1934 Act Registration No. 1-14700

 

 

 

 

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

 

FORM 6-K

 

 

REPORT OF FOREIGN PRIVATE ISSUER

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

THE SECURITIES EXCHANGE ACT OF 1934

For the month of November 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:            .)

 

 

 

---

SIGNATURES

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

 

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

---

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

 

---

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 September 30, 2017 and 2016 and the related consolidated statements of comprehensive income for the three months ended September 30, 2017 and 2016 and for the nine months ended September 30, 2017 and 2016, as well as the consolidated statements of changes in equity and cash flows for the nine months ended September 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

November 14, 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.

 

- 1 -

---

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED BALANCE SHEETS

(In Thousands of New Taiwan Dollars)

 

 

		September 30, 2017 (Reviewed)								December 31, 2016 (Audited)								September 30, 2016 (Reviewed)
		Amount				%				Amount				%				Amount				%
ASSETS
CURRENT ASSETS
Cash and cash equivalents (Note 6)		$	408,077,695				22			$	541,253,833				29			$	463,971,657				27
Financial assets at fair value through profit or loss (Note 7)			1,125,668				—				6,451,112				—				1,848,317				—
Available-for-sale financial assets (Notes 8 and 14)			84,953,011				5				67,788,767				4				45,815,003				3
Held-to-maturity financial assets (Note 9)			7,521,216				—				16,610,116				1				5,320,041				—
Hedging derivative financial assets (Notes 4 and 10)			98,879				—				5,550				—				—				—
Notes and accounts receivable, net (Note 11)			117,649,258				7				128,335,271				7				129,118,058				8
Receivables from related parties (Note 29)			1,076,438				—				969,559				—				170,704				—
Other receivables from related parties (Note 29)			165,929				—				146,788				—				149,684				—
Inventories (Notes 12 and 33)			73,893,879				4				48,682,233				3				53,882,144				3
Other financial assets (Notes 30 and 33)			5,209,635				—				4,100,475				—				5,866,961				—
Other current assets (Note 17)			5,090,170				—				3,385,422				—				3,448,916				—
Total current assets			704,861,778				38				817,729,126				44				709,591,485				41
NONCURRENT ASSETS
Held-to-maturity financial assets (Note 9)			18,899,177				1				22,307,561				1				27,430,893				2
Financial assets carried at cost (Note 13)			4,986,046				—				4,102,467				—				3,788,041				—
Investments accounted for using equity method (Note 14)			17,018,500				1				19,743,888				1				18,691,554				1
Property, plant and equipment (Note 15)			1,065,756,867				58				997,777,687				53				934,928,493				54
Intangible assets (Note 16)			14,841,399				1				14,614,846				1				14,630,613				1
Deferred income tax assets (Note 4)			11,237,149				1				8,271,421				—				7,506,051				1
Refundable deposits			1,241,028				—				407,874				—				509,564				—
Other noncurrent assets (Note 17)			2,582,438				—				1,500,432				—				1,610,069				—
Total noncurrent assets			1,136,562,604				62				1,068,726,176				56				1,009,095,278				59
TOTAL		$	1,841,424,382				100			$	1,886,455,302				100			$	1,718,686,763				100
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Short-term loans (Note 18)		$	54,430,200				3			$	57,958,200				3			$	37,648,800				2
Financial liabilities at fair value through profit or loss (Note 7)			251,212				—				191,135				—				224,525				—
Hedging derivative financial liabilities (Notes 4 and 10)			7,545				—				—				—				1,039				—
Accounts payable			27,545,477				1				26,062,351				2				24,936,790				1
Payables to related parties (Note 29)			1,442,029				—				1,262,174				—				1,039,778				—
Salary and bonus payable			12,304,052				1				13,681,817				1				12,183,218				1
Accrued profit sharing bonus to employees and compensation to directors and supervisors (Notes 22 and 27)			17,067,133				1				22,894,006				1				16,252,681				1
Payables to contractors and equipment suppliers			47,975,461				3				63,154,514				3				58,789,579				3
Income tax payable (Note 4)			20,663,395				1				40,306,054				2				27,970,532				2
Provisions (Note 19)			14,123,509				1				18,037,789				1				11,512,994				1
Long-term liabilities - current portion (Note 20)			59,071,057				3				38,109,680				2				38,109,680				2
Accrued expenses and other current liabilities (Notes 21 and 29)			43,641,234				2				36,581,553				2				28,885,496				2
Total current liabilities			298,522,304				16				318,239,273				17				257,555,112				15
NONCURRENT LIABILITIES
Bonds payable (Note 20)			91,800,000				5				153,093,557				8				152,138,965				9
Long-term bank loans			14,520				—				21,780				—				24,200				—
Deferred income tax liabilities (Note 4)			120,360				—				141,183				—				37,510				—
Net defined benefit liability (Note 4)			8,574,626				—				8,551,408				—				7,475,381				—
Guarantee deposits (Note 21)			9,243,250				1				14,670,433				1				15,872,972				1
Others			1,736,633				—				1,686,542				—				1,689,974				—
Total noncurrent liabilities			111,489,389				6				178,164,903				9				177,239,002				10
Total liabilities			410,011,693				22				496,404,176				26				434,794,114				25
EQUITY ATTRIBUTABLE TO SHAREHOLDERS OF THE PARENT
Capital stock (Note 22)			259,303,805				14				259,303,805				14				259,303,805				15
Capital surplus (Note 22)			56,281,271				3				56,272,304				3				56,269,958				3
Retained earnings (Note 22)
Appropriated as legal capital reserve			241,722,663				13				208,297,945				11				208,297,945				12
Unappropriated earnings			892,598,197				49				863,710,224				46				764,460,228				45
			1,134,320,860				62				1,072,008,169				57				972,758,173				57
Others (Note 22)			(19,189,089	)			(1	)			1,663,983				—				(5,218,902	)			—
Equity attributable to shareholders of the parent			1,430,716,847				78				1,389,248,261				74				1,283,113,034				75
NONCONTROLLING INTERESTS			695,842				—				802,865				—				779,615				—
Total equity			1,431,412,689				78				1,390,051,126				74				1,283,892,649				75
TOTAL		$	1,841,424,382				100			$	1,886,455,302				100			$	1,718,686,763				100

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

 

- 2 -

---

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

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

(Reviewed, Not Audited)

 

 

		For the Three Months Ended September 30																For the Nine Months Ended September 30
		2017								2016								2017								2016
		Amount				%				Amount				%				Amount				%				Amount				%
NET REVENUE (Notes 23, 29 and 35)		$	252,107,345				100			$	260,405,885				100			$	699,876,957				100			$	685,711,092				100
COST OF REVENUE (Notes 12, 27, 29 and 33)			126,230,664				50				128,366,813				49				343,761,367				49				347,960,308				51
GROSS PROFIT BEFORE REALIZED (UNREALIZED) GROSS PROFIT ON SALES TO ASSOCIATES			125,876,681				50				132,039,072				51				356,115,590				51				337,750,784				49
REALIZED (UNREALIZED) GROSS PROFIT ON SALES TO ASSOCIATES			3,467				—				11,717				—				(37,152	)			—				(28,181	)			—
GROSS PROFIT			125,880,148				50				132,050,789				51				356,078,438				51				337,722,603				49
OPERATING EXPENSES (Notes 27 and 29)
Research and development			21,045,439				8				18,724,320				7				59,515,288				8				51,246,823				7
General and administrative			5,003,679				2				5,584,814				2				15,178,441				2				14,096,947				2
Marketing			1,487,598				1				1,531,454				1				4,366,284				1				4,383,455				1
Total operating expenses			27,536,716				11				25,840,588				10				79,060,013				11				69,727,225				10
OTHER OPERATING INCOME AND EXPENSES, NET (Notes 16 and 27)			(286,999	)			—				51,921				—				(354,201	)			—				55,059				—
INCOME FROM OPERATIONS (Note 35)			98,056,433				39				106,262,122				41				276,664,224				40				268,050,437				39
NON-OPERATING INCOME AND EXPENSES
Share of profits of associates			751,618				—				881,376				—				2,036,879				—				2,614,537				—
Other income			2,128,556				1				1,521,234				1				6,859,745				1				4,646,589				1
Foreign exchange loss, net (Note 34)			(462,310	)			—				(409,625	)			—				(914,048	)			—				(2,310,461	)			—
Finance costs			(843,214	)			—				(822,667	)			—				(2,499,791	)			—				(2,494,672	)			—
Other gains and losses, net (Note 24)			887,081				—				817,175				—				2,311,121				—				3,405,475				—
Total non-operating income and expenses			2,461,731				1				1,987,493				1				7,793,906				1				5,861,468				1
INCOME BEFORE INCOME TAX			100,518,164				40				108,249,615				42				284,458,130				41				273,911,905				40
INCOME TAX EXPENSE (Notes 4 and 25)			10,568,936				4				11,460,502				5				40,617,342				6				39,801,916				6
NET INCOME			89,949,228				36				96,789,113				37				243,840,788				35				234,109,989				34
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			(882,654	)			(1	)			(10,123,965	)			(4	)			(20,772,474	)			(3	)			(17,070,485	)			(2	)
Changes in fair value of available-for-sale financial assets			(43,684	)			—				59,051				—				(108,757	)			—				80,327				—
Cash flow hedges			19,522				—				—				—				38,519				—				—				—
Share of other comprehensive income (loss) of associates			1,710				—				(11,372	)			—				(56,920	)			—				(2,743	)			—
Income tax benefit (expense) related to items that may be reclassified subsequently			1,192				—				(33,879	)			—				53,633				—				(6,239	)			—
Other comprehensive loss for the period, net of income tax			(903,914	)			(1	)			(10,110,165	)			(4	)			(20,845,999	)			(3	)			(16,999,140	)			(2	)
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD		$	89,045,314				35			$	86,678,948				33			$	222,994,789				32			$	217,110,849				32
NET INCOME ATTRIBUTABLE TO:
Shareholders of the parent		$	89,925,437				36			$	96,759,056				37			$	243,825,354				35			$	234,046,870				34
Noncontrolling interests			23,791				—				30,057				—				15,434				—				63,119				—
		$	89,949,228				36			$	96,789,113				37			$	243,840,788				35			$	234,109,989				34
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO:
Shareholders of the parent		$	89,029,620				35			$	86,652,080				33			$	222,984,427				32			$	217,053,855				32
Noncontrolling interests			15,694				—				26,868				—				10,362				—				56,994				—
		$	89,045,314				35			$	86,678,948				33			$	222,994,789				32			$	217,110,849				32
		For the Three Months Ended September 30																For the Nine Months Ended September 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		$					3.47			$					3.73			$					9.40			$					9.03
Diluted earnings per share		$					3.47			$					3.73			$					9.40			$					9.03

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

 

- 3 -

---

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 for the nine months ended September 30, 2017			—				—				—				—				243,825,354				243,825,354				—				—				—				—				—				243,825,354				15,434				243,840,788
Other comprehensive income (loss) for the nine months ended September 30, 2017, net of income tax			—				—				—				—				—				—				(20,831,019	)			(43,804	)			33,896				—				(20,840,927	)			(20,840,927	)			(5,072	)			(20,845,999	)
Total comprehensive income (loss) for the nine months ended September 30, 2017			—				—				—				—				243,825,354				243,825,354				(20,831,019	)			(43,804	)			33,896				—				(20,840,927	)			222,984,427				10,362				222,994,789
Adjustments to share of changes in equities of associates			—				—				6,206				—				—				—				—				—				—				(12,145	)			(12,145	)			(5,939	)			—				(5,939	)
From share of changes in equities of subsidiaries			—				—				2,761				—				—				—				—				—				—				—				—				2,761				(2,761	)			—
Decrease in noncontrolling interests			—				—				—				—				—				—				—				—				—				—				—				—				(114,624	)			(114,624	)
BALANCE, SEPTEMBER 30, 2017			25,930,380			$	259,303,805			$	56,281,271			$	241,722,663			$	892,598,197			$	1,134,320,860			$	(19,169,782	)		$	(41,163	)		$	34,001			$	(12,145	)		$	(19,189,089	)		$	1,430,716,847			$	695,842			$	1,431,412,689
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 nine months ended September 30, 2016			—				—				—				—				234,046,870				234,046,870				—				—				—				—				—				234,046,870				63,119				234,109,989
Other comprehensive income (loss) for the nine months ended September 30, 2016, net of income tax			—				—				—				—				—				—				(17,091,106	)			97,601				490				—				(16,993,015	)			(16,993,015	)			(6,125	)			(16,999,140	)
Total comprehensive income (loss) for the nine months ended September 30, 2016			—				—				—				—				234,046,870				234,046,870				(17,091,106	)			97,601				490				—				(16,993,015	)			217,053,855				56,994				217,110,849
Disposal of investments accounted for using equity method			—				—				(56,169	)			—				—				—				—				—				—				—				—				(56,169	)			—				(56,169	)
Adjustments to share of changes in equities of associates			—				—				18,875				—				—				—				—				—				—				—				—				18,875				9				18,884
From share of changes in equities of subsidiaries			—				—				7,037				—				—				—				—				—				—				—				—				7,037				(7,037	)			—
Decrease in noncontrolling interests			—				—				—				—				—				—				—				—				—				—				—				—				(231,157	)			(231,157	)
Effect of disposal of subsidiary			—				—				—				—				—				—				—				—				—				—				—				—				(1,954	)			(1,954	)
BALANCE, SEPTEMBER 30, 2016			25,930,380			$	259,303,805			$	56,269,958			$	208,297,945			$	764,460,228			$	972,758,173			$	(6,051,157	)		$	832,372			$	(117	)		$	—			$	(5,218,902	)		$	1,283,113,034			$	779,615			$	1,283,892,649

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

 

- 4 -

---

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands of New Taiwan Dollars)

(Reviewed, Not Audited)

 

 

		Nine Months Ended September 30
		2017				2016
CASH FLOWS FROM OPERATING ACTIVITIES
Income before income tax		$	284,458,130			$	273,911,905
Adjustments for:
Depreciation expense			186,131,944				164,665,319
Amortization expense			3,197,293				2,725,524
Finance costs			2,499,791				2,494,672
Share of profits of associates			(2,036,879	)			(2,614,537	)
Interest income			(6,714,157	)			(4,509,169	)
Loss (gain) on disposal or retirement of property, plant and equipment, net			251,319				(61,491	)
Impairment loss on intangible assets			13,520				—
Impairment loss on financial assets			15,941				55,055
Gain on disposal of available-for-sale financial assets, net			(266,986	)			(83,138	)
Gain on disposal of financial assets carried at cost, net			(12,809	)			(37,831	)
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			37,152				28,181
Gain on foreign exchange, net			(6,624,087	)			(2,542,581	)
Dividend income			(145,588	)			(137,420	)
Loss arising from fair value hedges, net			32,058				129
Changes in operating assets and liabilities:
Financial instruments at fair value through profit or loss			5,260,911				(1,690,376	)
Notes and accounts receivable, net			5,990,086				(48,540,162	)
Receivables from related parties			(106,879	)			335,018
Other receivables from related parties			(19,141	)			(24,666	)
Inventories			(25,211,646	)			13,170,126
Other financial assets			604,831				(1,285,255	)
Other current assets			(1,639,813	)			84,453
Other noncurrent assets			(890,881	)			—
Accounts payable			1,452,987				5,807,444
Payables to related parties			179,855				(82,578	)
Salary and bonus payable			(1,377,765	)			481,176
Accrued profit sharing bonus to employees and compensation to directors and supervisors			(5,826,873	)			(4,706,212	)
Accrued expenses and other current liabilities			9,167,145				1,337,333
Provisions			(3,899,652	)			1,398,158
Net defined benefit liability			23,218				27,355
Cash generated from operations			444,543,025				400,502,497
Income taxes paid			(63,351,167	)			(45,887,694	)
Net cash generated by operating activities			381,191,858				354,614,803

(Continued)

 

- 5 -

---

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands of New Taiwan Dollars)

(Reviewed, Not Audited)

 

 

		Nine Months Ended September 30
		2017				2016
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions of:
Available-for-sale financial assets		$	(66,661,656	)		$	(51,587,356	)
Held-to-maturity financial assets			(1,695,771	)			(25,112,300	)
Financial assets carried at cost			(1,190,157	)			(240,743	)
Property, plant and equipment			(269,408,108	)			(215,502,503	)
Intangible assets			(3,677,303	)			(2,989,442	)
Land use right			—				(805,318	)
Proceeds from disposal or redemption of:
Available-for-sale financial assets			45,952,054				20,654,629
Held-to-maturity financial assets			12,510,000				7,400,000
Financial assets carried at cost			58,237				160,498
Property, plant and equipment			253,267				93,720
Proceeds from return of capital of financial assets carried at cost			14,828				65,383
Derecognition of hedging derivative financial instruments			(35,790	)			(11,974	)
Interest received			6,776,756				4,679,716
Proceeds from government grants - property, plant and equipment			436,587				—
Other dividends received			145,588				137,420
Dividends received from investments accounted for using equity method			4,245,772				5,478,790
Refundable deposits paid			(1,084,028	)			(140,056	)
Refundable deposits refunded			247,027				74,455
Decrease in receivables for temporary payments			—				706,718
Net cash used in investing activities			(273,112,697	)			(256,938,363	)
CASH FLOWS FROM FINANCING ACTIVITIES
Decrease in short-term loans			(290,110	)			(157,064	)
Repayment of bonds			(38,100,000	)			(23,471,600	)
Repayment of long-term bank loans			(7,260	)			(6,120	)
Interest paid			(2,907,017	)			(3,148,821	)
Guarantee deposits received			4,400,240				996,803
Guarantee deposits refunded			(6,810,329	)			(500,835	)
Cash dividends			(181,512,663	)			(155,582,283	)
Decrease in noncontrolling interests			(114,624	)			(231,666	)
Net cash used in financing activities			(225,341,763	)			(182,101,586	)

 

(Continued)

 

- 6 -

---

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands of New Taiwan Dollars)

(Reviewed, Not Audited)

 

 

		Nine Months Ended September 30
		2017				2016
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS		$	(15,913,536	)		$	(14,292,127	)
NET DECREASE IN CASH AND CASH EQUIVALENTS			(133,176,138	)			(98,717,273	)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD			541,253,833				562,688,930
CASH AND CASH EQUIVALENTS, END OF PERIOD		$	408,077,695			$	463,971,657

 

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

 

- 7 -

---

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 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 November 14, 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.

 

- 8 -

---

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:

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.

 

- 9 -

---

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 investments in debt instruments 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.

 

- 10 -

---

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

 

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.

 

- 11 -

---

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)

 

- 12 -

---

(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.

 

- 13 -

---

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

 

 

- 14 -

---

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:

 

 

- 15 -

---

8.	AVAILABLE-FOR-SALE FINANCIAL ASSETS

 

 

9.	HELD-TO-MATURITY FINANCIAL ASSETS

 

 

10.	HEDGING DERIVATIVE FINANCIAL INSTRUMENTS

 

 

- 16 -

---

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.

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.

 

- 17 -

---

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

 

 

- 18 -

---

Write-down of inventories to net realizable value (excluding earthquake losses) and reversal of write-down of inventories resulting from the increase in 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.

 

 

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.

 

- 19 -

---

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

 

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.

 

- 20 -

---

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.

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

 

- 21 -

---

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.

 

- 22 -

---

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

 

 

- 23 -

---

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

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

As of September 30, 2017, 1,068,165 thousand ADSs of TSMC were traded on the NYSE. The number of common shares represented by the ADSs was 5,340,823 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.

 

- 24 -

---

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)

 

- 25 -

---

(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

 

 

- 26 -

---

24.	OTHER GAINS AND LOSSES

 

 

25.	INCOME TAX

 

a.

Income tax expense recognized in profit or loss

 

 

- 27 -

---

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

 

 

- 28 -

---

EPS is computed as follows:

 

 

27.	ADDITIONAL INFORMATION OF EXPENSES BY NATURE

 

 

- 29 -

---

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$6,034,054 thousand and NT$6,489,734 thousand for the three months ended September 30, 2017 and 2016, respectively; and NT$16,356,611 thousand and NT$15,697,270 thousand for the nine months ended September 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.

 

- 30 -

---

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

 

 

Note 1:

Including held for trading and designated as at FVTPL.

 

Note 2:

Including financial assets carried at cost.

 

Note 3:

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

 

Note 4:

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

 

b.

Financial risk management objectives

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

 

- 31 -

---

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 nine months ended September 30, 2017 and 2016 would have decreased by NT$185,262 thousand and NT$673,869 thousand, respectively, and the other comprehensive income for the nine months ended September 30, 2017 would have decreased by NT$465,790 thousand.

Interest rate risk

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

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$151 thousand and NT$211 thousand for the nine months ended September 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 at the end of the reporting period, a hypothetical 100 basis points (1.00%) increase in interest rates across all maturities would have resulted in a decrease in other comprehensive income by NT$1,919,137 thousand and NT$1,018,890 thousand for the nine months ended September 30, 2017 and 2016, respectively.

 

- 32 -

---

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 nine months ended September 30, 2017 and 2016, the other comprehensive income would have decreased by NT$335,977 thousand and NT$320,828 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 September 30, 2017, December 31, 2016 and September 30, 2016, the Company’s ten largest customers accounted for 73%, 74% and 76% of accounts receivable, respectively. The Company believes the concentration of credit risk is not material for the remaining accounts receivable.

Financial credit risk

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

 

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.

 

- 33 -

---

 

(Continued)

 

- 34 -

---

(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).

 

- 35 -

---

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:

 

 

- 36 -

---

(Continued)

 

- 37 -

---

(Concluded)

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

There were no purchases and disposals for assets classified as Level 3 for the nine months ended September 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 and corporate bonds 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.

 

 

- 38 -

---

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:

 

 

 

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.

 

- 39 -

---

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

 

 

b.

Net revenue

 

 

c.

Purchases

 

 

d.

Receivables from related parties

 

(Continued)

 

- 40 -

---

(Concluded)

 

e.

Payables to related parties

 

 

f.

Accrued expenses and other current liabilities

 

 

g.

Others

 

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

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

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.

 

- 41 -

---

h.

Compensation of key management personnel

The compensation to directors and other key management personnel for the three months and nine months ended September 30, 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 September 30, 2017, December 31, 2016 and September 30, 2016, the aforementioned other financial assets amounted to NT$168,293 thousand, NT$185,698 thousand and NT$152,826 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:

 

 

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

 

- 42 -

---

b.

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

 

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 four U.S. patents. On August 28, 2017, Mr. Uri Cohen amended the complaint to dismiss without prejudice TSMC North America and another company. On the same day, TSMC and TSMC North America filed a declaratory judgment complaint in the U.S. District Court for the Northern District of California seeking a ruling of non-infringement of the same U.S. patents asserted by Mr. Uri Cohen. The outcome cannot be determined and the Company cannot make a reliable estimate of the contingent liability at this time.

 

e.

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

 

f.

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

 

g.

Amounts available under unused letters of credit as of September 30, 2017, December 31, 2016 and September 30, 2016 were NT$96,765 thousand, NT$122,356 thousand and NT$119,221 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.

 

- 43 -

---

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)

 

- 44 -

---

(Concluded)

 

Note 1:

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

Note 2:

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

Please refer to the consolidated statements of comprehensive income for the total of realized and unrealized foreign exchange gain and loss for the three months and nine months ended September 30, 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.

 

- 45 -

---

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.

 

- 46 -

---

TABLE 1

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

FINANCINGS PROVIDED

FOR THE NINE MONTHS ENDED SEPTEMBER 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	21,028,440 4,600,000	)		$ (RMB	21,028,440 4,600,000	)		$ (RMB	13,257,060 2,900,000	)		1.3%-1.5%		The need for short-term/ long-term financing		$	—			Operating capital		$	—				—			$	—			$	49,297,136			$	49,297,136
2		TSMC Global		TSMC		Other receivables from related parties		Yes		(US$	45,358,500 1,500,000	)		(US$	45,358,500 1,500,000	)		(US$	7,197,079 238,007	)		1.45%		The need for short-term financing			—			Operating capital			—				—				—				301,083,863				301,083,863

 

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.

 

- 47 -

---

TABLE 2

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

ENDORSEMENTS/GUARANTEES PROVIDED

FOR THE NINE MONTHS ENDED SEPTEMBER 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		$	357,679,212			$ (US$	34,774,850 1,150,000	)		$ (US$	34,774,850 1,150,000	)		$ (US$	34,774,850 1,150,000	)		$	—			2.43%		$	357,679,212			Yes		No		No
				TSMC North America		Subsidiary			357,679,212			(US$	2,516,287 83,213	)		(US$	2,516,287 83,213	)		(US$	2,516,287 83,213	)			—			0.18%			357,679,212			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.

 

- 48 -

---

TABLE 3

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

MARKETABLE SECURITIES HELD

SEPTEMBER 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		September 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			—			$	650,371				N/A			$	650,437
		Common stock
		Motech			—			Available-for-sale financial assets			58,320				1,344,271				12				1,344,271
		Semiconductor Manufacturing International Corporation			—			”			21,105				724,099				—				724,099
		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			—			”			1,152				4,041				2				4,041
		Fund
		Horizon Ventures Fund			—			Financial assets carried at cost			—				6,975				12				6,975
		Crimson Asia Capital			—			”			—				6,410				1				6,410
TSMC Partners		Common stock
		Tela Innovations			—			Financial assets carried at cost			10,440			US$	65,000				25			US$	65,000
		Mcube Inc.			—			”			6,333				—				12				—
		Fund
		China Walden Venture Investments II, L.P.			—			Financial assets carried at cost			—			US$	8,607				9			US$	8,607
		Shanghai Walden Venture Capital Enterprise			—			”			—			US$	4,270				6			US$	4,270
TSMC Global		Corporate bond
		Morgan Stanley			—			Available-for-sale financial assets			—			US$	38,254				N/A			US$	38,254
		Bank of America Corp			—			”			—			US$	37,690				N/A			US$	37,690
		Goldman Sachs Group Inc/The			—			”			—			US$	34,023				N/A			US$	34,023
		JPMorgan Chase & Co			—			”			—			US$	33,685				N/A			US$	33,685
		AT&T Inc			—			”			—			US$	24,883				N/A			US$	24,883
		Citigroup Inc			—			”			—			US$	23,820				N/A			US$	23,820
		Verizon Communications Inc			—			”			—			US$	19,507				N/A			US$	19,507
		Ford Motor Credit Co LLC			—			”			—			US$	17,626				N/A			US$	17,626
		BAT Capital Corp			—			”			—			US$	17,045				N/A			US$	17,045
		Wells Fargo & Co			—			”			—			US$	15,841				N/A			US$	15,841
		Apple Inc			—			”			—			US$	15,651				N/A			US$	15,651
		Credit Suisse AG/New York NY			—			”			—			US$	13,735				N/A			US$	13,735
		PNC Bank NA			—			”			—			US$	13,243				N/A			US$	13,243
		Tyson Foods Inc			—			”			—			US$	12,271				N/A			US$	12,271
		Anheuser-Busch InBev Finance Inc			—			”			—			US$	11,897				N/A			US$	11,897
		Southern Co/The			—			”			—			US$	11,406				N/A			US$	11,406
		AbbVie Inc			—			”			—			US$	11,185				N/A			US$	11,185
		Westpac Banking Corp			—			”			—			US$	10,485				N/A			US$	10,485
		BP Capital Markets PLC			—			”			—			US$	10,341				N/A			US$	10,341
		Svenska Handelsbanken AB			—			”			—			US$	9,923				N/A			US$	9,923
		CVS Health Corp			—			”			—			US$	9,882				N/A			US$	9,882
		Oracle Corp			—			”			—			US$	9,721				N/A			US$	9,721
		Capital One NA/Mclean VA			—			”			—			US$	9,632				N/A			US$	9,632
		Microsoft Corp			—			”			—			US$	9,386				N/A			US$	9,386
		Aviation Capital Group Corp			—			”			—			US$	9,181				N/A			US$	9,181
		ERAC USA Finance LLC			—			”			—			US$	8,852				N/A			US$	8,852

(Continued)

 

- 49 -

---

Held Company Name		Marketable Securities Type and Name		Relationship with the Company		Financial Statement Account		September 30, 2017														Note
								Shares/Units (In Thousands)				Carrying Value (Foreign Currencies in Thousands)				Percentage of Ownership (%)		Fair Value (Foreign Currencies in Thousands)
TSMC Global		Mitsubishi UFJ Financial Group Inc		—		Available-for-sale financial assets			—			US$	8,837			N/A		US$	8,837
		International Bank for Reconstruction & Development		—		”			—			US$	8,760			N/A		US$	8,760
		Hewlett Packard Enterprise Co		—		”			—			US$	8,732			N/A		US$	8,732
		Ventas Realty LP / Ventas Capital Corp		—		”			—			US$	8,546			N/A		US$	8,546
		Cardinal Health Inc		—		”			—			US$	8,443			N/A		US$	8,443
		Rockwell Collins Inc		—		”			—			US$	8,130			N/A		US$	8,130
		Daimler Finance North America LLC		—		”			—			US$	8,105			N/A		US$	8,105
		Dominion Energy Inc		—		”			—			US$	8,040			N/A		US$	8,040
		American Express Credit Corp		—		”			—			US$	7,824			N/A		US$	7,824
		Huntington National Bank/The		—		”			—			US$	7,800			N/A		US$	7,800
		Duke Energy Corp		—		”			—			US$	7,771			N/A		US$	7,771
		UBS Group Funding Switzerland AG		—		”			—			US$	7,559			N/A		US$	7,559
		American International Group Inc		—		”			—			US$	7,458			N/A		US$	7,458
		Sumitomo Mitsui Financial Group Inc		—		”			—			US$	7,446			N/A		US$	7,446
		Reckitt Benckiser Treasury Services PLC		—		”			—			US$	7,149			N/A		US$	7,149
		Siemens Financieringsmaatschappij NV		—		”			—			US$	7,140			N/A		US$	7,140
		ABN AMRO Bank NV		—		”			—			US$	7,130			N/A		US$	7,130
		21st Century Fox America Inc		—		”			—			US$	6,957			N/A		US$	6,957
		HSBC Holdings PLC		—		”			—			US$	6,946			N/A		US$	6,946
		Deutsche Telekom International Finance BV		—		”			—			US$	6,675			N/A		US$	6,675
		QUALCOMM Inc		—		”			—			US$	6,532			N/A		US$	6,532
		Marriott International Inc/MD		—		”			—			US$	6,521			N/A		US$	6,521
		Mizuho Financial Group Inc		—		”			—			US$	6,509			N/A		US$	6,509
		Reliance Standard Life Global Funding II		—		”			—			US$	6,506			N/A		US$	6,506
		Dow Chemical Co/The		—		”			—			US$	6,446			N/A		US$	6,446
		Welltower Inc		—		”			—			US$	6,379			N/A		US$	6,379
		Banque Federative du Credit Mutuel SA		—		”			—			US$	6,301			N/A		US$	6,301
		Citizens Bank NA/Providence RI		—		”			—			US$	6,284			N/A		US$	6,284
		Santander UK Group Holdings PLC		—		”			—			US$	6,252			N/A		US$	6,252
		SunTrust Banks Inc		—		”			—			US$	6,225			N/A		US$	6,225
		Asian Development Bank		—		”			—			US$	6,077			N/A		US$	6,077
		Skandinaviska Enskilda Banken AB		—		”			—			US$	6,048			N/A		US$	6,048
		BB&T Corp		—		”			—			US$	6,010			N/A		US$	6,010
		SMBC Aviation Capital Finance DAC		—		”			—			US$	5,996			N/A		US$	5,996
		Hyundai Capital America		—		”			—			US$	5,994			N/A		US$	5,994
		Royal Bank of Canada		—		”			—			US$	5,989			N/A		US$	5,989
		NextEra Energy Capital Holdings Inc		—		”			—			US$	5,877			N/A		US$	5,877
		Danone SA		—		”			—			US$	5,806			N/A		US$	5,806
		Aspen Insurance Holdings Ltd		—		”			—			US$	5,805			N/A		US$	5,805
		Shell International Finance BV		—		”			—			US$	5,780			N/A		US$	5,780
		Toyota Motor Credit Corp		—		”			—			US$	5,669			N/A		US$	5,669
		Penske Truck Leasing Co Lp / PTL Finance Corp		—		”			—			US$	5,656			N/A		US$	5,656
		Nordea Bank AB		—		”			—			US$	5,597			N/A		US$	5,597
		Bank of New York Mellon Corp/The		—		”			—			US$	5,552			N/A		US$	5,552
		Air Lease Corp		—		”			—			US$	5,541			N/A		US$	5,541
		New York Life Global Funding		—		”			—			US$	5,473			N/A		US$	5,473
		ANZ New Zealand Int’l Ltd/London		—		”			—			US$	5,418			N/A		US$	5,418
		Banco Santander SA		—		”			—			US$	5,350			N/A		US$	5,350
		Montpelier Re Holdings Ltd		—		”			—			US$	5,337			N/A		US$	5,337
		McCormick & Co Inc/MD		—		”			—			US$	5,331			N/A		US$	5,331
		Manufacturers & Traders Trust Co		—		”			—			US$	5,323			N/A		US$	5,323
		Toronto-Dominion Bank/The		—		”			—			US$	5,300			N/A		US$	5,300
		Amgen Inc		—		”			—			US$	5,261			N/A		US$	5,261
		Jackson National Life Global Funding		—		”			—			US$	5,181			N/A		US$	5,181
		Berkshire Hathaway Finance Corp		—		”			—			US$	5,151			N/A		US$	5,151
		KeyBank NA/Cleveland OH		—		”			—			US$	5,077			N/A		US$	5,077
		UBS AG/Stamford CT		—		”			—			US$	5,044			N/A		US$	5,044
		Analog Devices Inc		—		”			—			US$	5,016			N/A		US$	5,016
		International Finance Corp		—		”			—			US$	5,000			N/A		US$	5,000

(Continued)

 

- 50 -

---

								September 30, 2017
Held Company Name		Marketable Securities Type and Name		Relationship with the Company		Financial Statement Account		Shares/Units (In Thousands)				Carrying Value (Foreign Currencies in Thousands)				Percentage of Ownership (%)		Fair Value (Foreign Currencies in Thousands)				Note
TSMC Global		Macquarie Group Ltd		—		Available-for-sale financial assets			—			US$	4,986			N/A		US$	4,986
		Cox Communications Inc		—		”			—			US$	4,962			N/A		US$	4,962
		Five Corners Funding Trust		—		”			—			US$	4,883			N/A		US$	4,883
		Barclays PLC		—		”			—			US$	4,869			N/A		US$	4,869
		Schlumberger Holdings Corp		—		”			—			US$	4,828			N/A		US$	4,828
		Air Liquide Finance SA		—		”			—			US$	4,772			N/A		US$	4,772
		Fifth Third Bank/Cincinnati OH		—		”			—			US$	4,720			N/A		US$	4,720
		Ontario Teachers’ Cadillac Fairview Properties Trust		—		”			—			US$	4,696			N/A		US$	4,696
		US Bank NA/Cincinnati OH		—		”			—			US$	4,388			N/A		US$	4,388
		US Bancorp		—		”			—			US$	4,322			N/A		US$	4,322
		Lloyds Bank PLC		—		”			—			US$	4,228			N/A		US$	4,228
		Oaktree Capital Management LP		—		”			—			US$	4,228			N/A		US$	4,228
		Celgene Corp		—		”			—			US$	4,221			N/A		US$	4,221
		BNP Paribas SA		—		”			—			US$	4,208			N/A		US$	4,208
		Exelon Generation Co LLC		—		”			—			US$	4,168			N/A		US$	4,168
		KeyCorp		—		”			—			US$	4,089			N/A		US$	4,089
		Mondelez International Holdings Netherlands BV		—		”			—			US$	4,013			N/A		US$	4,013
		Intel Corp		—		”			—			US$	4,003			N/A		US$	4,003
		Intercontinental Exchange Inc		—		”			—			US$	3,992			N/A		US$	3,992
		Fortive Corp		—		”			—			US$	3,988			N/A		US$	3,988
		AEP Texas Inc		—		”			—			US$	3,983			N/A		US$	3,983
		Edison International		—		”			—			US$	3,979			N/A		US$	3,979
		Wells Fargo Bank NA		—		”			—			US$	3,919			N/A		US$	3,919
		Ryder System Inc		—		”			—			US$	3,837			N/A		US$	3,837
		Fifth Third Bancorp		—		”			—			US$	3,804			N/A		US$	3,804
		Suncorp-Metway Ltd		—		”			—			US$	3,800			N/A		US$	3,800
		Husky Energy Inc		—		”			—			US$	3,784			N/A		US$	3,784
		Sprint Spectrum Co LLC / Sprint Spectrum Co II LLC / Sprint Spectrum Co III LLC		—		”			—			US$	3,741			N/A		US$	3,741
		Pacific Gas & Electric Co		—		”			—			US$	3,639			N/A		US$	3,639
		Canadian Imperial Bank of Commerce		—		”			—			US$	3,615			N/A		US$	3,615
		Lam Research Corp		—		”			—			US$	3,606			N/A		US$	3,606
		Protective Life Global Funding		—		”			—			US$	3,601			N/A		US$	3,601
		SES GLOBAL Americas Holdings GP		—		”			—			US$	3,528			N/A		US$	3,528
		BAT International Finance PLC		—		”			—			US$	3,497			N/A		US$	3,497
		Aetna Inc		—		”			—			US$	3,422			N/A		US$	3,422
		Credit Agricole SA/London		—		”			—			US$	3,393			N/A		US$	3,393
		Kroger Co/The		—		”			—			US$	3,388			N/A		US$	3,388
		Cigna Corp		—		”			—			US$	3,122			N/A		US$	3,122
		Realty Income Corp		—		”			—			US$	3,120			N/A		US$	3,120
		Anheuser-Busch InBev Worldwide Inc		—		”			—			US$	3,067			N/A		US$	3,067
		Time Warner Inc		—		”			—			US$	3,032			N/A		US$	3,032
		Citibank NA		—		”			—			US$	3,002			N/A		US$	3,002
		Delta Air Lines Class A Pass Through Trust		—		”			—			US$	2,900			N/A		US$	2,900
		Principal Life Global Funding II		—		”			—			US$	2,793			N/A		US$	2,793
		BMW US Capital LLC		—		”			—			US$	2,737			N/A		US$	2,737
		PartnerRe Finance B LLC		—		”			—			US$	2,695			N/A		US$	2,695
		Chevron Corp		—		”			—			US$	2,646			N/A		US$	2,646
		Nuveen Finance LLC		—		”			—			US$	2,569			N/A		US$	2,569
		LyondellBasell Industries NV		—		”			—			US$	2,547			N/A		US$	2,547
		Metropolitan Life Global Funding I		—		”			—			US$	2,533			N/A		US$	2,533
		Credit Suisse Group Funding Guernsey Ltd		—		”			—			US$	2,509			N/A		US$	2,509
		Wm Wrigley Jr Co		—		”			—			US$	2,501			N/A		US$	2,501
		Eastman Chemical Co		—		”			—			US$	2,460			N/A		US$	2,460
		Xylem Inc/NY		—		”			—			US$	2,453			N/A		US$	2,453
		Commonwealth Bank of Australia/New York NY		—		”			—			US$	2,411			N/A		US$	2,411
		HSBC USA Inc		—		”			—			US$	2,378			N/A		US$	2,378
		NBCUniversal Media LLC		—		”			—			US$	2,364			N/A		US$	2,364
		EI du Pont de Nemours & Co		—		”			—			US$	2,348			N/A		US$	2,348

(Continued)

 

- 51 -

---

Held Company Name		Marketable Securities Type and Name		Relationship with the Company		Financial Statement Account		September 30, 2017														Note
								Shares/Units (In Thousands)				Carrying Value (Foreign Currencies in Thousands)				Percentage of Ownership (%)		Fair Value (Foreign Currencies in Thousands)
TSMC Global		National Australia Bank Ltd/New York		—		Available-for-sale financial assets			—			US$	2,331			N/A		US$	2,331
		Biogen Inc		—		”			—			US$	2,321			N/A		US$	2,321
		Simon Property Group LP		—		”			—			US$	2,313			N/A		US$	2,313
		Bank of Tokyo-Mitsubishi UFJ Ltd/The		—		”			—			US$	2,312			N/A		US$	2,312
		Kimco Realty Corp		—		”			—			US$	2,312			N/A		US$	2,312
		Voya Financial Inc		—		”			—			US$	2,297			N/A		US$	2,297
		Gilead Sciences Inc		—		”			—			US$	2,281			N/A		US$	2,281
		Digital Realty Trust LP		—		”			—			US$	2,262			N/A		US$	2,262
		Cintas Corp No 2		—		”			—			US$	2,244			N/A		US$	2,244
		Inter-American Development Bank		—		”			—			US$	2,240			N/A		US$	2,240
		ING Groep NV		—		”			—			US$	2,237			N/A		US$	2,237
		Pricoa Global Funding I		—		”			—			US$	2,214			N/A		US$	2,214
		ProAssurance Corp		—		”			—			US$	2,182			N/A		US$	2,182
		Express Scripts Holding Co		—		”			—			US$	2,162			N/A		US$	2,162
		WR Berkley Corp		—		”			—			US$	2,160			N/A		US$	2,160
		HCP Inc		—		”			—			US$	2,127			N/A		US$	2,127
		Sysco Corp		—		”			—			US$	2,024			N/A		US$	2,024
		Lloyds Banking Group PLC		—		”			—			US$	2,019			N/A		US$	2,019
		Enel Finance International NV		—		”			—			US$	2,016			N/A		US$	2,016
		British Telecommunications PLC		—		”			—			US$	2,014			N/A		US$	2,014
		State Street Corp		—		”			—			US$	2,014			N/A		US$	2,014
		Johnson Controls International plc		—		”			—			US$	2,009			N/A		US$	2,009
		Enterprise Products Operating LLC		—		”			—			US$	2,006			N/A		US$	2,006
		Danske Bank A/S		—		”			—			US$	1,974			N/A		US$	1,974
		AutoZone Inc		—		”			—			US$	1,955			N/A		US$	1,955
		Stryker Corp		—		”			—			US$	1,955			N/A		US$	1,955
		UnitedHealth Group Inc		—		”			—			US$	1,951			N/A		US$	1,951
		Magellan Midstream Partners LP		—		”			—			US$	1,945			N/A		US$	1,945
		Bear Stearns Cos LLC/The		—		”			—			US$	1,936			N/A		US$	1,936
		BPCE SA		—		”			—			US$	1,935			N/A		US$	1,935
		Capital One Financial Corp		—		”			—			US$	1,920			N/A		US$	1,920
		Branch Banking & Trust Co		—		”			—			US$	1,894			N/A		US$	1,894
		Sumitomo Mitsui Banking Corp		—		”			—			US$	1,887			N/A		US$	1,887
		Cooperatieve Rabobank UA/NY		—		”			—			US$	1,864			N/A		US$	1,864
		WestRock RKT Co		—		”			—			US$	1,852			N/A		US$	1,852
		SunTrust Bank/Atlanta GA		—		”			—			US$	1,850			N/A		US$	1,850
		Orange SA		—		”			—			US$	1,844			N/A		US$	1,844
		StanCorp Financial Group Inc		—		”			—			US$	1,836			N/A		US$	1,836
		Australia & New Zealand Banking Group Ltd/New York NY		—		”			—			US$	1,804			N/A		US$	1,804
		Regency Centers LP		—		”			—			US$	1,783			N/A		US$	1,783
		Dominion Energy Gas Holdings LLC		—		”			—			US$	1,781			N/A		US$	1,781
		Alterra Finance LLC		—		”			—			US$	1,772			N/A		US$	1,772
		Alimentation Couche-Tard Inc		—		”			—			US$	1,763			N/A		US$	1,763
		Sumitomo Mitsui Trust Bank Ltd		—		”			—			US$	1,700			N/A		US$	1,700
		Amazon.com Inc		—		”			—			US$	1,646			N/A		US$	1,646
		African Development Bank		—		”			—			US$	1,567			N/A		US$	1,567
		UBS AG/London		—		”			—			US$	1,557			N/A		US$	1,557
		Caterpillar Financial Services Corp		—		”			—			US$	1,549			N/A		US$	1,549
		PSEG Power LLC		—		”			—			US$	1,518			N/A		US$	1,518
		McKesson Corp		—		”			—			US$	1,509			N/A		US$	1,509
		Standard Chartered PLC		—		”			—			US$	1,507			N/A		US$	1,507
		Harley-Davidson Financial Services Inc		—		”			—			US$	1,504			N/A		US$	1,504
		Continental Airlines Class A Pass Through Trust		—		”			—			US$	1,501			N/A		US$	1,501
		Guardian Life Global Funding		—		”			—			US$	1,483			N/A		US$	1,483
		HSBC Bank PLC		—		”			—			US$	1,476			N/A		US$	1,476
		Cisco Systems Inc		—		”			—			US$	1,474			N/A		US$	1,474
		Oesterreichische Kontrollbank AG		—		”			—			US$	1,456			N/A		US$	1,456
		Monongahela Power Co		—		”			—			US$	1,440			N/A		US$	1,440
		Texas Eastern Transmission LP		—		”			—			US$	1,406			N/A		US$	1,406

(Continued)

 

- 52 -

---

Held Company Name		Marketable Securities Type and Name		Relationship with the Company		Financial Statement Account		September 30, 2017														Note
								Shares/Units (In Thousands)				Carrying Value (Foreign Currencies in Thousands)				Percentage of Ownership (%)		Fair Value (Foreign Currencies in Thousands)
TSMC Global		Walt Disney Co/The		—		Available-for-sale financial assets			—			US$	1,397			N/A		US$	1,397
		CBOE Holdings Inc		—		”			—			US$	1,374			N/A		US$	1,374
		Entergy Arkansas Inc		—		”			—			US$	1,310			N/A		US$	1,310
		International Business Machines Corp		—		”			—			US$	1,307			N/A		US$	1,307
		Entergy Corp		—		”			—			US$	1,293			N/A		US$	1,293
		Philip Morris International Inc		—		”			—			US$	1,293			N/A		US$	1,293
		GATX Corp		—		”			—			US$	1,291			N/A		US$	1,291
		Visa Inc		—		”			—			US$	1,288			N/A		US$	1,288
		Eaton Corp		—		”			—			US$	1,272			N/A		US$	1,272
		Comcast Corp		—		”			—			US$	1,270			N/A		US$	1,270
		Western Union Co/The		—		”			—			US$	1,269			N/A		US$	1,269
		Nissan Motor Acceptance Corp		—		”			—			US$	1,268			N/A		US$	1,268
		Consolidated Edison Inc		—		”			—			US$	1,221			N/A		US$	1,221
		Sempra Energy		—		”			—			US$	1,190			N/A		US$	1,190
		American Airlines Class A Pass Through Trust		—		”			—			US$	1,172			N/A		US$	1,172
		Public Service Enterprise Group Inc		—		”			—			US$	1,143			N/A		US$	1,143
		Kreditanstalt fuer Wiederaufbau		—		”			—			US$	1,141			N/A		US$	1,141
		DXC Technology Co		—		”			—			US$	1,131			N/A		US$	1,131
		ERP Operating LP		—		”			—			US$	1,125			N/A		US$	1,125
		Wesfarmers Ltd		—		”			—			US$	1,096			N/A		US$	1,096
		International Paper Co		—		”			—			US$	1,091			N/A		US$	1,091
		Marsh & McLennan Cos Inc		—		”			—			US$	1,089			N/A		US$	1,089
		CA Inc		—		”			—			US$	1,077			N/A		US$	1,077
		Glencore Finance Canada Ltd		—		”			—			US$	1,075			N/A		US$	1,075
		Merck & Co Inc		—		”			—			US$	1,057			N/A		US$	1,057
		EOG Resources Inc		—		”			—			US$	1,054			N/A		US$	1,054
		Commonwealth Edison Co		—		”			—			US$	1,050			N/A		US$	1,050
		Lincoln National Corp		—		”			—			US$	1,044			N/A		US$	1,044
		Athene Global Funding		—		”			—			US$	1,041			N/A		US$	1,041
		Statoil ASA		—		”			—			US$	1,025			N/A		US$	1,025
		Berkshire Hathaway Energy Co		—		”			—			US$	1,021			N/A		US$	1,021
		Macquarie Bank Ltd		—		”			—			US$	1,012			N/A		US$	1,012
		Altera Corp		—		”			—			US$	1,011			N/A		US$	1,011
		Ares Capital Corp		—		”			—			US$	1,010			N/A		US$	1,010
		Home Depot Inc/The		—		”			—			US$	1,006			N/A		US$	1,006
		John Deere Capital Corp		—		”			—			US$	1,003			N/A		US$	1,003
		United Technologies Corp		—		”			—			US$	998			N/A		US$	998
		Georgia-Pacific LLC		—		”			—			US$	987			N/A		US$	987
		Capital One Bank USA NA		—		”			—			US$	979			N/A		US$	979
		Duke Realty LP		—		”			—			US$	976			N/A		US$	976
		National Retail Properties Inc		—		”			—			US$	975			N/A		US$	975
		Bunge Ltd Finance Corp		—		”			—			US$	971			N/A		US$	971
		Exxon Mobil Corp		—		”			—			US$	956			N/A		US$	956
		CenterPoint Energy Resources Corp		—		”			—			US$	943			N/A		US$	943
		Duke Energy Progress LLC		—		”			—			US$	943			N/A		US$	943
		PPL Capital Funding Inc		—		”			—			US$	933			N/A		US$	933
		Coca-Cola Femsa SAB de CV		—		”			—			US$	926			N/A		US$	926
		GlaxoSmithKline Capital Inc		—		”			—			US$	923			N/A		US$	923
		Southern Electric Generating Co		—		”			—			US$	903			N/A		US$	903
		Lockheed Martin Corp		—		”			—			US$	901			N/A		US$	901
		CNOOC Finance Ltd		—		”			—			US$	893			N/A		US$	893
		Federal Realty Investment Trust		—		”			—			US$	872			N/A		US$	872
		Mastercard Inc		—		”			—			US$	854			N/A		US$	854
		Consolidated Edison Co of New York Inc		—		”			—			US$	848			N/A		US$	848
		Bank of Nova Scotia		—		”			—			US$	843			N/A		US$	843
		Huntington Bancshares Inc/OH		—		”			—			US$	841			N/A		US$	841
		MetLife Inc		—		”			—			US$	831			N/A		US$	831
		Nucor Corp		—		”			—			US$	821			N/A		US$	821
		Bank of Montreal		—		”			—			US$	818			N/A		US$	818

(Continued)

 

- 53 -

---

Held Company Name		Marketable Securities Type and Name		Relationship with the Company		Financial Statement Account		September 30, 2017														Note
								Shares/Units (In Thousands)				Carrying Value (Foreign Currencies in Thousands)				Percentage of Ownership (%)		Fair Value (Foreign Currencies in Thousands)
TSMC Global		Pacific LifeCorp		—		Available-for-sale financial assets			—			US$	816			N/A		US$	816
		Aon PLC		—		”			—			US$	814			N/A		US$	814
		AXIS Specialty Finance LLC		—		”			—			US$	814			N/A		US$	814
		ONEOK Partners LP		—		”			—			US$	809			N/A		US$	809
		Societe Generale SA		—		”			—			US$	808			N/A		US$	808
		Manulife Financial Corp		—		”			—			US$	805			N/A		US$	805
		Activision Blizzard Inc		—		”			—			US$	801			N/A		US$	801
		State Grid Overseas Investment Ltd		—		”			—			US$	798			N/A		US$	798
		Spectra Energy Partners LP		—		”			—			US$	788			N/A		US$	788
		Sinopec Capital Ltd		—		”			—			US$	779			N/A		US$	779
		AIG Global Funding		—		”			—			US$	765			N/A		US$	765
		Baidu Inc		—		”			—			US$	760			N/A		US$	760
		Crown Castle Towers LLC		—		”			—			US$	748			N/A		US$	748
		CMS Energy Corp		—		”			—			US$	743			N/A		US$	743
		APT Pipelines Ltd		—		”			—			US$	726			N/A		US$	726
		Baker Hughes a GE Co LLC		—		”			—			US$	722			N/A		US$	722
		Duke Energy Progress LLC		—		”			—			US$	720			N/A		US$	720
		DTE Energy Co		—		”			—			US$	719			N/A		US$	719
		Norfolk Southern Railway Co		—		”			—			US$	717			N/A		US$	717
		Regions Financial Corp		—		”			—			US$	716			N/A		US$	716
		American Honda Finance Corp		—		”			—			US$	714			N/A		US$	714
		Total Capital International SA		—		”			—			US$	706			N/A		US$	706
		Scentre Group Trust 1 / Scentre Group Trust 2		—		”			—			US$	704			N/A		US$	704
		TTX Co		—		”			—			US$	702			N/A		US$	702
		Rochester Gas & Electric Corp		—		”			—			US$	689			N/A		US$	689
		ING Bank NV		—		”			—			US$	679			N/A		US$	679
		Ohio Power Co		—		”			—			US$	668			N/A		US$	668
		Entergy Gulf States Louisiana LLC		—		”			—			US$	656			N/A		US$	656
		RBC USA Holdco Corp		—		”			—			US$	651			N/A		US$	651
		Georgia Power Co		—		”			—			US$	649			N/A		US$	649
		Grupo Bimbo SAB de CV		—		”			—			US$	643			N/A		US$	643
		Alexandria Real Estate Equities Inc		—		”			—			US$	641			N/A		US$	641
		Texas Instruments Inc		—		”			—			US$	639			N/A		US$	639
		Liberty Property LP		—		”			—			US$	636			N/A		US$	636
		Potash Corp of Saskatchewan Inc		—		”			—			US$	633			N/A		US$	633
		Life Technologies Corp		—		”			—			US$	620			N/A		US$	620
		BOC Aviation Ltd		—		”			—			US$	619			N/A		US$	619
		Daiwa Securities Group Inc		—		”			—			US$	618			N/A		US$	618
		Dr Pepper Snapple Group Inc		—		”			—			US$	616			N/A		US$	616
		Altria Group Inc		—		”			—			US$	609			N/A		US$	609
		ABC Inc		—		”			—			US$	604			N/A		US$	604
		Kimberly-Clark Corp		—		”			—			US$	602			N/A		US$	602
		American Express Co		—		”			—			US$	600			N/A		US$	600
		Host Hotels & Resorts LP		—		”			—			US$	595			N/A		US$	595
		McDonald’s Corp		—		”			—			US$	588			N/A		US$	588
		MUFG Union Bank NA		—		”			—			US$	585			N/A		US$	585
		AvalonBay Communities Inc		—		”			—			US$	583			N/A		US$	583
		Mizuho Bank Ltd		—		”			—			US$	581			N/A		US$	581
		AXIS Specialty Finance PLC		—		”			—			US$	577			N/A		US$	577
		Boston Properties LP		—		”			—			US$	558			N/A		US$	558
		Bunge Ltd Finance Corp		—		”			—			US$	553			N/A		US$	553
		Weyerhaeuser Co		—		”			—			US$	552			N/A		US$	552
		Caisse Centrale Desjardins		—		”			—			US$	550			N/A		US$	550
		Prudential Financial Inc		—		”			—			US$	541			N/A		US$	541
		O’Reilly Automotive Inc		—		”			—			US$	538			N/A		US$	538
		Brambles USA Inc		—		”			—			US$	537			N/A		US$	537
		Southwestern Electric Power Co		—		”			—			US$	527			N/A		US$	527
		TD Ameritrade Holding Corp		—		”			—			US$	524			N/A		US$	524
		Fulton Financial Corp		—		”			—			US$	521			N/A		US$	521

(Continued)

 

- 54 -

---

Held Company Name		Marketable Securities Type and Name		Relationship with the Company		Financial Statement Account		September 30, 2017														Note
								Shares/Units (In Thousands)				Carrying Value (Foreign Currencies in Thousands)				Percentage of Ownership (%)		Fair Value (Foreign Currencies in Thousands)
TSMC Global		Regency Centers Corp		—		Available-for-sale financial assets			—			US$	516			N/A		US$	516
		Burlington Northern Santa Fe LLC		—		”			—			US$	510			N/A		US$	510
		Walgreens Boots Alliance Inc		—		”			—			US$	508			N/A		US$	508
		ORIX Corp		—		”			—			US$	505			N/A		US$	505
		Swedbank AB		—		”			—			US$	505			N/A		US$	505
		CBS Corp		—		”			—			US$	503			N/A		US$	503
		Halliburton Co		—		”			—			US$	500			N/A		US$	500
		MassMutual Global Funding II		—		”			—			US$	491			N/A		US$	491
		Comerica Inc		—		”			—			US$	475			N/A		US$	475
		Narragansett Electric Co/The		—		”			—			US$	472			N/A		US$	472
		CenterPoint Energy Inc		—		”			—			US$	470			N/A		US$	470
		Spire Inc		—		”			—			US$	463			N/A		US$	463
		Equifax Inc		—		”			—			US$	455			N/A		US$	455
		Canadian Pacific Railway Co		—		”			—			US$	445			N/A		US$	445
		Texas-New Mexico Power Co		—		”			—			US$	442			N/A		US$	442
		Nationwide Building Society		—		”			—			US$	438			N/A		US$	438
		Valero Energy Corp		—		”			—			US$	435			N/A		US$	435
		TransCanada PipeLines Ltd		—		”			—			US$	419			N/A		US$	419
		Woolworths Ltd		—		”			—			US$	419			N/A		US$	419
		Blackstone Holdings Finance Co LLC		—		”			—			US$	418			N/A		US$	418
		Volkswagen Group of America Finance LLC		—		”			—			US$	400			N/A		US$	400
		Southern Power Co		—		”			—			US$	399			N/A		US$	399
		IBM Credit LLC		—		”			—			US$	397			N/A		US$	397
		Aon Corp		—		”			—			US$	394			N/A		US$	394
		First Niagara Financial Group Inc		—		”			—			US$	389			N/A		US$	389
		Nationwide Financial Services Inc		—		”			—			US$	381			N/A		US$	381
		Enbridge Inc		—		”			—			US$	365			N/A		US$	365
		NetApp Inc		—		”			—			US$	365			N/A		US$	365
		Deutsche Bank AG		—		”			—			US$	354			N/A		US$	354
		Phillips 66		—		”			—			US$	325			N/A		US$	325
		PacifiCorp		—		”			—			US$	318			N/A		US$	318
		eBay Inc		—		”			—			US$	306			N/A		US$	306
		Eli Lilly & Co		—		”			—			US$	296			N/A		US$	296
		BAE Systems Holdings Inc		—		”			—			US$	293			N/A		US$	293
		Barclays Bank PLC		—		”			—			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$	252			N/A		US$	252
		NBCUniversal Enterprise Inc		—		”			—			US$	251			N/A		US$	251
		Hartford Financial Services Group Inc/The		—		”			—			US$	239			N/A		US$	239
		Kansas City Power & Light Co		—		”			—			US$	239			N/A		US$	239
		Protective Life Corp		—		”			—			US$	231			N/A		US$	231
		WestRock MWV LLC		—		”			—			US$	228			N/A		US$	228
		Rolls-Royce PLC		—		”			—			US$	225			N/A		US$	225
		Assurant Inc		—		”			—			US$	211			N/A		US$	211
		Fidelity National Information Services Inc		—		”			—			US$	209			N/A		US$	209
		NiSource Finance Corp		—		”			—			US$	84			N/A		US$	84
		JPMorgan Chase & Co.		—		Held-to-maturity financial assets			—			US$	152,218			N/A		US$	154,004
		Wells Fargo & Co		—		”			—			US$	150,006			N/A		US$	152,178
		Goldman Sachs Group, Inc.		—		”			—			US$	100,000			N/A		US$	101,168
		Westpac Banking Corp.		—		”			—			US$	100,000			N/A		US$	100,965
		Commonwealth Bank of Australia		—		”			—			US$	50,000			N/A		US$	50,454
		National Australia Bank		—		”			—			US$	50,000			N/A		US$	50,394
		Bank of Nova Scotia		—		”			—			US$	49,988			N/A		US$	50,365
		Government bond
		United States Treasury Note/Bond		—		Available-for-sale financial assets			—			US$	131,752			N/A		US$	131,752
		United States Treasury Floating Rate Note		—		”			—			US$	87,556			N/A		US$	87,556
		United States Treasury Bill		—		”			—			US$	5,497			N/A		US$	5,497
		United States Treasury Inflation Indexed Bonds		—		”			—			US$	4,645			N/A		US$	4,645
		Abu Dhabi Government International Bond		—		”			—			US$	3,496			N/A		US$	3,496

(Continued)

 

- 55 -

---

Held Company Name		Marketable Securities Type and Name		Relationship with the Company		Financial Statement Account		September 30, 2017														Note
								Shares/Units (In Thousands)				Carrying Value (Foreign Currencies in Thousands)				Percentage of Ownership (%)		Fair Value (Foreign Currencies in Thousands)
TSMC Global		Agency bonds/Agency mortgage-backed securities
		Fannie Mae		—		Available-for-sale financial assets			—			US$	479,755			N/A		US$	479,755
		Freddie Mac		—		”			—			US$	223,463			N/A		US$	223,463
		Ginnie Mae		—		”			—			US$	107,899			N/A		US$	107,899
		Fannie Mae-Aces		—		”			—			US$	6,796			N/A		US$	6,796
		Federal Home Loan Banks		—		”			—			US$	6,182			N/A		US$	6,182
		Freddie Mac Multifamily Structured Pass Through Certificates		—		”			—			US$	4,080			N/A		US$	4,080
		Export-Import Bank of Korea		—		”			—			US$	3,006			N/A		US$	3,006
		Province of Quebec Canada		—		”			—			US$	2,585			N/A		US$	2,585
		Export Development Canada		—		”			—			US$	2,006			N/A		US$	2,006
		CPPIB Capital Inc		—		”			—			US$	1,186			N/A		US$	1,186
		Federal Farm Credit Banks		—		”			—			US$	903			N/A		US$	903
		Freddie Mac Strips		—		”			—			US$	811			N/A		US$	811
		Fannie Mae Interest Strip		—		”			—			US$	250			N/A		US$	250
		Fannie Mae Grantor Trust		—		”			—			US$	215			N/A		US$	215
		Fannie Mae Benchmark REMIC		—		”			—			US$	173			N/A		US$	173
		Fannie Mae REMIC Trust		—		”			—			US$	107			N/A		US$	107
		Negotiable certificate of deposit
		Bank of China		—		Held-to-maturity financial assets			—			US$	50,000			N/A		US$	50,032
		China Development Bank		—		”			—			US$	50,000			N/A		US$	50,031
		China Construction Bank		—		”			—			US$	50,000			N/A		US$	50,018
		Asset-backed securities
		Citibank Credit Card Issuance Trust		—		Available-for-sale financial assets			—			US$	39,343			N/A		US$	39,343
		Chase Issuance Trust		—		”			—			US$	29,765			N/A		US$	29,765
		American Express Credit Account Master Trust		—		”			—			US$	29,085			N/A		US$	29,085
		Discover Card Execution Note Trust		—		”			—			US$	23,882			N/A		US$	23,882
		Capital One Multi-Asset Execution Trust		—		”			—			US$	21,568			N/A		US$	21,568
		Ford Credit Floorplan Master Owner Trust A		—		”			—			US$	20,725			N/A		US$	20,725
		BA Credit Card Trust		—		”			—			US$	17,240			N/A		US$	17,240
		UBS-Barclays Commercial Mortgage Trust		—		”			—			US$	13,321			N/A		US$	13,321
		Toyota Auto Receivables Owner Trust		—		”			—			US$	13,145			N/A		US$	13,145
		COMM Mortgage Trust		—		”			—			US$	12,255			N/A		US$	12,255
		Ford Credit Auto Owner Trust/Ford Credit		—		”			—			US$	11,782			N/A		US$	11,782
		Morgan Stanley Bank of America Merrill Lynch Trust		—		”			—			US$	11,069			N/A		US$	11,069
		Chesapeake Funding II LLC		—		”			—			US$	10,676			N/A		US$	10,676
		JPMCC Commercial Mortgage Securities Trust		—		”			—			US$	10,221			N/A		US$	10,221
		Mercedes-Benz Master Owner Trust		—		”			—			US$	10,054			N/A		US$	10,054
		Hyundai Auto Lease Securitization Trust		—		”			—			US$	8,916			N/A		US$	8,916
		GM Financial Automobile Leasing Trust		—		”			—			US$	8,117			N/A		US$	8,117
		BANK		—		”			—			US$	8,067			N/A		US$	8,067
		Honda Auto Receivables Owner Trust		—		”			—			US$	7,544			N/A		US$	7,544
		CGDBB Commercial Mortgage Trust		—		”			—			US$	7,500			N/A		US$	7,500
		Nissan Auto Lease Trust		—		”			—			US$	7,476			N/A		US$	7,476
		GS Mortgage Securities Trust		—		”			—			US$	7,292			N/A		US$	7,292
		Citigroup Commercial Mortgage Trust		—		”			—			US$	6,862			N/A		US$	6,862
		JPMBB Commercial Mortgage Securities Trust		—		”			—			US$	5,945			N/A		US$	5,945
		Hyundai Auto Receivables Trust		—		”			—			US$	5,612			N/A		US$	5,612
		Nissan Auto Receivables Owner Trust		—		”			—			US$	5,592			N/A		US$	5,592
		Ford Credit Auto Owner Trust		—		”			—			US$	5,542			N/A		US$	5,542
		Nissan Master Owner Trust Receivables		—		”			—			US$	4,005			N/A		US$	4,005
		Cold Storage Trust		—		”			—			US$	3,812			N/A		US$	3,812
		BMW Vehicle Lease Trust		—		”			—			US$	3,723			N/A		US$	3,723
		Wheels SPV 2 LLC		—		”			—			US$	3,664			N/A		US$	3,664
		Hertz Fleet Lease Funding LP		—		”			—			US$	3,496			N/A		US$	3,496
		Wells Fargo Commercial Mortgage Trust		—		”			—			US$	3,261			N/A		US$	3,261
		GM Financial Consumer Automobile Receivables Trust		—		”			—			US$	3,003			N/A		US$	3,003
		CSMC OA LLC		—		”			—			US$	2,880			N/A		US$	2,880

(Continued)

 

- 56 -

---

Held Company Name		Marketable Securities Type and Name		Relationship with the Company		Financial Statement Account		September 30, 2017														Note
								Shares/Units (In Thousands)				Carrying Value (Foreign Currencies in Thousands)				Percentage of Ownership (%)		Fair Value (Foreign Currencies in Thousands)
TSMC Global		Mercedes-Benz Auto Lease Trust		—		Available-for-sale financial assets			—			US$	2,482			N/A		US$	2,482
		BMW Floorplan Master Owner Trust		—		”			—			US$	2,444			N/A		US$	2,444
		WFRBS Commercial Mortgage Trust		—		”			—			US$	1,948			N/A		US$	1,948
		CarMax Auto Owner Trust		—		”			—			US$	1,942			N/A		US$	1,942
		Ford Credit Auto Lease Trust		—		”			—			US$	1,792			N/A		US$	1,792
		Morgan Stanley Capital I Trust		—		”			—			US$	1,728			N/A		US$	1,728
		Mercedes-Benz Auto Receivables Trust		—		”			—			US$	1,680			N/A		US$	1,680
		CFCRE Commercial Mortgage Trust		—		”			—			US$	1,066			N/A		US$	1,066
		Enterprise Fleet Financing LLC		—		”			—			US$	940			N/A		US$	940
		280 Park Avenue Mortgage Trust		—		”			—			US$	830			N/A		US$	830
		Structure product
		Bank of Tokyo-Mitsubishi UFJ		—		Held-to-maturity financial assets			—			US$	50,000			N/A		US$	49,727
		Commercial paper
		Societe Generale Instl		—		Available-for-sale financial assets			—			US$	2,000			N/A		US$	2,000
		UBS AG Stamford Branch		—		”			—			US$	2,000			N/A		US$	2,000
		Norinchukin Bank		—		”			—			US$	2,000			N/A		US$	2,000
		Bank of Tokyo-Mitsubishi UFJ		—		”			—			US$	1,000			N/A		US$	1,000
		AXA Financial Inc		—		”			—			US$	886			N/A		US$	886
		Fund
		Primavera Capital Fund II L.P.		—		Financial assets carried at cost			—			US$	61,554			4		US$	61,554
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
VTAF III		Preferred stock
		Neoconix, Inc.		—		Financial assets carried at cost			4,147			US$	170			—		US$	170
VTAF II		Common stock
		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.		—		”			1,085			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
		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)

 

- 57 -

---

TABLE 4

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

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

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 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				—			$	—				—			$	1,310,000			$	1,310,000			$	—				—			$	650,371
		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				1,035				10,350,000				10,350,000				—				—				—
		Stock
		TSMC Nanjing		Investments accounted for using equity method			—				Subsidiary				—				6,331,094				—				754,310				—				—				—				—				—				6,936,003
		TSMC Global		Prepayments for Investments (Note 2)			—				Subsidiary				—				—				—				47,623,265				—				—				—				—				—				47,623,265
TSMC Global		Corporate bond
		Bank of America Corp		Available-for-sale financial assets			—				—				—			US$	27,973				—			US$	20,157				—			US$	12,500			US$	12,629			US$	(129	)			—			US$	35,837
		AT&T Inc		”			—				—				—			US$	13,332				—			US$	15,734				—			US$	4,417			US$	4,427			US$	(10	)			—			US$	24,883
		Citigroup Inc		”			—				—				—			US$	16,819				—			US$	10,167				—			US$	3,302			US$	3,306			US$	(4	)			—			US$	23,820
		Goldman Sachs Group Inc/The		”			—				—				—			US$	7,390				—			US$	16,555				—			US$	1,900			US$	1,976			US$	(76	)			—			US$	22,216
		Verizon Communications Inc		”			—				—				—			US$	17,059				—			US$	11,167				—			US$	8,943			US$	9,082			US$	(139	)			—			US$	19,507
		BAT Capital Corp		”			—				—				—				—				—			US$	16,945				—				—				—				—				—			US$	17,045
		Ford Motor Credit Co LLC		”			—				—				—			US$	7,877				—			US$	10,827				—			US$	1,964			US$	2,016			US$	(52	)			—			US$	16,824
		Apple Inc		”			—				—				—			US$	2,607				—			US$	13,738				—			US$	854			US$	862			US$	(8	)			—			US$	15,651
		Morgan Stanley		”			—				—				—			US$	11,237				—			US$	12,049				—			US$	9,018			US$	8,973			US$	45				—			US$	14,490
		Tyson Foods Inc		”			—				—				—			US$	1,704				—			US$	10,762				—			US$	201			US$	200			US$	1				—			US$	12,271
		Morgan Stanley		”			—				—				—				—				—			US$	11,681				—				—				—				—				—			US$	11,740
		JPMorgan Chase & Co		”			—				—				—				—				—			US$	10,596				—				—				—				—				—			US$	10,641
		Microsoft Corp		”			—				—				—			US$	2,905				—			US$	11,279				—			US$	5,076			US$	4,992			US$	84				—			US$	9,386
		QUALCOMM Inc		”			—				—				—				—				—			US$	10,048				—			US$	3,561			US$	3,548			US$	13				—			US$	6,532
		BMW US Capital LLC		”			—				—				—			US$	7,180				—			US$	5,995				—			US$	10,552			US$	10,495			US$	57				—			US$	2,737
		Aetna Inc		”			—				—				—			US$	11,618				—				—				—			US$	10,157			US$	10,069			US$	88				—			US$	1,605
		Government bond
		United States Treasury Note/Bond		Available-for-sale financial assets			—				—				—			US$	195,285				—			US$	233,540				—			US$	308,395			US$	308,911			US$	(516	)			—			US$	127,072
		United States Treasury Floating Rate Note		”			—				—				—			US$	30,756				—			US$	171,891				—			US$	115,149			US$	115,059			US$	90				—			US$	87,556
		United States Treasury Bill		”			—				—				—				—				—			US$	13,691				—			US$	8,198			US$	8,197			US$	1				—			US$	5,497
		United States Treasury Inflation Indexed Bonds		”			—				—				—			US$	19,349				—			US$	8,051				—			US$	22,694			US$	22,840			US$	(146	)			—			US$	4,645
		United States Treasury Bill		”			—				—				—				—				—			US$	97,678				—			US$	97,712			US$	97,678			US$	34				—				—

(Continued)

 

- 58 -

---

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		Agency bonds/Agency mortgage-backed securities
		Government National Mortgage Association		Available-for-sale financial assets			—				—				—				—				—			US$	15,138				—				—			US$	5			US$	(5	)			—			US$	15,402
		FED HM LN PC Pool G07375		”			—				—				—			US$	10				—			US$	12,123				—			US$	378			US$	412			US$	(34	)			—			US$	11,756
		FNMA Pool AL9718		”			—				—				—				—				—			US$	9,841				—			US$	1,178			US$	1,334			US$	(156	)			—			US$	8,535
		FNMA TBA 30 Yr 4.5		”			—				—				—				—				—			US$	34,832				—			US$	27,090			US$	27,098			US$	(8	)			—			US$	7,730
		FNMA TBA 30 Yr 3.5		”			—				—				—				—				—			US$	48,104				—			US$	45,212			US$	45,206			US$	6				—			US$	2,889
		GNMA II TBA 30 Yr 4		”			—				—				—				—				—			US$	24,662				—			US$	22,466			US$	22,453			US$	13				—			US$	2,210
		FNMA TBA 15 Yr 3		”			—				—				—				—				—			US$	27,219				—			US$	25,212			US$	25,177			US$	35				—			US$	2,036
		GNMA II TBA 30 Yr 3.5		”			—				—				—				—				—			US$	26,422				—			US$	26,267			US$	26,277			US$	(10	)			—			US$	146
		FNMA TBA 30 Yr 3		”			—				—				—				—				—			US$	57,626				—			US$	57,629			US$	57,626			US$	3				—				—
		FNMA TBA 30 Yr 4		”			—				—				—				—				—			US$	21,721				—			US$	21,726			US$	21,721			US$	5				—				—
		FNMA TBA 30 Yr 5		”			—				—				—				—				—			US$	11,128				—			US$	11,134			US$	11,128			US$	6				—				—
		GNMA II TBA 30 Yr 3		”			—				—				—				—				—			US$	12,544				—			US$	12,541			US$	12,544			US$	(3	)			—				—
		Asset-backed securities
		Citibank Credit Card Issuance Trust		Available-for-sale financial assets			—				—				—			US$	22,585				—			US$	20,312				—			US$	3,542			US$	3,712			US$	(170	)			—			US$	39,343
		Chase Issuance Trust		”			—				—				—			US$	31,276				—			US$	9,059				—			US$	10,607			US$	10,606			US$	1				—			US$	29,765
		Discover Card Execution Note Trust		”			—				—				—			US$	23,076				—			US$	14,786				—			US$	13,991			US$	14,003			US$	(12	)			—			US$	23,882
		Capital One Multi-Asset Execution Trust		”			—				—				—			US$	39,626				—			US$	200				—			US$	18,303			US$	18,384			US$	(81	)			—			US$	21,568
		Ford Credit Floorplan Master Owner Trust A		”			—				—				—			US$	11,944				—			US$	10,779				—			US$	2,000			US$	2,001			US$	(1	)			—			US$	20,725
		Fund
		Primavera Capital Fund II L.P.		Financial assets carried at cost			—				—				—			US$	23,784				—			US$	37,770				—				—				—				—				—			US$	61,554
ISDF II		Stock
		Alchip Technologies Limited		Available-for-sale financial assets			—				—				6,581			US$	6,387				—				—				6,581			US$	17,954			US$	3,206			US$	14,747				—				—

 

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$1,570,000 thousand as of September 30, 2017. The total injection was finished in October 2017.

(Concluded)

 

- 59 -

---

TABLE 5

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

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

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017

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

 

 

Types of

Transaction Amount (Foreign Currencies in

Nature of

Prior Transaction of Related Counter-party

Price

Purpose of

Other

Company Name

Property

Transaction Date

Thousands)

Payment Term

Counter-party

Relationships

Owner

Relationships

Transfer Date

Amount

Reference

Acquisition

Terms

TSMC

Fab

August 2, 2016 to July 20, 2017

$

309,070

Monthly settlement by the construction progress and acceptance

UNITED INTEGRATED SERVICES CO., LTD.

—

N/A

N/A

N/A

N/A

Bidding, price comparison and price negotiation

Manufacturing purpose

None

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

September 22, 2016 to September 5, 2017

302,620

Monthly settlement by the construction progress and acceptance

Uangyih-Tech Industrial 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

Fab

March 27, 2017 to September 22, 2017

456,622

Monthly settlement by the construction progress and acceptance

Cica-Huntek Chemical Technology Taiwan Co., Ltd

—

N/A

N/A

N/A

N/A

Bidding, price comparison and price negotiation

Manufacturing purpose

None

Fab

April 14, 2017 to September 29, 2017

485,131

Monthly settlement by the construction progress and acceptance

KEDGE Construction Co., Ltd.

—

N/A

N/A

N/A

N/A

Bidding, price comparison and price negotiation

Manufacturing purpose

None

Fab

May 25, 2017 to September 6, 2017

1,958,912

Monthly settlement by the construction progress and acceptance

DA CIN Construction Co., Ltd.

—

N/A

N/A

N/A

N/A

Bidding, price comparison and price negotiation

Manufacturing purpose

None

TSMC Nanjing

Fab

March 21, 2017 to June 23, 2017

RMB  183,300

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

RMB  119,027

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

RMB  98,000

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

 

- 60 -

---

TABLE 6

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

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

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017

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

 

 

																						Notes/Accounts Payable or Receivable
						Transaction Details																Ending Balance
								Amount (Foreign Currencies				% to						Abnormal Transaction				(Foreign Currencies in				% to
Company Name		Related Party		Nature of Relationships		Purchases/ Sales		in Thousands)				Total				Payment Terms		Unit Price		Payment Terms		Thousands)				Total				Note
TSMC		TSMC North America		Subsidiary		Sales		$	453,808,649				63			Net 30 days from invoice date (Note)		—		Note		$	79,337,055				69
		GUC		Associate		Sales			5,230,409				1			Net 30 days from the end of the month of when invoice is issued		—		—			869,302				1
		TSMC Nanjing		Subsidiary		Sales			108,411				—			Net 30 days from the end of the month of when invoice is issued		—		—			—				—
		TSMC China		Subsidiary		Purchases			16,875,817				28			Net 30 days from the end of the month of when invoice is issued		—		—			(1,694,161	)			6
		WaferTech		Indirect subsidiary		Purchases			6,633,069				11			Net 30 days from the end of the month of when invoice is issued		—		—			(1,516,376	)			5
		VIS		Associate		Purchases			4,417,318				7			Net 30 days from the end of the month of when invoice is issued		—		—			(600,612	)			2
		SSMC		Associate		Purchases			3,140,113				5			Net 30 days from the end of the month of when invoice is issued		—		—			(429,648	)			1
TSMC North America		GUC		Associate of TSMC		Sales		(US$	653,205 21,359)				—			Net 30 days from invoice date		—		—		(US$	63,729 2,108)				—
VisEra Tech		Xintec		Associate of TSMC		Sales			170,423				10			Net 30 days from the end of the month of when invoice is issued		—		—			143,407				30

 

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.

 

- 61 -

---

TABLE 7

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

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

SEPTEMBER 30, 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		$	80,508,204			50		$	4,784,376			—		$	16,344,320			$	—
		TSMC Nanjing		Subsidiary			2,761,430			Note 2			—			—			—				—
		GUC		Associate			869,302			47			—			—			—				—
TSMC North America		TSMC		Parent company		(US$	158,868 5,254)			Note 2			—			—			—				—
TSMC Japan		TSMC		Parent company		(JPY	100,418 372,055)			Note 2			—			—			—				—
TSMC Global Ltd.		TSMC		Parent company		(US$	7,197,658 238,026)			Note 2			—			—			—				—
TSMC China		TSMC		Parent company		(RMB	1,694,161 372,403)			28			—			—			—				—
		TSMC Nanjing		The same parent company		(RMB	13,330,128 2,915,984)			Note 2			—			—			—				—
TSMC Technology		TSMC		The ultimate parent of the Company		(US$	233,763 7,731	)		Note 2			—			—			—				—
WaferTech		TSMC		The ultimate parent of the Company		(US$	1,516,376 50,146	)		57			—			—			—				—
VisEra Tech		Xintec		Associate of TSMC			144,557			51			—			—			—				—

 

Note 1:

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

Note 2:

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

 

- 62 -

---

TABLE 8

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

INTERCOMPANY RELATIONSHIPS AND SIGNIFICANT INTERCOMPANY TRANSACTIONS

FOR THE NINE MONTHS ENDED SEPTEMBER 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		$	453,808,649			—		65%
								Receivables from related parties			79,337,055			—		4%
								Other receivables from related parties			1,171,149			—		—
								Payables to related parties			158,868			—		—
				TSMC Japan		1		Marketing expenses - commission			155,209			—		—
								Payables to related parties			100,418			—		—
				TSMC Europe		1		Marketing expenses - commission			328,207			—		—
				TSMC Global		1		Short-term loans			7,197,079			—		—
				TSMC China		1		Purchases			16,875,817			—		2%
								Payables to related parties			1,694,161			—		—
				TSMC Nanjing		1		Net revenue from sale of goods			108,411			—		—
								Proceeds from disposal of property, plant and equipment			2,606,062			—		—
								Other receivables from related parties			2,761,430			—		—
				TSMC Canada		1		Research and development expenses			187,833			—		—
				TSMC Technology		1		Research and development expenses			1,378,228			—		—
								Payables to related parties			233,763			—		—
				WaferTech		1		Purchases			6,633,069			—		1%
								Payables to related parties			1,516,376			—		—
1		TSMC China		TSMC Nanjing		3		Other receivables from related parties			13,330,128			—		1%

 

Note 1:

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

No. 3 represents the transactions between subsidiaries.

Note 2:

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

 

- 63 -

---

TABLE 9

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

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

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017

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

 

 

								Original Investment Amount								Balance as of September 30, 2017										Net Income				Share of Profits/Losses
Investor Company		Investee Company		Location		Main Businesses and Products		September 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)				(Losses) of the Investee (Foreign Currencies in Thousands)				of Investee (Note 1) (Foreign Currencies in Thousands)				Note
TSMC		TSMC Global		Tortola, British Virgin Islands		Investment activities		$	279,830,484 Note 3			$	232,207,219				7			100		$	301,083,863			$	3,399,812			$	3,399,812			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			50,520,922				1,995,204				1,995,204			Subsidiary
		VIS		Hsin-Chu, Taiwan		Manufacturing, selling, packaging, testing and computer-aided design of integrated circuits and other semiconductor devices and the manufacturing and design service of masks			10,180,677				10,180,677				464,223			28			8,285,386				3,288,081				927,514			Associate
		SSMC		Singapore		Manufacturing and selling of integrated circuits and other semiconductor devices			5,120,028				5,120,028				314			39			5,329,236				3,278,934				1,271,898			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			4,531,678				64,620				56,155			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			4,254,408				180,385				180,385			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			2,264,539				(809,657	)			(330,786	)		Associate
		GUC		Hsin-Chu, Taiwan		Researching, developing, manufacturing, testing and marketing of integrated circuits			386,568				386,568				46,688			35			1,139,339				482,931				168,253			Associate
		TSMC Europe		Amsterdam, the Netherlands		Customer service and supporting activities			15,749				15,749				—			100			401,207				30,152				30,152			Subsidiary
		VTAF II		Cayman Islands		Investing in new start-up technology companies			470,505				608,562				—			98			362,166				135,452				132,743			Subsidiary
		VTAF III		Cayman Islands		Investing in new start-up technology companies			1,329,951				1,355,417				—			98			157,446				(26,099	)			(25,577	)		Subsidiary
		TSMC Japan		Yokohama, Japan		Customer service and supporting activities			83,760				83,760				6			100			133,446				4,149				4,149			Subsidiary
		TSMC Korea		Seoul, Korea		Customer service and supporting activities			13,656				13,656				80			100			37,246				1,829				1,829			Subsidiary
		TSMC Solar Europe GmbH		Hamburg, Germany		Selling of solar related products and providing customer service			25,266				25,266				1			100			(22,222	)			(14,480	)			(14,480	)		Subsidiary
TSMC Partners		TSMC Development		Delaware, U.S.A		Investing in companies involved in the manufacturing related business in the semiconductor industry		(US$	17,748,443 586,939	)		(US$	17,748,443 586,939	)			—			100		(US$	26,794,095 886,077	)		(US$	1,348,031 44,131	)			Note 2			Subsidiary
		TSMC Technology		Delaware, U.S.A		Engineering support activities		(US$	431,874 14,282)			(US$	431,874 14,282)				—			100		(US$	510,008 16,866)			(US$	309 (3))				Note 2			Subsidiary
		ISDF II		Cayman Islands		Investing in new start-up technology companies		(US$	157,056 5,194)			(US$	157,056 5,194)				9,299			97		(US$	470,726 15,567)			(US$	377,868 12,476)				Note 2			Subsidiary
		TSMC Canada		Ontario, Canada		Engineering support activities		(US$	69,550 2,300)			(US$	69,550 2,300)				2,300			100		(US$	181,028 5,987)			(US$	8,185 266)				Note 2			Subsidiary
		ISDF		Cayman Islands		Investing in new start-up technology companies		(US$	14,369 475)			(US$	14,369 475)				583			97		(US$	502 17)			(US$	44 1)				Note 2			Subsidiary
VTAF III		Growth Fund		Cayman Islands		Investing in new start-up technology companies		(US$	68,394 2,262)			(US$	44,202 1,462)				—			100		(US$	50,898 1,683)			(US$	(995) (33))				Note 2			Subsidiary
		Mutual-Pak		New Taipei, Taiwan		Manufacturing of electronic parts, wholesaling and retailing of electronic materials, and researching, developing and testing of RFID		(US$	48,181 1,593	)		(US$	157,626 5,213	)			4,693			58		(US$	(1,348) (45))			(US$	(14,914 (486	)  ))			Note 2			Subsidiary

 

- 64 -

---

Original Investment Amount

Balance as of September 30, 2017

Net Income

Share of Profits/Losses

Investor Company

Investee Company

Location

Main Businesses and Products

September 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)

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

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

Note

TSMC Development

WaferTech

Washington, U.S.A

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

$

—

$

—

293,637

100

$ (US$

5,719,532 189,144

)

$ (US$

1,205,705 39,470)

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$1,570,000 thousand as of September 30, 2017. The total injection was finished in October 2017.

 

 

- 65 -

---

TABLE 10

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

INFORMATION ON INVESTMENT IN MAINLAND CHINA

FOR NINE MONTHS ENDED SEPTEMBER 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 September 30, 2017 (US$ in Thousands)				Net Income (Losses) of the Investee Company				Percentage of Ownership		Share of Profits/Losses				Carrying Amount as of September 30, 2017				Accumulated Inward Remittance of Earnings as of September 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	)		$	6,892,771			100%		$	7,011,807 (Note 2	)		$	49,184,988			$	—
TSMC Nanjing		Manufacturing, selling, testing and computer-aided design of integrated circuits and other semiconductor devices		$ (RMB	7,189,510 1,530,565	)			Note 1			(US$	6,435,200 200,000	)		(US$	754,310 25,000	)			—			(US$	7,189,510 225,000	)			56,746			100%			56,746 (Note 2	)			6,936,003				—

 

Accumulated Investment in Mainland China as of September 30, 2017 (US$ in Thousands)				Investment Amounts Authorized by Investment Commission, MOEA (US$ in Thousands)				Upper Limit on Investment
$ (US$	26,129,177 821,000	)		$ (US$	119,412,667 3,596,000	)			Note 3

 

Note 1:

TSMC directly invested US$596,000 thousand in TSMC China and US$225,000 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.

 

- 66 -