1934 Act Registration No. 1-14700

 

 

 

 

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

 

FORM 6-K

 

 

REPORT OF FOREIGN PRIVATE ISSUER

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

THE SECURITIES EXCHANGE ACT OF 1934

For the month of May 2016

 

 

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   x            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   x

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

 

 

 

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SIGNATURES

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

 

				Taiwan Semiconductor Manufacturing Company Ltd.
Date: May 17, 2016				By		/s/ Lora Ho
						Lora Ho
						Senior Vice President & Chief Financial Officer

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		Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries   Consolidated Financial Statements for the Three Months Ended March 31, 2016 and 2015 and Independent Accountants’ Review Report

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INDEPENDENT ACCOUNTANTS’ REVIEW REPORT

The Board of Directors and Shareholders

Taiwan Semiconductor Manufacturing Company Limited

We have reviewed the accompanying consolidated balance sheets of Taiwan Semiconductor Manufacturing Company Limited and subsidiaries (the “Company”) as of March 31, 2016 and 2015 and the related consolidated statements of comprehensive income, changes in equity and cash flows for the three months ended March 31, 2016 and 2015. 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 by the Financial Supervisory Commission of the Republic of China.

 

May 10, 2016

Notice to Readers

The accompanying consolidated financial statements are intended only to present the consolidated financial position, results of operations 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 accepted and applied in the Republic of China.

For the convenience of readers, the 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 accountants’ review report and consolidated financial statements shall prevail.

 

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Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED BALANCE SHEETS

(In Thousands of New Taiwan Dollars)

 

 

		March 31, 2016 (Reviewed)								December 31, 2015 (Audited)								March 31, 2015 (Reviewed)
		Amount				%				Amount				%				Amount				%
ASSETS
CURRENT ASSETS
Cash and cash equivalents (Note 6)		$	617,984,318				36			$	562,688,930				34			$	437,412,411				28
Financial assets at fair value through profit or loss (Note 7)			618,810				—				6,026				—				297,698				—
Available-for-sale financial assets (Note 8)			22,232,905				1				14,299,361				1				68,204,390				5
Held-to-maturity financial assets (Note 9)			7,561,182				1				9,166,523				1				13,060,038				1
Hedging derivative financial assets (Note 10)			—				—				1,739				—				—				—
Notes and accounts receivable, net (Note 11)			96,273,270				6				85,059,675				5				98,529,745				6
Receivables from related parties (Note 32)			683,818				—				505,722				—				592,021				—
Other receivables from related parties (Note 32)			141,009				—				125,018				—				162,908				—
Inventories (Notes 12 and 36)			57,242,320				3				67,052,270				4				64,599,666				4
Other financial assets (Notes 4, 33 and 36)			7,057,944				—				4,305,358				—				3,946,604				—
Other current assets (Note 17)			2,695,531				—				3,533,369				—				3,688,211				—
Total current assets			812,491,107				47				746,743,991				45				690,493,692				44
NONCURRENT ASSETS
Held-to-maturity financial assets (Note 9)			17,525,301				1				6,910,873				—				—				—
Financial assets carried at cost (Note 13)			4,093,568				—				3,990,882				—				1,817,677				—
Investments accounted for using equity method (Note 14)			24,715,683				1				24,091,828				2				30,363,144				2
Property, plant and equipment (Note 15)			844,305,450				49				853,470,392				52				813,219,884				52
Intangible assets (Note 16)			13,989,513				1				14,065,880				1				13,138,963				1
Deferred income tax assets (Note 4)			7,561,741				1				6,384,974				—				6,246,031				1
Refundable deposits			443,337				—				430,802				—				442,633				—
Other noncurrent assets (Note 17)			1,399,936				—				1,428,676				—				1,173,031				—
Total noncurrent assets			914,034,529				53				910,774,307				55				866,401,363				56
TOTAL		$	1,726,525,636				100			$	1,657,518,298				100			$	1,556,895,055				100
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Short-term loans (Note 18)		$	34,690,040				2			$	39,474,000				2			$	18,683,595				1
Financial liabilities at fair value through profit or loss (Note 7)			16				—				72,610				—				64,929				—
Hedging derivative financial liabilities (Note 10)			458				—				—				—				11,627,838				1
Accounts payable			18,513,952				1				18,575,286				1				18,595,310				1
Payables to related parties (Note 32)			1,115,073				—				1,149,988				—				1,609,613				—
Salary and bonus payable			8,580,300				1				11,702,042				1				8,032,667				1
Accrued profit sharing bonus to employees and compensation to directors and supervisors (Notes 22 and 28)			25,395,073				1				20,958,893				1				23,436,465				1
Payables to contractors and equipment suppliers			33,953,061				2				26,012,192				2				27,372,814				2
Income tax payable (Note 4)			41,474,426				2				32,901,106				2				38,954,401				2
Provisions (Note 19)			10,090,163				1				10,163,536				1				8,130,817				1
Long-term liabilities - current portion (Note 20)			33,272,901				2				23,517,612				1				—				—
Accrued expenses and other current liabilities (Note 21)			28,807,760				2				27,701,329				2				31,056,696				2
Total current liabilities			235,893,223				14				212,228,594				13				187,565,145				12
NONCURRENT LIABILITIES
Bonds payable (Note 20)			181,151,058				11				191,965,082				12				213,208,771				14
Long-term bank loans			30,000				—				32,500				—				40,000				—
Deferred income tax liabilities (Note 4)			13,831				—				31,271				—				159,538				—
Obligations under finance leases			—				—				—				—				799,612				—
Net defined benefit liability (Note 4)			7,437,455				—				7,448,026				—				6,553,652				—
Guarantee deposits (Note 21)			19,492,280				1				21,564,801				1				23,715,049				2
Others (Note 19)			1,561,713				—				1,613,545				—				937,535				—
Total noncurrent liabilities			209,686,337				12				222,655,225				13				245,414,157				16
Total liabilities			445,579,560				26				434,883,819				26				432,979,302				28
EQUITY ATTRIBUTABLE TO SHAREHOLDERS OF THE PARENT
Capital stock (Note 22)			259,303,805				15				259,303,805				16				259,303,020				17
Capital surplus (Note 22)			56,317,375				3				56,300,215				3				56,274,436				4
Retained earnings (Note 22)
Appropriated as legal capital reserve			177,640,561				11				177,640,561				11				151,250,682				10
Unappropriated earnings			781,434,518				45				716,653,025				43				632,904,503				40
			959,075,079				56				894,293,586				54				784,155,185				50
Others (Note 22)			5,276,848				—				11,774,113				1				24,110,858				1
Equity attributable to shareholders of the parent			1,279,973,107				74				1,221,671,719				74				1,123,843,499				72
NONCONTROLLING INTERESTS			972,969				—				962,760				—				72,254				—
Total equity			1,280,946,076				74				1,222,634,479				74				1,123,915,753				72
TOTAL		$	1,726,525,636				100			$	1,657,518,298				100			$	1,556,895,055				100

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

 

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Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

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

(Reviewed, Not Audited)

 

 

		Three Months Ended March 31
		2016								2015
		Amount				%				Amount				%
NET REVENUE (Notes 24, 32 and 38)		$	203,495,361				100			$	222,034,144				100
COST OF REVENUE (Notes 12, 28, 32 and 36)			112,124,894				55				112,585,333				51
GROSS PROFIT BEFORE UNREALIZED GROSS PROFIT ON SALES TO ASSOCIATES			91,370,467				45				109,448,811				49
UNREALIZED GROSS PROFIT ON SALES TO ASSOCIATES			(32,889	)			—				(19,547	)			—
GROSS PROFIT			91,337,578				45				109,429,264				49
OPERATING EXPENSES (Notes 28 and 32)
Research and development			15,618,963				7				16,781,463				7
General and administrative			3,844,935				2				4,366,053				2
Marketing			1,415,099				1				1,390,996				1
Total operating expenses			20,878,997				10				22,538,512				10
OTHER OPERATING INCOME AND EXPENSES, NET (Note 28)			8,733				—				(264,629	)			—
INCOME FROM OPERATIONS (Note 38)			70,467,314				35				86,626,123				39
NON-OPERATING INCOME AND EXPENSES
Share of profits of associates and joint venture			840,895				—				1,134,649				1
Other income			1,332,589				1				881,782				—
Foreign exchange gain (loss), net (Note 37)			(1,093,618	)			(1	)			48,183				—
Finance costs			(850,580	)			—				(793,942	)			—
Other gains and losses (Note 25)			1,559,299				1				362,185				—
Total non-operating income and expenses			1,788,585				1				1,632,857				1
INCOME BEFORE INCOME TAX			72,255,899				36				88,258,980				40
INCOME TAX EXPENSE (Notes 4 and 26)			7,463,302				4				9,275,072				4
NET INCOME			64,792,597				32				78,983,908				36

(Continued)

 

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Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

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

(Reviewed, Not Audited)

 

 

		Three Months Ended March 31
		2016								2015
		Amount				%				Amount				%
OTHER COMPREHENSIVE INCOME (LOSS) (Notes 22 and 26)
Items that may be reclassified subsequently to profit or loss
Exchange differences arising on translation of foreign operations		$	(6,593,053	)			(3	)		$	(2,279,138	)			(1	)
Changes in fair value of available-for-sale financial assets			51,294				—				(204,815	)			—
Share of other comprehensive income of associates and joint venture			26,157				—				843,163				—
Income tax benefit (expense) related to items that may be reclassified subsequently			17,440				—				(4,793	)			—
Other comprehensive loss for the period, net of income tax			(6,498,162	)			(3	)			(1,645,583	)			(1	)
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD		$	58,294,435				29			$	77,338,325				35
NET INCOME (LOSS) ATTRIBUTABLE TO:
Shareholders of the parent		$	64,781,493				32			$	78,989,911				36
Noncontrolling interests			11,104				—				(6,003	)			—
		$	64,792,597				32			$	78,983,908				36
TOTAL COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO:
Shareholders of the parent		$	58,284,228				29			$	77,351,478				35
Noncontrolling interests			10,207				—				(13,153	)			—
		$	58,294,435				29			$	77,338,325				35
		2016								2015
		Income Attributable to Shareholders of the Parent								Income Attributable to Shareholders of the Parent
EARNINGS PER SHARE (NT$, Note 27)
Basic earnings per share		$					2.50			$					3.05
Diluted earnings per share		$					2.50			$					3.05

 

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

 

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Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(In Thousands of New Taiwan Dollars)

(Reviewed, Not Audited)

 

 

		Equity Attributable to Shareholders of the Parent
																										Others
		Capital Stock - Common Stock												Retained Earnings												Foreign Currency				Unrealized Gain/Loss from Available-
		Shares (In Thousands)				Amount				Capital Surplus				Legal Capital Reserve				Unappropriated Earnings				Total				Translation Reserve				for-sale Financial Assets				Cash Flow Hedges Reserve				Total				Total				Noncontrolling Interests				Total Equity
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
Net income for the three months ended March 31, 2016			—				—				—				—				64,781,493				64,781,493				—				—				—				—				64,781,493				11,104				64,792,597
Other comprehensive income (loss) for the three months ended March 31, 2016, net of income tax			—				—				—				—				—				—				(6,587,294	)			89,938				91				(6,497,265	)			(6,497,265	)			(897	)			(6,498,162	)
Total comprehensive income (loss) for the three months ended March 31, 2016			—				—				—				—				64,781,493				64,781,493				(6,587,294	)			89,938				91				(6,497,265	)			58,284,228				10,207				58,294,435
Adjustments to share of changes in equities of associates and joint venture			—				—				17,160				—				—				—				—				—				—				—				17,160				2				17,162
BALANCE, March 31, 2016			25,930,380			$	259,303,805			$	56,317,375			$	177,640,561			$	781,434,518			$	959,075,079			$	4,452,655			$	824,709			$	(516	)		$	5,276,848			$	1,279,973,107			$	972,969			$	1,280,946,076
BALANCE, JANUARY 1, 2015			25,929,662			$	259,296,624			$	55,989,922			$	151,250,682			$	553,914,592			$	705,165,274			$	4,502,113			$	21,247,483			$	(305	)		$	25,749,291			$	1,046,201,111			$	127,221			$	1,046,328,332
Net income for the three months ended March 31, 2015			—				—				—				—				78,989,911				78,989,911				—				—				—				—				78,989,911				(6,003	)			78,983,908
Other comprehensive income (loss) for the three months ended March 31, 2015, net of income tax			—				—				—				—				—				—				(2,258,112	)			619,879				(200	)			(1,638,433	)			(1,638,433	)			(7,150	)			(1,645,583	)
Total comprehensive income (loss) for the three months ended March 31, 2015			—				—				—				—				78,989,911				78,989,911				(2,258,112	)			619,879				(200	)			(1,638,433	)			77,351,478				(13,153	)			77,338,325
Issuance of stock from exercise of employee stock options			640				6,396				23,793				—				—				—				—				—				—				—				30,189				—				30,189
Adjustments to share of changes in equities of associates and joint venture			—				—				261,752				—				—				—				—				—				—				—				261,752				(26	)			261,726
From share of changes in equities of subsidiaries			—				—				(1,031	)			—				—				—				—				—				—				—				(1,031	)			1,031				—
Decrease in noncontrolling interests			—				—				—				—				—				—				—				—				—				—				—				(179	)			(179	)
Effect of disposal of subsidiary			—				—				—				—				—				—				—				—				—				—				—				(42,640	)			(42,640	)
BALANCE, March 31, 2015			25,930,302			$	259,303,020			$	56,274,436			$	151,250,682			$	632,904,503			$	784,155,185			$	2,244,001			$	21,867,362			$	(505	)		$	24,110,858			$	1,123,843,499			$	72,254			$	1,123,915,753

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

 

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Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands of New Taiwan Dollars)

(Reviewed, Not Audited)

 

 

		Three Months Ended March 31
		2016				2015
CASH FLOWS FROM OPERATING ACTIVITIES
Income before income tax		$	72,255,899			$	88,258,980
Adjustments for:
Depreciation expense			54,950,729				54,706,227
Amortization expense			896,332				771,769
Finance costs			850,580				793,942
Share of profits of associates and joint venture			(840,895	)			(1,134,649	)
Interest income			(1,332,589	)			(881,782	)
Loss (gain) on disposal of property, plant and equipment, net			(8,235	)			4,081
Loss (gain) on disposal of available-for-sale financial assets, net			10,829				(2,961	)
Gain on disposal of financial assets carried at cost, net			(14,381	)			(42,243	)
Unrealized gross profit on sales to associates			32,889				19,547
Gain on foreign exchange, net			(1,293,976	)			(1,054,551	)
Loss (gain) from hedging instruments			11,870				(4,592,076	)
Loss (gain) arising from changes in fair value of available-for-sale financial assets in hedge effective portion			(10,625	)			4,602,284
Changes in operating assets and liabilities:
Derivative financial instruments			(685,378	)			(526,938	)
Notes and accounts receivable, net			(12,473,495	)			16,205,075
Receivables from related parties			(178,096	)			(279,066	)
Other receivables from related parties			(15,991	)			15,717
Inventories			9,809,950				1,738,305
Other financial assets			(3,129,147	)			(425,720	)
Other current assets			837,838				(32,060	)
Accounts payable			3,728				(2,573,738	)
Payables to related parties			(7,283	)			118,123
Salary and bonus payable			(3,121,742	)			(2,541,255	)
Accrued profit sharing bonus to employees and compensation to directors and supervisors			4,436,180				5,383,645
Accrued expenses and other current liabilities			760,672				(82,857	)
Provisions			(64,147	)			(2,314,512	)
Net defined benefit liability			(10,571	)			(14,130	)
Cash generated from operations			121,670,945				156,119,157
Income taxes paid			(142,092	)			(118,496	)
Net cash generated by operating activities			121,528,853				156,000,661
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions of:
Available-for-sale financial assets			(11,171,713	)			—
Held-to-maturity financial assets			(12,439,373	)			(9,372,767	)
Financial assets carried at cost			(187,378	)			(31,533	)

(Continued)

 

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Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands of New Taiwan Dollars)

(Reviewed, Not Audited)

 

 

		Three Months Ended March 31
		2016				2015
Property, plant and equipment		$	(38,141,373	)		$	(48,875,682	)
Intangible assets			(1,003,705	)			(1,151,372	)
Proceeds from disposal or redemption of:
Available-for-sale financial assets			2,943,420				36,021
Held-to-maturity financial assets			3,000,000				800,000
Financial assets carried at cost			14,381				9,125
Property, plant and equipment			12,470				30,161
Derecognition of hedging derivative financial instrument			(9,647	)			—
Interest received			1,541,119				874,723
Net cash inflow from disposal of subsidiary (Note 30)			—				601,047
Refundable deposits paid			(55,609	)			(189,442	)
Refundable deposits refunded			47,608				101,714
Decrease in receivables for temporary payments			102,433				—
Net cash used in investing activities			(55,347,367	)			(57,168,005	)
CASH FLOWS FROM FINANCING ACTIVITIES
Decrease in short-term loans			(4,114,866	)			(17,341,135	)
Interest paid			(689,803	)			(861,616	)
Guarantee deposits received			200,080				176,072
Guarantee deposits refunded			(202,243	)			(174,920	)
Proceeds from exercise of employee stock options			—				30,189
Decrease in noncontrolling interests			—				(179	)
Net cash used in financing activities			(4,806,832	)			(18,171,589	)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS			(6,079,266	)			(1,779,163	)
NET INCREASE IN CASH AND CASH EQUIVALENTS			55,295,388				78,881,904
CASH AND CASH EQUIVALENTS INCLUDED IN NONCURRENT ASSETS HELD FOR SALE, BEGINNING OF PERIOD			—				81,478
CASH AND CASH EQUIVALENT ON CONSOLIDATED BALANCE SHEET, BEGINNING OF PERIOD			562,688,930				358,449,029
CASH AND CASH EQUIVALENTS, END OF PERIOD		$	617,984,318			$	437,412,411

 

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

 

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Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2016 and 2015

(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 and operating segments information of TSMC and its subsidiaries (collectively as the “Company”) are described in Notes 4 and 38.

 

2.	THE AUTHORIZATION OF FINANCIAL STATEMENTS

The accompanying consolidated financial statements were reported to the Board of Directors and issued on May 10, 2016.

 

3.	APPLICATION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS

The Company has not applied the following International Financial Reporting Standards (IFRS), International Accounting Standards (IASs), Interpretations of International Financial Reporting Standards, and Interpretations of IASs (collectively, “IFRSs”) issued by the International Accounting Standards Board (IASB) but not endorsed by the Financial Supervisory Commission (FSC). On March 10, 2016, the FSC preannounced the scope of IFRSs to be endorsed and will take effect from January 1, 2017. The scope includes all IFRSs that were issued by the IASB before January 1, 2016 and have effective dates on or before January 1, 2017, which means the scope excludes those that are not yet effective as of January 1, 2017 such as IFRS 9 “Financial Instruments” and IFRS 15 “Revenue from Contracts with Customers” and those with undetermined effective dates. In addition, the FSC announced that an entity should apply IFRS 15 starting January 1, 2018. As of the date the consolidated financial statements were issued, the FSC has not announced the effective dates of other new, amended and revised standards and interpretations.

 

 

(Continued)

 

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(Concluded)

 

Note 1:

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

Note 2:

The amendment to IFRS 5 is applied prospectively to changes in a method of disposal that occur in annual periods beginning on or after January 1, 2016; the remaining amendments are effective for annual periods beginning on or after January 1, 2016.

Except for the following, the initial application of the above new standards and interpretations has not had any material impact on the Company’s accounting policies:

 

a.

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:

 

1)

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.

 

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2)

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.

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

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

The main change in IFRS 9 is the increase of the eligibility of hedge accounting. It allows reporters to reflect risk management activities in the financial statements more closely as it provides more opportunities to apply hedge accounting. A fundamental difference to IAS 39 is that IFRS 9 (a) increases the scope of hedged items eligible for hedge accounting. For example, the risk components of non-financial items may be designated as hedging accounting; (b) revises a new way to account for the gain or loss recognition arising from hedging derivative financial instruments, which results in a less volatility in profit or loss; and (c) is necessary for there to be an economic relationship between the hedged item and hedging instrument instead of performing the retrospective hedge effectiveness testing.

 

b.

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 contracts; 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.

 

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c.

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.

 

d.

Amendments to IAS 36, “Recoverable Amount Disclosures for Non-Financial Assets”

The amendments to IAS 36 clarify that the Company is only required to disclose the recoverable amount in the period of impairment accrual or reversal. Moreover, if the recoverable amount of impaired assets is based on fair value less costs of disposal, the Company should also disclose the discount rate used. The Company expects the aforementioned amendments will result in a broader disclosure of recoverable amount for non-financial assets.

Except for the aforementioned impact, as of the date that 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, 2015.

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

Statement of Compliance

The accompanying consolidated financial statements have been prepared in conformity with the Regulations Governing the Preparation of Financial Reports by Securities Issuers and IAS 34, “Interim Financial Reporting,” endorsed 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.

 

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Basis of Consolidation

The basis for the consolidated financial statements

The basis for the consolidated financial statements applied in these consolidated financial statements is consistent with those applied in the consolidated financial statements for the year ended December 31, 2015.

The subsidiaries in the consolidated financial statements

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

 

 

(Continued)

 

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(Concluded)

 

Note a:

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

 

Note b:

Due to the expiration of the investment agreement between Emerging Alliance and TSMC, Emerging Alliance completed the liquidation procedures in April 2016.

 

Note c:

In August 2015, TSMC Solar ceased its manufacturing operations. TSMC Solar and TSMC GN were incorporated into TSMC in December 2015. After the incorporation, TSMC Solar Europe GmbH, the 100% owned subsidiary of TSMC Solar, is held directly by TSMC and TSMC Solar Europe GmbH has started the liquidation procedures. TSMC Solar NA, the 100% owned subsidiary of TSMC Solar, completed the liquidation procedures in December 2015.

 

Note d:

To simplify overseas investments structure, in the second quarter of 2014, the Board of Directors of TSMC Solar approved to file for the liquidation of TSMC Solar Europe. The liquidation procedure was completed in the second quarter of 2015 and TSMC Solar Europe GmbH, the 100% owned subsidiary of TSMC Solar Europe, was held directly by TSMC Solar.

 

Note e:

The Company acquired OmniVision Technologies, Inc.’s (“OVT’s”) 49.1% ownership in VisEra Holding and 100% ownership in Taiwan OmniVision Investment Holding Co. (“OVT Taiwan”) on November 20, 2015. As a result, the Company has obtained controls of VisEra Holding and OVT Taiwan; therefore the Company has consolidated VisEra Holding, OVT Taiwan and VisEra Tech, held directly by VisEra Holding, since November 20, 2015. Please refer to Note 29.

 

Note f:

OVT Taiwan that originally acquired by the Company was renamed as Chi Cherng in December 2015.

Under an 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 wholly-owned subsidiary managing a 300mm wafer fab and design service center.

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.

Insurance Claim

The Company recognizes insurance claim reimbursement for losses incurred related to disaster damages. Insurance claim reimbursements are recorded, net of any deductible amounts, at the time while there is evidence that the claim reimbursement is virtually certain to be received.

 

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, 2015.

 

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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

 

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

Outstanding forward exchange contracts consisted of the following:

 

 

(Continued)

 

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(Concluded)

Outstanding cross currency swap contracts consisted of the following:

 

 

8.	AVAILABLE-FOR-SALE FINANCIAL ASSETS

 

 

9.	HELD-TO-MATURITY FINANCIAL ASSETS

 

 

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10.	HEDGING DERIVATIVE FINANCIAL INSTRUMENTS

 

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

The outstanding interest rate futures contracts consisted of the following:

 

The Company’s investments in publicly traded stocks are exposed to the risk of market price fluctuations. Accordingly, the Company entered into stock forward contracts to sell shares at a contracted price determined by specific percentage of the spot price on the trade date in a specific future period in order to hedge the fair value risk caused by changes in equity prices.

The outstanding stock forward contracts consisted of the following:

 

 

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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 and the amounts are still considered recoverable.

Aging analysis of notes and accounts receivable, net

 

Movements of the allowance for doubtful receivables

 

 

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Aging analysis of accounts receivable that is individually determined as impaired

 

 

12.	INVENTORIES

 

Reversal of the reserve for inventory write-downs resulting from the increase in net realizable value in the amount of NT$544,672 thousand (excluding earthquake losses) and write-down of inventories to net realizable value in the amount of NT$1,769,358 thousand, respectively, were included in the cost of revenue for the three months ended March 31, 2016 and 2015. Please refer to related earthquake losses in Note 36.

 

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 common stock of Richwave Technology Corp. was listed on the Taiwan Stock Exchange Corporation in November 2015. Thus, the Company reclassified the aforementioned investment from financial assets carried at cost to available-for-sale financial assets.

 

14.	INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD

Investments accounted for using the equity method consisted of the following:

 

 

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a.

Investments in associates

Associates consisted of the following:

 

The Company acquired OVT’s 49.1% ownership in VisEra Holding on November 20, 2015. As a result, the Company has obtained control of VisEra Holding and consolidated VisEra Holding since November 20, 2015. The Company included the Xintec shares held by VisEra Holding and total percentage of ownership over Xintec increased to 41.4%.

In June 2015, Motech merged with Topcell Solar International Co., Ltd with exchange of shares. As a result, the Company’s percentage of ownership over Motech decreased to 18.0%. In the fourth quarter of 2015, the Company sold 29,160 thousand common shares of Motech and recognized a disposal gain of NT$202,384 thousand. After the sale, the Company’s percentage of ownership over Motech decreased to 12.0%. Motech continues to be accounted for using equity method as the Company still retains significant influence over Motech.

In the second quarter of 2015, the Company sold 82,000 thousand common shares of VIS and recognized a disposal gain of NT$2,263,539 thousand. After the sale, the Company owned approximately 28.3% of the equity interest in VIS.

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 follow. The closing price represents the quoted price in active markets, the level 1 fair value measurement.

 

 

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b.

Investments in joint venture

Joint venture consisted of the following:

 

The Company acquired OVT’s 49.1% ownership in VisEra Holding on November 20, 2015. As a result, the Company has obtained control of VisEra Holding and consolidated VisEra Holding since November 20, 2015. Please refer to Note 29 for related disclosures.

 

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.

 

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For the year ended December 31, 2015, the Company recognized an impairment loss of NT$259,568 thousand under foundry segment since the carrying amount of some of property, plant and equipment is expected to be unrecoverable. Such impairment loss was included in other operating income and expenses for the year ended December 31, 2015.

In August 2015, TSMC Solar ceased its manufacturing operations. In the third quarter of 2015, the Company recognized an impairment loss of NT$2,286,016 thousand since the carrying amounts of some of machinery and equipment, office equipment and mechanical and electrical power equipment were expected to be unrecoverable. Such impairment loss was included in other operating income and expenses for the year ended December 31, 2015.

The Company had a building lease agreement with leasing terms from December 2003 to November 2018 and such lease was accounted for as a finance lease. In August 2015, the lease was determined to be an operating lease due to a modification on lease conditions; as such, the Company recognized a gain of NT$430,041 thousand from the modification. Such gain was included in other operating income and expenses for the year ended December 31, 2015.

 

16.	INTANGIBLE ASSETS

 

 

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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, 2015 to reflect the relevant specific risk in the cash-generating unit.

In August 2015, TSMC Solar ceased its manufacturing operation and the Company recognized an impairment loss of NT$58,514 thousand in the third quarter of 2015 since the carrying amounts of technology license fees, software and system design costs were expected to be unrecoverable. Such impairment loss was included in other operating income and expenses for the year ended December 31, 2015.

 

17.	OTHER ASSETS

 

 

18.	SHORT-TERM LOANS

 

 

19.	PROVISIONS

 

 

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Provisions for sales returns and allowances are estimated based on historical experience, management judgment, and any known factors that would significantly affect the returns and allowances, and are recognized as a reduction of revenue in the same period of the related product sales.

The provision for warranties represents the present value of the Company’s best estimate of the future outflow of the economic benefits that will be required under the Company’s obligations for warranties. The best estimate has been made on the basis of historical warranty trends of business.

 

20.	BONDS PAYABLE

 

The major terms of overseas unsecured bonds are as follows:

 

 

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21.	GUARANTEE DEPOSITS

 

Starting from the second quarter of 2015, some of guarantee deposits were refunded to customers by offsetting related accounts receivable.

 

22.

EQUITY

 

a.

Capital stock

 

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

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

As of March 31, 2016, 1,072,635 thousand ADSs of TSMC were traded on the NYSE. The number of common shares represented by the ADSs was 5,363,175 thousand shares (one ADS represents five common shares).

 

b.

Capital surplus

 

 

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Under the Company Law, 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 may be used to offset a deficit.

 

c.

Retained earnings and dividend policy

TSMC’s existing 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)

Bonus to directors and profit sharing to employees of TSMC of not more than 0.3% and not less than 1% of the remainder, respectively. Directors who also serve as executive officers of TSMC are not entitled to receive the bonus to directors. TSMC may issue profit sharing to employees in stock of an affiliated company meeting the conditions set by the Board of Directors or, by the person duly authorized by the Board of Directors;

 

4)

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

TSMC’s existing Articles of Incorporation also provide that profits of TSMC may be distributed by way of cash dividend and/or stock dividend. However, distribution of profits shall be made preferably by way of cash dividend. Distribution of profits 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.

In accordance with the amendments to the Company Act in May 2015, the recipients of dividends and bonuses are limited to shareholders and do not include employees. The consequential amendments to TSMC’s Articles of Incorporation had been proposed by TSMC’s Board of Directors on February 2, 2016 and are subject to the resolution of the shareholders in their meeting to be held on June 7, 2016 (expected). For information about the accrual basis of profit sharing bonus to employees and compensation to directors for the three months ended March 31, 2016 and 2015, and the appropriations for the years ended December 31, 2015 and 2014, please refer to employee benefits expense in Note 28.

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

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

 

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The appropriations of 2015 and 2014 earnings have been approved by TSMC’s Board of Directors in its meeting held on February 2, 2016 and by TSMC’s shareholders in its meeting held on June 9, 2015, respectively. The appropriations and dividends per share were as follows:

 

The appropriations of earnings for 2015 are to be presented for approval in the TSMC’s shareholders’ meeting to be held on June 7, 2016 (expected).

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:

 

 

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The exchange differences arising on translation of foreign operation’s net assets from its functional currency to TSMC’s presentation currency are recognized directly in other comprehensive income and also accumulated in the foreign currency translation reserve.

Unrealized gain/loss on available-for-sale financial assets represents the cumulative gains or losses arising from the fair value measurement on available-for-sale financial assets that are recognized in other comprehensive income, excluding the amounts recognized in profit or loss for the effective portion from changes in fair value of the hedging instruments. When those available-for-sale financial assets have been disposed of or are determined to be impaired subsequently, the related cumulative gains or losses in other comprehensive income are reclassified to profit or loss.

The cash flow hedges reserve represents the cumulative effective portion of gains or losses arising on changes in fair value of the hedging instruments entered into as cash flow hedges. The cumulative gains or losses arising on changes in fair value of the hedging instruments that are recognized and accumulated in cash flow hedges reserve will be reclassified to profit or loss only when the hedge transaction affects profit or loss.

 

23.	SHARE-BASED PAYMENT

The Company did not issue employee stock option plans for the three months ended March 31, 2016 and 2015. Information about the TSMC’s outstanding employee stock options is described as follows:

 

 

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The numbers of outstanding stock options and exercise prices have been adjusted to reflect the distribution of earnings by TSMC in accordance with the plans.

The employee stock options have been fully exercised in the second quarter of 2015.

Information about TSMC’s outstanding stock options was as follows:

 

March 31, 2015
Range of Exercise Price (NT$)		Weighted-average Remaining Contractual Life (Years)
$47.2		0.1

 

24.	NET REVENUE

 

 

25.	OTHER GAINS AND LOSSES

 

 

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26.	INCOME TAX

 

a.

Income tax expense recognized in profit or loss

 

 

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 2015 and 2014 were 12.71% and 11.13%, respectively; however, effective from January 1, 2015, the creditable ratio for individual shareholders residing in the Republic of China will be half of the original creditable ratio according to the revised Article 66 - 6 of the 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 2013. All investment tax credit adjustments assessed by the tax authorities have been recognized accordingly.

 

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27.	EARNINGS PER SHARE

 

EPS is computed as follows:

 

 

28.	ADDITIONAL INFORMATION OF EXPENSES BY NATURE

 

 

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Under the Company Act as amended in May 2015, the Company’s Articles of Incorporation should stipulate a fixed amount or ratio of annual profit to be distributed as profit sharing bonus to employees. The Company expects to make amendments to the Company’s Articles of Incorporation to be approved during the 2016 annual shareholders’ meeting.

TSMC accrued profit sharing bonus to employees based on a percentage of net income before income tax, profit sharing bonus to employees and compensation to directors during the period, which amounted to NT$4,344,524 thousand for the three months ended March 31, 2016. TSMC accrued profit sharing bonus to employees based on certain percentage of net income during the period, which amounted to NT$5,282,686 thousand for the three months ended March 31, 2015. 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 2, 2016 approved the 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 payment in 2015, respectively. There is no significant difference between the aforementioned approved amounts and the amounts charged against earnings of 2015. After the amendments to TSMC’s Articles of Incorporation to be approved during the TSMC’s shareholders’ meeting to be held on June 7, 2016 (expected), the appropriations of profit sharing bonus to employees and compensation to directors for 2015 are to be submitted to the shareholders’ meeting.

TSMC’s profit sharing bonus to employees and compensation to directors in the amounts of NT$17,645,966 thousand and NT$406,854 thousand in cash for 2014, respectively, had been approved by the shareholders in its meetings held on June 9, 2015. The aforementioned approved amount has no difference with the one approved by the Board of Directors in its meetings held on February 10, 2015 and the same amount had been charged against earnings of 2014.

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.

 

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29.	CONSOLIDATION OF SUBSIDIARY

Due to a Chinese consortium’s acquisition of OVT, major shareholders of VisEra Holding and OVT Taiwan, the Company acquired OVT’s 49.1% ownership in VisEra Holding and 100% ownership in OVT Taiwan on November 20, 2015. The related information is as follows:

 

a.

Subsidiaries acquired

 

 

b.

Considerations transferred

 

 

c.

Assets acquired and liabilities assumed at the date of acquisition

 

 

(Continued)

 

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(Concluded)

 

d.

Goodwill arising on acquisition

 

 

e.

Net cash outflow on acquisition of subsidiaries

 

 

f.

Impact of acquisitions on the results of the Company

The results of VisEra Holding since the acquisition date included in the consolidated statements of comprehensive income for the year ended December 31, 2015 were as follows:

 

Had the business combination of VisEra Holding been in effect on January 1, 2015, the Company’s net revenue and net income for the year ended December 31, 2015 would have been NT$846,401,819 thousand and NT$306,687,674 thousand, respectively. This pro-forma information is for illustrative purposes only and is not necessarily an indication of revenue and results of operations of the Company that actually would have been achieved had the acquisition been completed on January 1, 2015, nor is it intended to be a projection of future results. The aforementioned pro-forma net revenue and net income were calculated based on the fair value of assets acquired and liabilities assumed at the date of acquisition.

 

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30.	DISPOSAL OF SUBSIDIARY

In January 2015, the Board of Directors of TSMC approved a sale of TSMC SSL common shares of 565,480 thousand held by TSMC and TSMC Guang Neng to Epistar Corporation. The transaction was completed in February 2015.

 

a.

Consideration received from the disposal

 

 

b.

Gain/loss on disposal of subsidiary

 

 

c.

Net cash inflow arising from disposal of subsidiary

 

 

31.	FINANCIAL INSTRUMENTS

 

a.

Categories of financial instruments

 

(Continued)

 

- 34 -

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(Concluded)

 

Note:

Including financial assets carried at cost.

 

b.

Financial risk management objectives

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

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

 

- 35 -

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c.

Market risk

The Company is exposed to the market risks arising from changes in foreign exchange rates, interest rates and the prices in equity investments, and utilizes some derivative financial instruments to reduce the related risks.

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, including currency forward contracts and cross currency swaps, to hedge its currency exposure. These instruments help to reduce, but do not eliminate, the impact of foreign currency exchange rate movements.

The Company also holds short-term borrowings in foreign currencies in proportion to its expected future cash flows. This allows foreign-currency-denominated borrowings to be serviced with expected future cash flows and provides a partial hedge against transaction translation exposure.

The Company’s sensitivity analysis to foreign currency risk mainly focuses on the foreign currency monetary items at the end of the reporting period. Assuming an unfavorable 10% movement in the levels of foreign exchanges against the New Taiwan dollar, the net income for the three months ended March 31, 2016 and 2015 would have decreased by NT$300,909 thousand and NT$211,761 thousand, respectively, after taking into consideration of the hedging contracts and the hedged items.

Interest rate risk

The Company is exposed to interest rate risk arising from borrowing at both fixed and floating interest rates and from fixed income securities. All of the Company’s long-term bonds 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 floating interest rate 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 increase in interest rates of 100 basis point (1%) would have resulted in an increase in the interest expense, net of tax, by approximately NT$83 thousand for both the three months ended March 31, 2016 and 2015.

The Company classified 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. To manage its exposure to the fair value fluctuations, the Company enters into interest rate futures contract to hedge against price risk caused by changes in risk-free interest rates in the Company’s investments in available-for-sale fixed income securities.

Assuming a hypothetical increase of 100 basis point (1%) in interest rates of available-for-sale fixed income securities at the end of the reporting period, the net income for the three months ended March 31, 2016 would have been unaffected as they were classified as available-for-sale; however, the other comprehensive income for the three months ended March 31, 2016 would have decreased by NT$455,802 thousand.

 

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Other price risk

The Company is exposed to equity price risk arising from available-for-sale equity investments. To reduce the equity price risk, the Company utilizes some stock forward contracts to partially hedge its exposure.

Assuming a hypothetical decrease of 5% in equity prices of the equity investments at the end of the reporting period, the net income for the three months ended March 31, 2016 and 2015 would have been unaffected as they were classified as available-for-sale; however, the other comprehensive income for the three months ended March 31, 2016 and 2015 would have decreased by NT$260,202 thousand and NT$135,041 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 recognized in the consolidated balance sheet.

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 March 31, 2016, December 31, 2015 and March 31, 2015, the Company’s ten largest customers accounted for 71%, 68% and 68% of accounts receivable, respectively. The Company believes the concentration of credit risk is insignificant for the remaining accounts receivable.

Financial credit risk

The Company regularly monitors and reviews the transaction 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 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.

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

 

 

(Continued)

 

- 37 -

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(Continued)

 

- 38 -

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(Concluded)

 

f.

Fair value of financial instruments

 

1)

Fair value of financial instruments carried at amortized cost

Except as detailed in the following table, the Company considers that the carrying amounts of financial assets and financial liabilities carried at amortized cost recognized in the consolidated financial statements approximate their fair values.

 

 

- 39 -

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2)

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 financial assets and financial liabilities with standard terms and conditions and traded on active liquid markets are determined with reference to quoted market prices (includes interest rate futures contracts, publicly traded stocks, money market funds, government bonds, agency bonds and corporate bonds).

 

•

Forward exchange contracts and cross currency swap contracts are measured using quoted forward exchange rates and yield curves derived from quoted interest rates matching maturities of the contracts; and stock forward contracts are measured at the difference between the present value of stock forward price discounted based on the applicable yield curve derived from quoted interest rates and the stock spot price. For investments in corporate issued asset-backed securities, the fair value is determined using quoted market prices or the present value of future cash flows based on the observable yield curves.

 

•

The fair values of other financial assets and financial liabilities are determined in accordance with generally accepted pricing models based on discounted cash flow analysis.

 

3)

Fair value measurements recognized in the consolidated balance sheets

The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, 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).

Financial assets and liabilities measured at fair value on a recurring basis

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

 

 

(Continued)

 

- 40 -

---

(Concluded)

 

 

There were no transfers between Level 1 and Level 2 for the three months ended March 31, 2016 and 2015, respectively.

 

- 41 -

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There were no purchases and disposals for assets on Level 3 for the three months ended March 31, 2016 and 2015, respectively.

Financial assets and liabilities not measured at fair value but for which the fair value is disclosed

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

For investments in negotiable certificate of deposit, structured product and commercial paper, the fair value is determined using the present value of future cash flows based on the observable yield curves.

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

The table below sets out the balances for the Company’s assets and liabilities at amortized cost but for which the fair value is disclosed:

 

 

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32.	RELATED PARTY TRANSACTIONS

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

 

a.

Net revenue

 

 

b.

Purchases

 

 

c.

Receivables from related parties

 

 

- 43 -

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d.

Payables to related parties

 

 

e.

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 machinery and equipment from Xintec and office from VIS, respectively. The lease terms and prices were both determined in accordance with mutual agreements. The rental expenses were paid to Xintec and VIS quarterly and monthly, respectively; 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 joint venture), and then recognized such gain/loss over the depreciable lives of the disposed assets.

 

f.

Compensation of key management personnel

The compensation to directors and other key management personnel for the three months ended March 31, 2016 and 2015 were as follows:

 

 

- 44 -

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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.

 

33.	PLEDGED ASSETS

The Company provided certificate of deposits recorded in other financial assets as collateral mainly for litigation and building lease agreements. As of March 31, 2016, December 31, 2015 and March 31, 2015, the aforementioned other financial assets amounted to NT$154,406 thousand, NT$177,229 thousand and NT$290,149 thousand, respectively.

 

34.	SIGNIFICANT OPERATING LEASE ARRANGEMENTS

The Company leases several parcels of land, factory and office premises from the Science Park Administration and entered into lease agreements for its office premises and certain office equipment located in the United States, Europe, Japan, Shanghai and Taiwan. These operating leases expire between April 2016 and March 2035 and can be renewed upon expiration.

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

 

 

35.	SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNIZED COMMITMENTS

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

 

a.

Under a technical cooperation agreement with Industrial Technology Research Institute, the R.O.C. Government or its designee approved by TSMC can use up to 35% of TSMC’s capacity provided TSMC’s outstanding commitments to its customers are not prejudiced. The term of this agreement is for five years beginning from January 1, 1987 and is automatically renewed for successive periods of five years unless otherwise terminated by either party with one year prior notice. As of March 31, 2016, the R.O.C. Government did not invoke such right.

 

b.

Under a Shareholders Agreement entered into with Philips and EDB Investments Pte Ltd. on March 30, 1999, the parties formed a joint venture company, SSMC, which is an integrated circuit foundry in Singapore. TSMC’s equity interest in SSMC was 32%. Nevertheless, in September 2006, Philips spun-off its semiconductor subsidiary which was renamed as NXP B.V. Further, TSMC and NXP B.V. purchased all the SSMC shares owned by EDB Investments Pte Ltd. pro rata according to the Shareholders Agreement on November 15, 2006. After the purchase, TSMC and NXP B.V. currently own approximately 39% and 61% of the SSMC shares, respectively. TSMC and NXP B.V. are required, in the aggregate, to purchase at least 70% of SSMC’s capacity, but TSMC alone is not required to purchase more than 28% of the capacity. If any party defaults on the commitment and the capacity utilization of SSMC falls below a specific percentage of its capacity, the defaulting party is required to compensate SSMC for all related unavoidable costs. There was no default from the aforementioned commitment as of March 31, 2016.

 

- 45 -

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c.

In June 2010, Keranos, LLC. filed a complaint in the U.S. District Court for the Eastern District of Texas alleging that TSMC, TSMC North America, and several other leading technology companies infringe three expired U.S. patents. In response, TSMC, TSMC North America, and several co-defendants in the Texas case filed a lawsuit against Keranos in the U.S. District Court for the Northern District of California in November 2010, seeking a judgment declaring that they did not infringe the asserted patents, and that those patents were invalid. These two litigations have been consolidated into a single lawsuit in the U.S. District Court for the Eastern District of Texas. In February 2014, the Court entered a final judgment in favor of TSMC, dismissing all of Keranos’ claims against TSMC with prejudice. Keranos appealed the final judgment to the U.S. Court of Appeals for the Federal Circuit, and in August 2015, the Federal Circuit remanded the case back to the Texas court for further proceedings. The outcome cannot be determined and the Company cannot make a reliable estimate of the contingent liability at this time.

 

d.

In December 2010, Ziptronix, Inc. filed a complaint in the U.S. District Court for the Northern District of California accusing TSMC, TSMC North America and one other company of infringing several U.S. patents. In September 2014, the Court granted summary judgment of noninfringement in favor of TSMC and TSMC North America. Ziptronix, Inc. can appeal the Court’s order. In August 2015, Tessera Technologies, Inc. announced it had acquired Ziptronix. The outcome cannot be determined and the Company cannot make a reliable estimate of the contingent liability at this time.

 

e.

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 March 31, 2016, TSMC has paid EUR181,859 thousand to ASML under the research and development funding agreement.

 

f.

In March 2014, DSS Technology Management, Inc. (DSS) filed a complaint in the U.S. District Court for the Eastern District of Texas alleging that TSMC, TSMC North America, TSMC Development and several other companies infringe one U.S. patent. TSMC Development has subsequently been dismissed. In May 2015, the Court entered a final judgment of noninfringement in favor of TSMC and TSMC North America. DSS appealed the final judgment to the U.S. Court of Appeals for the Federal Circuit (Federal Circuit). In November 2015, the Patent Trial and Appeal Board (PTAB) determined after concluding an Inter Partes Review (IPR) that the patent claims asserted by DSS in the District Court litigation are unpatentable. DSS appealed the PTAB’s decision to the Federal Circuit in January 2016. In March 2016, the District Court’s judgment of noninfringement was affirmed by the Federal Circuit. In April 2016, the District Court litigation between the parties and the related Federal Circuit appeal were dismissed, and the appeal proceeding of the PTAB’s decision is also over as to TSMC.

 

g.

Amounts available under unused letters of credit as of March 31, 2016, December 31, 2015 and March 31, 2015 were NT$122,284 thousand, NT$144,738 thousand and NT$219,807 thousand, respectively.

 

36.	SIGNIFICANT LOSS FROM DISASTER

On February 6, 2016, an earthquake struck Taiwan. The resulting damage was mostly to inventories and equipment. In the first quarter of 2016, the Company recognized related earthquake losses of NT$2,289,128 thousand, net of insurance claim. Such losses were primarily included in cost of revenue for the three months ended March 31, 2016.

 

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37.	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)

 

- 47 -

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(Concluded)

 

Note 1:

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

Note 2:

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

The realized and unrealized foreign exchange gain and loss was a net loss of NT$1,093,618 thousand and a net gain of NT$48,183 thousand for the three months ended March 31, 2016 and 2015, 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.

 

38.	OPERATING SEGMENTS INFORMATION

 

a.

Operating segments

The Company’s only reportable segment is 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 also had other operating segments that did not exceed the quantitative threshold for separate reporting. These segments mainly engaged in the researching, developing, designing, manufacturing and selling of renewable energy and efficiency related technologies and products.

The Company uses the income from operations as the measurement for segment profit and the basis of performance assessment. There was no material differences between the accounting policies of the operating segment and the accounting policies described in Note 4.

 

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b.

Segment revenue and operating results

 

 

39.	ADDITIONAL DISCLOSURES

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

 

a.

Financings provided: None;

 

b.

Endorsement/guarantee provided: Please see Table 1 attached;

 

c.

Marketable securities held (excluding investments in subsidiaries, associates and joint venture): Please see Table 2 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 3 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 4 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 5 attached;

 

h.

Receivables from related parties amounting to at least NT$100 million or 20% of the paid-in capital: Please see Table 6 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 7 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 8 attached;

 

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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 9 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 7 attached.

 

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TABLE 1

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

ENDORSEMENTS/GUARANTEES PROVIDED

FOR THE THREE MONTHS ENDED MARCH 31, 2016

(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		$	319,993,277			$ (US$	48,270,000 1,500,000	)		$ (US$	48,270,000 1,500,000	)		$ (US$	48,270,000 1,500,000	)		$	—				3.77%			$	319,993,277				Yes				No				No
				TSMC North America		Subsidiary			319,993,277			(US$	2,677,804 83,213	)		(US$	2,677,804 83,213	)		(US$	2,677,804 83,213	)			—				0.21%				319,993,277				Yes				No				No

 

Note 1:

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

Note 2:

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

Note 3:

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

 

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TABLE 2

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

MARKETABLE SECURITIES HELD

March 31, 2016

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

 

 

Held Company Name		Marketable Securities Type and Name		Relationship with the Company		Financial Statement Account		March 31, 2016														Note
								Shares/Units (In Thousands)				Carrying Value (Foreign Currencies in Thousands)				Percentage of Ownership (%)		Fair Value (Foreign Currencies in Thousands)
TSMC		Bank debentures
		HSBC Bank (Taiwan) Limited		—		Held-to-maturity financial assets			—			$	300,497			N/A		$	300,704
		The Export-Import Bank of the ROC		—		”			—				149,999			N/A			149,999
		Corporate bond
		CPC Corporation, Taiwan		—		Held-to-maturity financial assets			—				3,055,201			N/A			3,060,359
		Taiwan Power Company		—		”			—				1,205,701			N/A			1,207,609
		Hon Hai Precision Ind. Co., Ltd.		—		”			—				1,002,494			N/A			1,004,519
		Nan Ya Plastics Corporation		—		”			—				302,038			N/A			302,038
		Formosa Petrochemical Corporation		—		”			—				300,710			N/A			300,701
		Formosa Plastics Corporation		—		”			—				175,530			N/A			175,963
		China Steel Corporation		—		”			—				100,310			N/A			100,476
		Structure deposit
		Hua Nan Commercial Bank		—		Held-to-maturity financial assets			—				2,000,000			N/A			1,997,251
		Cathay United Bank		—		”			—				1,000,000			N/A			999,734
		Commercial paper
		Taiwan Power Company		—		Held-to-maturity financial assets			40				399,338			N/A			398,928
		Stock
		Semiconductor Manufacturing International Corporation		—		Available-for-sale financial assets			211,047				604,334			1			604,334
		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
		W.K. Technology Fund IV		—		”			3,200				24,521			2			24,521
		Fund
		Horizon Ventures Fund		—		Financial assets carried at cost			—				11,259			12			11,259
		Crimson Asia Capital		—		”			—				9,357			1			9,357
TSMC Partners		Stock
		Tela Innovations		—		Financial assets carried at cost			10,440			US$	65,000			25		US$	65,000
		Mcube Inc.		—		”			6,333				—			14			—
		Fund
		Shanghai Walden Venture Capital Enterprise		—		Financial assets carried at cost			—			US$	5,000			6		US$	5,000
		China Walden Venture Investments II, L.P.		—		”			—			US$	4,931			9		US$	4,931
TSMC Global		Corporate bond
		JPMorgan Chase & Co.		—		Available-for-sale financial assets			—			US$	11,067			N/A		US$	11,067
		Bank of America Corp.		—		”			—			US$	8,997			N/A		US$	8,997
		Sysco Corporation		—		”			—			US$	7,970			N/A		US$	7,970
		Verizon Communications		—		”			—			US$	7,201			N/A		US$	7,201
		Bank of Ny Mellon Corp.		—		”			—			US$	6,127			N/A		US$	6,127
		BB&T Corporation		—		”			—			US$	6,040			N/A		US$	6,040

(Continued)

 

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Held Company Name		Marketable Securities Type and Name		Relationship with the Company		Financial Statement Account		March 31, 2016														Note
								Shares/Units (In Thousands)				Carrying Value (Foreign Currencies in Thousands)				Percentage of Ownership (%)		Fair Value (Foreign Currencies in Thousands)
TSMC Global		Citigroup Inc.		—		Available-for-sale financial assets			—			US$	6,024			N/A		US$	6,024
		AT&T Inc.		—		”			—			US$	5,894			N/A		US$	5,894
		Citizens Bank NA/RI		—		”			—			US$	5,551			N/A		US$	5,551
		State Street Corp.		—		”			—			US$	5,549			N/A		US$	5,549
		Anheuser Busch InBev Fin.		—		”			—			US$	5,120			N/A		US$	5,120
		US Bank NA Cincinnati		—		”			—			US$	5,031			N/A		US$	5,031
		PNC Bank NA		—		”			—			US$	4,958			N/A		US$	4,958
		Burlingtn North Santa Fe		—		”			—			US$	4,933			N/A		US$	4,933
		Swedbank AB		—		”			—			US$	4,887			N/A		US$	4,887
		ING Bank N.V.		—		”			—			US$	4,726			N/A		US$	4,726
		Hyundai Capital America		—		”			—			US$	4,671			N/A		US$	4,671
		KfW		—		”			—			US$	4,628			N/A		US$	4,628
		Morgan Stanley		—		”			—			US$	4,572			N/A		US$	4,572
		CVS Health Corp.		—		”			—			US$	4,483			N/A		US$	4,483
		Pepsico Inc.		—		”			—			US$	4,208			N/A		US$	4,208
		Berkshire Hathaway Inc.		—		”			—			US$	4,085			N/A		US$	4,085
		Chubb Ina Holdings Inc.		—		”			—			US$	4,067			N/A		US$	4,067
		Cisco Systems Inc.		—		”			—			US$	4,058			N/A		US$	4,058
		Ameren Corp.		—		”			—			US$	4,056			N/A		US$	4,056
		Home Depot Inc.		—		”			—			US$	4,040			N/A		US$	4,040
		Svenska Handelsbanken AB		—		”			—			US$	4,037			N/A		US$	4,037
		Wells Fargo Bank NA		—		”			—			US$	4,030			N/A		US$	4,030
		Public Service Electric and Gas Company		—		”			—			US$	4,028			N/A		US$	4,028
		Johnson & Johnson		—		”			—			US$	4,021			N/A		US$	4,021
		Asian Development Bank		—		”			—			US$	4,001			N/A		US$	4,001
		Toronto Dominion Bank		—		”			—			US$	3,971			N/A		US$	3,971
		WEC Energy Group Inc.		—		”			—			US$	3,967			N/A		US$	3,967
		Enel Finance Intl N.V.		—		”			—			US$	3,931			N/A		US$	3,931
		National Rural Util. Coop.		—		”			—			US$	3,869			N/A		US$	3,869
		UBS Group Funding		—		”			—			US$	3,557			N/A		US$	3,557
		Intl Bk Recon & Develop		—		”			—			US$	3,547			N/A		US$	3,547
		Fifth Third Bancorp		—		”			—			US$	3,427			N/A		US$	3,427
		Fifth Third Bank		—		”			—			US$	2,846			N/A		US$	2,846
		Wells Fargo & Company		—		”			—			US$	2,520			N/A		US$	2,520
		Ryder System Inc.		—		”			—			US$	2,504			N/A		US$	2,504
		Oracle Corp.		—		”			—			US$	2,481			N/A		US$	2,481
		Morgan Stanley		—		”			—			US$	2,442			N/A		US$	2,442
		American Honda Finance		—		”			—			US$	2,370			N/A		US$	2,370
		Shell International Fin.		—		”			—			US$	2,222			N/A		US$	2,222
		Comcast Corp.		—		”			—			US$	2,162			N/A		US$	2,162
		Xcel Energy Inc.		—		”			—			US$	2,025			N/A		US$	2,025
		Toyota Motor Credit Corp.		—		”			—			US$	2,019			N/A		US$	2,019
		Visa Inc.		—		”			—			US$	2,012			N/A		US$	2,012
		FMS Wertmanagement		—		”			—			US$	2,009			N/A		US$	2,009
		Nordic Investment Bank		—		”			—			US$	2,007			N/A		US$	2,007
		New York Life Global FDG		—		”			—			US$	2,005			N/A		US$	2,005
		Royal Bank of Canada		—		”			—			US$	2,003			N/A		US$	2,003
		African Development Bank		—		”			—			US$	2,001			N/A		US$	2,001
		Pricoa Global Funding 144A		—		”			—			US$	1,993			N/A		US$	1,993
		Goldman Sachs Group Inc.		—		”			—			US$	1,928			N/A		US$	1,928

(Continued)

 

- 53 -

---

Held Company Name		Marketable Securities Type and Name		Relationship with the Company		Financial Statement Account		March 31, 2016														Note
								Shares/Units (In Thousands)				Carrying Value (Foreign Currencies in Thousands)				Percentage of Ownership (%)		Fair Value (Foreign Currencies in Thousands)
TSMC Global		Oncor Electric Delivery		—		Available-for-sale financial assets			—			US$	1,884			N/A		US$	1,884
		Procter & Gamble Co/The		—		”			—			US$	1,828			N/A		US$	1,828
		Electricite de France SA		—		”			—			US$	1,818			N/A		US$	1,818
		Public Service Colorado		—		”			—			US$	1,687			N/A		US$	1,687
		JPMorgan Chase & Co.		—		”			—			US$	1,606			N/A		US$	1,606
		Heineken N.V.		—		”			—			US$	1,601			N/A		US$	1,601
		Capital One Bank (USA), NA		—		”			—			US$	1,549			N/A		US$	1,549
		Medtronic Inc.		—		”			—			US$	1,513			N/A		US$	1,513
		Abbvie Inc.		—		”			—			US$	1,510			N/A		US$	1,510
		Nextera Energy Capital		—		”			—			US$	1,509			N/A		US$	1,509
		Wm. Wrigley Jr. Co.		—		”			—			US$	1,506			N/A		US$	1,506
		Pfizer Inc.		—		”			—			US$	1,405			N/A		US$	1,405
		Biogen Inc.		—		”			—			US$	1,391			N/A		US$	1,391
		General Electric Co.		—		”			—			US$	1,350			N/A		US$	1,350
		Unitedhealth Group Inc.		—		”			—			US$	1,317			N/A		US$	1,317
		CSX Corp.		—		”			—			US$	1,308			N/A		US$	1,308
		Chevron Corp.		—		”			—			US$	1,257			N/A		US$	1,257
		Principal Lfe Glb Fnd II		—		”			—			US$	1,206			N/A		US$	1,206
		American Intl Group		—		”			—			US$	1,169			N/A		US$	1,169
		Trans Canada Pipelines		—		”			—			US$	1,152			N/A		US$	1,152
		Corning Inc.		—		”			—			US$	1,140			N/A		US$	1,140
		Pacificorp		—		”			—			US$	1,095			N/A		US$	1,095
		Merck & Co Inc.		—		”			—			US$	1,075			N/A		US$	1,075
		Gilead Sciences Inc.		—		”			—			US$	1,030			N/A		US$	1,030
		Statoil ASA		—		”			—			US$	1,026			N/A		US$	1,026
		Met Life Glob Funding I		—		”			—			US$	1,017			N/A		US$	1,017
		Morgan Stanley		—		”			—			US$	1,017			N/A		US$	1,017
		Keycorp		—		”			—			US$	1,016			N/A		US$	1,016
		UBS AG Stamford CT		—		”			—			US$	1,013			N/A		US$	1,013
		Celgene Corp.		—		”			—			US$	1,011			N/A		US$	1,011
		Bank of America N.A.		—		”			—			US$	1,009			N/A		US$	1,009
		Suntrust Banks Inc.		—		”			—			US$	1,009			N/A		US$	1,009
		Schlumberger Hldgs Corp.		—		”			—			US$	1,007			N/A		US$	1,007
		Rabobank Nederland NY		—		”			—			US$	1,006			N/A		US$	1,006
		HSBC USA Inc.		—		”			—			US$	1,003			N/A		US$	1,003
		Carnival Corp.		—		”			—			US$	1,003			N/A		US$	1,003
		IBM Corp.		—		”			—			US$	1,002			N/A		US$	1,002
		Credit Suisse New York		—		”			—			US$	1,002			N/A		US$	1,002
		Eaton Corp.		—		”			—			US$	1,001			N/A		US$	1,001
		Aig Global Funding		—		”			—			US$	999			N/A		US$	999
		Deutsche Bank AG, London		—		”			—			US$	994			N/A		US$	994
		Marsh & Mclennan Cos Inc.		—		”			—			US$	935			N/A		US$	935
		Stryker Corp.		—		”			—			US$	910			N/A		US$	910
		Mastercard Inc.		—		”			—			US$	871			N/A		US$	871
		Amgen Inc.		—		”			—			US$	861			N/A		US$	861
		Eaton Corp.		—		”			—			US$	838			N/A		US$	838
		Manuf & Traders Trust Co.		—		”			—			US$	757			N/A		US$	757
		TTX Co.		—		”			—			US$	709			N/A		US$	709
		Commonwealth Bk Austr NY		—		”			—			US$	651			N/A		US$	651
		Bayer US Finance LLC		—		”			—			US$	603			N/A		US$	603

(Continued)

 

- 54 -

---

Held Company Name		Marketable Securities Type and Name		Relationship with the Company		Financial Statement Account		March 31, 2016														Note
								Shares/Units (In Thousands)				Carrying Value (Foreign Currencies in Thousands)				Percentage of Ownership (%)		Fair Value (Foreign Currencies in Thousands)
TSMC Global		Coca Cola Co/The		—		Available-for-sale financial assets			—			US$	591			N/A		US$	591
		Mcdonald S Corp.		—		”			—			US$	555			N/A		US$	555
		American Intl Group		—		”			—			US$	505			N/A		US$	505
		Duke Energy Corp.		—		”			—			US$	427			N/A		US$	427
		Nissan Motor Acceptance		—		”			—			US$	297			N/A		US$	297
		Philip Morris Intl Inc.		—		”			—			US$	291			N/A		US$	291
		U.S. Bancorp		—		”			—			US$	265			N/A		US$	265
		Rolls Royce PLC		—		”			—			US$	226			N/A		US$	226
		Berkshire Hathaway Fin.		—		”			—			US$	137			N/A		US$	137
		Goldman Sachs Group, Inc.		—		Held-to-maturity financial assets			—			US$	100,000			N/A		US$	100,251
		JPMorgan Chase & Co.		—		”			—			US$	69,070			N/A		US$	69,217
		Commonwealth Bank of Australia		—		”			—			US$	50,000			N/A		US$	50,053
		National Australia Bank		—		”			—			US$	50,000			N/A		US$	50,019
		Westpac Banking Corporation		—		”			—			US$	50,000			N/A		US$	50,011
		Government bond
		US Treasury N/B		—		Available-for-sale financial assets			—			US$	15,808			N/A		US$	15,808
		Agency bond
		Fnma Pool AL7191		—		Available-for-sale financial assets			—			US$	15,331			N/A		US$	15,331
		Fnma Pool 888577		—		”			—			US$	11,975			N/A		US$	11,975
		Fnma Pool AV5062		—		”			—			US$	10,002			N/A		US$	10,002
		Fnma Pool AL1543		—		”			—			US$	6,235			N/A		US$	6,235
		Fnma Pool AL8153		—		”			—			US$	6,051			N/A		US$	6,051
		Fed Hm Ln Pc Pool J32501		—		”			—			US$	5,778			N/A		US$	5,778
		Fnma Pool 995113		—		”			—			US$	4,797			N/A		US$	4,797
		Fnma Pool AD4037		—		”			—			US$	4,775			N/A		US$	4,775
		Fnma Pool AS6275		—		”			—			US$	4,762			N/A		US$	4,762
		Fnma Pool AL7671		—		”			—			US$	4,675			N/A		US$	4,675
		Fnma Pool AL0516		—		”			—			US$	4,066			N/A		US$	4,066
		Fnma Pool 310104		—		”			—			US$	4,006			N/A		US$	4,006
		Fnma Pool AS3460		—		”			—			US$	3,921			N/A		US$	3,921
		Fnma Pool AV3015		—		”			—			US$	3,918			N/A		US$	3,918
		Fnma Pool AL0950		—		”			—			US$	3,252			N/A		US$	3,252
		Fnma Pool AH5613		—		”			—			US$	3,209			N/A		US$	3,209
		Fed Hm Ln Pc Pool A94972		—		”			—			US$	3,120			N/A		US$	3,120
		Fnma Pool AS6092		—		”			—			US$	3,060			N/A		US$	3,060
		Fed Hm Ln Pc Pool J32520		—		”			—			US$	3,057			N/A		US$	3,057
		Fannie Mae		—		”			—			US$	3,001			N/A		US$	3,001
		Fed Hm Ln Pc Pool G60374		—		”			—			US$	2,816			N/A		US$	2,816
		Fnma Pool 725423		—		”			—			US$	2,814			N/A		US$	2,814
		Fed Hm Ln Pc Pool 2B5202		—		”			—			US$	2,615			N/A		US$	2,615
		Fnma Pool 888637		—		”			—			US$	2,563			N/A		US$	2,563
		Fed Hm Ln Pc Pool 849787		—		”			—			US$	2,373			N/A		US$	2,373
		Fnma Pool 995024		—		”			—			US$	2,339			N/A		US$	2,339
		Fnma Pool AD0198		—		”			—			US$	2,266			N/A		US$	2,266
		Fnma Pool AL6818		—		”			—			US$	2,201			N/A		US$	2,201
		Fnma Pool AY6119		—		”			—			US$	2,025			N/A		US$	2,025
		Fnma Pool AL7485		—		”			—			US$	2,008			N/A		US$	2,008
		Freddie Mac		—		”			—			US$	2,000			N/A		US$	2,000
		Fnma Pool 255364		—		”			—			US$	1,964			N/A		US$	1,964

(Continued)

 

- 55 -

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Held Company Name		Marketable Securities Type and Name		Relationship with the Company		Financial Statement Account		March 31, 2016														Note
								Shares/Units (In Thousands)				Carrying Value (Foreign Currencies in Thousands)				Percentage of Ownership (%)		Fair Value (Foreign Currencies in Thousands)
TSMC Global		Fnma Pool AL6254		—		Available-for-sale financial assets			—			US$	1,894			N/A		US$	1,894
		Fnma Pool AL7421		—		”			—			US$	1,875			N/A		US$	1,875
		Fnma Pool AH7196		—		”			—			US$	1,830			N/A		US$	1,830
		Freddie Mac		—		”			—			US$	1,749			N/A		US$	1,749
		Fnma Pool 930289		—		”			—			US$	1,618			N/A		US$	1,618
		Fnma Pool AL4141		—		”			—			US$	1,611			N/A		US$	1,611
		Fnma Pool MA1201		—		”			—			US$	1,529			N/A		US$	1,529
		Fannie Mae		—		”			—			US$	1,395			N/A		US$	1,395
		Fnma Pool 890101		—		”			—			US$	1,304			N/A		US$	1,304
		Federal Farm Credit Bank		—		”			—			US$	1,252			N/A		US$	1,252
		Fed Hm Ln Pc Pool 849872		—		”			—			US$	1,251			N/A		US$	1,251
		Fed Hm Ln Pc Pool 849614		—		”			—			US$	1,101			N/A		US$	1,101
		Fnma Pool AX5630		—		”			—			US$	1,066			N/A		US$	1,066
		Fnma Pool AL7912		—		”			—			US$	1,028			N/A		US$	1,028
		Fed Hm Ln Pc Pool J32972		—		”			—			US$	845			N/A		US$	845
		Fed Hm Ln Pc Pool V60841		—		”			—			US$	774			N/A		US$	774
		Fed Hm Ln Pc Pool 840260		—		”			—			US$	772			N/A		US$	772
		Fnma Pool 888129		—		”			—			US$	742			N/A		US$	742
		Fed Hm Ln Pc Pool G05956		—		”			—			US$	713			N/A		US$	713
		Fnma Pool AD0249		—		”			—			US$	705			N/A		US$	705
		Export Developmnt Canada		—		”			—			US$	655			N/A		US$	655
		Fannie Mae		—		”			—			US$	645			N/A		US$	645
		Fnma Pool 257041		—		”			—			US$	624			N/A		US$	624
		Fnma Pool AL6302		—		”			—			US$	614			N/A		US$	614
		Fnma Pool 725946		—		”			—			US$	530			N/A		US$	530
		Fnma Pool AL7920		—		”			—			US$	523			N/A		US$	523
		Fnma Pool 257004		—		”			—			US$	495			N/A		US$	495
		Fed Hm Ln Pc Pool C03532		—		”			—			US$	416			N/A		US$	416
		Fed Hm Ln Pc Pool G60473		—		”			—			US$	392			N/A		US$	392
		Fed Hm Ln Pc Pool J33012		—		”			—			US$	387			N/A		US$	387
		Fnma Pool AW8203		—		”			—			US$	378			N/A		US$	378
		Fnma Pool AE0154		—		”			—			US$	363			N/A		US$	363
		Fnma Pool AL6406		—		”			—			US$	362			N/A		US$	362
		Fnma Pool 256513		—		”			—			US$	354			N/A		US$	354
		Fed Hm Ln Pc Pool C03464		—		”			—			US$	327			N/A		US$	327
		Fed Hm Ln Pc Pool G03221		—		”			—			US$	261			N/A		US$	261
		Fnma Pool 735997		—		”			—			US$	260			N/A		US$	260
		Fnma Pool 889633		—		”			—			US$	222			N/A		US$	222
		Fnma Pool 725424		—		”			—			US$	191			N/A		US$	191
		Fnma Pool 889576		—		”			—			US$	180			N/A		US$	180
		Fnma Pool 888994		—		”			—			US$	164			N/A		US$	164
		Fed Hm Ln Pc Pool C91854		—		”			—			US$	136			N/A		US$	136
		Fnma Pool AE0375		—		”			—			US$	124			N/A		US$	124
		Fnma Pool 889455		—		”			—			US$	82			N/A		US$	82
		Fnma Pool 995018		—		”			—			US$	79			N/A		US$	79
		Fnma Pool 831811		—		”			—			US$	66			N/A		US$	66
		Fnma Pool 954940		—		”			—			US$	46			N/A		US$	46
		Fed Hm Ln Pc Pool 849506		—		”			—			US$	44			N/A		US$	44
		Fnma Pool AL6964		—		”			—			US$	32			N/A		US$	32
		Fed Hm Ln Pc Pool C91845		—		”			—			US$	27			N/A		US$	27

(Continued)

 

- 56 -

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Held Company Name		Marketable Securities Type and Name		Relationship with the Company		Financial Statement Account		March 31, 2016														Note
								Shares/Units (In Thousands)				Carrying Value (Foreign Currencies in Thousands)				Percentage of Ownership (%)		Fair Value (Foreign Currencies in Thousands)
TSMC Global		Fnma Pool 745516		—		Available-for-sale financial assets			—			US$	25			N/A		US$	25
		Fnma Pool 890071		—		”			—			US$	24			N/A		US$	24
		Fnma Pool 535994		—		”			—			US$	23			N/A		US$	23
		Fnma Pool AE0616		—		”			—			US$	21			N/A		US$	21
		Fnma Pool 323692		—		”			—			US$	17			N/A		US$	17
		Fnma Pool 725773		—		”			—			US$	14			N/A		US$	14
		Fnma Pool 735141		—		”			—			US$	11			N/A		US$	11
		Negotiable certificate of deposit
		Bank of China		—		Held-to-maturity financial assets			—			US$	50,000			N/A		US$	50,334
		China Development Bank		—		”			—			US$	50,000			N/A		US$	50,325
		China Construction Bank		—		”			—			US$	50,000			N/A		US$	50,209
		Corporate issued asset-backed securities
		Chase Issuance Trust		—		Available-for-sale financial assets			—			US$	22,037			N/A		US$	22,037
		Citibank Credit Card Issuance Trust		—		”			—			US$	21,035			N/A		US$	21,035
		Discover Card Execution Note Trust		—		”			—			US$	18,553			N/A		US$	18,553
		Capital One Multi Asset Execution Trust		—		”			—			US$	16,335			N/A		US$	16,335
		Bank of America Credit Card Trust		—		”			—			US$	10,442			N/A		US$	10,442
		American Express Credit Account Master Trust		—		”			—			US$	7,779			N/A		US$	7,779
		Ford Credit Floorplan Master Owner Trust		—		”			—			US$	7,330			N/A		US$	7,330
		Mercedes Benz Master Owner Trust		—		”			—			US$	5,987			N/A		US$	5,987
		Ford Credit Auto Owner Trust		—		”			—			US$	4,701			N/A		US$	4,701
		American Express Credit Account Master Trust		—		”			—			US$	4,002			N/A		US$	4,002
		American Express Credit Account Master Trust		—		”			—			US$	3,997			N/A		US$	3,997
		GS Mortgage Securities Trust		—		”			—			US$	3,177			N/A		US$	3,177
		Mercedes Benz Auto Lease Trust		—		”			—			US$	3,002			N/A		US$	3,002
		Hyundai Auto Receivables Trust		—		”			—			US$	2,843			N/A		US$	2,843
		BMW Floorplan Master Owner Trust		—		”			—			US$	2,438			N/A		US$	2,438
		Toyota Auto Receivables Owner Trust		—		”			—			US$	2,076			N/A		US$	2,076
		Carmax Auto Owner Trust		—		”			—			US$	2,009			N/A		US$	2,009
		Nissan Auto Receivables Owner Trust		—		”			—			US$	2,005			N/A		US$	2,005
		Ford Credit Auto Owner Trust		—		”			—			US$	2,002			N/A		US$	2,002
		Nissan Auto Lease Trust		—		”			—			US$	2,002			N/A		US$	2,002
		Hyundai Auto Lease Securitization Trust		—		”			—			US$	2,001			N/A		US$	2,001
		Nissan Auto Receivables Owner Trust		—		”			—			US$	2,001			N/A		US$	2,001
		Toyota Auto Receivables Owner Trust		—		”			—			US$	2,001			N/A		US$	2,001
		BMW Vehicle Lease Trust		—		”			—			US$	2,000			N/A		US$	2,000
		Mercedes Benz Auto Lease Trust		—		”			—			US$	2,000			N/A		US$	2,000
		USAA Auto Owner Trust		—		”			—			US$	1,999			N/A		US$	1,999
		Nissan Master Owner Trust Receivables Trust		—		”			—			US$	1,996			N/A		US$	1,996
		Chrysler Capital Auto Receivables Trust		—		”			—			US$	1,806			N/A		US$	1,806
		Golden Credit Card Trust		—		”			—			US$	1,800			N/A		US$	1,800
		Hyundai Auto Lease Securitization Trust		—		”			—			US$	1,756			N/A		US$	1,756
		Mercedes Benz Auto Receivables Trust		—		”			—			US$	1,704			N/A		US$	1,704
		Honda Auto Receivables Owner Trust		—		”			—			US$	1,701			N/A		US$	1,701
		Toyota Auto Receivables Owner Trust		—		”			—			US$	1,685			N/A		US$	1,685
		Ford Credit Auto Lease Trust		—		”			—			US$	1,656			N/A		US$	1,656
		Ford Credit Auto Owner Trust		—		”			—			US$	1,431			N/A		US$	1,431
		Chesapeake Funding II LLC		—		”			—			US$	1,380			N/A		US$	1,380
		Hyundai Auto Receivables Trust		—		”			—			US$	1,008			N/A		US$	1,008

(Continued)

 

- 57 -

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Held Company Name		Marketable Securities Type and Name		Relationship with the Company		Financial Statement Account		March 31, 2016														Note
								Shares/Units (In Thousands)				Carrying Value (Foreign Currencies in Thousands)				Percentage of Ownership (%)		Fair Value (Foreign Currencies in Thousands)
TSMC Global		Nissan Auto Lease Trust		—		Available-for-sale financial assets			—			US$	818			N/A		US$	818
		Hyundai Auto Lease Securitization Trust		—		”			—			US$	86			N/A		US$	86
		Fund
		Primavera Capital Fund II L.P.		—		Financial assets carried at cost			—			US$	17,069			5		US$	17,069
VTAF III		Common stock
		Accton Wireless Broadband Corp.		—		Financial assets carried at cost			2,249			US$	315			6		US$	315
		Preferred stock
		BridgeLux, Inc.		—		Financial assets carried at cost			7,522			US$	5,177			3		US$	5,177
		GTBF, Inc.		—		”			1,154			US$	1,500			N/A		US$	1,500
		LiquidLeds Lighting Corp.		—		”			1,600			US$	800			11		US$	800
		Neoconix, Inc.		—		”			4,147			US$	170			—		US$	170
VTAF II		Common stock
		RichWave Technology Corp.		—		Available-for-sale financial assets			1,267			US$	3,079			3		US$	3,079
		Sentelic		—		Financial assets carried at cost			1,806			US$	2,607			8		US$	2,607
		Aether Systems, Inc.		—		”			3,100			US$	2,429			30		US$	2,429
		Preferred stock
		Aquantia		—		Financial assets carried at cost			4,643			US$	4,441			2		US$	4,441
		5V Technologies, Inc.		—		”			963			US$	2,168			2		US$	2,168
		Impinj, Inc.		—		”			711			US$	1,100			—		US$	1,100
		QST Holdings, LLC		—		”			—			US$	588			13		US$	588
		Cresta Technology Corporation		—		”			92			US$	28			—		US$	28
Emerging Alliance		Common stock
		RichWave Technology Corp.		—		Available-for-sale financial assets			4,034			US$	9,803			8		US$	9,803
		Global Investment Holding Inc.		—		Financial assets carried at cost			11,124			US$	3,065			6		US$	3,065
		Preferred stock
		QST Holdings, LLC		—		Financial assets carried at cost			—			US$	141			4		US$	141
ISDF		Preferred stock
		Sonics, Inc.		—		Financial assets carried at cost			230				—			3			—
ISDF II		Common stock
		Alchip Technologies Limited		—		Available-for-sale financial assets			6,581			US$	7,352			11		US$	7,352
		Goyatek Technology, Corp.		—		Financial assets carried at cost			745				—			6			—
		Sonics, Inc.		—		”			278				—			4			—
		Preferred stock
		Sonics, Inc.		—		Financial assets carried at cost			264				—			4			—

(Concluded)

 

- 58 -

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TABLE 3

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

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

FOR THE THREE MONTHS ENDED MARCH 31, 2016

(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		Bank debentures
		HSBC Bank (Taiwan) Limited		Held-to-maturity financial assets		—		—			—			$	3,305,475				—			$	—				—			$	3,000,000			$	3,000,000			$	—				—			$	300,497
		Corporate bond
		CPC Corporation, Taiwan		Held-to-maturity financial assets		—		—			—				1,543,723				—				1,513,743				—				—				—				—				—				3,055,201
		Nan Ya Plastics Corporation		”		—		—			—				—				—				302,139				—				—				—				—				—				302,038
		Commercial paper
		Taiwan Power Company		Held-to-maturity financial assets		—		—			—				—				40				399,338				—				—				—				—				40				399,338
		Stock
		TSMC Global		Prepayments for Investments (Note 2)		—		Subsidiary			—				—				—				6,620,627				—				—				—				—				—				6,620,627
TSMC Global		Corporate bond
		Goldman Sachs Group, Inc.		Held-to-maturity financial assets		—		—			—				—				—			US$	100,000				—				—				—				—				—			US$	100,000
		JPMorgan Chase & Co.		”		—		—			—			US$	10,798				—			US$	58,533				—				—				—				—				—			US$	69,070
		National Australia Bank		”		—		—			—				—				—			US$	50,000				—				—				—				—				—			US$	50,000
		Westpac Banking Corporation		”		—		—			—				—				—			US$	50,000				—				—				—				—				—			US$	50,000
		Commonwealth Bank of Australia		”		—		—			—				—				—			US$	50,000				—				—				—				—				—			US$	50,000
		Government bond
		US Treasury N/B		Available-for-sale financial assets		—		—			—			US$	26,702				—			US$	2,259				—			US$	13,250			US$	13,287			US$	(37	)			—			US$	15,808
		Agency bond
		Fnma Pool AL7191		Available-for-sale financial assets		—		—			—			US$	5,864				—			US$	9,855				—			US$	501			US$	571			US$	(70	)			—			US$	15,331
		Fnma Pool 888577		”		—		—			—				—				—			US$	11,995				—				—				—				—				—			US$	11,975
		Fnma Pool AV5062		”		—		—			—				—				—			US$	9,975				—				—				—				—				—			US$	10,002
		Fnma Tba 15 Yr 2.5		”		—		—			—			US$	3,964				—			US$	11,998				—			US$	16,006			US$	15,978			US$	28				—				—
		Corporate issued asset-backed securities
		Citibank Credit Card Issuance Trust		Available-for-sale financial assets		—		—			—			US$	9,756				—			US$	11,268				—				—				—				—				—			US$	21,035

 

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 2016, 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, MOEA. The prepayment for investment was US$202,900 thousand as of March 31, 2016 and the total injection is expected to be finished in the fourth quarter of 2016.

 

- 59 -

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TABLE 4

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

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

FOR THE THREE MONTHS ENDED MARCH 31, 2016

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

 

 

Company Name

Types of Property

Transaction Date

Transaction Amount (Foreign Currencies in Thousands)

Payment Term

Counter-party

Nature of Relationships

Prior Transaction of Related Counter-party

Price Reference

Purpose of Acquisition

Other Terms

Owner

Relationships

Transfer Date

Amount

TSMC

Fab

April 15, 2015 to February 17, 2016

$

362,111

Monthly settlement by the construction progress and acceptance

Environetics Design Group Co., Ltd.

—

N/A

N/A

N/A

N/A

Bidding, price comparison and price negotiation

Manufacturing purpose

None

Fab

September 17, 2015 to January 25, 2016

3,201,800

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

Fab

December 10, 2015 to January 25, 2016

2,747,768

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

December 31, 2015 to January 04, 2016

1,250,000

Monthly settlement by the construction progress and acceptance

China Steel Structure Co., Ltd.

—

N/A

N/A

N/A

N/A

Bidding, price comparison and price negotiation

Manufacturing purpose

None

Fab

January 22, 2016 to January 25, 2016

750,000

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

 

- 60 -

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TABLE 5

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

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

FOR THE THREE MONTHS ENDED MARCH 31, 2016

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

 

 

						Transaction Details												Abnormal Transaction				Notes/Accounts Payable or Receivable
Company Name		Related Party		Nature of Relationships		Purchases/Sales		Amount (Foreign Currencies in Thousands)				% to Total				Payment Terms		Unit Price		Payment Terms		Ending Balance (Foreign Currencies in Thousands)				% to Total				Note
TSMC		TSMC North America		Subsidiary		Sales		$	127,059,031				61			Net 30 days from invoice date (Note)		—		Note		$	56,786,317				61
		GUC		Associate		Sales			1,334,523				1			Net 30 days from the end of the month of when invoice is issued		—		—			668,811				1
		TSMC China		Subsidiary		Purchases			4,411,905				28			Net 30 days from the end of the month of when invoice is issued		—		—			(1,282,363	)			6
		WaferTech		Indirect subsidiary		Purchases			2,122,936				13			Net 30 days from the end of the month of when invoice is issued		—		—			(1,313,799	)			6
		VIS		Associate		Purchases			1,657,063				10			Net 30 days from the end of the month of when invoice is issued		—		—			(531,477	)			2
		SSMC		Associate		Purchases			688,182				4			Net 30 days from the end of the month of when invoice is issued		—		—			(258,813	)			1
TSMC North America		GUC		Associate of TSMC		Sales		(US$	241,322 7,282	)			—			Net 30 days from invoice date		—		—		(US$	14,302 444	)			—

 

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 -

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TABLE 6

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

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

March 31, 2016

(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		$	59,249,788			41		$	3,525,530			—		$	3,559,182			$	—
		GUC		Associate			669,088			39			280,933			—			280,933				—
TSMC Japan		TSMC		Parent company		(JPY	111,863 390,856	)		109			—			—			—				—
TSMC China		TSMC		Parent company		(RMB	1,282,363 257,732	)		28			—			—			—				—
TSMC Technology		TSMC		Parent company		(US$	204,667 6,360	)		Note 2			—			—			—				—
WaferTech		TSMC		Parent company		(US$	1,313,799 40,827	)		44			—			—			—				—

 

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 -

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TABLE 7

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

INTERCOMPANY RELATIONSHIPS AND SIGNIFICANT INTERCOMPANY TRANSACTIONS

FOR THE THREE MONTHS ENDED MARCH 31, 2016

(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		$	127,059,031			—		62%
								Receivables from related parties			56,786,317			—		3%
								Other receivables from related parties			2,463,471			—		—
				TSMC Japan		1		Payables to related parties			111,863			—		—
				TSMC Europe		1		Marketing expenses - commission			111,849			—		—
				TSMC China		1		Purchases			4,411,905			—		2%
								Payables to related parties			1,282,363			—		—
				TSMC Technology		1		Research and development expenses			448,421			—		—
								Payables to related parties			204,667			—		—
				WaferTech		1		Purchases			2,122,936			—		1%
								Payables to related parties			1,313,799			—		—

 

Note 1:

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

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 -

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TABLE 8

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

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

FOR THE THREE MONTHS ENDED MARCH 31, 2016

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

 

 

Investor Company		Investee Company		Location		Main Businesses and Products		Original Investment Amount								Balance as of March 31, 2016												Net Income (Losses) of the Investee (Foreign Currencies in Thousands)				Share of Profits/Losses of Investee (Note 1) (Foreign Currencies in Thousands)				Note
								March 31, 2016 (Foreign Currencies in Thousands)				December 31, 2015 (Foreign Currencies in Thousands)				Shares (In Thousands)				Percentage of Ownership				Carrying Value (Foreign Currencies in Thousands)
TSMC		TSMC Global		Tortola, British Virgin Islands		Investment activities		$	174,375,863 (Note 3	)		$	167,755,236				5				100			$	206,150,350			$	479,955			$	479,955			Subsidiary
		TSMC Partners		Tortola, British Virgin Islands		Investing in companies involved in the design, manufacture, and other related business in the semiconductor industry			31,456,130				31,456,130				988,268				100				50,549,617				695,284				695,284			Subsidiary
		SSMC		Singapore		Fabrication and supply of integrated circuits			5,120,028				5,120,028				314				39				9,649,635				902,923				350,244			Associate
		VIS		Hsin-Chu, Taiwan		Research, design, development, manufacture, packaging, testing and sale of memory integrated circuits, LSI, VLSI and related parts			10,180,677				10,180,677				464,223				28				8,846,336				1,353,171				381,994			Associate
		TSMC North America		San Jose, California, U.S.A		Selling and marketing of integrated circuits and semiconductor devices			333,718				333,718				11,000				100				4,176,574				34,944				34,944			Subsidiary
		Xintec		Taoyuan, Taiwan		Wafer level chip size packaging service			1,309,969				1,309,969				92,778				35				2,188,733				(61,998	)			(21,361	)		Associate
		Motech		New Taipei, Taiwan		Manufacturing and sales of solar cells, crystalline silicon solar cell, and test and measurement instruments and design and construction of solar power systems			5,221,931				5,221,931				58,320				12				2,148,431				816,584				78,418			Associate
		GUC		Hsin-Chu, Taiwan		Researching, developing, manufacturing, testing and marketing of integrated circuits			386,568				386,568				46,688				35				1,174,917				159,654				55,874			Associate
		VTAF II		Cayman Islands		Investing in new start-up technology companies			608,562				608,562				—				98				541,318				2,719				2,665			Subsidiary
		Emerging Alliance		Cayman Islands		Investing in new start-up technology companies			844,775				844,775				—				99.5				419,414				(280	)			(279	)		Subsidiary
		Chi Cherng		Taipei, Taiwan		Investment activities			394,674				394,674				36,600				100				394,584				220				220			Subsidiary
		VTAF III		Cayman Islands		Investing in new start-up technology companies			1,499,452				1,499,452				—				98				374,164				(3,991	)			(3,911	)		Subsidiary
		TSMC Europe		Amsterdam, the Netherlands		Marketing and engineering supporting activities			15,749				15,749				—				100				345,505				10,311				10,311			Subsidiary
		TSMC Japan		Yokohama, Japan		Marketing activities			83,760				83,760				6				100				135,200				1,742				1,742			Subsidiary
		TSMC Korea		Seoul, Korea		Customer service and technical supporting activities			13,656				13,656				80				100				36,337				716				716			Subsidiary
		TSMC Solar Europe GmbH		Hamburg, Germany		Selling of solar modules and related products and providing customer service			25,266				25,266				1				100				(1,603	)			(2,823	)			(2,823	)		Subsidiary

 

(Continued)

 

- 64 -

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Investor Company		Investee Company		Location		Main Businesses and Products		Original Investment Amount								Balance as of March 31, 2016												Net Income (Losses) of the Investee (Foreign Currencies in Thousands)				Share of Profits/Losses of Investee (Note 1) (Foreign Currencies in Thousands)				Note
								March 31, 2016 (Foreign Currencies in Thousands)				December 31, 2015 (Foreign Currencies in Thousands)				Shares (In Thousands)				Percentage of Ownership				Carrying Value (Foreign Currencies in Thousands)
TSMC Partners		TSMC Development		Delaware, U.S.A		Investment activities		(US$	0.03 0.001	)		(US$	0.03 0.001	)			—				100			(US$	26,033,188 808,987	)		(US$	557,721 16,830	)			Note 2			Subsidiary
		VisEra Holding		Cayman Islands		Investing in companies involved in the design, manufacture, and other related businesses in the semiconductor industry		(US$	4,865,757 151,204	)		(US$	4,865,757 151,204	)			86,000				98			(US$	7,075,016 219,858	)		(US$	87,873 2,652	)			Note 2			Subsidiary
		TSMC Technology		Delaware, U.S.A		Engineering support activities		(US$	0.03 0.001	)		(US$	0.03 0.001	)			—				100			(US$	553,841 17,211	)		(US$	21,291 643	)			Note 2			Subsidiary
		ISDF II		Cayman Islands		Investing in new start-up technology companies		(US$	299,242 9,299	)		(US$	299,242 9,299	)			9,299				97			(US$	350,511 10,892	)		(US$	4 —	)			Note 2			Subsidiary
		TSMC Canada		Ontario, Canada		Engineering support activities		(US$	74,014 2,300	)		(US$	74,014 2,300	)			2,300				100			(US$	162,178 5,040	)		(US$	2,351 71	)			Note 2			Subsidiary
		ISDF		Cayman Islands		Investing in new start-up technology companies		(US$	18,761 583	)		(US$	18,761 583	)			583				97			(US$	4,035 125	)		(US$	11 —	)			Note 2			Subsidiary
VTAF III		Growth Fund		Cayman Islands		Investing in new start-up technology companies		(US$	47,040 1,462	)		(US$	47,040 1,462	)			—				100			(US$	24,801 771	)		(US$	(801 (24	)  ))			Note 2			Subsidiary
VTAF III		Mutual-Pak		New Taipei, Taiwan		Manufacturing of electronic parts, wholesaling and retailing of electronic materials, and researching, developing and testing of RFID		$ (US$	167,744 5,212	)		$ (US$	167,744 5,212	)			15,643				58			$ (US$	16,401 510	)		$ (US$	(6,587 (199	)  ))			Note 2			Subsidiary
		VTA Holdings		Delaware, U.S.A		Investing in new start-up technology companies			—				—				—				62				—				—				Note 2			Subsidiary
VTAF II		VTA Holdings		Delaware, U.S.A		Investing in new start-up technology companies			—				—				—				31				—				—				Note 2			Subsidiary
Emerging Alliance		VTA Holdings		Delaware, U.S.A		Investing in new start-up technology companies			—				—				—				7				—				—				Note 2			Subsidiary
TSMC Development		WaferTech		Washington, U.S.A		Manufacturing, selling, testing and computer-aided designing of integrated circuits and other semiconductor devices			—				—				293,637				100			(US$	6,749,915 209,755	)		(US$	529,517 15,979	)			Note 2			Subsidiary
VisEra Holding		VisEra Tech		Hsin-Chu, Taiwan		Engaged in manufacturing electronic spare parts and in researching, developing, designing, manufacturing, selling, packaging and testing of color filter		(US$	3,027,129 94,069	)		(US$	3,027,129 94,069	)			253,120				87			(US$	5,447,635 169,286	)		(US$	94,720 2,858	)			Note 2			Subsidiary
		Xintec		Taoyuan, Taiwan		Wafer level chip size packaging service		(US$	195,749 6,083	)		(US$	195,749 6,083	)			18,504				6			(US$	707,631 21,990	)		(US$	(61,998 (1,871	)  ))			Note 2			Associate

 

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 2016, 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, MOEA. The prepayment for investment was US$202,900 thousand as of March 31, 2016 and the total injection is expected to be finished in the fourth quarter of 2016.

(Concluded)

 

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TABLE 9

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

INFORMATION ON INVESTMENT IN MAINLAND CHINA

FOR THE THREE MONTHS ENDED MARCH 31, 2016

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

 

 

Investee Company		Main Businesses and Products		Total Amount of Paid-in Capital (Foreign Currencies in Thousands)				Method of Investment				Accumulated Outflow of Investment from Taiwan as of January 1, 2016 (US$ in Thousands)				Investment Flows								Accumulated Outflow of Investment from Taiwan as of March 31, 2016 (US$ in Thousands)				Net Income (Losses) of the Investee Company				Percentage of Ownership				Share of Profits/Losses				Carrying Amount as of March 31, 2016				Accumulated Inward Remittance of Earnings as of March 31, 2016
																Outflow				Inflow
TSMC China		Manufacturing and selling of integrated circuits at the order of and pursuant to product design specifications provided by customers		$ (RMB	18,939,667 4,502,080	)			Note 1			$ (US$	18,939,667 596,000	)		$	—			$	—			$ (US$	18,939,667 596,000	)		$	1,033,338				100%			$	974,151 (Note 2	)		$	40,480,827			$	—

 

Accumulated Investment in Mainland China as of March 31, 2016 (US$ in Thousands)				Investment Amounts Authorized by Investment Commission, MOEA (US$ in Thousands)				Upper Limit on Investment (US$ in Thousands)
$ (US$	18,939,667 596,000	)		$ (US$	119,412,667 3,596,000	)		$	768,567,646

 

Note 1:

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

Note 2:

Amount was recognized based on the reviewed financial statements.

 

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