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 August 2017

 

 

Taiwan Semiconductor Manufacturing Company Ltd.

(Translation of Registrant’s Name Into English)

 

 

No. 8, Li-Hsin Rd. 6,

Hsinchu Science Park,

Taiwan

(Address of Principal Executive Offices)

 

 

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

Form 20-F  ☒            Form 40-F  ☐

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

Yes  ☐            No  ☒

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

 

 

 

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SIGNATURES

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

 

				Taiwan Semiconductor Manufacturing Company Ltd.
Date: Aug 14, 2017				By		/s/ Lora Ho
						Lora Ho
						Senior Vice President & Chief Financial Officer

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		Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries
		Consolidated Financial Statements for the Six Months Ended June 30, 2017 and 2016 and Independent Accountants’ Review Report

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INDEPENDENT ACCOUNTANTS’ REVIEW REPORT

The Board of Directors and Shareholders

Taiwan Semiconductor Manufacturing Company Limited

We have reviewed the accompanying consolidated balance sheets of Taiwan Semiconductor Manufacturing Company Limited and subsidiaries (the “Company”) as of June 30, 2017 and 2016 and the related consolidated statements of comprehensive income for the three months ended June 30, 2017 and 2016 and for the six months ended June 30, 2017 and 2016, as well as the consolidated statements of changes in equity and cash flows for the six months ended June 30, 2017 and 2016. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to issue a report on these consolidated financial statements based on our reviews.

We conducted our reviews in accordance with Statement on Auditing Standards No. 36, “Review of Financial Statements,” issued by the Auditing Standards Committee of the Accounting Research and Development Foundation of the Republic of China. A review consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the Republic of China, the objective of which is the expression of an opinion regarding the consolidated financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our reviews, we are not aware of any material modifications that should be made to the consolidated financial statements referred to above for them to be in conformity with the Guidelines 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.

 

Deloitte & Touche

Taipei, Taiwan

Republic of China

August 8, 2017

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 accountants’ 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 accountants’ review report and consolidated financial statements shall prevail.

 

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Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED BALANCE SHEETS

(In Thousands of New Taiwan Dollars)

 

 

		June 30, 2017 (Reviewed)								December 31, 2016 (Audited)								June 30, 2016 (Reviewed)
		Amount				%				Amount				%				Amount				%
ASSETS
CURRENT ASSETS
Cash and cash equivalents (Note 6)		$	570,466,958				29			$	541,253,833				29			$	622,359,302				35
Financial assets at fair value through profit or loss (Note 7)			4,995,251				—				6,451,112				—				1,820,907				—
Available-for-sale financial assets (Notes 8 and 14)			76,252,652				4				67,788,767				4				36,322,049				2
Held-to-maturity financial assets (Note 9)			7,210,380				—				16,610,116				1				7,362,302				—
Hedging derivative financial assets (Notes 4 and 10)			24,517				—				5,550				—				—				—
Notes and accounts receivable, net (Note 11)			109,893,282				6				128,335,271				7				111,300,187				6
Receivables from related parties (Note 29)			436,001				—				969,559				—				424,210				—
Other receivables from related parties (Note 29)			1,532,321				—				146,788				—				1,546,979				—
Inventories (Notes 12 and 33)			61,010,525				3				48,682,233				3				60,705,814				4
Other financial assets (Notes 30 and 33)			2,450,135				—				4,100,475				—				7,419,643				—
Other current assets (Note 17)			3,777,530				—				3,385,422				—				3,263,678				—
Total current assets			838,049,552				42				817,729,126				44				852,525,071				47
NONCURRENT ASSETS
Held-to-maturity financial assets (Note 9)			20,529,204				1				22,307,561				1				27,266,867				2
Financial assets carried at cost (Note 13)			4,313,269				—				4,102,467				—				4,066,621				—
Investments accounted for using equity method (Note 14)			18,976,025				1				19,743,888				1				22,064,632				1
Property, plant and equipment (Note 15)			1,077,626,759				54				997,777,687				53				875,870,205				49
Intangible assets (Note 16)			14,118,892				1				14,614,846				1				14,066,562				1
Deferred income tax assets (Note 4)			10,010,278				1				8,271,421				—				6,643,607				—
Refundable deposits			742,707				—				407,874				—				441,447				—
Other noncurrent assets (Note 17)			2,067,091				—				1,500,432				—				1,546,548				—
Total noncurrent assets			1,148,384,225				58				1,068,726,176				56				951,966,489				53
TOTAL		$	1,986,433,777				100			$	1,886,455,302				100			$	1,804,491,560				100
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Short-term loans (Note 18)		$	54,745,200				3			$	57,958,200				3			$	38,739,600				2
Financial liabilities at fair value through profit or loss (Note 7)			82,552				—				191,135				—				178,704				—
Hedging derivative financial liabilities (Notes 4 and 10)			19				—				—				—				4,217				—
Accounts payable			24,509,899				1				26,062,351				2				22,117,148				1
Payables to related parties (Note 29)			1,101,776				—				1,262,174				—				1,037,116				—
Salary and bonus payable			10,042,918				1				13,681,817				1				9,843,554				1
Accrued profit sharing bonus to employees and compensation to directors and supervisors (Notes 22 and 27)			33,376,142				2				22,894,006				1				30,365,818				2
Payables to contractors and equipment suppliers			50,376,846				2				63,154,514				3				48,102,264				3
Cash dividends payable (Note 22)			181,626,763				9				—				—				155,696,382				9
Income tax payable (Note 4)			33,463,459				2				40,306,054				2				31,168,780				2
Provisions (Note 19)			13,818,216				1				18,037,789				1				9,495,889				—
Long-term liabilities - current portion (Note 20)			79,865,605				4				38,109,680				2				22,010,000				1
Accrued expenses and other current liabilities (Notes 21 and 29)			40,497,750				2				36,581,553				2				29,979,582				2
Total current liabilities			523,507,145				27				318,239,273				17				398,739,054				23
NONCURRENT LIABILITIES
Bonds payable (Note 20)			99,300,000				5				153,093,557				8				181,276,211				10
Long-term bank loans			16,940				—				21,780				—				26,300				—
Deferred income tax liabilities (Note 4)			160,709				—				141,183				—				3,631				—
Net defined benefit liability (Note 4)			8,556,640				—				8,551,408				—				7,456,666				—
Guarantee deposits (Note 21)			10,818,377				1				14,670,433				1				17,950,414				1
Others			1,708,321				—				1,686,542				—				1,708,306				—
Total noncurrent liabilities			120,560,987				6				178,164,903				9				208,421,528				11
Total liabilities			644,068,132				33				496,404,176				26				607,160,582				34
EQUITY ATTRIBUTABLE TO SHAREHOLDERS OF THE PARENT
Capital stock (Note 22)			259,303,805				13				259,303,805				14				259,303,805				14
Capital surplus (Note 22)			56,282,780				3				56,272,304				3				56,263,141				3
Retained earnings (Note 22)
Appropriated as legal capital reserve			241,722,663				12				208,297,945				11				208,297,945				12
Unappropriated earnings			802,672,760				40				863,710,224				46				667,701,172				37
			1,044,395,423				52				1,072,008,169				57				875,999,117				49
Others (Note 22)			(18,296,511	)			(1	)			1,663,983				—				4,888,074				—
Equity attributable to shareholders of the parent			1,341,685,497				67				1,389,248,261				74				1,196,454,137				66
NONCONTROLLING INTERESTS			680,148				—				802,865				—				876,841				—
Total equity			1,342,365,645				67				1,390,051,126				74				1,197,330,978				66
TOTAL		$	1,986,433,777				100			$	1,886,455,302				100			$	1,804,491,560				100

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

 

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Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

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

(Reviewed, Not Audited)

 

 

		For the Three Months Ended June 30																For the Six Months Ended June 30
		2017								2016								2017								2016
		Amount				%				Amount				%				Amount				%				Amount				%
NET REVENUE (Notes 23, 29 and 35)		$	213,855,212				100			$	221,809,846				100			$	447,769,612				100			$	425,305,207				100
COST OF REVENUE (Notes 12, 27, 29 and 33)			105,101,969				49				107,468,601				48				217,530,703				49				219,593,495				52
GROSS PROFIT BEFORE UNREALIZED GROSS PROFIT ON SALES TO ASSOCIATES			108,753,243				51				114,341,245				52				230,238,909				51				205,711,712				48
UNREALIZED GROSS PROFIT ON SALES TO ASSOCIATES			(44,589	)			—				(7,009	)			—				(40,619	)			—				(39,898	)			—
GROSS PROFIT			108,708,654				51				114,334,236				52				230,198,290				51				205,671,814				48
OPERATING EXPENSES (Notes 27 and 29)
Research and development			19,057,456				9				16,903,540				8				38,469,849				8				32,522,503				7
General and administrative			4,927,159				2				4,667,198				2				10,174,762				2				8,512,133				2
Marketing			1,382,199				1				1,436,902				1				2,878,686				1				2,852,001				1
Total operating expenses			25,366,814				12				23,007,640				11				51,523,297				11				43,886,637				10
OTHER OPERATING INCOME AND EXPENSES, NET (Note 27)			(86,439	)			—				(5,595	)			—				(67,202	)			—				3,138				—
INCOME FROM OPERATIONS (Note 35)			83,255,401				39				91,321,001				41				178,607,791				40				161,788,315				38
NON-OPERATING INCOME AND EXPENSES
Share of profits of associates			618,451				—				892,266				—				1,285,261				—				1,733,161				—
Other income			2,626,210				1				1,792,766				1				4,731,189				1				3,125,355				1
Foreign exchange loss, net (Note 34)			(551,533	)			—				(807,218	)			—				(451,738	)			—				(1,900,836	)			—
Finance costs			(839,913	)			—				(821,425	)			—				(1,656,577	)			—				(1,672,005	)			—
Other gains and losses (Note 24)			1,008,851				—				1,029,001				—				1,424,040				—				2,588,300				—
Total non-operating income and expenses			2,862,066				1				2,085,390				1				5,332,175				1				3,873,975				1
INCOME BEFORE INCOME TAX			86,117,467				40				93,406,391				42				183,939,966				41				165,662,290				39
INCOME TAX EXPENSE (Notes 4 and 25)			19,846,815				9				20,878,112				9				30,048,406				7				28,341,414				7
NET INCOME			66,270,652				31				72,528,279				33				153,891,560				34				137,320,876				32
OTHER COMPREHENSIVE INCOME (LOSS) (Notes 4, 22 and 25)
Items that may be reclassified subsequently to profit or loss:
Exchange differences arising on translation of foreign operations			1,353,774				1				(353,467	)			—				(19,889,820	)			(4	)			(6,946,520	)			(1	)
Changes in fair value of available-for-sale financial assets			28,397				—				(30,018	)			—				(65,073	)			—				21,276				—
Cash flow hedges			18,997				—				—				—				18,997				—				—				—
Share of other comprehensive income (loss) of associates			3,027				—				(17,528	)			—				(58,630	)			—				8,629				—
Income tax benefit related to items that may be reclassified subsequently			6,041				—				10,200				—				52,441				—				27,640				—
Other comprehensive income (loss) for the period, net of income tax			1,410,236				1				(390,813	)			—				(19,942,085	)			(4	)			(6,888,975	)			(1	)
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD		$	67,680,888				32			$	72,137,466				33			$	133,949,475				30			$	130,431,901				31
NET INCOME (LOSS) ATTRIBUTABLE TO:
Shareholders of the parent		$	66,271,019				31			$	72,506,321				33			$	153,899,917				34			$	137,287,814				32
Noncontrolling interests			(367	)			—				21,958				—				(8,357	)			—				33,062				—
		$	66,270,652				31			$	72,528,279				33			$	153,891,560				34			$	137,320,876				32
TOTAL COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO:
Shareholders of the parent		$	67,680,017				32			$	72,117,547				33			$	133,954,807				30			$	130,401,775				31
Noncontrolling interests			871				—				19,919				—				(5,332	)			—				30,126				—
		$	67,680,888				32			$	72,137,466				33			$	133,949,475				30			$	130,431,901				31
		For the Three Months Ended June 30																For the Six Months Ended June 30
		2017								2016								2017								2016
		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 26)
Basic earnings per share		$					2.56			$					2.80			$					5.94			$					5.29
Diluted earnings per share		$					2.56			$					2.80			$					5.94			$					5.29

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

 

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Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF 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 Currency				Unrealized Gain/Loss from Available-								Unearned Stock-Based
		Shares (In Thousands)				Amount				Capital Surplus				Legal Capital Reserve				Unappropriated Earnings				Total				Translation Reserve				for-sale Financial Assets				Cash Flow Hedges Reserve				Employee Compensation				Total				Total				Noncontrolling Interests				Total Equity
BALANCE, JANUARY 1, 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$7.0 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 (loss) for the six months ended June 30, 2017			—				—				—				—				153,899,917				153,899,917				—				—				—				—				—				153,899,917				(8,357	)			153,891,560
Other comprehensive income (loss) for the six months ended June 30, 2017, net of income tax			—				—				—				—				—				—				(19,947,752	)			(14,089	)			16,731				—				(19,945,110	)			(19,945,110	)			3,025				(19,942,085	)
Total comprehensive income (loss) for the six months ended June 30, 2017			—				—				—				—				153,899,917				153,899,917				(19,947,752	)			(14,089	)			16,731				—				(19,945,110	)			133,954,807				(5,332	)			133,949,475
Adjustments to share of changes in equities of associates			—				—				7,715				—				—				—				—				—				—				(15,384	)			(15,384	)			(7,669	)			—				(7,669	)
From share of changes in equities of subsidiaries			—				—				2,761				—				—				—				—				—				—				—				—				2,761				(2,761	)			—
Decrease in noncontrolling interests			—				—				—				—				—				—				—				—				—				—				—				—				(114,624	)			(114,624	)
BALANCE, JUNE 30, 2017			25,930,380			$	259,303,805			$	56,282,780			$	241,722,663			$	802,672,760			$	1,044,395,423			$	(18,286,515	)		$	(11,448	)		$	16,836			$	(15,384	)		$	(18,296,511	)		$	1,341,685,497			$	680,148			$	1,342,365,645
BALANCE, JANUARY 1, 2016			25,930,380			$	259,303,805			$	56,300,215			$	177,640,561			$	716,653,025			$	894,293,586			$	11,039,949			$	734,771			$	(607	)		$	—			$	11,774,113			$	1,221,671,719			$	962,760			$	1,222,634,479
Appropriations of prior year’s earnings
Legal capital reserve			—				—				—				30,657,384				(30,657,384	)			—				—				—				—				—				—				—				—				—
Cash dividends to shareholders - NT$6.0 per share			—				—				—				—				(155,582,283	)			(155,582,283	)			—				—				—				—				—				(155,582,283	)			—				(155,582,283	)
Total			—				—				—				30,657,384				(186,239,667	)			(155,582,283	)			—				—				—				—				—				(155,582,283	)			—				(155,582,283	)
Net income for the six months ended June 30, 2016			—				—				—				—				137,287,814				137,287,814				—				—				—				—				—				137,287,814				33,062				137,320,876
Other comprehensive income (loss) for the six months ended June 30, 2016, net of income tax			—				—				—				—				—				—				(6,958,514	)			72,190				285				—				(6,886,039	)			(6,886,039	)			(2,936	)			(6,888,975	)
Total comprehensive income (loss) for the six months ended June 30, 2016			—				—				—				—				137,287,814				137,287,814				(6,958,514	)			72,190				285				—				(6,886,039	)			130,401,775				30,126				130,431,901
Disposal of investments accounted for using equity method			—				—				(56,169	)			—				—				—				—				—				—				—				—				(56,169	)			—				(56,169	)
Adjustments to share of changes in equities of associates			—				—				19,095				—				—				—				—				—				—				—				—				19,095				8				19,103
Decrease in noncontrolling interests			—				—				—				—				—				—				—				—				—				—				—				—				(114,099	)			(114,099	)
Effect of disposal of subsidiary			—				—				—				—				—				—				—				—				—				—				—				—				(1,954	)			(1,954	)
BALANCE, JUNE 30, 2016			25,930,380			$	259,303,805			$	56,263,141			$	208,297,945			$	667,701,172			$	875,999,117			$	4,081,435			$	806,961			$	(322	)		$	—			$	4,888,074			$	1,196,454,137			$	876,841			$	1,197,330,978

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

 

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Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands of New Taiwan Dollars)

(Reviewed, Not Audited)

 

 

		Six Months Ended June 30
		2017				2016
CASH FLOWS FROM OPERATING ACTIVITIES
Income before income tax		$	183,939,966			$	165,662,290
Adjustments for:
Depreciation expense			116,099,116				109,352,892
Amortization expense			2,065,459				1,769,157
Finance costs			1,656,577				1,672,005
Share of profits of associates			(1,285,261	)			(1,733,161	)
Interest income			(4,588,686	)			(2,987,896	)
Gain on disposal of property, plant and equipment, net			(15,343	)			(6,828	)
Impairment loss on financial assets			12,032				30,872
Loss (gain) on disposal of available-for-sale financial assets, net			59,311				(89,669	)
Gain on disposal of financial assets carried at cost, net			(4,753	)			(20,009	)
Loss on disposal of investments accounted for using equity method, net			—				259,960
Loss from liquidation of subsidiaries			—				36,105
Unrealized gross profit on sales to associates			40,619				39,898
Loss (gain) on foreign exchange, net			(6,377,351	)			308,122
Dividend income			(142,503	)			(137,459	)
Loss arising from fair value hedges, net			23,494				841
Changes in operating assets and liabilities:
Financial instruments at fair value through profit or loss			1,159,461				(1,708,787	)
Notes and accounts receivable, net			15,263,197				(29,118,721	)
Receivables from related parties			533,558				81,512
Other receivables from related parties			8,492				(19,200	)
Inventories			(12,328,292	)			6,346,456
Other financial assets			1,844,118				(3,053,635	)
Other current assets			(143,032	)			269,691
Other noncurrent assets			(433,328	)			—
Accounts payable			(1,398,358	)			3,446,305
Payables to related parties			(160,398	)			(85,240	)
Salary and bonus payable			(3,638,899	)			(1,858,488	)
Accrued profit sharing bonus to employees and compensation to directors and supervisors			10,482,136				9,406,925
Accrued expenses and other current liabilities			4,823,091				1,420,239
Provisions			(4,192,045	)			(642,887	)
Net defined benefit liability			5,232				8,640
Cash generated from operations			303,307,610				258,649,930
Income taxes paid			(38,899,186	)			(30,444,686	)
Net cash generated by operating activities			264,408,424				228,205,244

 

(Continued)

 

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Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands of New Taiwan Dollars)

(Reviewed, Not Audited)

 

 

		Six Months Ended June 30
		2017				2016
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions of:
Available-for-sale financial assets		$	(48,350,281	)		$	(28,802,391	)
Held-to-maturity financial assets			(1,695,771	)			(23,706,522	)
Financial assets carried at cost			(475,184	)			(218,762	)
Property, plant and equipment			(207,694,057	)			(111,727,052	)
Intangible assets			(1,970,729	)			(1,783,656	)
Land use right			—				(805,318	)
Proceeds from disposal or redemption of:
Available-for-sale financial assets			36,338,151				8,070,785
Held-to-maturity financial assets			11,350,000				4,700,000
Financial assets carried at cost			50,180				20,009
Property, plant and equipment			170,029				26,517
Proceeds from return of capital of financial assets carried at cost			—				42,064
Derecognition of hedging derivative financial instruments			6,496				(9,534	)
Interest received			4,432,649				3,310,985
Proceeds from government grants - property, plant and equipment			436,587				—
Other dividends received			124,835				118,890
Dividends received from investments accounted for using equity method			163,408				—
Refundable deposits paid			(378,335	)			(59,844	)
Refundable deposits refunded			42,008				63,470
Decrease in receivables for temporary payments			—				706,718
Net cash used in investing activities			(207,450,014	)			(150,053,641	)
CASH FLOWS FROM FINANCING ACTIVITIES
Decrease in short-term loans			(290,110	)			(157,064	)
Repayment of bonds			(10,000,000	)			(11,471,600	)
Repayment of long-term bank loans			(4,840	)			(3,700	)
Interest paid			(1,383,051	)			(1,289,308	)
Guarantee deposits received			848,259				498,025
Guarantee deposits refunded			(1,718,541	)			(485,721	)
Decrease in noncontrolling interests			(524	)			(509	)
Net cash used in financing activities			(12,548,807	)			(12,909,877	)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS			(15,196,478	)			(5,571,354	)
NET INCREASE IN CASH AND CASH EQUIVALENTS			29,213,125				59,670,372
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD			541,253,833				562,688,930
CASH AND CASH EQUIVALENTS, END OF PERIOD		$	570,466,958			$	622,359,302

 

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

 

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Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2017 and 2016

(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 August 8, 2017.

 

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 would not have a significant effect on TSMC and its subsidiaries’ (collectively as the “Company”) accounting policies:

 

1)

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

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

 

(Continued)

 

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When the amendments are applied retrospectively from January 1, 2017, the disclosure of related party transactions is enhanced, please refer to Note 29.

 

b.

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

 

 

Note 1:

The aforementioned new, revised or amended standards or interpretations are effective after fiscal year beginning on or after the effective dates, unless specified otherwise.

Note 2:

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

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

 

1)

IFRS 9 “Financial Instruments”

All recognized financial assets currently in the scope of IAS 39, “Financial Instruments: Recognition and Measurement,” will be subsequently measured at either the amortized cost or the fair value. The classification and measurement requirements in IFRS 9 are stated as follows:

For the debt instruments invested by the Company, if the contractual cash flows that are solely for payments of principal and interest on the principal amount outstanding, the classification and measurement requirements are stated as follows:

 

a)

If the objective of the Company’s business model is to hold the financial asset to collect the contractual cash flows, such assets are measured at the amortized cost. Interest revenue should be recognized in profit or loss by using the effective interest method, continuously assessed for impairment and the impairment loss or reversal of impairment loss should be recognized in profit and loss.

 

b)

If the objective of the Company’s business model is to hold the financial asset both to collect the contractual cash flows and to sell the financial assets, such assets are measured at fair value through other comprehensive income and are continuously assessed for impairment. Interest revenue should be recognized in profit or loss by using the effective interest method. A gain or loss on a financial asset measured at fair value through other comprehensive income should be recognized in other comprehensive income, except for impairment gains or losses and foreign exchange gains and losses. When such financial asset is derecognized or reclassified, the cumulative gain or loss previously recognized in other comprehensive income is reclassified from equity to profit or loss.

 

(Continued)

 

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The other financial assets which do not meet the aforementioned criteria should be measured at the fair value through profit or loss. However, the Company may irrevocably designate an investment in equity instruments that is not held for trading as measured at fair value through other comprehensive income. All relevant gains and losses shall be recognized in other comprehensive income, except for dividends which are recognized in profit or loss. No subsequent impairment assessment is required, and the cumulative gain or loss previously recognized in other comprehensive income cannot be reclassified from equity to profit or loss.

IFRS 9 adds a new expected loss impairment model to measure the impairment of financial assets. A loss allowance for expected credit losses should be recognized on financial assets measured at amortized cost and financial assets mandatorily measured at fair value through other comprehensive income. If the credit risk on a financial instrument has not increased significantly since initial recognition, the Company should measure the loss allowance for that financial instrument at an amount equal to 12-month expected credit losses. If the credit risk on a financial instrument has increased significantly since initial recognition and is not deemed to be a low credit risk, the Company should measure the loss allowance for that financial instrument at an amount equal to the lifetime expected credit losses. The Company should always measure the loss allowance at an amount equal to lifetime expected credit losses for trade receivables.

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

When IFRS 9 becomes effective, the Company may elect to apply this Standard either retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of the initial application of this Standard recognized at the date of initial application. However, the requirements for general hedge accounting shall be applied prospectively.

 

2)

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

IFRS 15 establishes principles for recognizing revenue that apply to all contracts with customers, and will supersede IAS 18 “Revenue,” IAS 11 “Construction Contracts,” and a number of revenue-related interpretations.

When applying IFRS 15, the Company shall recognize revenue by applying the following steps:

 

•

Identify the contract with the customer;

 

•

Identify the performance obligations in the contract;

 

•

Determine the transaction price;

 

•

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

 

•

Recognize revenue when the entity satisfies a performance obligation.

When IFRS 15 and related amendment are effective, the Company may elect to apply this Standard either retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying this Standard recognized at the date of initial application.

 

(Continued)

 

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

 

c.

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

 

 

Note 3:

The aforementioned new, revised or amended standards or interpretations are effective after fiscal year beginning on or after the effective dates, unless specified otherwise.

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

 

1)

IFRS 16 “Leases”

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

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

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

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

 

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, 2016.

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.

 

(Continued)

 

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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, 2016.

The subsidiaries in the consolidated financial statements

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

 

(Continued)

 

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(Concluded)

 

Note a:

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

Note b:

Under the investment agreement entered into with the municipal government of Nanjing, China on March 28, 2016, the Company will make an investment in Nanjing in the amount of approximately US$3 billion to establish a subsidiary operating a 300mm wafer fab with the capacity of 20,000 12-inch wafers per month, and a design service center. TSMC Nanjing was established in May 2016.

Note c:

TSMC Solar Europe GmbH is in the process of liquidation.

Note d:

Chi Cherng was incorporated into TSMC in December 2016.

Note e:

To simplify investment structure, VisEra Tech owned by VisEra Holding was transferred to TSMC in the third quarter of 2016. In October 2016, VisEra Holding was incorporated into TSMC Partners, the subsidiary of TSMC.

Note f:

ISDF and ISDF II are in the process of liquidation.

Note g:

VTA Holdings completed the liquidation procedures in April 2017.

Hedge Accounting

Cash Flow Hedge

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

Hedge accounting is discontinued prospectively when the Company revokes the designated hedging relationship, or when the hedging instruments expire or are sold, terminated, or exercised, or no longer meet the criteria for hedge accounting.

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.

 

- 12 -

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

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, 2016.

 

6.	CASH AND CASH EQUIVALENTS

 

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

 

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

 

 

- 13 -

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

Outstanding forward exchange contracts consisted of the following:

 

Outstanding cross currency swap contracts consisted of the following:

 

 

- 14 -

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8.	AVAILABLE-FOR-SALE FINANCIAL ASSETS

 

 

9.	HELD-TO-MATURITY FINANCIAL ASSETS

 

 

10.	HEDGING DERIVATIVE FINANCIAL INSTRUMENTS

 

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

 

- 15 -

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The outstanding interest rate futures contracts consisted of the following:

 

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

Outstanding forward exchange contracts consisted of the following:

 

 

11.	NOTES AND ACCOUNTS RECEIVABLE, NET

 

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. Notes and accounts receivable include amounts that are past due but for which the Company has not recognized a specific allowance for doubtful receivables after the assessment since there has not been a significant change in the credit quality of its customers. In addition, the Company has obtained guarantee to certain receivables.

 

- 16 -

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Aging analysis of notes and accounts receivable, net

 

Movements of the allowance for doubtful receivables

 

Aging analysis of accounts receivable that is individually determined as impaired

 

 

12.	INVENTORIES

 

Reversal of write-down of inventories resulting from the increase in net realizable value (excluding earthquake losses) and write-down of inventories to net realizable value (excluding earthquake losses) were included in the cost of revenue, which were as follows. Please refer to related earthquake losses in Note 33.

 

- 17 -

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13.	FINANCIAL ASSETS CARRIED AT COST

 

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

The stock of Impinj, Inc. was listed in July 2016. Accordingly, the Company reclassified the aforementioned investments from financial assets carried at cost to available-for-sale financial assets.

 

14.	INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD

Associates consisted of the following:

 

Starting June 2016, the Company has no longer served as Motech’s board of director. As a result, the Company exercises no significant influence over Motech. Therefore, Motech is no longer accounted for using the equity method. Further, such investment was reclassified to available-for-sale financial assets and the Company recognized a disposal loss of NT$259,960 thousand.

 

- 18 -

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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.

 

 

15.	PROPERTY, PLANT AND EQUIPMENT

 

 

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

 

16.	INTANGIBLE ASSETS

 

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 8.40% in its test of impairment for December 31, 2016 to reflect the relevant specific risk in the cash-generating unit.

 

- 20 -

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17.	OTHER ASSETS

 

 

18.	SHORT-TERM LOANS

 

 

19.	PROVISIONS

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

 

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

 

- 21 -

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20.	BONDS PAYABLE

 

The major terms of overseas unsecured bonds are as follows:

 

 

21.	GUARANTEE DEPOSITS

 

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

 

22.

EQUITY

 

a.

Capital stock

 

 

- 22 -

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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 June 30, 2017, 1,068,224 thousand ADSs of TSMC were traded on the NYSE. The number of common shares represented by the ADSs was 5,341,120 thousand shares (one ADS represents five common shares).

 

b.

Capital surplus

 

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

 

c.

Retained earnings and dividend policy

In accordance with the amendments to the R.O.C. Company Act in May 2015, the recipients of dividends and bonuses are limited to shareholders and do not include employees. The amendments to TSMC’s Articles of Incorporation on earnings distribution policy had been approved by TSMC’s shareholders in its meeting held on June 7, 2016. For policy about the profit sharing bonus to employees, please refer to Note 27.

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

 

1)

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

 

2)

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

 

3)

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

 

- 23 -

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

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

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

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

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

 

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

 

d.

Others

Changes in others were as follows:

 

 

(Continued)

 

- 24 -

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(Concluded)

 

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

 

23.	NET REVENUE

 

 

- 25 -

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24.	OTHER GAINS AND LOSSES

 

 

25.	INCOME TAX

 

a.

Income tax expense recognized in profit or loss

 

 

- 26 -

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b.

Income tax expense recognized in other comprehensive income

 

 

c.

Integrated income tax information

 

The estimated and actual creditable ratio for distribution of TSMC’s earnings of 2016 and 2015 were 13.90% and 12.57%, respectively; however, the creditable ratio for individual shareholders residing in the R.O.C. is half of the original creditable ratio according to the R.O.C. Income Tax Law.

The imputation credit allocated to shareholders is based on its balance as of the date of the dividend distribution. The estimated creditable ratio may change when the actual distribution of the imputation credit is made.

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

 

d.

Income tax examination

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

 

26.	EARNINGS PER SHARE

 

 

- 27 -

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EPS is computed as follows:

 

 

27.	ADDITIONAL INFORMATION OF EXPENSES BY NATURE

 

 

- 28 -

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

TSMC accrued profit sharing bonus to employees based on a percentage of net income before income tax, profit sharing bonus to employees and compensation to directors during the period, which amounted to NT$4,445,463 thousand and NT$4,863,012 thousand for the three months ended June 30, 2017 and 2016, respectively; and NT$10,322,557 thousand and NT$9,207,536 thousand for the six months ended June 30, 2017 and 2016, respectively. Compensation to directors was expensed based on estimated amount payable. If there is a change in the proposed amounts after the annual consolidated financial statements are authorized for issue, the differences are recorded as a change in accounting estimate.

The Board of Directors of TSMC held on February 14, 2017 approved the 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. There is no significant difference between the aforementioned approved amounts and the amounts charged against earnings of 2016.

 

- 29 -

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

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

 

28.	FINANCIAL INSTRUMENTS

 

a.

Categories of financial instruments

 

(Continued)

 

- 30 -

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(Concluded)

 

Note:

Including financial assets carried at cost.

 

b.

Financial risk management objectives

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

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

 

c.

Market risk

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

Foreign currency risk

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

The Company’s sensitivity analysis of foreign currency risk mainly focuses on the foreign currency monetary items and the derivatives financial instruments at the end of the reporting period. Assuming an unfavorable 10% movement in the levels of foreign exchanges relative to the New Taiwan dollar, the net income for the six months ended June 30, 2017 and 2016 would have decreased by NT$503,920 thousand and NT$89,642 thousand, respectively, and the other comprehensive income for the six months ended June 30, 2017 would have decreased by NT$34,770 thousand.

 

- 31 -

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Interest rate risk

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

Assuming the amount of the long-term bank loans at the end of the reporting period had been outstanding for the entire period and all other variables were held constant, a hypothetical 100 basis point (1.00%) increase in interest rates would have resulted in an increase in the interest expense, net of tax, by approximately NT$110 thousand and NT$151 thousand for the six months ended June 30, 2017 and 2016, respectively.

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

Based on a sensitivity analysis performed for the six months ended June 30, 2017 and 2016, a hypothetical 100 basis points (1.00%) increase in interest rates across all maturities would have resulted in a decrease in other comprehensive income by NT$1,717,186 thousand and NT$607,921 thousand, respectively.

Other price risk

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

Assuming a hypothetical decrease of 5% in prices of the equity investments at the end of the reporting period for the six months ended June 30, 2017 and 2016, the other comprehensive income would have decreased by NT$329,734 thousand and NT$328,089 thousand, respectively.

 

d.

Credit risk management

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

Business related credit risk

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

As of June 30, 2017, December 31, 2016 and June 30, 2016, the Company’s ten largest customers accounted for 70%, 74% and 69% of accounts receivable, respectively. The Company believes the concentration of credit risk is not material for the remaining accounts receivable.

 

- 32 -

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Financial credit risk

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

 

e.

Liquidity risk management

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

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

 

 

(Continued)

 

- 33 -

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(Concluded)

 

f.

Fair value of financial instruments

 

1)

Fair value measurements recognized in the consolidated balance sheets

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

 

•

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

 

•

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

 

•

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).

 

- 34 -

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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:

 

 

- 35 -

---

 

(Continued)

 

- 36 -

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(Concluded)

There were no transfers between Level 1 and Level 2 for the six months ended June 30, 2017 and 2016, respectively.

There were no purchases and disposals for assets classified as Level 3 for the six months ended June 30, 2017 and 2016, respectively.

Valuation techniques and assumptions used in fair value measurement

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

 

•

The fair values of interest rate futures contracts, publicly traded stocks, government bonds, agency bonds, agency mortgage-backed securities, corporate bonds and money market funds are determined by quoted market prices in active markets.

 

•

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

 

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

 

 

- 37 -

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Fair value hierarchy

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

 

 

 

 

- 38 -

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Fair value measurement

For investments in bonds, the fair value is determined using active market prices.

For investments in negotiable certificate of deposit and structured product, the fair values are determined by quoted market prices. For investment in commercial paper, the fair value is determined by the present value of future cash flows based on the discounted curves that are derived from the quoted market prices.

The fair value of the Company’s bonds payable is determined using active market prices.

 

29.	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

 

b.

Net revenue

 

 

c.

Purchases

 

 

- 39 -

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d.

Receivables from related parties

 

 

e.

Payables to related parties

 

 

f.

Accrued expenses and other current liabilities

 

 

g.

Others

 

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

 

- 40 -

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

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

 

h.

Compensation of key management personnel

The compensation to directors and other key management personnel for the three months and six months ended June 30, 2017 and 2016 were as follows:

 

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

 

30.	PLEDGED ASSETS

The Company provided certificate of deposits recorded in other financial assets as collateral mainly for building lease agreements. As of June 30, 2017, December 31, 2016 and June 30, 2016, the aforementioned other financial assets amounted to NT$177,567 thousand, NT$185,698 thousand and NT$154,829 thousand, respectively.

 

31.	SIGNIFICANT OPERATING LEASE ARRANGEMENTS

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

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

 

 

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32.	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 June 30, 2017, the R.O.C. Government did not invoke such right.

 

b.

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

 

c.

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

Both parties also signed the research and development funding agreement whereby TSMC shall provide EUR276,000 thousand to ASML’s research and development programs from 2013 to 2017. As of June 30, 2017, TSMC has paid EUR260,201 thousand to ASML under the research and development funding agreement.

 

d.

In May 2017, Mr. Uri Cohen filed a complaint in the U.S. District Court for the Eastern District of Texas alleging that TSMC, TSMC North America and other companies infringe several U.S. patents. The outcome cannot be determined and the Company cannot make a reliable estimate of the contingent liability at this time.

 

e.

Amounts available under unused letters of credit as of June 30, 2017, December 31, 2016 and June 30, 2016 were NT$97,325 thousand, NT$122,356 thousand and NT$122,675 thousand, respectively.

 

33.	SIGNIFICANT LOSS FROM DISASTER

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

 

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

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

 

 

(Continued)

 

- 43 -

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(Concluded)

 

Note 1:

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

Note 2:

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

Please refer to the consolidated statements of comprehensive income for the total of realized and unrealized foreign exchange gain and loss for the three months and six months ended June 30, 2017 and 2016, respectively. Since there were varieties of foreign currency transactions and functional currencies within the subsidiaries of the Company, the Company was unable to disclose foreign exchange gain (loss) towards each foreign currency with significant impact.

 

35.	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.

 

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36.	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 10;

 

j.

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

 

k.

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

 

l.

Information on investment in mainland China

 

1)

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

 

2)

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

 

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TABLE 1

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

FINANCINGS PROVIDED

FOR THE SIX MONTHS ENDED JUNE 30, 2017

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

 

 

No.		Financing Company		Counter- party		Financial Statement Account		Related Party		Maximum Balance for the Period (Foreign Currencies in Thousands) (Note 3)				Ending Balance (Foreign Currencies in Thousands) (Note 3)				Amount Actually Drawn (Foreign Currencies in Thousands)				Interest Rate				Nature for Financing (Note 4)		Transaction Amounts				Reason for Financing (Note 4)		Allowance for Bad Debt				Collateral								Financing Limits for Each Borrowing Company (Notes 1 and 2)				Financing Company’s Total Financing Amount Limits (Notes 1 and 2)
																																						Item				Value
1		TSMC China		TSMC Nanjing		Other receivables from related parties		Yes		$ (RMB	20,636,060 4,600,000	)		$ (RMB	20,636,060   4,600,000	)		$ (RMB	7,177,760   1,600,000	)			1.5	%		The need for long-term financing		$	—			Operating capital		$	—				—			$	—			$	45,991,492			$	45,991,492
2		TSMC Global		TSMC		Other receivables from related parties		Yes		(US$	45,621,000 1,500,000	)		(US$	45,621,000 1,500,000	)		(US$	7,603,500 250,000	)			1.27	%		The need for short-term financing			—			Operating capital			—				—				—				259,503,712				259,503,712

 

Note 1:

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

Note 2:

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

Note 3:

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

Note 4:

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

 

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TABLE 2

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

ENDORSEMENTS/GUARANTEES PROVIDED

FOR THE SIX MONTHS ENDED JUNE 30, 2017

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

 

 

No.		Endorsement/ Guarantee Provider		Guaranteed Party				Limits on Endorsement/ Guarantee Amount Provided to Each Guaranteed Party (Notes 1 and 2)				Maximum Balance for the Period (US$ in Thousands) (Note 3)				Ending Balance (US$ in Thousands) (Note 3)				Amount Actually Drawn (US$ in Thousands)				Amount of Endorsement/ Guarantee Collateralized by Properties				Ratio of Accumulated Endorsement/ Guarantee to Net Equity per Latest Financial Statements				Maximum Endorsement/ Guarantee Amount Allowable (Note 2)				Guarantee Provided by Parent Company		Guarantee Provided by A Subsidiary		Guarantee Provided to Subsidiaries in Mainland China
				Name		Nature of Relationship
0		TSMC		TSMC Global		Subsidiary		$	335,421,374			$ (US$	34,976,100 1,150,000	)		$ (US$	34,976,100 1,150,000	)		$ (US$	34,976,100 1,150,000	)		$	—				2.61	%		$	335,421,374			Yes		No		No
				TSMC North America		Subsidiary			335,421,374			(US$	2,530,849 83,213	)		(US$	2,530,849 83,213	)		(US$	2,530,849 83,213	)			—				0.19	%			335,421,374			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.

 

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TABLE 3

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

MARKETABLE SECURITIES HELD

JUNE 30, 2017

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

 

 

Held Company Name		Marketable Securities Type and Name		Relationship with the Company				Financial Statement Account		June 30, 2017																Note
										Shares/Units (In Thousands)				Carrying Value (Foreign Currencies in Thousands)				Percentage of Ownership (%)				Fair Value (Foreign Currencies in Thousands)
TSMC		Corporate bond
		CPC Corporation, Taiwan			—			Held-to-maturity financial assets			—			$	1,161,873				N/A			$	1,162,443
		Nan Ya Plastics Corporation			—			”			—				150,200				N/A				150,209
		Commercial paper
		Taiwan Power Company			—			Held-to-maturity financial assets			50				498,818				N/A				499,928
		Stock
		Motech			—			Available-for-sale financial assets			58,320				1,452,163				12				1,452,163
		Semiconductor Manufacturing International Corporation			—			”			21,105				744,891				—				744,891
		United Industrial Gases Co., Ltd.			—			Financial assets carried at cost			21,230				193,584				10				193,584
		Shin-Etsu Handotai Taiwan Co., Ltd.			—			”			10,500				105,000				7				105,000
		Global Investment Holding Inc.			—			”			11,124				99,041				6				99,041
		W.K. Technology Fund IV			—			”			2,560				18,121				2				18,121
		Fund
		Horizon Ventures Fund			—			Financial assets carried at cost			—				9,031				12				9,031
		Crimson Asia Capital			—			”			—				8,263				1				8,263
TSMC Partners		Common stock
		Tela Innovations			—			Financial assets carried at cost			10,440			US$	65,000				25			US$	65,000
		Mcube Inc.			—			”			6,333				—				13				—
		Fund
		China Walden Venture Investments II, L.P.			—			Financial assets carried at cost			—			US$	8,101				9			US$	8,101
		Shanghai Walden Venture Capital Enterprise			—			”			—			US$	4,270				6			US$	4,270
TSMC Global		Corporate bond
		Bank of America Corp.			—			Available-for-sale financial assets			—			US$	32,753				N/A			US$	32,753
		Morgan Stanley			—			”			—			US$	30,992				N/A			US$	30,992
		JPMorgan Chase & Co.			—			”			—			US$	29,871				N/A			US$	29,871
		Goldman Sachs Group Inc.			—			”			—			US$	27,152				N/A			US$	27,152
		Verizon Communications			—			”			—			US$	21,377				N/A			US$	21,377
		Citigroup Inc.			—			”			—			US$	20,596				N/A			US$	20,596
		AT&T Inc.			—			”			—			US$	19,257				N/A			US$	19,257
		Abbvie Inc.			—			”			—			US$	15,128				N/A			US$	15,128
		PNC Bank NA			—			”			—			US$	13,875				N/A			US$	13,875
		Ford Motor Credit Co LLC			—			”			—			US$	13,547				N/A			US$	13,547
		Microsoft Corp.			—			”			—			US$	13,393				N/A			US$	13,393
		Apple Inc.			—			”			—			US$	11,638				N/A			US$	11,638
		Anheuser Busch InBev Fin.			—			”			—			US$	11,354				N/A			US$	11,354
		Westpac Banking Corp.			—			”			—			US$	10,474				N/A			US$	10,474
		BP Capital Markets PLC			—			”			—			US$	10,323				N/A			US$	10,323
		BMW US Capital LLC			—			”			—			US$	10,302				N/A			US$	10,302
		Qualcomm, Inc.			—			”			—			US$	10,093				N/A			US$	10,093
		Svenska Handelsbanken AB			—			”			—			US$	9,904				N/A			US$	9,904
		CVS Health Corp.			—			”			—			US$	9,768				N/A			US$	9,768
		Oracle Corp.			—			”			—			US$	9,721				N/A			US$	9,721
		Capital One NA			—			”			—			US$	9,601				N/A			US$	9,601
		Wells Fargo & Company			—			”			—			US$	9,210				N/A			US$	9,210

(Continued)

 

- 48 -

---

Held Company Name		Marketable Securities Type and Name		Relationship with the Company		Financial Statement Account		June 30, 2017																Note
								Shares/Units (In Thousands)				Carrying Value (Foreign Currencies in Thousands)				Percentage of Ownership (%)				Fair Value (Foreign Currencies in Thousands)
TSMC Global		Analog Devices, Inc.		—		Available-for-sale financial assets			—			US$	9,014				N/A			US$	9,014
		Southern Co.		—		”			—			US$	8,601				N/A			US$	8,601
		Cardinal Health Inc.		—		”			—			US$	8,445				N/A			US$	8,445
		Duke Energy Corp.		—		”			—			US$	8,181				N/A			US$	8,181
		Rockwell Collins, Inc.		—		”			—			US$	8,125				N/A			US$	8,125
		Aviation Capital Group		—		”			—			US$	8,072				N/A			US$	8,072
		American Express Credit		—		”			—			US$	7,817				N/A			US$	7,817
		ERAC USA Finance LLC		—		”			—			US$	7,663				N/A			US$	7,663
		Ventas Realty LP/Cap Crp.		—		”			—			US$	7,529				N/A			US$	7,529
		UBS Group Funding (Switzerland) AG		—		”			—			US$	7,156				N/A			US$	7,156
		Reckitt Benckiser Treasury		—		”			—			US$	7,123				N/A			US$	7,123
		ABN AMRO Bank N.V.		—		”			—			US$	7,122				N/A			US$	7,122
		HSBC Holdings PLC		—		”			—			US$	6,923				N/A			US$	6,923
		Credit Suisse New York		—		”			—			US$	6,878				N/A			US$	6,878
		Tyson Foods, Inc.		—		”			—			US$	6,805				N/A			US$	6,805
		Deutsche Telekom International Fin.		—		”			—			US$	6,647				N/A			US$	6,647
		Dow Chemical Co/The		—		”			—			US$	6,524				N/A			US$	6,524
		Citizens Bank NA/RI		—		”			—			US$	6,272				N/A			US$	6,272
		Dominion Energy, Inc.		—		”			—			US$	6,251				N/A			US$	6,251
		Teva Pharmaceuticals Netherlands		—		”			—			US$	6,243				N/A			US$	6,243
		Suntrust Banks Inc.		—		”			—			US$	6,214				N/A			US$	6,214
		Daimler Finance NA LLC.		—		”			—			US$	6,168				N/A			US$	6,168
		Welltower Inc.		—		”			—			US$	6,133				N/A			US$	6,133
		Hyundai Capital America		—		”			—			US$	6,067				N/A			US$	6,067
		Sumitomo Mitsui Trust Bank, Limited		—		”			—			US$	6,043				N/A			US$	6,043
		Skandinaviska Enskilda Banken AB		—		”			—			US$	6,038				N/A			US$	6,038
		BB&T Corporation		—		”			—			US$	5,994				N/A			US$	5,994
		Royal Bank of Canada		—		”			—			US$	5,976				N/A			US$	5,976
		Mizuho Financial Group		—		”			—			US$	5,910				N/A			US$	5,910
		Nextera Energy Capital		—		”			—			US$	5,887				N/A			US$	5,887
		Huntington National Bank		—		”			—			US$	5,814				N/A			US$	5,814
		Groupe Danone S.A.		—		”			—			US$	5,796				N/A			US$	5,796
		Shell International Fin.		—		”			—			US$	5,765				N/A			US$	5,765
		Berkshire Hathaway Fin.		—		”			—			US$	5,754				N/A			US$	5,754
		Toyota Motor Credit Corp.		—		”			—			US$	5,668				N/A			US$	5,668
		Nordea Bank AB		—		”			—			US$	5,594				N/A			US$	5,594
		Mitsubishi UFJ Fin Grp.		—		”			—			US$	5,585				N/A			US$	5,585
		Bank of Ny Mellon Corp.		—		”			—			US$	5,542				N/A			US$	5,542
		Cisco Systems Inc.		—		”			—			US$	5,508				N/A			US$	5,508
		New York Life Global FDG		—		”			—			US$	5,461				N/A			US$	5,461
		Siemens Financieringsmat		—		”			—			US$	5,445				N/A			US$	5,445
		CA, Inc.		—		”			—			US$	5,385				N/A			US$	5,385
		Enel Finance Intl N.V.		—		”			—			US$	5,379				N/A			US$	5,379
		Toronto Dominion Bank		—		”			—			US$	5,296				N/A			US$	5,296
		Amgen Inc.		—		”			—			US$	5,259				N/A			US$	5,259
		Jackson Natl Life Global		—		”			—			US$	5,159				N/A			US$	5,159
		Sempra Energy		—		”			—			US$	5,158				N/A			US$	5,158
		Intl. Bank Recon. & Development		—		”			—			US$	5,144				N/A			US$	5,144
		Voya Financial, Inc.		—		”			—			US$	5,037				N/A			US$	5,037
		Manuf & Traders Trust Co.		—		”			—			US$	5,006				N/A			US$	5,006
		Macquarie Group Ltd.		—		”			—			US$	5,004				N/A			US$	5,004
		Reliance Stand Life II		—		”			—			US$	4,970				N/A			US$	4,970
		American Intl. Group		—		”			—			US$	4,859				N/A			US$	4,859
		Twenty-First Century Fox Inc.		—		”			—			US$	4,827				N/A			US$	4,827
		Air Liquide Finance		—		”			—			US$	4,756				N/A			US$	4,756
		Fifth Third Bank		—		”			—			US$	4,714				N/A			US$	4,714
		ING Bank N.V.		—		”			—			US$	4,699				N/A			US$	4,699
		Cadillac Fairview Corp. Ltd.		—		”			—			US$	4,673				N/A			US$	4,673

(Continued)

 

- 49 -

---

Held Company Name		Marketable Securities Type and Name		Relationship with the Company		Financial Statement Account		June 30, 2017																Note
								Shares/Units (In Thousands)				Carrying Value (Foreign Currencies in Thousands)				Percentage of Ownership (%)				Fair Value (Foreign Currencies in Thousands)
TSMC Global		Sumitomo Mitsui Financial Group		—		Available-for-sale financial assets			—			US$	4,440				N/A			US$	4,440
		US Bank NA Cincinnati		—		”			—			US$	4,386				N/A			US$	4,386
		U.S. Bancorp		—		”			—			US$	4,309				N/A			US$	4,309
		Marriott International, Inc.		—		”			—			US$	4,276				N/A			US$	4,276
		Oaktree Capital Management, L.P.		—		”			—			US$	4,264				N/A			US$	4,264
		Lloyds Bank PLC		—		”			—			US$	4,227				N/A			US$	4,227
		Exelon Generation Co. LLC		—		”			—			US$	4,166				N/A			US$	4,166
		Schlumberger Hldgs Corp.		—		”			—			US$	4,143				N/A			US$	4,143
		Banco Santander, S.A.		—		”			—			US$	4,111				N/A			US$	4,111
		Keycorp Pty Ltd.		—		”			—			US$	4,072				N/A			US$	4,072
		Pepsico Inc.		—		”			—			US$	4,021				N/A			US$	4,021
		Mondelez International		—		”			—			US$	4,002				N/A			US$	4,002
		Intel Corp.		—		”			—			US$	4,000				N/A			US$	4,000
		Fortive Corporation		—		”			—			US$	3,982				N/A			US$	3,982
		Wells Fargo Bank NA		—		”			—			US$	3,912				N/A			US$	3,912
		Fifth Third Bancorp		—		”			—			US$	3,808				N/A			US$	3,808
		Suncorp Metway Ltd.		—		”			—			US$	3,794				N/A			US$	3,794
		Husky Energy Inc.		—		”			—			US$	3,755				N/A			US$	3,755
		Sprint Spectrum L.P.		—		”			—			US$	3,727				N/A			US$	3,727
		Anheuser Busch InBev Worldwide Inc.		—		”			—			US$	3,632				N/A			US$	3,632
		Lam Research Corp.		—		”			—			US$	3,614				N/A			US$	3,614
		Canadian Imperial Bank		—		”			—			US$	3,612				N/A			US$	3,612
		UBS AG Stamford CT		—		”			—			US$	3,536				N/A			US$	3,536
		SES GLOBAL-Americas Holdings		—		”			—			US$	3,529				N/A			US$	3,529
		BAT Intl Finance PLC		—		”			—			US$	3,496				N/A			US$	3,496
		Aetna Inc.		—		”			—			US$	3,414				N/A			US$	3,414
		Credit Agricole London		—		”			—			US$	3,383				N/A			US$	3,383
		BNP Paribas		—		”			—			US$	3,357				N/A			US$	3,357
		Ryder System Inc.		—		”			—			US$	3,244				N/A			US$	3,244
		Pricoa Global Funding I		—		”			—			US$	3,202				N/A			US$	3,202
		Air Lease Corporation		—		”			—			US$	3,141				N/A			US$	3,141
		Protective Life Global Funding		—		”			—			US$	3,096				N/A			US$	3,096
		Key Bank N.A.		—		”			—			US$	3,086				N/A			US$	3,086
		Time Warner Inc.		—		”			—			US$	3,038				N/A			US$	3,038
		Principal Life Global Funding II		—		”			—			US$	2,788				N/A			US$	2,788
		Barclays PLC		—		”			—			US$	2,731				N/A			US$	2,731
		PartnerRe Finance B LLC		—		”			—			US$	2,719				N/A			US$	2,719
		Chevron Corp.		—		”			—			US$	2,646				N/A			US$	2,646
		LyondellBasell Industries N.V.		—		”			—			US$	2,563				N/A			US$	2,563
		Nuveen Finance, LLC		—		”			—			US$	2,562				N/A			US$	2,562
		MetLife Global Funding I		—		”			—			US$	2,534				N/A			US$	2,534
		Wm. Wrigley Jr. Co.		—		”			—			US$	2,504				N/A			US$	2,504
		Penske Truck Leasing (PTL)		—		”			—			US$	2,492				N/A			US$	2,492
		Sumitomo Mitsui Banking		—		”			—			US$	2,486				N/A			US$	2,486
		Eastman Chemical Company		—		”			—			US$	2,458				N/A			US$	2,458
		Xylem Inc.		—		”			—			US$	2,437				N/A			US$	2,437
		Commonwealth Bank Australia NY		—		”			—			US$	2,411				N/A			US$	2,411
		HSBC USA Inc.		—		”			—			US$	2,377				N/A			US$	2,377
		NBCUniversal Media, LLC		—		”			—			US$	2,374				N/A			US$	2,374
		EI du Pont de Nemours		—		”			—			US$	2,349				N/A			US$	2,349
		Biogen Inc.		—		”			—			US$	2,333				N/A			US$	2,333
		National Australia Bank/NY		—		”			—			US$	2,322				N/A			US$	2,322
		Simon Property Group LP		—		”			—			US$	2,311				N/A			US$	2,311
		Bank of Tokyo-Mitsubishi UFJ		—		”			—			US$	2,306				N/A			US$	2,306
		Gilead Sciences Inc.		—		”			—			US$	2,277				N/A			US$	2,277
		Mckesson Corp.		—		”			—			US$	2,258				N/A			US$	2,258
		Inter-American Development Bank		—		”			—			US$	2,239				N/A			US$	2,239
		Cintas Corporation No. 2		—		”			—			US$	2,238				N/A			US$	2,238
		ING Groep N.V.		—		”			—			US$	2,237				N/A			US$	2,237

(Continued)

 

- 50 -

---

Held Company Name		Marketable Securities Type and Name		Relationship with the Company		Financial Statement Account		June 30, 2017																Note
								Shares/Units (In Thousands)				Carrying Value (Foreign Currencies in Thousands)				Percentage of Ownership (%)				Fair Value (Foreign Currencies in Thousands)
TSMC Global		Allied World Assurance		—		Available-for-sale financial assets			—			US$	2,169				N/A			US$	2,169
		Express Scripts Holding		—		”			—			US$	2,154				N/A			US$	2,154
		Celgene Corp.		—		”			—			US$	2,139				N/A			US$	2,139
		HCP Inc.		—		”			—			US$	2,117				N/A			US$	2,117
		Sysco Corporation		—		”			—			US$	2,021				N/A			US$	2,021
		Lloyds Banking Group PLC		—		”			—			US$	2,019				N/A			US$	2,019
		Johnson Controls International PLC		—		”			—			US$	2,016				N/A			US$	2,016
		British Telecommunications PLC		—		”			—			US$	2,010				N/A			US$	2,010
		Enterprise Products Operating, LLC		—		”			—			US$	2,009				N/A			US$	2,009
		State Street Corp.		—		”			—			US$	2,009				N/A			US$	2,009
		Credit Suisse Group Funding Limited		—		”			—			US$	1,994				N/A			US$	1,994
		Autozone Inc.		—		”			—			US$	1,975				N/A			US$	1,975
		Danske Bank A/S		—		”			—			US$	1,969				N/A			US$	1,969
		The Bear Stearns Companies LLC.		—		”			—			US$	1,960				N/A			US$	1,960
		Stryker Corp.		—		”			—			US$	1,956				N/A			US$	1,956
		Magellan Midstream Partners LP		—		”			—			US$	1,951				N/A			US$	1,951
		Unitedhealth Group Inc.		—		”			—			US$	1,951				N/A			US$	1,951
		BPCE SA		—		”			—			US$	1,931				N/A			US$	1,931
		Capital One Financial Co.		—		”			—			US$	1,913				N/A			US$	1,913
		Branch Banking & Trust		—		”			—			US$	1,890				N/A			US$	1,890
		Cooperatieve Rabobank UA/NY		—		”			—			US$	1,862				N/A			US$	1,862
		WestRock RKT Company		—		”			—			US$	1,856				N/A			US$	1,856
		Suntrust Bank		—		”			—			US$	1,849				N/A			US$	1,849
		Orange S.A.		—		”			—			US$	1,840				N/A			US$	1,840
		Stancorp Financial Group		—		”			—			US$	1,827				N/A			US$	1,827
		Aust. & NZ Banking Grp. NY		—		”			—			US$	1,804				N/A			US$	1,804
		Regency Centers, L.P.		—		”			—			US$	1,793				N/A			US$	1,793
		Dominion Energy Gas Holdings		—		”			—			US$	1,773				N/A			US$	1,773
		Kimco Realty Corp.		—		”			—			US$	1,711				N/A			US$	1,711
		Pacific Gas & Electric		—		”			—			US$	1,604				N/A			US$	1,604
		African Development Bank		—		”			—			US$	1,566				N/A			US$	1,566
		Realty Income Corp.		—		”			—			US$	1,531				N/A			US$	1,531
		PSEG Power LLC		—		”			—			US$	1,520				N/A			US$	1,520
		Standard Chartered PLC		—		”			—			US$	1,503				N/A			US$	1,503
		Guardian Life Global Funding		—		”			—			US$	1,480				N/A			US$	1,480
		HSBC Bank PLC		—		”			—			US$	1,480				N/A			US$	1,480
		Oesterreichische Kontrollbank		—		”			—			US$	1,457				N/A			US$	1,457
		Texas Eastern Transmission, LP		—		”			—			US$	1,400				N/A			US$	1,400
		Walt Disney Company/The		—		”			—			US$	1,398				N/A			US$	1,398
		IBM Corp.		—		”			—			US$	1,307				N/A			US$	1,307
		Equifax Inc.		—		”			—			US$	1,303				N/A			US$	1,303
		Philip Morris Intl Inc.		—		”			—			US$	1,289				N/A			US$	1,289
		Visa Inc.		—		”			—			US$	1,287				N/A			US$	1,287
		Eaton Corp.		—		”			—			US$	1,284				N/A			US$	1,284
		Comcast Corp.		—		”			—			US$	1,279				N/A			US$	1,279
		The Western Union Company		—		”			—			US$	1,276				N/A			US$	1,276
		Nissan Motor Acceptance		—		”			—			US$	1,264				N/A			US$	1,264
		Kroger Co.		—		”			—			US$	1,244				N/A			US$	1,244
		Consolidated Edison, Inc.		—		”			—			US$	1,221				N/A			US$	1,221
		American Airlines 2013-2		—		”			—			US$	1,216				N/A			US$	1,216
		Banque Fed Cred Mutuel		—		”			—			US$	1,179				N/A			US$	1,179
		ONEOK Partners LP		—		”			—			US$	1,162				N/A			US$	1,162
		Public Service Enterprise Group Inc.		—		”			—			US$	1,143				N/A			US$	1,143
		KfW		—		”			—			US$	1,141				N/A			US$	1,141
		DXC Technology Co.		—		”			—			US$	1,130				N/A			US$	1,130
		ERP Operating LP		—		”			—			US$	1,122				N/A			US$	1,122
		Berkshire Hathaway Inc.		—		”			—			US$	1,121				N/A			US$	1,121
		Medtronic Inc.		—		”			—			US$	1,099				N/A			US$	1,099
		Wesfarmers Ltd.		—		”			—			US$	1,097				N/A			US$	1,097

(Continued)

 

- 51 -

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Held Company Name		Marketable Securities Type and Name		Relationship with the Company		Financial Statement Account		June 30, 2017																Note
								Shares/Units (In Thousands)				Carrying Value (Foreign Currencies in Thousands)				Percentage of Ownership (%)				Fair Value (Foreign Currencies in Thousands)
TSMC Global		International Paper Company		—		Available-for-sale financial assets			—			US$	1,091				N/A			US$	1,091
		Marsh & Mclennan Cos Inc.		—		”			—			US$	1,090				N/A			US$	1,090
		Cigna Corporation		—		”			—			US$	1,085				N/A			US$	1,085
		Merck & Co Inc.		—		”			—			US$	1,058				N/A			US$	1,058
		UBS AG London		—		”			—			US$	1,055				N/A			US$	1,055
		EOG Resources, Inc.		—		”			—			US$	1,050				N/A			US$	1,050
		Lincoln National Corp.		—		”			—			US$	1,048				N/A			US$	1,048
		Berkshire Hathaway Energy Co.		—		”			—			US$	1,030				N/A			US$	1,030
		Statoil ASA		—		”			—			US$	1,025				N/A			US$	1,025
		Amazon.com Inc.		—		”			—			US$	1,018				N/A			US$	1,018
		Altera Corp.		—		”			—			US$	1,013				N/A			US$	1,013
		HP Enterprise Co.		—		”			—			US$	1,012				N/A			US$	1,012
		Macquarie Bank Ltd.		—		”			—			US$	1,011				N/A			US$	1,011
		Home Depot Inc.		—		”			—			US$	1,007				N/A			US$	1,007
		John Deere Capital Corp.		—		”			—			US$	1,004				N/A			US$	1,004
		Harley-Davidson Financial Services, Inc.		—		”			—			US$	1,004				N/A			US$	1,004
		United Technologies Corporation		—		”			—			US$	1,001				N/A			US$	1,001
		Georgia-Pacific LLC		—		”			—			US$	985				N/A			US$	985
		Capital One Bank (USA), NA		—		”			—			US$	978				N/A			US$	978
		National Retail Properties, Inc.		—		”			—			US$	977				N/A			US$	977
		Duke Realty LP		—		”			—			US$	973				N/A			US$	973
		Exxon Mobil Corporation		—		”			—			US$	956				N/A			US$	956
		Duke Energy Progress Inc.		—		”			—			US$	951				N/A			US$	951
		PPL Capital Funding, Inc.		—		”			—			US$	934				N/A			US$	934
		Glaxosmithkline Cap. Inc.		—		”			—			US$	932				N/A			US$	932
		Coca Cola Femsa S.A.B. de C.V.		—		”			—			US$	929				N/A			US$	929
		Southern Electric Generating Company		—		”			—			US$	904				N/A			US$	904
		Lockheed Martin Corp.		—		”			—			US$	902				N/A			US$	902
		CNOOC Finance (2011) Ltd.		—		”			—			US$	894				N/A			US$	894
		Federal Realty Invs Trust		—		”			—			US$	878				N/A			US$	878
		Mastercard Inc.		—		”			—			US$	857				N/A			US$	857
		Alterra Finance LLC		—		”			—			US$	842				N/A			US$	842
		Metlife Inc.		—		”			—			US$	841				N/A			US$	841
		Huntington Bancshares		—		”			—			US$	838				N/A			US$	838
		Nucor Corporation		—		”			—			US$	830				N/A			US$	830
		Pacific LifeCorp		—		”			—			US$	820				N/A			US$	820
		AXIS Specialty Finance PLC		—		”			—			US$	819				N/A			US$	819
		Bank Of Montreal		—		”			—			US$	815				N/A			US$	815
		Aon PLC		—		”			—			US$	814				N/A			US$	814
		Societe Generale Group		—		”			—			US$	808				N/A			US$	808
		Manulife Financial Corporation		—		”			—			US$	807				N/A			US$	807
		Activision Blizzard		—		”			—			US$	799				N/A			US$	799
		State Grid Overseas Investment Ltd.		—		”			—			US$	798				N/A			US$	798
		Spectra Energy Partners, LP		—		”			—			US$	789				N/A			US$	789
		Sinopec Capital (2013) Ltd.		—		”			—			US$	780				N/A			US$	780
		Cox Communications, Inc.		—		”			—			US$	778				N/A			US$	778
		AIG Global Funding		—		”			—			US$	765				N/A			US$	765
		Baidu, Inc.		—		”			—			US$	760				N/A			US$	760
		Crown Castle Towers LLC		—		”			—			US$	753				N/A			US$	753
		CMS Energy Corp.		—		”			—			US$	752				N/A			US$	752
		Norfolk Southern Railway Co.		—		”			—			US$	724				N/A			US$	724
		APT Pipelines Ltd.		—		”			—			US$	724				N/A			US$	724
		Baker Hughes Incorporated		—		”			—			US$	721				N/A			US$	721
		DTE Electric Company		—		”			—			US$	718				N/A			US$	718
		Regions Financial Corporation		—		”			—			US$	717				N/A			US$	717
		American Honda Finance		—		”			—			US$	714				N/A			US$	714
		Total Capital International S.A.		—		”			—			US$	706				N/A			US$	706
		Scentre Group		—		”			—			US$	702				N/A			US$	702
		TTX Co.		—		”			—			US$	701				N/A			US$	701

(Continued)

 

- 52 -

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Held Company Name		Marketable Securities Type and Name		Relationship with the Company		Financial Statement Account		June 30, 2017														Note
								Shares/Units (In Thousands)				Carrying Value (Foreign Currencies in Thousands)				Percentage of Ownership (%)		Fair Value (Foreign Currencies in Thousands)
TSMC Global		Mattel Inc.		—		Available-for-sale financial assets			—			US$	700			N/A		US$	700
		Rochester Gas & Electric		—		”			—			US$	695			N/A		US$	695
		Continental Airlines Inc.		—		”			—			US$	681			N/A		US$	681
		Ohio Power Company		—		”			—			US$	669			N/A		US$	669
		Entergy Louisiana, LLC		—		”			—			US$	663			N/A		US$	663
		Athene Global Funding		—		”			—			US$	653			N/A		US$	653
		RBC USA Holdco Corp.		—		”			—			US$	653			N/A		US$	653
		Grupo Bimbo, S.A.B. de C.V.		—		”			—			US$	643			N/A		US$	643
		Alexandria Real Estate Equities		—		”			—			US$	642			N/A		US$	642
		Texas Instruments, Inc.		—		”			—			US$	639			N/A		US$	639
		Liberty Property LP		—		”			—			US$	637			N/A		US$	637
		Potash Corp Saskatchewan Inc.		—		”			—			US$	636			N/A		US$	636
		Life Technologies Corp.		—		”			—			US$	622			N/A		US$	622
		Dr Pepper Snapple Group, Inc.		—		”			—			US$	617			N/A		US$	617
		Daiwa Securities Group		—		”			—			US$	615			N/A		US$	615
		Altria Group, Inc.		—		”			—			US$	610			N/A		US$	610
		ABC Inc.		—		”			—			US$	610			N/A		US$	610
		Kimberly Clark Corp.		—		”			—			US$	603			N/A		US$	603
		Host Hotels & Resorts, Inc.		—		”			—			US$	595			N/A		US$	595
		Mcdonald’s Corp.		—		”			—			US$	587			N/A		US$	587
		MUFG Union Bank, N.A.		—		”			—			US$	585			N/A		US$	585
		CenterPoint Energy Resources		—		”			—			US$	583			N/A		US$	583
		AvalonBay Communities		—		”			—			US$	581			N/A		US$	581
		AXIS Specialty Finance PLC		—		”			—			US$	578			N/A		US$	578
		Boston Properties LP		—		”			—			US$	560			N/A		US$	560
		Bunge Limited Finance Corp.		—		”			—			US$	559			N/A		US$	559
		Fédération des caisses		—		”			—			US$	550			N/A		US$	550
		Prudential Financial Inc.		—		”			—			US$	543			N/A		US$	543
		Digital Realty Trust, L.P.		—		”			—			US$	541			N/A		US$	541
		Brambles USA Inc.		—		”			—			US$	540			N/A		US$	540
		O’Reilly Automotive Inc.		—		”			—			US$	540			N/A		US$	540
		Southwestern Electric Power Company		—		”			—			US$	532			N/A		US$	532
		TD Ameritrade Holding Corp.		—		”			—			US$	527			N/A		US$	527
		Regency Centers Corp.		—		”			—			US$	518			N/A		US$	518
		Burlington Northern Santa Fe Corp.		—		”			—			US$	515			N/A		US$	515
		Walgreens Boots Alliance		—		”			—			US$	508			N/A		US$	508
		Swedbank AB		—		”			—			US$	506			N/A		US$	506
		CBS Corp.		—		”			—			US$	505			N/A		US$	505
		Halliburton Co.		—		”			—			US$	501			N/A		US$	501
		MassMutual Global Funding		—		”			—			US$	489			N/A		US$	489
		Narragansett Electric		—		”			—			US$	475			N/A		US$	475
		Comerica Inc.		—		”			—			US$	474			N/A		US$	474
		Spire, Inc.		—		”			—			US$	464			N/A		US$	464
		Texas-New Mexico Power		—		”			—			US$	449			N/A		US$	449
		Canadian Pacific Railway Company		—		”			—			US$	449			N/A		US$	449
		Nationwide Building Society		—		”			—			US$	441			N/A		US$	441
		Valero Energy Corp.		—		”			—			US$	439			N/A		US$	439
		Blackstone Holdings Finance Co., LLC		—		”			—			US$	422			N/A		US$	422
		Trans Canada Pipelines		—		”			—			US$	420			N/A		US$	420
		Woolworths Limited		—		”			—			US$	419			N/A		US$	419
		Volkswagen Group of America, Inc.		—		”			—			US$	400			N/A		US$	400
		Southern Power Company		—		”			—			US$	397			N/A		US$	397
		Aon Corp.		—		”			—			US$	394			N/A		US$	394
		First Niagara Financial Group, Inc.		—		”			—			US$	391			N/A		US$	391
		Nationwide Financial Service, Inc.		—		”			—			US$	383			N/A		US$	383
		Enbridge, Inc.		—		”			—			US$	363			N/A		US$	363
		Deutsche Bank AG		—		”			—			US$	353			N/A		US$	353
		CBOE Holdings, Inc.		—		”			—			US$	350			N/A		US$	350
		ConocoPhillips		—		”			—			US$	337			N/A		US$	337

(Continued)

 

- 53 -

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Held Company Name		Marketable Securities Type and Name		Relationship with the Company		Financial Statement Account		June 30, 2017														Note
								Shares/Units (In Thousands)				Carrying Value (Foreign Currencies in Thousands)				Percentage of Ownership (%)		Fair Value (Foreign Currencies in Thousands)
TSMC Global		Phillips 66		—		Available-for-sale financial assets			—			US$	326			N/A		US$	326
		PacifiCorp		—		”			—			US$	320			N/A		US$	320
		eBay, Inc.		—		”			—			US$	305			N/A		US$	305
		Eli Lilly & Co.		—		”			—			US$	296			N/A		US$	296
		Barclays Bank PLC		—		”			—			US$	294			N/A		US$	294
		BAE Systems Holdings, Inc.		—		”			—			US$	293			N/A		US$	293
		Amphenol Corp.		—		”			—			US$	291			N/A		US$	291
		EMD Finance LLC		—		”			—			US$	282			N/A		US$	282
		Nomura Holdings Inc.		—		”			—			US$	253			N/A		US$	253
		NBCUniversal Enterprise, Inc.		—		”			—			US$	251			N/A		US$	251
		Bank of Nova Scotia		—		”			—			US$	246			N/A		US$	246
		Kansas City Power & Light Company		—		”			—			US$	242			N/A		US$	242
		Protective Life Corporation		—		”			—			US$	233			N/A		US$	233
		WestRock MWV, LLC		—		”			—			US$	231			N/A		US$	231
		Rolls Royce PLC		—		”			—			US$	226			N/A		US$	226
		Assurant, Inc.		—		”			—			US$	211			N/A		US$	211
		Fidelity National Information		—		”			—			US$	208			N/A		US$	208
		Nisource Finance Corp.		—		”			—			US$	84			N/A		US$	84
		JPMorgan Chase & Co.		—		Held-to-maturity financial assets			—			US$	152,533			N/A		US$	154,237
		Wells Fargo & Company		—		”			—			US$	150,006			N/A		US$	151,562
		Westpac Banking Corp.		—		”			—			US$	100,000			N/A		US$	101,002
		Goldman Sachs Group, Inc.		—		”			—			US$	100,000			N/A		US$	100,565
		Commonwealth Bank of Australia		—		”			—			US$	50,000			N/A		US$	50,455
		National Australia Bank		—		”			—			US$	50,000			N/A		US$	50,392
		Bank of Nova Scotia		—		”			—			US$	49,986			N/A		US$	50,281
		Government bond
		US Treasury N/B		—		Available-for-sale financial assets			—			US$	213,778			N/A		US$	213,778
		Abu Dhabi Government International Bond		—		”			—			US$	3,478			N/A		US$	3,478
		Agency bonds/Agency mortgage-backed securities
		Federal National Mortgage Association		—		Available-for-sale financial assets			—			US$	446,850			N/A		US$	446,850
		Federal Home Loan Mortgage Corporation		—		”			—			US$	181,670			N/A		US$	181,670
		Government National Mortgage Association		—		”			—			US$	43,096			N/A		US$	43,096
		Government National Mortgage Association		—		”			—			US$	27,679			N/A		US$	27,679
		Federal Home Loan Bank		—		”			—			US$	6,182			N/A		US$	6,182
		Fhlmc Multifamily Structured PTC		—		”			—			US$	3,634			N/A		US$	3,634
		Export Import Bank Korea		—		”			—			US$	3,007			N/A		US$	3,007
		Province Of Quebec		—		”			—			US$	2,592			N/A		US$	2,592
		Export Developmnt Canada		—		”			—			US$	2,005			N/A		US$	2,005
		CPPIB Capital, Inc.		—		”			—			US$	1,186			N/A		US$	1,186
		Federal Farm Credit Bank		—		”			—			US$	904			N/A		US$	904
		Negotiable certificate of deposit
		China Construction Bank		—		Held-to-maturity financial assets			—			US$	50,000			N/A		US$	50,100
		Bank of China		—		”			—			US$	50,000			N/A		US$	50,094
		China Development Bank		—		”			—			US$	50,000			N/A		US$	50,079
		Asset-backed securities
		Citibank Credit Card Issuance Trust		—		Available-for-sale financial assets			—			US$	33,844			N/A		US$	33,844
		Discover Card Execution Note Trust		—		”			—			US$	28,764			N/A		US$	28,764
		Chase Issuance Trust		—		”			—			US$	27,310			N/A		US$	27,310
		Capital One Multi Asset Execution Trust		—		”			—			US$	27,180			N/A		US$	27,180
		American Express Credit Account Master Trust		—		”			—			US$	24,269			N/A		US$	24,269
		Ford Credit Floorplan Master Owner Trust		—		”			—			US$	22,741			N/A		US$	22,741
		Bank of America Credit Card Trust		—		”			—			US$	21,254			N/A		US$	21,254
		COMM Mortgage Trust		—		”			—			US$	12,681			N/A		US$	12,681
		Ford Credit Auto Owner Trust		—		”			—			US$	11,792			N/A		US$	11,792
		Morgan Stanley Bank of America Merrill Lynch Trust		—		”			—			US$	11,094			N/A		US$	11,094

(Continued)

 

- 54 -

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Held Company Name		Marketable Securities Type and Name		Relationship with the Company		Financial Statement Account		June 30, 2017														Note
								Shares/Units (In Thousands)				Carrying Value (Foreign Currencies in Thousands)				Percentage of Ownership (%)		Fair Value (Foreign Currencies in Thousands)
TSMC Global		UBS-Barclays Commercial Mortgage Trust		—		Available-for-sale financial assets			—			US$	10,193			N/A		US$	10,193
		Mercedes Benz Master Owner Trust		—		”			—			US$	10,061			N/A		US$	10,061
		Hyundai Auto Lease Securitization Trust		—		”			—			US$	9,928			N/A		US$	9,928
		GM Financial Automobile Leasing Trust		—		”			—			US$	9,077			N/A		US$	9,077
		Hyundai Auto Receivables Trust		—		”			—			US$	8,979			N/A		US$	8,979
		Nissan Auto Lease Trust		—		”			—			US$	8,731			N/A		US$	8,731
		Honda Auto Receivables Owner Trust		—		”			—			US$	8,608			N/A		US$	8,608
		Nissan Auto Receivables Owner Trust		—		”			—			US$	8,457			N/A		US$	8,457
		J.P. Morgan Chase Commercial Mortgage Securities Trust		—		”			—			US$	7,564			N/A		US$	7,564
		GS Mortgage Securities Trust		—		”			—			US$	7,375			N/A		US$	7,375
		JPMBB Commercial Mortgage Securities Trust		—		”			—			US$	6,443			N/A		US$	6,443
		Chesapeake Funding II LLC		—		”			—			US$	6,339			N/A		US$	6,339
		Toyota Auto Receivables Owner Trust		—		”			—			US$	6,002			N/A		US$	6,002
		Ford Credit Auto Owner Trust		—		”			—			US$	5,984			N/A		US$	5,984
		Toyota Auto Receivables Owner Trust		—		”			—			US$	5,959			N/A		US$	5,959
		BMW Vehicle Lease Trust		—		”			—			US$	5,147			N/A		US$	5,147
		Citigroup Commercial Mortgage Trust		—		”			—			US$	4,899			N/A		US$	4,899
		Bank		—		”			—			US$	4,011			N/A		US$	4,011
		Nissan Master Owner Trust Receivables Trust		—		”			—			US$	4,007			N/A		US$	4,007
		Cold Storage Trust		—		”			—			US$	3,805			N/A		US$	3,805
		Mercedes Benz Auto Lease Trust		—		”			—			US$	3,703			N/A		US$	3,703
		Hertz Fleet Lease Funding L.P.		—		”			—			US$	3,496			N/A		US$	3,496
		Wells Fargo Commercial Mortgage Trust		—		”			—			US$	3,334			N/A		US$	3,334
		Ford Credit Auto Lease Trust		—		”			—			US$	3,007			N/A		US$	3,007
		Credit Suisse Mortgage Trust		—		”			—			US$	2,888			N/A		US$	2,888
		BMW Floorplan Master Owner Trust		—		”			—			US$	2,445			N/A		US$	2,445
		WF-RBS Commercial Mortgage Trust		—		”			—			US$	2,050			N/A		US$	2,050
		Carmax Auto Owner Trust		—		”			—			US$	1,998			N/A		US$	1,998
		Mercedes Benz Auto Receivables Trust		—		”			—			US$	1,882			N/A		US$	1,882
		Morgan Stanley Capital I Trust		—		”			—			US$	1,841			N/A		US$	1,841
		Golden Credit Card Trust		—		”			—			US$	1,800			N/A		US$	1,800
		Wheels SPV LLC		—		”			—			US$	1,693			N/A		US$	1,693
		CFCRE Commercial Mortgage Trust		—		”			—			US$	1,075			N/A		US$	1,075
		Enterprise Fleet Financing LLC		—		”			—			US$	1,028			N/A		US$	1,028
		Structure product
		Bank of Tokyo-Mitsubishi UFJ		—		Held-to-maturity financial assets			—			US$	50,000			N/A		US$	49,755
		Commercial paper
		BNP Paribas New York Branch		—		Available-for-sale financial assets			—			US$	3,000			N/A		US$	3,000
		Norinchukin Bank		—		”			—			US$	2,000			N/A		US$	2,000
		Societe Generale		—		”			—			US$	2,000			N/A		US$	2,000
		UBS AG, Stamford Branch		—		”			—			US$	2,000			N/A		US$	2,000
		Bank of Tokyo-Mitsubishi UFJ, Ltd., London		—		”			—			US$	1,000			N/A		US$	1,000
		Svenska Handelsbanken AB (publ)		—		”			—			US$	891			N/A		US$	891
		AXA Financial, Inc.		—		”			—			US$	886			N/A		US$	886
		Fund
		Primavera Capital Fund II L.P.		—		Financial assets carried at cost			—			US$	38,477			4		US$	38,477
VTAF III		Common stock
		LiquidLeds Lighting Corp.		—		Financial assets carried at cost			1,600			US$	800			11		US$	800
		Xenio Corporation		—		”			435			US$	453			3		US$	453
		Preferred stock
		Neoconix, Inc.		—		Financial assets carried at cost			4,147			US$	170			—		US$	170

(Continued)

 

- 55 -

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Held Company Name		Marketable Securities Type and Name		Relationship with the Company		Financial Statement Account		June 30, 2017														Note
								Shares/Units (In Thousands)				Carrying Value (Foreign Currencies in Thousands)				Percentage of Ownership (%)		Fair Value (Foreign Currencies in Thousands)
VTAF II		Common stock
		RichWave Technology Corp.		—		Available-for-sale financial assets			419			US$	1,508			1		US$	1,508
		Impinj, Inc.		—		”			7			US$	362			—		US$	362
		Sentelic		—		Financial assets carried at cost			1,806			US$	2,607			8		US$	2,607
		5V Technologies, Inc.		—		”			963			US$	2,168			2		US$	2,168
		Aether Systems, Inc.		—		”			3,100			US$	339			20		US$	339
		Preferred stock
		Aquantia		—		Financial assets carried at cost			4,643			US$	4,441			2		US$	4,441
ISDF		Preferred stock
		Sonics, Inc.		—		Financial assets carried at cost			230				—			3			—
ISDF II		Common stock
		Alchip Technologies Limited		—		Available-for-sale financial assets			6,249			US$	12,534			10		US$	12,534
		Sonics, Inc.		—		Financial assets carried at cost			278				—			4			—
		Preferred stock
		Sonics, Inc.		—		Financial assets carried at cost			264				—			4			—
Growth Fund		Common stock
		Innovium, Inc.		—		Financial assets carried at cost			221			US$	370			—		US$	370
		Preferred stock
		Innovium, Inc.		—		Financial assets carried at cost			230			US$	384			—		US$	384

(Concluded)

 

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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 SIX MONTHS ENDED JUNE 30, 2017

(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 1)
										Shares/Units (In Thousands)				Amount				Shares/Units (In Thousands)				Amount				Shares/Units (In Thousands)				Amount				Carrying Value				Gain/Loss on Disposal				Shares/Units (In Thousands)				Amount
TSMC		Corporate bond
		CPC Corporation, Taiwan		Held-to-maturity financial assets		—		—			—			$	1,967,303				—			$	—				—			$	800,000			$	800,000			$	—				—			$	1,161,873
		Hon Hai Precision Ind. Co., Ltd.		”		—		—			—				400,250				—				—				—				400,000				400,000				—				—				—
		Commercial paper
		Taiwan Power Company		Held-to-maturity financial assets		—		—			865				8,628,176				170				1,695,771				985				9,850,000				9,850,000				—				50				498,818
		Stock
		TSMC Global		Prepayments for Investments (Note 2)		—		Subsidiary			—				—				—				5,986,500				—				—				—				—				—				5,986,500
TSMC Global		Corporate bond
		Bank of America Corp.		Available-for-sale financial assets		—		—			—			US$	27,973				—			US$	13,417				—			US$	10,679			US$	10,803			US$	(124	)			—			US$	30,880
		Goldman Sachs Group Inc.		”		—		—			—			US$	7,390				—			US$	11,755				—			US$	1,900			US$	1,976			US$	(76	)			—			US$	17,375
		Morgan Stanley		”		—		—			—			US$	11,237				—			US$	12,049				—			US$	6,775			US$	6,738			US$	37				—			US$	16,706
		Microsoft Corp.		”		—		—			—			US$	2,905				—			US$	11,279				—			US$	1,001			US$	999			US$	2				—			US$	13,393
		JPMorgan Chase & Co.		”		—		—			—				—				—			US$	10,596				—				—				—				—				—			US$	10,611
		Qualcomm, Inc.		”		—		—			—				—				—			US$	10,048				—				—				—				—				—			US$	10,093
		Aetna Inc.		”		—		—			—			US$	11,618				—				—				—			US$	10,157			US$	10,069			US$	88				—			US$	1,604
		Government bond
		US Treasury N/B		Available-for-sale financial assets		—		—			—			US$	195,285				—			US$	193,984				—			US$	254,014			US$	254,497			US$	(483	)			—			US$	142,023
		US Treasury Floating Rate Note		”		—		—			—			US$	30,756				—			US$	142,388				—			US$	115,149			US$	115,059			US$	90				—			US$	58,030
		Treasury Inflation-Indexed N/B		”		—		—			—			US$	19,349				—			US$	8,039				—			US$	19,208			US$	19,326			US$	(118	)			—			US$	8,093
		Treasury Bill		”		—		—			—				—				—			US$	29,244				—			US$	28,348			US$	28,345			US$	3				—			US$	900
		WI Treasury Securities		”		—		—			—				—				—			US$	71,332				—			US$	71,362			US$	71,332			US$	30				—				—
		Agency bonds/Agency mortgage- backed securities
		FNMA Pool AL9718		Available-for-sale financial assets		—		—			—				—				—			US$	9,841				—			US$	621			US$	704			US$	(83	)			—			US$	9,202
		FNMA TBA 15 Yr 3		”		—		—			—				—				—			US$	14,993				—			US$	12,978			US$	12,955			US$	23				—			US$	2,034
		FNMA TBA 30 Yr 4.5		”		—		—			—				—				—			US$	21,945				—			US$	21,181			US$	21,194			US$	(13	)			—			US$	750
TSMC Global		GNMA II TBA 30 Yr 4		”		—		—			—				—				—			US$	19,296				—			US$	18,992			US$	18,980			US$	12				—			US$	316
		GNMA II TBA 30 Yr 3.5		”		—		—			—				—				—			US$	25,695				—			US$	25,539			US$	25,549			US$	(10	)			—			US$	145
		GNMA II TBA 30 Yr 3		”		—		—			—				—				—			US$	12,544				—			US$	12,541			US$	12,544			US$	(3	)			—				—
		FNMA TBA 30 Yr 5		”		—		—			—				—				—			US$	11,128				—			US$	11,134			US$	11,128			US$	6				—				—
		FNMA TBA 30 Yr 4		”		—		—			—				—				—			US$	21,721				—			US$	21,726			US$	21,721			US$	5				—				—
		FNMA TBA 30 Yr 3.5		”		—		—			—				—				—			US$	33,902				—			US$	33,891			US$	33,902			US$	(11	)			—				—
		FNMA TBA 30 Yr 3		”		—		—			—				—				—			US$	46,700				—			US$	46,736			US$	46,700			US$	36				—				—

(Continued)

 

- 57 -

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Company Name		Marketable Securities Type and Name		Financial Statement Account		Counter-party		Nature of Relationship		Beginning Balance								Acquisition								Disposal																Ending Balance (Note 1)
										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		Asset-backed securities
		Citibank Credit Card Issuance Trust		Available-for-sale financial assets		—		—			—			US$	22,585				—			US$	13,313				—			US$	2,031			US$	2,161			US$	(130	)			—			US$	33,844
		Discover Card Execution Note Trust		”		—		—			—			US$	23,076				—			US$	11,172				—			US$	5,500			US$	5,499			US$	1				—			US$	28,764
		Capital One Multi Asset Execution Trust		”		—		—			—			US$	39,626				—			US$	200				—			US$	12,703			US$	12,778			US$	(75	)			—			US$	27,180
		Ford Credit Floorplan Master Owner Trust		”		—		—			—			US$	11,944				—			US$	10,779				—				—				—				—				—			US$	22,741
		Fund
		Primavera Capital Fund II L.P.		Financial assets carried at cost		—		—			—			US$	23,784				—			US$	14,693				—				—				—				—				—			US$	38,477

 

Note 1:

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

Note 2:

To lower the hedging cost, in February 2017, the Board of Directors of TSMC approved to inject US$2,000,000 thousand of capital into TSMC Global. This project was approved by the Investment Commission, Ministry of Economic Affairs, R.O.C. (MOEA). The prepayment for investment was US$195,000 thousand as of June 30, 2017 and the total injection is expected to be finished in the fourth quarter of 2017.

(Concluded)

 

- 58 -

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TABLE 5

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

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

FOR THE SIX MONTHS ENDED JUNE 30, 2017

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

 

 

Company Name

Types of Property

Transaction Date

Transaction Amount (Foreign Currencies in Thousands)

Payment Term

Counter-party

Nature of Relationships

Prior Transaction of Related Counter-party

Price Reference

Purpose of Acquisition

Other Terms

Owner

Relationships

Transfer Date

Amount

TSMC

Fab

August 10, 2016 to April 6, 2017

$

837,466

Monthly settlement by the construction progress and acceptance

Fu Tsu Construction Co., Ltd.

—

N/A

N/A

N/A

N/A

Bidding, price comparison and price negotiation

Manufacturing purpose

None

Fab

January 18, 2017

352,766

Monthly settlement by the construction progress and acceptance

TASA Construction Corporation

—

N/A

N/A

N/A

N/A

Bidding, price comparison and price negotiation

Manufacturing purpose

None

TSMC Nanjing Company Ltd.

Fab

March 21, 2017 to June 23, 2017

RMB183,300

Monthly settlement by the construction progress and acceptance

China Construction First Division Group Construction & Development Co., Ltd.

—

N/A

N/A

N/A

N/A

Bidding, price comparison and price negotiation

Manufacturing purpose

None

Fab

May 25, 2017

RMB119,027

Monthly settlement by the construction progress and acceptance

Renchong Interior Decoration (Shanghai) Co., Ltd.

—

N/A

N/A

N/A

N/A

Bidding, price comparison and price negotiation

Manufacturing purpose

None

Fab

June 22, 2017 to June 27, 2017

RMB98,000

Monthly settlement by the construction progress and acceptance

Shanghai Baoye Group Co., Ltd.

—

N/A

N/A

N/A

N/A

Bidding, price comparison and price negotiation

Manufacturing purpose

None

 

- 59 -

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TABLE 6

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

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

FOR THE SIX MONTHS ENDED JUNE 30, 2017

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

 

 

																						Notes/Accounts Payable or
						Transaction Details												Abnormal Transaction				Receivable
								Amount (Foreign Currencies				% to										Ending Balance (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		$	287,574,248				62			Net 30 days from invoice date (Note)		—		Note		$	66,739,205				62
		GUC		Associate		Sales			3,047,052				1			Net 30 days from the end of the month of when invoice is issued		—		—			341,107				—
		TSMC China		Subsidiary		Purchases			11,220,670				28			Net 30 days from the end of the month of when invoice is issued		—		—			(1,832,175	)			7
		WaferTech		Indirect subsidiary		Purchases			4,359,047				11			Net 30 days from the end of the month of when invoice is issued		—		—			(1,512,184	)			5
		VIS		Associate		Purchases			2,821,271				7			Net 30 days from the end of the month of when invoice is issued		—		—			(416,232	)			1
		SSMC		Associate		Purchases			2,064,649				5			Net 30 days from the end of the month of when invoice is issued		—		—			(458,644	)			2
TSMC North America		GUC		Associate of TSMC		Sales		(US$	414,555 13,480	)			—			Net 30 days from invoice date		—		—		(US$	86,836 2,855	)			—

 

Note:

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

 

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TABLE 7

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

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

JUNE 30, 2017

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

 

 

Company Name		Related Party		Nature of Relationships		Ending Balance (Foreign Currencies in Thousands)				Turnover Days (Note 1)		Overdue						Amounts Received in Subsequent Period				Allowance for Bad Debts
												Amount				Action Taken
TSMC		TSMC North America		Subsidiary		$	67,559,095			48		$	1,180,581			—		$	5,254,863			$	—
		VIS		Associate			1,474,583			Note 2			—			—			—				—
		VisEra Tech		Subsidiary			760,168			Note 2			—			—			—				—
		GUC		Associate			341,107			38			—			—			—				—
TSMC Global		TSMC		Parent company			7,603,768			Note 2			—			—			—				—
						(US$	250,009	)
TSMC China		TSMC		Parent company			1,832,175			29			—			—			—				—
						(RMB	408,411	)
		TSMC Nanjing		The same parent company			7,213,695			Note 2			—			—			—				—
						(RMB	1,608,010	)
TSMC Technology		TSMC		The ultimate parent of the Company		(US$	216,047 7,104	)		Note 2			—			—			—				—
WaferTech		TSMC		The ultimate parent of the Company		(US$	1,512,184 49,720	)		58			—			—			—				—

 

Note 1:

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

Note 2:

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

 

- 61 -

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TABLE 8

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

INTERCOMPANY RELATIONSHIPS AND SIGNIFICANT INTERCOMPANY TRANSACTIONS

FOR THE SIX MONTHS ENDED JUNE 30, 2017

(Amounts in Thousands of New Taiwan Dollars)

 

 

No.		Company Name		Counter Party		Nature of Relationship (Note 1)		Intercompany Transactions
								Financial Statements Item		Amount				Terms (Note 2)		Percentage of Consolidated Net Revenue or Total Assets
0		TSMC		TSMC North America		1		Net revenue from sale of goods		$	287,574,248			—		64%
								Receivables from related parties			66,739,205			—		3%
								Other receivables from related parties			819,890			—		—
				TSMC Japan		1		Marketing expenses - commission			102,593			—		—
				TSMC Europe		1		Marketing expenses - commission			212,189			—		—
				TSMC Global		1		Short-term loans			7,603,500			—		—
				TSMC China		1		Purchases			11,220,670			—		3%
								Payables to related parties			1,832,175			—		—
				VisEra Tech		1		Other receivables from related parties			760,168			—		—
				TSMC Canada		1		Research and development expenses			120,780			—		—
				TSMC Technology		1		Research and development expenses			883,200			—		—
								Payables to related parties			216,047			—		—
				WaferTech		1		Purchases			4,359,047			—		1%
								Payables to related parties			1,512,184			—		—
1		TSMC China		TSMC Nanjing		3		Other receivables from related parties			7,213,695			—		—

 

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.

 

- 62 -

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TABLE 9

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

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

FOR THE SIX MONTHS ENDED JUNE 30, 2017

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

 

 

Investor Company		Investee Company		Location		Main Businesses and Products		Original Investment Amount								Balance as of June 30, 2017										Net Income (Losses) of the Investee (Foreign Currencies in Thousands)				Share of Profits/Losses of Investee (Note 1) (Foreign Currencies in Thousands)				Note
								June 30, 2017 (Foreign Currencies in Thousands)				December 31, 2016 (Foreign Currencies in Thousands)				Shares (In Thousands)				Percentage of Ownership		Carrying Value (Foreign Currencies in Thousands)
TSMC		TSMC Global		Tortola, British Virgin Islands		Investment activities		$	238,193,719 Note 3			$	232,207,219				7			100		$	259,503,712			$	2,264,670			$	2,264,670			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			50,134,056				1,093,644				1,093,644			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			7,956,845				2,129,857				600,728			Associate
		SSMC		Singapore		Manufacturing and selling of integrated circuits and other semiconductor devices			5,120,028				5,120,028				314			39			7,596,341				2,121,561				822,954			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			4,437,218				(44,030	)			(38,305	)		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			4,224,656				126,238				126,238			Subsidiary
		Xintec		Taoyuan, Taiwan		Wafer level chip size packaging and wafer level post passivation interconnection service			1,988,317				1,988,317				111,282			41			2,344,813				(609,250	)			(248,833	)		Associate
		GUC		Hsin-Chu, Taiwan		Researching, developing, manufacturing, testing and marketing of integrated circuits			386,568				386,568				46,688			35			1,078,026				316,911				110,412			Associate
		TSMC Europe		Amsterdam, the Netherlands		Customer service and supporting activities			15,749				15,749				—			100			378,915				19,487				19,487			Subsidiary
		VTAF II		Cayman Islands		Investing in new start-up technology companies			470,505				608,562				—			98			365,580				93,619				91,747			Subsidiary
		VTAF III		Cayman Islands		Investing in new start-up technology companies			1,329,951				1,355,417				—			98			168,551				(15,602	)			(15,290	)		Subsidiary
		TSMC Japan		Yokohama, Japan		Customer service and supporting activities			83,760				83,760				6			100			132,560				2,704				2,704			Subsidiary
		TSMC Korea		Seoul, Korea		Customer service and supporting activities			13,656				13,656				80			100			36,843				1,283				1,283			Subsidiary
		TSMC Solar Europe GmbH		Hamburg, Germany		Selling of solar related products and providing customer service			25,266				25,266				1			100			(21,539	)			(14,455	)			(14,455	)		Subsidiary
TSMC Partners		TSMC Development		Delaware, U.S.A		Investing in companies involved in the manufacturing related business in the semiconductor industry		$ (US$	17,851,157 586,939	)		$ (US$	17,851,157 586,939	)			—			100		$ (US$	26,467,770 870,250	)		$ (US$	868,652 28,303	)			Note 2			Subsidiary
		TSMC Technology		Delaware, U.S.A		Engineering support activities			434,373				434,373				—			100			543,006				30,230				Note 2			Subsidiary
								(US$	14,282	)		(US$	14,282	)								(US$	17,854	)		(US$	984	)
		ISDF II		Cayman Islands		Investing in new start-up technology companies			157,965				157,965				9,299			97			355,828				12,948				Note 2			Subsidiary
								(US$	5,194	)		(US$	5,194	)								(US$	11,699	)		(US$	428	)
		TSMC Canada		Ontario, Canada		Engineering support activities			69,952				69,952				2,300			100			174,080				8,891				Note 2			Subsidiary
								(US$	2,300	)		(US$	2,300	)								(US$	5,724	)		(US$	289	)
		ISDF		Cayman Islands		Investing in new start-up technology companies			14,452				14,452				583			97			462				—				Note 2			Subsidiary
								(US$	475	)		(US$	475	)								(US$	15	)
VTAF III		Growth Fund		Cayman Islands		Investing in new start-up technology companies			68,789				44,458				—			100			51,574				(614	)			Note 2			Subsidiary
								(US$	2,262	)		(US$	1,462	)								(US$	1,696	)		(US$	(20	))

(Continued)

 

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Investor Company

Investee Company

Location

Main Businesses and Products

Original Investment Amount

Balance as of June 30, 2017

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

Share of Profits/Losses of Investee (Note 1) (Foreign Currencies in Thousands)

Note

June 30, 2017 (Foreign Currencies in Thousands)

December 31, 2016 (Foreign Currencies in Thousands)

Shares (In Thousands)

Percentage of Ownership

Carrying Value (Foreign Currencies in Thousands)

VTAF III

Mutual-Pak

New Taipei, Taiwan

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

$ (US$

158,538 5,213

)

$ (US$

158,538 5,213

)

15,643

58

$ (US$

14,531 478

)

$ (US$

(10,967 (355

)  ))

Note 2

Subsidiary

TSMC Development

WaferTech

Washington, U.S.A

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

—

—

293,637

100

(US$

5,325,252 175,092

)

(US$

780,110 25,418

)

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.

Note 3:

To lower the hedging cost, in February 2017, the Board of Directors of TSMC approved to inject US$2,000,000 thousand of capital into TSMC Global. This project was approved by the Investment Commission, Ministry of Economic Affairs, R.O.C. (MOEA). The prepayment for investment was US$195,000 thousand as of June 30, 2017 and the total injection is expected to be finished in the fourth quarter of 2017.

(Concluded)

 

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TABLE 10

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

INFORMATION ON INVESTMENT IN MAINLAND CHINA

FOR SIX MONTHS ENDED JUNE 30, 2017

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

 

 

Investee Company		Main Businesses and Products		Total Amount of Paid-in Capital (RMB in Thousands)				Method of Investment				Accumulated Outflow of Investment from Taiwan as of January 1, 2017 (US$ in Thousands)				Investment Flows								Accumulated Outflow of Investment from Taiwan as of June 30, 2017 (US$ in Thousands)				Net Income (Losses) of the Investee Company				Percentage of Ownership		Share of Profits/Losses				Carrying Amount as of June 30, 2017				Accumulated Inward Remittance of Earnings as of June 30, 2017
																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	)		$	4,478,588			100%		$	4,592,206 (Note 2	)		$	45,863,677			$	—
TSMC Nanjing		Manufacturing, selling, testing and computer-aided design of integrated circuits and other semiconductor devices		$ (RMB	6,435,200 1,366,240	)			Note 1			(US$	6,435,200 200,000	)			—				—			(US$	6,435,200 200,000	)			73,435			100%			73,435 (Note 2	)			6,203,715				—

 

Accumulated Investment in Mainland China as of June 30, 2017 (US$ in Thousands)		Investment Amounts Authorized by Investment Commission, MOEA (US$ in Thousands)		Upper Limit on Investment
$25,374,867 (US$796,000)		$119,412,667 (US$3,596,000)		Note 3

 

Note 1:

TSMC directly invested US$596,000 thousand in TSMC China and US$200,000 thousands in TSMC Nanjing.

Note 2:

Amount was recognized based on the reviewed financial statements.

Note 3:

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

 

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