value through other comprehensive income

                    US$ 40,876           US$ 10,270           US$ 5,393     US$ 5,426     US$ (33         US$ 44,855  
 

CVS Health Corp

 

                    US$ 10,018           US$ 16,959           US$ 199     US$ 198     US$ 1           US$ 26,700  
 

Inter American Development Bank

 

                    US$           US$ 21,168           US$     US$     US$           US$ 21,164  
 

Celgene Corp

 

                    US$ 6,181           US$ 10,575           US$ 8,076     US$ 8,258     US$ (182         US$ 8,370  
 

Cooperatieve Rabobank UA/NY

 

                    US$ 1,450           US$ 11,593           US$ 6,683     US$ 6,798     US$ (115         US$ 6,252  
 

Asian Development Bank

 

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

Government bond

                         
 

United States Treasury Note/Bond

 

Financial assets at fair value through other comprehensive income

                    US$ 202,689           US$ 373,192           US$ 302,629     US$ 304,216     US$ (1,587         US$ 267,884  
 

United States Treasury Floating Rate Note

 

                    US$ 49,901           US$ 99,327           US$ 79,979     US$ 79,935     US$ 44           US$ 69,244  
 

United States Treasury Bill

 

                    US$ 2,997           US$ 153,233           US$ 147,939     US$ 147,908     US$ 31           US$ 8,381  
 

Agency bonds/Agency mortgage-backed securities

                         
 

FNMA TBA 30 Yr 5

 

Financial assets at fair value through other comprehensive income

                    US$           US$ 139,880           US$ 109,786     US$ 109,735     US$ 51           US$ 30,000  
 

FNMA Pool BM4495

 

                    US$           US$ 29,117           US$ 184     US$ 185     US$ (1         US$ 28,880  
 

FNMA Pool BM1948

 

                    US$ 41,275           US$ 5,537           US$ 17,499     US$ 18,617     US$ (1,118         US$ 27,609  
 

FED HM LN PC Pool G61603

 

                    US$           US$ 27,059           US$     US$     US$           US$ 27,147  
 

FNMA Pool CA2352

 

                    US$           US$ 25,863           US$     US$     US$           US$ 26,040  
 

FNMA Pool BM4493

 

                    US$           US$ 18,366           US$ 639     US$ 640     US$ (1         US$ 17,665  
 

GNMA II Pool MA5468

 

                    US$           US$ 17,751           US$     US$     US$           US$ 17,662  
 

Government National Mortgage Association

 

                    US$           US$ 16,433           US$     US$     US$           US$ 16,094  

(Continued)

 

- 80 -


Company Name

 

Marketable

Securities
Type and Name

 

Financial Statement
Account

  Counter-party   Nature of
Relationship
  Beginning Balance     Acquisition     Disposal     Ending Balance (Note)  
  Shares/Units
(In Thousands)
    Amount     Shares/Units
(In Thousands)
    Amount     Shares/Units
(In Thousands)
    Amount     Carrying Value     Gain/Loss on
Disposal
    Shares/Units
(In Thousands)
    Amount  

TSMC Global

 

FED HM LN PC Pool G61553

 

Financial assets at fair value through other comprehensive income

            US$           US$ 15,372           US$     US$     US$           US$ 15,275  
 

FNMA Pool CA2169

 

            US$           US$ 15,368           US$     US$     US$           US$ 15,248  
 

GNMA II Pool MA5332

 

            US$           US$ 26,202           US$ 13,130     US$ 13,116     US$ 14           US$ 13,006  
 

GNMA II TBA 30 Yr 5

 

            US$           US$ 12,328           US$     US$     US$           US$ 12,275  
 

Government National Mortgage Association

 

            US$           US$ 10,494           US$     US$     US$           US$ 10,231  
 

FNMA TBA 15 Yr 3

 

            US$ 2,015           US$ 55,925           US$ 51,392     US$ 51,432     US$ (40         US$ 6,514  
 

FNMA TBA 30 Yr 4.5

 

            US$ 15,758           US$ 112,478           US$ 125,642     US$ 125,894     US$ (252         US$ 2,389  
 

GNMA II TBA 30 Yr 4

 

            US$ 2,378           US$ 38,275           US$ 38,302     US$ 38,349     US$ (47         US$ 2,319  
 

FNMA TBA 15 Yr 3.5

 

            US$           US$ 30,355           US$ 28,336     US$ 28,341     US$ (5         US$ 2,010  
 

GNMA II TBA 30 Yr 3.5

 

            US$ 145           US$ 38,929           US$ 37,352     US$ 37,428     US$ (76         US$ 1,643  
 

FNMA TBA 30 Yr 3.5

 

            US$ 2,866           US$ 57,051           US$ 59,733     US$ 59,627     US$ 106           US$ 295  
 

FNMA TBA 30 Yr 3

 

            US$           US$ 123,851           US$ 123,395     US$ 123,851     US$ (456         US$  
 

FED HM LN PC Pool G60594

 

            US$ 11,599           US$           US$ 11,191     US$ 11,711     US$ (520         US$  
 

Federal Home Loan Bank Discount Notes

 

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

Asset-backed securities

                         
 

Citibank Credit Card Issuance Trust

 

Financial assets at fair value through other comprehensive income

            US$ 48,328           US$ 27,950           US$ 20,343     US$ 20,346     US$ (3         US$ 55,773  
 

Discover Card Execution Note Trust

 

            US$ 45,722           US$ 16,266           US$ 17,729     US$ 17,754     US$ (25         US$ 44,159  
 

Chase Issuance Trust

 

            US$ 39,211           US$ 17,750           US$ 16,973     US$ 16,982     US$ (9         US$ 39,969  
 

American Express Credit Account Master Trust

 

            US$ 12,805           US$ 25,878           US$ 11,239     US$ 11,233     US$ 6           US$ 27,427  
 

Capital One Multi-Asset Execution Trust

 

            US$ 22,544           US$           US$ 15,223     US$ 15,227     US$ (4         US$ 7,302  

 

Note:

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

(Concluded)

 

- 81 -


TABLE 5

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

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

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018

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

 

 

    Types of      

Transaction
Amount

(Foreign

Currencies in

            Nature of  

 

Prior Transaction of Related Counter-party

  Price   Purpose of   Other

Company Name

 

Property

 

Transaction Date

  Thousands)    

Payment Term

 

Counter-party

  Relationships   Owner   Relationships   Transfer Date   Amount  

Reference

 

Acquisition

  Terms

TSMC

 

Fab

 

March 10, 2017 to January 25, 2018

  $ 303,592    

Monthly settlement by the construction progress and acceptance

 

HSIEH KUN CO., LTD

    N/A   N/A   N/A   N/A  

Price comparison and price negotiation

 

Manufacturing purpose

  None
 

Fab

 

March 17, 2017 to March 12, 2018

    301,341    

Monthly settlement by the construction progress and acceptance

 

Jer Yih Electrical Eng. Co.

    N/A   N/A   N/A   N/A  

Price comparison and price negotiation

 

Manufacturing purpose

  None
 

Fab

 

March 21, 2017 to August 6, 2018

    607,800    

Monthly settlement by the construction progress and acceptance

 

TRUSVAL TECHNOLOGY CO., LTD.

    N/A   N/A   N/A   N/A  

Price comparison and price negotiation

 

Manufacturing purpose

  None
 

Fab

 

April 10, 2017 to March 30, 2018

    382,672    

Monthly settlement by the construction progress and acceptance

 

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

    N/A   N/A   N/A   N/A  

Price comparison and price negotiation

 

Manufacturing purpose

  None
 

Fab

 

April 18, 2017 to June 4, 2018

    1,334,403    

Monthly settlement by the construction progress and acceptance

 

CHEN FULL INTERNATIONAL CO., LTD.

    N/A   N/A   N/A   N/A  

Price comparison and price negotiation

 

Manufacturing purpose

  None
 

Fab

 

April 20, 2017 to April 19, 2018

    300,874    

Monthly settlement by the construction progress and acceptance

 

Unique Station International Corp.

    N/A   N/A   N/A   N/A  

Price comparison and price negotiation

 

Manufacturing purpose

  None
 

Fab

 

April 21, 2017 to June 12, 2018

    1,841,951    

Monthly settlement by the construction progress and acceptance

 

Organo Technology Co., Ltd.

    N/A   N/A   N/A   N/A  

Price comparison and price negotiation

 

Manufacturing purpose

  None
 

Fab

 

April 25, 2017 to July 31, 2018

    2,559,574    

Monthly settlement by the construction progress and acceptance

 

YANKEY ENGINEERING CO., LTD.

    N/A   N/A   N/A   N/A  

Price comparison and price negotiation

 

Manufacturing purpose

  None
 

Fab

 

May 12, 2017 to May 10, 2018

    413,901    

Monthly settlement by the construction progress and acceptance

 

HUAN YU TECHNOLOGIES CO., LTD.

    N/A   N/A   N/A   N/A  

Price comparison and price negotiation

 

Manufacturing purpose

  None
 

Fab

 

May 25, 2017 to June 21, 2018

    2,187,982    

Monthly settlement by the construction progress and acceptance

 

MEGA UNION TECHNOLOGY INCORPORATED

    N/A   N/A   N/A   N/A  

Price comparison and price negotiation

 

Manufacturing purpose

  None
 

Fab

 

July 11, 2017 to July 31, 2018

    1,422,454    

Monthly settlement by the construction progress and acceptance

 

TASA Construction Corporation

    N/A   N/A   N/A   N/A  

Price comparison and price negotiation

 

Manufacturing purpose

  None
 

Fab

 

July 24, 2017 to June 21, 2018

    347,431    

Monthly settlement by the construction progress and acceptance

 

MandarTech Interiors Inc.

    N/A   N/A   N/A   N/A  

Price comparison and price negotiation

 

Manufacturing purpose

  None

(Continued)

 

- 82 -


    Types of      

Transaction
Amount

(Foreign

Currencies in

            Nature of  

 

Prior Transaction of Related Counter-party

  Price   Purpose of   Other

Company Name

 

Property

 

Transaction Date

  Thousands)    

Payment Term

 

Counter-party

  Relationships   Owner   Relationships   Transfer Date   Amount  

Reference

 

Acquisition

  Terms

TSMC

 

Fab

 

July 28, 2017 to April 19, 2018

  $ 348,757    

Monthly settlement by the construction progress and acceptance

 

J.J. PAN AND PARTNERS , ARCHITECTS AND PLANNERS

    N/A   N/A   N/A   N/A  

Price comparison and price negotiation

 

Manufacturing purpose

  None
 

Fab

 

July 28, 2017 to May 8, 2018

    574,621    

Monthly settlement by the construction progress and acceptance

 

Trane Taiwan Distribution Limited

    N/A   N/A   N/A   N/A  

Price comparison and price negotiation

 

Manufacturing purpose

  None
 

Fab

 

August 8, 2017 to June 28, 2018

    337,069    

Monthly settlement by the construction progress and acceptance

 

Lumax International Corp., Ltd

    N/A   N/A   N/A   N/A  

Price comparison and price negotiation

 

Manufacturing purpose

  None
 

Fab

 

August 16, 2017 to July 31, 2018

    1,012,550    

Monthly settlement by the construction progress and acceptance

 

Air Liquide Far Eastern

    N/A   N/A   N/A   N/A  

Price comparison and price negotiation

 

Manufacturing purpose

  None
 

Fab

 

September 5, 2017 to June 1, 2018

    1,224,738    

Monthly settlement by the construction progress and acceptance

 

Uangyih-Tech Industrial Co., Ltd.

    N/A   N/A   N/A   N/A  

Price comparison and price negotiation

 

Manufacturing purpose

  None
 

Fab

 

September 14, 2017 to March 22, 2018

    784,003    

Monthly settlement by the construction progress and acceptance

 

Siemens Ltd.

    N/A   N/A   N/A   N/A  

Price comparison and price negotiation

 

Manufacturing purpose

  None
 

Fab

 

November 9, 2017 to June 20, 2018

    1,773,165    

Monthly settlement by the construction progress and acceptance

 

MARKETECH INTERNATIONAL CORP.

    N/A   N/A   N/A   N/A  

Price comparison and price negotiation

 

Manufacturing purpose

  None
 

Fab

 

November 10, 2017 to May 24, 2018

    305,783    

Monthly settlement by the construction progress and acceptance

 

DESICCANT TECHNOLOGY CO., LTD.

    N/A   N/A   N/A   N/A  

Price comparison and price negotiation

 

Manufacturing purpose

  None
 

Fab

 

November 13, 2017 to August 13, 2018

    948,048    

Monthly settlement by the construction progress and acceptance

 

Chen Yuan International Co., Ltd

    N/A   N/A   N/A   N/A  

Price comparison and price negotiation

 

Manufacturing purpose

  None
 

Fab

 

November 14, 2017 to April 16, 2018

    1,724,550    

Monthly settlement by the construction progress and acceptance

 

PAN ASIA Corp.

    N/A   N/A   N/A   N/A  

Price comparison and price negotiation

 

Manufacturing purpose

  None
 

Fab

 

December 5, 2017 to July 31, 2018

    7,219,028    

Monthly settlement by the construction progress and acceptance

 

UNITED INTEGRATED SERVICES CO., LTD.

    N/A   N/A   N/A   N/A  

Price comparison and price negotiation

 

Manufacturing purpose

  None

(Continued)

 

- 83 -


    Types of      

Transaction
Amount

(Foreign

Currencies in

            Nature of  

 

Prior Transaction of Related Counter-party

  Price   Purpose of   Other

Company Name

 

Property

 

Transaction Date

  Thousands)    

Payment Term

 

Counter-party

  Relationships   Owner   Relationships   Transfer Date   Amount  

Reference

 

Acquisition

  Terms

TSMC

 

Fab

 

December 13, 2017 to July 23, 2018

  $ 2,457,695    

Monthly settlement by the construction progress and acceptance

 

Taiwan Puritic Corp.

    N/A   N/A   N/A   N/A  

Price comparison and price negotiation

 

Manufacturing purpose

  None
 

Fab

 

December 14, 2017 to May 23, 2018

    305,566    

Monthly settlement by the construction progress and acceptance

 

WHOLETECH SYSTEM HITECH LIMITED

    N/A   N/A   N/A   N/A  

Price comparison and price negotiation

 

Manufacturing purpose

  None
 

Fab

 

December 26, 2017 to February 13, 2018

    525,172    

Monthly settlement by the construction progress and acceptance

 

ABB Ltd.

    N/A   N/A   N/A   N/A  

Price comparison and price negotiation

 

Manufacturing purpose

  None
 

Fab

 

January 4, 2018 to April 16, 2018

    1,744,533    

Monthly settlement by the construction progress and acceptance

 

KEDGE Construction Co., Ltd.

    N/A   N/A   N/A   N/A  

Price comparison and price negotiation

 

Manufacturing purpose

  None
 

Fab

 

January 5, 2018 to April 16, 2018

    315,886    

Monthly settlement by the construction progress and acceptance

 

Shihlin Electric & Engineering Corp. Tainan Branch

    N/A   N/A   N/A   N/A  

Price comparison and price negotiation

 

Manufacturing purpose

  None
 

Fab

 

February 5, 2018 to July 31, 2018

    2,564,709    

Monthly settlement by the construction progress and acceptance

 

L&K ENGINEERING CO.,LTD.

    N/A   N/A   N/A   N/A  

Price comparison and price negotiation

 

Manufacturing purpose

  None
 

Fab

 

February 6, 2018 to August 13, 2018

    5,387,421    

Monthly settlement by the construction progress and acceptance

 

Fu Tsu Construction Co., Ltd.

    N/A   N/A   N/A   N/A  

Price comparison and price negotiation

 

Manufacturing purpose

  None
 

Fab

 

February 12, 2018 to April 16, 2018

    378,445    

Monthly settlement by the construction progress and acceptance

 

AMPOWER INTERNATIONAL ENTERPRISE

    N/A   N/A   N/A   N/A  

Price comparison and price negotiation

 

Manufacturing purpose

  None
 

Fab

 

February 13, 2018 to June 25, 2018

    1,415,232    

Monthly settlement by the construction progress and acceptance

 

Cica-Huntek Chemical Technology Taiwan Co., Ltd

    N/A   N/A   N/A   N/A  

Price comparison and price negotiation

 

Manufacturing purpose

  None
 

Fab

 

April 13, 2018 to April 16, 2018

    410,000    

Monthly settlement by the construction progress and acceptance

 

Lead Fu Industrials Corp.

    N/A   N/A   N/A   N/A  

Price comparison and price negotiation

 

Manufacturing purpose

  None
 

Fab

 

April 16, 2018

    2,691,210    

Monthly settlement by the construction progress and acceptance

 

DA CIN Construction Co., Ltd.

    N/A   N/A   N/A   N/A  

Price comparison and price negotiation

 

Manufacturing purpose

  None

(Continued)

 

- 84 -


    Types of      

Transaction
Amount

(Foreign

Currencies in

            Nature of  

 

Prior Transaction of Related Counter-party

  Price   Purpose of   Other

Company Name

 

Property

 

Transaction Date

  Thousands)    

Payment Term

 

Counter-party

  Relationships   Owner   Relationships   Transfer Date   Amount  

Reference

 

Acquisition

  Terms

TSMC

 

Fab

 

August 16, 2017 to July 31, 2018

  $ 617,447    

Monthly settlement by the construction progress and acceptance

 

Kao Hsin Engineering Co., Ltd.

  —     N/A   N/A   N/A   N/A  

Price comparison and price negotiation

 

Manufacturing purpose

  None

(Concluded)

 

- 85 -


TABLE 6

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

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

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018

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

 

 

                    Notes/Accounts
Payable or
Receivable
     
           

Transaction Details

      Ending Balance            
               

Amount

(Foreign Currencies

    % to         Abnormal Transaction   (Foreign
Currencies in
    % to      

Company Name

 

Related Party

 

Nature of Relationships

 

Purchases/Sales

  in Thousands)     Total    

Payment Terms

  Unit Price   Payment Terms   Thousands)     Total     Note

TSMC

 

TSMC North America

  Subsidiary   Sales   $ 449,319,589       58    

Net 30 days from invoice date

(Note)

    Note   $ 86,509,418       69    
 

GUC

  Associate   Sales     5,356,073       1    

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

        1,338,059       1    
 

TSMC China

  Subsidiary   Purchases     13,944,138       19    

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

        (1,089,594     3    
 

TSMC Nanjing

  Subsidiary   Purchases     7,185,512       10    

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

        (1,434,737     4    
 

WaferTech

  Indirect subsidiary   Purchases     6,406,552       9    

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

        (1,329,743     4    
 

VIS

  Associate   Purchases     3,985,293       6    

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

        (467,874     1    
 

SSMC

  Associate   Purchases     2,708,201       4    

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

        (367,328     1    

TSMC North America

 

GUC

  Associate of TSMC   Sales    

(US$

1,421,992

47,625)

 

 

       

Net 30 days from invoice date

       

(US$

208,918

6,849)

 

 

       

VisEra Tech

 

Xintec

  Associate of TSMC   Sales     343,851       18    

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

        210,096       37    

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

 

- 86 -


TABLE 7

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

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

SEPTEMBER 30, 2018

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

 

 

Company Name

  

Related Party

  

Nature of Relationships

   Ending Balance
(Foreign Currencies
in Thousands)
     Turnover Days
(Note 1)
  

 

Overdue

   Amounts Received
in Subsequent
Period
     Allowance for
Bad Debts
 
   Amount      Action Taken

TSMC

  

TSMC North America

  

Subsidiary

   $ 87,305,818      54    $ 5,745,109         $ 45,056,581      $  
  

GUC

  

Associate

     1,338,196      54                        
  

TSMC Nanjing

  

Subsidiary

     121,987      Note 2                        

TSMC China

  

TSMC Nanjing

  

The same parent company

    

(RMB 

30,403,767

    6,858,508

 

   Note 2                        
  

TSMC

  

Parent company

    

(RMB 

1,089,594

245,793

 

   25                        

TSMC Nanjing

  

TSMC

  

Parent company

    

(RMB

1,434,737

 323,652

 

   28                        

WaferTech

  

TSMC

  

The ultimate parent of the Company

    

(USD 

1,329,743

43,591

 

   56     

(USD 

    710,084

23,278

 

       

(USD 

710,084

23,278

 

      

TSMC Technology

  

TSMC

  

The ultimate parent of the Company

    

(USD 

215,971

7,080

 

   Note 2                        

TSMC North America

  

TSMC

  

Parent company

    

(USD 

108,717

3,564)

 

 

   Note 2     

(USD 

10,658

349

 

       

(USD 

10,658

349

 

      

TSMC Japan

  

TSMC

  

Parent company

    

(JPY 

100,061

370,735)

 

 

   Note 2     

(JPY 

64,235

237,994

 

       

(JPY 

64,235

237,994

 

      

 

Note 1:

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

Note 2:

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

 

- 87 -


TABLE 8

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

INTERCOMPANY RELATIONSHIPS AND SIGNIFICANT INTERCOMPANY TRANSACTIONS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018

(Amounts in Thousands of New Taiwan Dollars)

 

 

No.

  

Company Name

  

Counter Party

   Nature of
Relationship

(Note 1)
  

Intercompany Transactions

  

Financial Statements Item

   Amount      Terms
(Note 2)
   Percentage of
Consolidated Net Revenue
or Total Assets

0

   TSMC    TSMC North America    1   

Net revenue from sale of goods

   $ 449,319,589         61%
           

Receivables from related parties

     86,509,418         4%
           

Other receivables from related parties

     796,400        
           

Payables to related parties

     108,717        
      TSMC Japan    1   

Marketing expenses - commission

     167,385        
           

Payables to related parties

     100,061        
      TSMC Europe    1   

Marketing expenses - commission

     355,276        
      TSMC China    1   

Purchases

     13,944,138         2%
           

Marketing expenses - commission

     115,561        
           

Payables to related parties

     1,089,594        
      TSMC Nanjing    1   

Purchases

     7,185,512         1%
           

Proceeds from disposal of property, plant and equipment

     2,539,445        
           

Other receivables from related parties

     121,987        
           

Payables to related parties

     1,434,737        
      TSMC Canada    1   

Research and development expenses

     221,935        
      TSMC Technology    1   

Research and development expenses

     1,546,508        
           

Payables to related parties

     215,971        
      WaferTech    1   

Purchases

     6,406,552         1%
           

Payables to related parties

     1,329,743        

1

   TSMC China    TSMC Nanjing    3   

Other receivables from related parties

     30,403,767         2%

 

Note 1:

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

No. 3 represents the transactions between subsidiaries.

Note 2:

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

 

- 88 -


TABLE 9

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

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

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018

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

 

 

                Original Investment Amount     Balance as of September 30, 2018     Net Income     Share of
Profits/Losses
     

Investor
Company

 

Investee

Company

 

Location

 

Main Businesses and Products

  September 30,
2018
(Foreign
Currencies in
Thousands)
    December 31,
2017
(Foreign
Currencies in
Thousands)
    Shares (In
Thousands)
    Percentage of
Ownership
  Carrying
Value
(Foreign
Currencies in
Thousands)
    (Losses) of the
Investee
(Foreign
Currencies in
Thousands)
    of Investee
(Note 1)
(Foreign
Currencies in
Thousands)
    Note

TSMC

  TSMC Global   Tortola, British Virgin Islands   Investment activities   $ 352,072,509     $ 292,890,229       11     100   $ 384,742,480     $ 6,581,643     $ 6,581,643     Subsidiary
  TSMC Partners   Tortola, British Virgin Islands  

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

    31,456,130       31,456,130       988,268     100     53,066,126       1,909,351       1,909,351     Subsidiary
  VIS   Hsin-Chu, Taiwan  

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

    10,180,677       10,180,677       464,223     28     8,450,652       4,238,101       1,196,560     Associate
  SSMC   Singapore  

Manufacturing and selling of integrated circuits and other semiconductor devices

    5,120,028       5,120,028       314     39     5,317,308       2,845,054       1,103,596     Associate
  VisEra Tech   Hsin-Chu, Taiwan  

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

    5,005,171       5,005,171       253,120     87     4,390,530       249,643       217,022     Subsidiary
  TSMC North America   San Jose, California, U.S.A  

Selling and marketing of integrated circuits and other semiconductor devices

    333,718       333,718       11,000     100     4,324,412       206,551       206,551     Subsidiary
  Xintec   Taoyuan, Taiwan  

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

    1,988,317       1,988,317       111,282     41     1,715,711       (1,479,071     (599,872   Associate
  GUC   Hsin-Chu, Taiwan  

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

    386,568       386,568       46,688     35     1,125,928       711,727       247,966     Associate
  TSMC Europe   Amsterdam, the Netherlands  

Customer service and supporting activities

    15,749       15,749           100     441,433       31,573       31,573     Subsidiary
  VTAF III   Cayman Islands  

Investing in new start-up technology companies

    1,318,885       1,318,885           98     199,014       (6,010     (5,890   Subsidiary
  VTAF II   Cayman Islands  

Investing in new start-up technology companies

    294,300       412,831           98     154,129       (3,549     (3,478   Subsidiary
  TSMC Japan   Yokohama, Japan  

Customer service and supporting activities

    83,760       83,760       6     100     137,377       4,543       4,543     Subsidiary
  TSMC Korea   Seoul, Korea  

Customer service and supporting activities

    13,656       13,656       80     100     40,784       1,988       1,988     Subsidiary
  TSMC Solar Europe GmbH   Hamburg, Germany  

Selling of solar related products and providing customer service

    25,266       25,266       1     100     (20,369     (21     (21   Subsidiary

TSMC Partners

  TSMC Development   Delaware, U.S.A   Investing in companies involved in the manufacturing related business in the semiconductor industry    

(US$

17,904,568

586,939

 

   

(US$

17,904,568

586,939

 

        100    

(US$

28,616,530

938,093

 

   

(US$

1,458,177

48,668

 

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

Engineering support activities

    435,673       435,673           100     577,021       42,308       Note 2     Subsidiary
        (US$ 14,282   (US$ 14,282       (US$ 18,916   (US$ 1,430    
  TSMC Canada   Ontario, Canada  

Engineering support activities

    70,162       70,162       2,300     100     202,790       21,784       Note 2     Subsidiary
        (US$ 2,300   (US$ 2,300       (US$ 6,648   (US$ 731    
  ISDF   Cayman Islands  

Investing in new start-up technology companies

    14,496       14,496       583     97     506             Note 2     Subsidiary
        (US$ 475   (US$ 475       (US$ 17      
  ISDF II   Cayman Islands  

Investing in new start-up technology companies

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

VTAF III

  Growth Fund   Cayman Islands   Investing in new start-up technology companies     65,701       65,701           100     97,419       (209     Note 2     Subsidiary
        (US$ 2,154   (US$ 2,154       (US$ 3,194   (US$ (8 ))     
  Mutual-Pak   New Taipei, Taiwan  

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

   

(US$

48,605

1,593

 

   

(US$

48,605

1,593

 

    4,693     39    

(US$

21,071

691

 

   

(US$

(5,492

(190


)) 

    Note 2     Associate

(Continued)

 

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                Original Investment Amount     Balance as of September 30, 2018     Net Income     Share of
Profits/Losses
     

Investor
Company

 

Investee

Company

 

Location

 

Main Businesses and Products

  September 30,
2018
(Foreign
Currencies in
Thousands)
    December 31,
2017
(Foreign
Currencies in
Thousands)
    Shares (In
Thousands)
    Percentage of
Ownership
  Carrying
Value

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

TSMC Development

  WaferTech   Washington, U.S.A  

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

  $     $       293,637     100   $

(US$

5,195,324

170,311

 

  $

(US$

1,190,576

39,741

 

    Note 2     Subsidiary

 

Note 1:

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

Note 2:

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

 

(Concluded)

 

- 90 -


TABLE 10

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

INFORMATION ON INVESTMENT IN MAINLAND CHINA

FOR NINE MONTHS ENDED SEPTEMBER 30, 2018

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

 

 

Investee Company

 

Main Businesses and
Products

  Total Amount of
Paid-in Capital

(RMB
in Thousands)
    Method of
Investment
    Accumulated
Outflow of
Investment from
Taiwan as of
January 1, 2018

(US$ in
Thousands)
   

 

Investment

Flows

    Accumulated
Outflow of
Investment from
Taiwan as of

September 30,
2018 (US$ in
Thousands)
    Net Income
(Losses) of the
Investee
Company
    Percentage of
Ownership
  Share of
Profits/Losses
    Carrying
Amount

as of
September 30,
2018
    Accumulated
Inward
Remittance of
Earnings as

of
September 30,
2018
 
  Outflow
(US$ in
Thousands)
    Inflow  

TSMC China

 

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

  $

(RMB

18,939,667

4,502,080

 

    Note 1     $

(US$

18,939,667

596,000

 

  $     $     $

(US$

18,939,667

596,000

 

  $ 4,202,563     100%   $

 

4,206,026

(Note 2

 

  $ 53,768,320     $  

TSMC Nanjing

 

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

   

(RMB

30,521,412

6,650,119

 

    Note 1      

(US$

28,160,092

920,000

 

   

(US$

2,361,320

80,000

 

         

(US$

30,521,412

1,000,000

 

    (4,751,679   100%    

(4,752,362

(Note 2


    23,679,547        

 

Accumulated Investment in Mainland China as
of September 30, 2018

(US$ in Thousands)
     Investment Amounts Authorized by
Investment Commission, MOEA
(US$ in Thousands)
     Upper Limit on Investment  
$

(US$

49,461,079

1,596,000

 

   $

(US$

119,412,667

3,596,000

 

     Note 3  

 

Note 1:

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

Note 2:

Amount was recognized based on the reviewed financial statements.

Note 3:

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

 

- 91 -